Public Expenditure to Rebuild Downtown Manhattan After 9/11/2001

According to this article, "The cost of rebuilding the trade center, several related projects and the downtown public transportation system will run close to $24 billion — probably not all that surprising given the institutional rivalries, the political squabbling and the complexity of building 26 interdependent projects on a cramped 16-acre site next to a river and with two transit lines running underneath.

Financing the reconstruction has been equally complex. After the terrorist attacks, President George W. Bush promised more than $20 billion in federal aid for New York. But slightly more than $6 billion was spent on the clean-up and emergency aid. Of the remaining $14 billion, only $8 billion was actual cash for rebuilding — the rest came in the form of tax incentives. The insurance proceeds from the site itself came to $4.5 billion."

"Goldman Sachs’s new tower across West Street from the World Trade Center site, a relative bargain at $2.4 billion, received $1.65 billion in tax-free Liberty Bonds, which saved the bank millions in financing costs. Goldman threatened to abandon the project after the state botched negotiations for the tower. That led the state to enlarge its incentive package to include $115 million in tax breaks and cash grants, in what critics described as the most egregious example of corporate welfare in city history."

Recognizing the emotion tied to the 9/11 attacks, these examples highlight an important issue concerning commercial real estate in this age of terrorism.  Should private companies (such as Goldman Sachs) be responsible for their own terrorism insurance or should the government (and national taxpayers) be the ultimate insurer?    

In the aftermath of the attacks,  Manhattan would have suffered a loss in real estate value if companies such as Goldman Sachs moved to the suburbs.  The land owners and voters of Manhattan benefited from having these companies receive federal $ to rebuild and remain in Manhattan.   Do people in Nebraska care if Goldman Sachs is located in Manhattan or New Jersey?   As this article highlights, everyone's tax dollars (including the people of Nebraska) were used to subsidize the rebuilding of downtown New York City.  An important policy question is to ask;  who should pay for such rebuilding efforts?   Private insurance companies or public taxpayers?    Dwight Jaffee of UC Berkeley has written on this important issue of disaster insurance. 

 

 

 

 

 

Comments

[Cash Lu]

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[Hendri Prastio Kurniawan]

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[Typepad]

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