An Overview of Economic Losses In NYC Due To Terrorist Attacks on 9-11

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An Overview of Economic LossesIn NYC Due To
Terrorist Attacks on 9-11

• Presented By
• Dr. Surendra K. Kaushik
• Research Assistance Provided By Jagadeesh Ambati

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September 11, 2001The Day when terror struck New
York and Washington, D.C.(Press Release from the
City Hall on October 4, 2001)

• Trade Center Attack Could Cost City Economy More
  Than 100 Billion Over 2 Years
• The attack on the World Trade Center will likely
  cost the city economy between 90 billion and
  105 billion by the end of fiscal year 2003,
  according to a preliminary report issued today
  by City Comptroller Alan G. Hevesi.
• That includes 45 billion for the value of
  buildings and people already lost and 45 billion
  to 60 billion for on-going costs, including lost
  economic activity over the next two fiscal years.
• As a result, City taxes and other revenues will
  be 1.3 billion less than previously expected in
  fiscal years 2002 and 2003. Insurance is likely
  to cover only about a third of those costs, about
  37 billion.
• The City could lose 115,300 jobs this fiscal
  year, although there will be an offset with some
  new jobs from clean-up, repair, construction and
  security.
• "You cannot reduce to dollars and cents the
  losses New Yorkers have suffered from the
  vicious World Trade Center attack, just as there
  is no way to put a dollar value on the heroism
  and determination of our response," said Hevesi.

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• "But to obtain the resources we will need to
  rebuild and create a better and stronger New York
  City, we must try to understand in dollar terms,
  what the attack cost our economy."
• "New Yorkers are the toughest, smartest, most
  resilient people in the world. We will recover
  from this attack.
• The federal and state governments have already
  proven that they are committed to helping us,"
  said Hevesi.
• "What this study makes clear is that what the
  President and Congress have committed so far is
  just a down payment on what it will take to
  ensure that the terrorists don't succeed in
  destroying not just the two towers, but also
  America's and the world's financial capital."
• The report provides preliminary data and the
  Comptroller's Office will continue to update the
  information and will cooperate with other efforts
  to calculate costs, including the report being
  prepared by the New York City Partnership.
• Loss of Buildings and People -- 45 billion
• Rebuilding the World Trade Center as smaller
  buildings is estimated to cost 6.7 billion.
  Repairing and restoring other damaged buildings
  will cost about 5.3 billion, for a total cost of
  12 billion.

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• Replacing and repairing infrastructure will cost
  about 9.4 billion, including 4 billion for
  subways, 3 billion for telephone, electric and
  other utility systems, and 2.4 billion in losses
  for the Port Authority, including the PATH train
  but excluding the Trade Center buildings.
• The value of furniture and fixtures, employee
  property, computer systems,vehicles, inventory in
  stores, etc., is another 12 billion. For
  securities firms in the WTC complex, the
  technology losses alone are estimated to be 3.2
  billion.
• It is impossible to put a real value on a human
  life and the pain of losing a loved one. But for
  purposes of economic analysis, one way economists
  ascribe an economic value to human life us by
  calculating how much an individual would have
  earned over his or her expected working life.
• On that basis, using the high average income for
  New Yorkers in general and financial workers in
  particular, the cost to the City economy of 5,600
  deaths is about 11 billion.
• Continuing Costs Loss of Economic Activity in
  FY 02 -- 42 billion
• The City is initially paying for clearing the
  area and the most visible portion of the
  cleanup, nearly half a million tons of steel,
  concrete and debris.

