MAY 2008 5/21/08Subprime Loan Maps, Federal Reserve Bank of New York. The Fed is now offering dynamic interactive maps showing conditions and density of owner-occupied subprime mortgage loans for all U.S. states, counties and zip codes. The maps are based on data for subprime mortgage loans, based on the grade assigned to the security. The underlying data start December 2007.A dozen separate functions are available, such as loans per 1000 housing units, foreclosures per 1000 housing units, REOs per 1000 housing units. Comment: This is part of what the U.S. Conference of Mayors asked the Mortgage Bankers Association for at their Detroit meeting, i.e., a way to estimate what the impact of foreclosures might be in every neighborhood.
5/20/08IBO: More Dark Job Forecasts for New York City, CrainsNY.The Independent Budget Office, in its Charter-mandated comments on the Mayor’s Executive Budget, predicts that the city will lose 33,300 financial jobs (17 percent) through the second quarter of 2009; after predicting just a few months ago that it would take three years to lose this many jobs; this will come close to the 40,000-person drop in securities jobs in 2001-2003. Overall, the IBO predicts a loss of 59,400 total jobs (1.9 percent) from the city’s most recent employment peak in the first quarter of 2008 to the expected trough in the second quarter of 2009. The IBO predicts a longer recession in New York City than the nation (the recession is imminent if it has not already begun), recovering in the second quarter of 2009. Finally, on the budget front the IBO predicts flat tax revenue in FY 2008 and a drop of 5.2 percent to $35.8 billion in FY 2009, meaning a balanced budget through 2010 because of a $4.6 billion surplus in FY 2008 and $1 billion in proposed spending cuts. Comment: The IBO’s report notes some of the “budget-busters” that may disrupt these projections of balanced budgets through 2010, and may make them look complacent in retrospect: (1) A deeper recession (more job losses than the 1.9 percent drop that is projected), (2) Labor settlements above 4 percent increases, (3) Failure by the Mayor or Council to reinstate by FY 2010 the 2006 temporary reduction in the property-tax rate. One could add: A decline in Federal or NY State aid or unexpectedly higher Other Than Personal Service expenses such as for fuel.
5/17/08 Dick Netzer, 79, Municipal Finance Expert, Dies, New York Times. Dick Netzer, an economist who advised mayors of New York City and governors of New York State and served on the first board of the Municipal Assistance Corporation, which pried New York City out of bankruptcy in the 1970s, died on May 7 in Manhattan. He was 79 and lived in Brooklyn and in East Hampton, N.Y. His death came after a long illness, his wife, Carol, said. Mr. Netzer, who spent much of his career at New York University and became dean of its Graduate School of Public Administration (now the Robert F. Wagner Graduate School of Public Service), was an expert in public finance, especially as it pertains to state and local government. He served, in the late 1960s, as an adviser to Mayor John V. Lindsay, in the 1970s, to Mayor Abraham D. Beame and Gov. Hugh L. Carey, and in the 1980s, to Gov. Mario M. Cuomo. And in June 1975, when the financier Felix Rohatyn and others recommended that the State Legislature create the Municipal Assistance Corporation, an agency with the power to issue bonds backed by portions of the city sales tax, Mr. Netzer joined the board. Comment: Few economists have been so involved in the life of their city as Dick Netzer. His work on land value taxation (LVT) and subsidy of the arts are especially noteworthy. The first reference that comes up when you Google "Dick Netzer" is his work on LVT, something that preoccupied his contemporaries at Columbia, C. Lowell Harris and the late William Vickrey. He was a keynote speaker at the 1993 Council of Georgist Organizations annual conference in Los Angeles. Another contribution he made was to the problem of subsidies to the arts, a natural continuation of the work of William Baumol and William Bowen on cost disease in the arts. At NYU, he bravely attacked the problem of NYU's money-losing engineering school at a time when shedding it appeared to be the only and inevitable option for NYU - although it was a loss to New York City, the loss has been offset by NYU's adoption of Brooklyn Poly.