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• The Comptroller has already agreed to register
  four emergency contracts totaling 1 billion for
  cleanup, with an additional 5 billion projected
  for stabilization and remediation.
• Another 7 billion in costs is expected for City
  government personal-service costs
  (such as police, fire, and sanitation overtime)
  and other-than-personal-service (OTPS) costs
  such as destroyed City vehicles, road rebuilding,
  and burial costs.
• Finally, 1 billion is the estimate of spending
  by private owners for cleanup and repairs.
• Treating those injured and the loss of work from
  trauma and the long-term effects of the attack
  for victims, their families, and countless other
  citizens could cost 3 billion.
• Many companies lost business as a result of the
  attack and economic
  activity will be affected for a long time.
• The total amount of lost business activity is
  projected at 21 billion for fiscal year 2002.
  Wall Street firms were severely affected by the
  closure of the NY Stock Exchange and many trading
  centers and are projected to lose 7.5 billion in
  economic activity over fiscal year 2002.
• Hotels, restaurants and theaters lost an
  estimated 2.3 billion.
• Retail and
  wholesale trade lost 1.7 billion, insurance 1.3
  billion.
• Lost rent
  from destroyed and damaged buildings is about
  1.75 billion.
• About 700
  million will be recouped as companies move to
  other locations
• in New York
  City, so the net loss is about 1.05 billion.
• Wages lost
  to the City economy because businesses locate
  elsewhere will
• be about 3
  billion in FY 02.
• The City
  could lose 115,300 jobs this year, including
  17,500 in retail and
• wholesale
  trade, almost 15,000 in the securities industry,
  almost 29,000 in
• service
  industries including 7,000 in airlines alone,
  8,000 in restaurants and

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• Retail and wholesale trade lost 1.7 billion,
  insurance 1.3 billion.
• Lost rent from destroyed and damaged buildings is
  about 1.75 billion.
• About 700 million will be recouped as companies
  move to other locations in New York City, so the
  net loss is about 1.05 billion.
• Wages lost to the City economy because businesses
  locate elsewhere will be about 3 billion in FY
  02.
• The City could lose 115,300 jobs this year,
  including 17,500 in retail and wholesale trade,
  almost 15,000 in the securities industry, almost
  29,000 in service industries including 7,000 in
  airlines alone, 8,000 in restaurants and 6,000 in
  hotels.
• Continuing Costs Loss of Economic Activity in
  FY 03 -- 3 billion to 18 billion
• The long-term impact of the attacks depends on
  how quickly the national and local economies
  recover and on the location decisions that
  companies make.
• There is not enough space in Manhattan for all
  the firms displaced from the World Trade Center.
  Some are moving out of the City. Some may return
  when there is new space, others may not.The
  impact on the city's economy in FY 03 could range
  from 3 billion to 18 billion.

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• Offsets Insurance -- 37 billionLife insurance
  payouts could total 4 billion, slightly more
  than one-third of the economic loss of 11
  billion.
• Property/casualty Insurance payments are
  estimated at 17 billion, half the total loss of
  34 billion.
• Business interruption insurance may provide 11
  billion of the 21 billion lost.The remaining 5
  billion will come from coverage such as
  unemployment insurance, Workers' Compensation
  (which provides both death benefits and
  disability benefits), and health insurance.
• Federal and State Aid
• The federal government has appropriated 20
  billion for recovery aid for New York,Washington
  and Pennsylvania, but it is still unclear how
  much of this the City will receive.
• Clearly, given the costs, this will not be
  enough. The level of state financial assistance
  is also unclear at this time.
• "It is essential that New York City receive an
  appropriate amount of aid, given the costs, and
  that this aid come quickly and with as few
  strings as possible," Hevesi said.
• Reduction in Taxes Other Revenues -- 1.3
  billion in FYs 02 and 03

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• Reduced economic activity will mean lower incomes
  for businesses and
  residents and lower City taxes and other
  revenues. In FY 02, tax revenues are projected to
  be 738 million less than currently projected,
  including 338 million less in sales and hotel
  taxes, 189 million in business taxes, 112
  million in personal income taxes, 45 million in
  commercial rent tax and 45 million in parking
  violations.
• In FY 03, taxes and other revenues are projected
  to be 567 million less than currently projected,
  including 195 million in property taxes, 135
  million less in sales and hotel taxes, 95
  million in business taxes, 50 million in
  personal income taxes, 38 million in commercial
  rent tax and 37 million in parking violations.
• Recommendations
• "Our goal must be to be the most
  business-friendly city in America," said
  Hevesi."We must help local businesses
  re-establish themselves as quickly as possible.
  The study makes the following recommendations
• Expedite payment of disaster grants and loans to
  help businesses get back to normal operations as
  quickly as possible.
• Provide tax incentives and utility cost breaks to
  keep businesses in New York City.Support and
  expedite microlending activities to help small
  businesses.

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• Rebuild on the Trade Center site as quickly as
  possible. Establish a state and city authority
  with the power needed to ensure that the site and
  neighboring
  buildings are cleared or safely repaired and that
  well-thought-out
  reconstruction plans are developed and
  implemented with no delays.
• Establish a security commission led by the police
  commissioner. The commission should seek to
  develop security procedures that balance the need
  to protect New Yorkers and the nation, while also
  promoting an
  efficient flow of people and goods necessary to
  conduct business.
• The commission should foster cooperation among
  companies to share and keep down security costs.
  As much as possible, technology should be used to
  allow effective scanning for potential weapons
  while allowing New Yorkers to go about their
  business as quickly as possible.

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September 11, 2001The Day when terror struck New
York and Washington DC

• 25 Million Square feet of commercial office space
  has been destroyed.
• Retail sales plunged 2.4 percent in September.
• Delays are a real threat to the U.S. economy. If
  it takes longer to move goods and people, the
  nation's productivity is likely to fall.
• The insurance industry estimates its costs alone
  have reached 30 billion. And in New York City,
  the costs of rebuilding, of lost jobs, and of
  lost revenues could reach to more than 100
  billion over the next two years.
• An estimated 3 billion has flowed out of equity
  funds since the attacks. Wall Street firms expect
  to lose 1 billion in profits this year. More
  than 300 companies around the country have cut
  profit estimates since the attacks, blaming the
  terrorism for a slowdown in business.
• Claims for first-time unemployment benefits
  jumped by 71,000 in the latest week to 528,000,
  the highest in eight years.
• Retail sales plunged 2.4 percent in September,
  their biggest drop in nine years
• With occupancy rates nationwide still down nearly
  12 percent last week, hotels are desperate for
  customers.
• Economies like Singapore, Malaysia and Taiwan
  rely heavily on shipments to the United States,
  their largest market. Japan is typically the key
  Asian trading partner and No. 2 destination for
  Asian goods.

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Effects Felt at Home and Abroad

• The Philippines, Thailand and Indonesia have also
  yet to work themselves free from the effects of
  the Asia crisis that started in 1997. With
  structural problems at home and a worsening of
  already weak overseas demand, there will be
  little to help them, experts say.
• Even the most robust economy in Asia, China, has
  been relying more and more on sales to the United
  States, particularly of electronics goods. Those
  will now take a sharp dip, as will other
  countries' key shipments, such as South Korean
  and Japanese car exports.
• New York Gov. George Pataki pitched a 54 billion
  recovery plan to the White House and Congress
  that he acknowledged included items not directly
  related to the Sept. 11 terrorist attacks. But he
  told them he wanted to send them a proposal they
  could work on now so the money could get back to
  New York businesses as quickly as possible.
• Under the governor's three-part plan, 34 billion
  would go toward rescue and rebuilding efforts,
  20 billion to economic recovery efforts,
  including creation of a "Liberty Zone" for
  economic development in Manhattan, and 100
  million for security measures.
• Japan, the world's second-largest economy, has
  increasingly relied on the United States to lead
  it out of a prolonged slump. It is about to enter
  its fourth recession in a decade.

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• While officials at the meeting signaled their
  agreement that New York is entitled to more than
  the 20 billion in emergency money approved last
  month, two key questions came of the discussion
  what costs were directly connected to the
  terrorism, and when New York should get the
  money.
• The answer to the first question is dependent on
  insurance payouts, state officials have said. And
  Pataki requested that the money be approved as
  quickly as possible,
• But Pataki argued that a quick payout could help
  hold off further economic damage to 9,000 small
  businesses destroyed by the attacks. and barred
  from reopening due to recovery operations.
• Gov. George Pataki is proposing a 54-billion aid
  package to help pay costs related to the New York
  City rescue effort, rebuilding and economic
  revitalization. It includes 15 billion for basic
  rescue and response costs, 19 billion for
  rebuilding and redevelopment costs and 20
  billion for economic recovery and revitalization
  costs.

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• Here's a breakdown
• RESCUE/ RESPONSE
• 5 billion for construction costs including
  demolition, debris removal and re-mediation of
  the World Trade Center site.
• 5 billion for emergency security measures.
• 900 million for utility costs, including repairs
  to utility lines and buildings.
• 378 million for victim assistance.
• 323 million for other city costs, including
  burials, reimbursement to the city Board of
  Education, and miscellaneous personnel and
  nonpersonnel service agency expenses.
• REBUILDING/ REDEVELOPMENT
• 8.2 billion for replacement of the World Trade
  Center and hotels.
• 2.4 billion for MTA capital costs to cover
  safety and security concerns.
• 1.7 billion to fix infrastructure damage to the
  Metropolitan Transportation Authority.

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• 1.3 billion for Port Authority security
  enhancements.
• 1 billion for cleanup of private buildings and
  debris removal.
• 850 million for subway station reconstruction.
• 250 million for reconstruction of city roads,
  water mains and sewers.
• 245 million to cover MTA losses in toll and fare
  revenue.
• 163 million to cover reduction of tax subsidies
  to the MTA because of economic disruption.
• ECONOMIC RECOVERY/ REVITALIZATION
• This part of Patakis plan does not include a
  specific breakdown of money requested in most
  cases, but lists types of costs, including
• Acceleration of the MTA's five-year capital
  program of railway track improvements, station
  rehabilitation, modernization and safety
  improvements.
• Acceleration of work on East Side highway access,
  and preliminary engineering studies for the
  Second Avenue Subway.
• Modernization of crossings at the border between
  New York State and Canada and improving security
  to enhance trade.
• Acceleration of the state's five-year capital
  program of bridge rehabilitation, road paving and
  intelligent technology projects.
• Creation of a "Liberty Zone" in lower Manhattan
  that would include tax incentives and grants for
  businesses as a way to rebuild 25 million square
  feet of commercial office space destroyed Sept.
  11.
• Payment of 100 percent of reimbursement of COBRA
  premiums for workers.

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• Creation of a "Liberty Zone" in lower Manhattan
  that would include tax incentives and grants for
  businesses as a way to rebuild 25 million square
  feet of commercial office space destroyed Sept.
  11.
• Payment of 100 percent of reimbursement of COBRA
  premiums for workers.
• Extension of unemployment insurance benefits
  beyond the current 26 weeks.
• Strengthening security to protect New York State
  water supplies, transportation, infrastructure,
  communications structures.
• "Going forward, economic indicators will show the
  full ramifications of these attacks," Labor
  Secretary Elaine Chao said. "What that means is
  that President Bush's economic stimulus package
  will be a major factor in helping our economy.
• The loss of jobs 199,000 last month was the
  largest decline since 259,000 in February 1991,
  when the United States was fighting the Gulf War
  and its economy was in a recession. The
  unemployment rate was steady at 4.9 percent
  despite the huge number of job cuts, in part
  because the work force the number of people
  employed or looking for work grew by 840,000
  people in September.
• In a visit to the Labor Department Thursday, Bush
  pledged to provide 3 billion in aid for workers
  who were displaced or lost their jobs in the wake
  of the Sept. 11 attacks.

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• The "Back to Work" package, as Chao dubbed it,
  will extend unemployment benefits by an
  additional 13 weeks for individuals living in
  states directly affected by the attacks, and in
  states where unemployment jumps to more than 30
  percent for three consecutive months.
• 'Economy in Recession
• The president is also calling for accelerating
  individual income tax cuts scheduled to take
  effect over the next few years and a stimulus
  package that will also include tax incentives to
  encourage businesses to invest. The total
  stimulus package is expected to be between 60
  billion and 75 billion. The president Friday
  urged Congress to pass already-signed tax relief
  for individuals and businesses as quickly as
  possible.
• Most economists now concede the U.S. economy is
  likely moving backwards rather than forwards.
  Gross domestic product the most broad measure
  of an economy's strength increased at a 0.3
  percent annual pace between April and June, the
  slowest in eight years.

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Estimated job losses announced in various
industries

• Aerospace
• Boeing 30,000
• Bombardier 3,800
• Textron 2,500
• Raytheon Aircraft 750
• Goodrich 450
• Rockwell Collins 2,600
• Airlines
• AMR (American, American Eagle, TWA) 20,000
• United 20,000
• Delta 13,000
• Continental 12,000
• US Airways 11,000
• Northwest 10,000
• British Airways 7,000
• Air Canada 5,000

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• Swiss Air 9,000
• KLM Royal Dutch Airlines 2,500
• America West 2,000
• Sabena 2,000
• Midway (shut down) 1,700
• Virgin Atlantic 1,200
• Scandinavian Airlines 1,100
• Air Transat 800
• American Trans Air 1,500
• Frontier Airlines 440
• National Airlines 300
• Vanguard Airlines 150
• Sun Country 200
• Alitalia 2,500
• Aer Lingus 2,500
• Textron (Cessna,Bell Helicopters) 2,500

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• Travel
• Mandalay Resort Group, Las Vegas 4,500
• MGM Mirage, Las Vegas 3,000
• Wyndham International 1,600
• Park Place Entertainment, Las Vegas 1,500
• Other Las Vegas Hotels 3,000
• Navigant International 800
• Rosenbluth International 800
• Shedd Aquarium 44
• Airline Service
• LSG Sky Chefs 4,800
• Gate Gourmet 3,000
• Manufacturing
• Fiat 20,000
• Ford Motor Company 5,000
• General Electric 4,000

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• Honeywell 4,000
• Alcatel 3,000
• McLeod 1,600
• Spheron 500
• Terex 500
• Brinton US Axminster 300
• Goodyear 1,400
• Technology
• Motorola 7,000
• WorldCom 1,000
• Sun Microsystems 3,900
• Nortel Networks 10,000
• Corning 4,000
• EMC 2,400
• Advanced Micro Devices 2,300
• Excite At Home 500
• Sony 5,000

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• Banks and Brokerages
• Credit Suisse First Boston 2,000
• Retail
• Nordstrom 1,600

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September 11, 2001Effect on Small Businesses in
Lower Manhattan

• The city estimates that 14632 businesses in the
  area close to WTC were destroyed ,damaged or
  significantly disrupted.
• 50,000 people who worked in the wtc are no longer
  there as clients and customers.
• Before Sep'11 only few enterprises have business
  interruption insurance and many didn't know it
  exists.
• 1800 businesses have sought S.B.A loans.
• 340 have been approved
• 12000 businesses who requested applications did
  not even submit them.
• The S.B.A should extend the grace period from 5
  months to one year or two years.
• Insurance will probably cover about 17 Billion
  of property damage,4 Billion for loss of life
  and perhaps 18 billion in economic losses.

SourceFred P.Hochberg,Small Business, Badly
Damaged, New York Times, October 17, 2001,
p.A23.
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SourcesThe information presented was
compiled from the following publications

• www.abcnews.com
• www.cnn.com
• www.nytimes.com
• www.msnbc.com
• www.google.com
• www.nyc.gov
• www.wsj.com
• The New York Times

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Ground Zero, Lower Manhattan