5/12/08Land Values Computed from CoStar Data, NYC and 10 NJ Counties, Federal Reserve Bank of New York. The latest issue of Current Issues in Economics and Finance, 14:3 (April/May 2008) includes an interesting computation by Fed staff members Andrew Haughwout, James Orr and David Bedoll of average land values per square foot in New York City (excluding Staten island) and ten New Jersey counties. The values rise from $47/sf in 1999 to $89/sf in 2001. In 2002 the land values fall after 9/11 raises questions about NYC as a place to live or work. Recovery sets in quickly in 2003, with land values rising to $104/sf and soaring to $366/sf in 2006. As theory would predict, prices are highest in mid-Manhattan and fall as a property is more distant from the center. Comment: The report is interesting on many levels. CoStar charges for its data and is a successful operation, meaning that it can afford to spend money making sure the individual transaction numbers are reasonable and correspond to reality. The five-fold increase in property values from the post-9/11 dip in 2002 was a remarkable achievement for which Mayor Bloomberg deserves significant credit – property values are an excellent hedonic index of the desirability of living or working in a particular city. One would like to have comparable data from other cities to see NYC’s relative performance. The data show how changes in building values primarily reflect changes in the underlying land. As more data of this type become available, it will become easier to show that taxes on land (“site”) value are fairer and more efficient than taxes on buildings, which depreciate in value. Site value taxation was at the heart of recommendations for New York City presented at economic hearings before NYC Comptroller Liz Holtzman in 1993 by Columbia Professor William Vickrey, who was awarded the Nobel Prize in Economics in 1996 for his work on auctions and congestion pricing. 5/7/08Kelly, Weiner Lead Quinnipiac NYC Mayoral Poll, NY Sun.Police Commissioner Raymond Kelly is leading a new poll of potential mayoral candidates, with 23% of New Yorkers saying they would most likely vote for him next year. Rep. Anthony Weiner, who is running for mayor, picked up 16% of the survey’s votes, while the Brooklyn borough president, Marty Markowitz, collected 13%. The speaker of the City Council, Christine Quinn, tied for fourth place with Comptroller William Thompson Jr., each pulling in 10% of the votes in the Quinnipiac University poll released today. Comment: Mayor Giuliani used to say that his #1 economic development priority was fighting crime. A city that is not considered safe loses employers and jobs. That gives a five-star police commissioner an edge. 5/7/08 NYC Mayoral Race,NY Sun. With 18 months to go before New Yorkers elect a new mayor, the field of candidates emerging to succeed Mayor Bloomberg is failing to excite New Yorkers. A professor of political science at Baruch College, Douglas Muzzio, said the problem is a lack of “star power” and “juice.” Comment: That would explain why a person who is not officially a candidate but has star power leads the polls.
1/29/08 (NY Daily News):Too Bad the Superbowl Isn't in New York City (or Even in New Jersey). How super will Super Bowl Sunday be for New York's economy? Local economists say it's difficult to measure the flurry of pregame spending, especially because it's still ongoing. But it's all positive. "The problem is that the game isn't being played here, so we can't measure things like hotel room occupancy," said consultant John Tepper Marlin of CityEconomist. "But when you fill up on a day in the wintertime when things are not full, that's new money." More: 1/29/08, Buying Spree Kicks Off, NY Daily News.
12/8/07 (HuffPost): New York's Faded Tech Glory. People may forget how different it was a century ago, when the NYC area was by far the country's leading center for technological innovation, making a reality of the promise of the ideas and inventions of people like Alfred Beach, Alexander Graham Bell, Thomas A. Edison, Herman Hollerith and Guglielmo Marconi (not to mention upstate innovation in cities like Buffalo and Rochester). But Stanford and MIT took the lead in innovation under the leadership of Fred Terman and Karl Compton, by yoking the academic lab to new-business formation and NYC and NY State have fallen behind. More: 12/8/07, John Tepper Marlin, Huffington Post, The Top Ten State Tech Leaders.
12/3/08 (Sallan Foundation):LEED Is Everywhere, But Certifications Are Harder to Find. The LEED (Leadership in Energy and Environmental Design) program is very successful, judging by the number of signs in New York City with large headlines indicating pursuit of this or that LEED certification, and the number of real estate advertisements that mention LEED certification achieved or in process. But actually just 14 buildings have been LEED-certified so far in the NYC area. More: 12/3/07 Snapshot by John Tepper Marlin, "Some Positive Lessons from the LEED Program," Sallan Foundation.
11/19 (Blogspot): Reducing Blight through LVT? I was privileged to attend a breakfast meeting this morning sponsored by the Drum Major Institute. Boston Mayor Thomas Menino was the featured speaker. He spoke about how he surveyed his city for abandoned buildings and through a variety of creative initiatives, not without opposition, reduced the number of abandoned units by 77 percent. Scott Stringer, Manhattan Borough President, said: "We tax buildings -- imagine if we created a system of incremental land value taxation." Unimproved land is taxed at a much lower rate than improved land. Some cities have attempted to solve this problem by taxing vacant land at a multiple of the rate for improved land. Others have taxed improvements at a fraction (e.g., half) the rate of taxes on land value. The ultimate fix is to tax just the underlying land (hence "land value taxation" or LVT) and not the improvements, so that property-owners pay the same tax regardless of whether or not they build anything on the land. The problem with tax abatements and PILOTs is that they undermine the City's ability to pay for the service needs created by the development. These service needs include education, sanitation, police, and the annual debt service for the bond issues to pay for local infrastructure improvements. More: 11/19/07 Comment by John Tepper Marlin, Blogspot, Manhattan Borough President Stringer on LVT on liveblog by Corinne Ramey. 11/15 (NY Sun Comment):European Buyers to the Rescue. Real estate brokers are happy about continuing European interest in NYC real estate. Comment: Europeans have every reason to be interested in Manhattan real estate because the euro, which was worth as little as 84 cents in mid-2001, is now (November 18) worth $1.47. So a condo priced at $1 million then that has gone up to $1.47 million today would be discounted to $840,000 to a Frenchman who had shopped for it in 2001 and is looking at it again. This is good news not only for the European, but also for anyone in Manhattan (where the typical European buyer would be looking) seeking to sell their apartment, becauseit means there are some new buyers showing up. But it is bad news for a young person who is waiting for prices to come down, because it means there is competition for the space. It also means that parents of young people are still in demand by sophisticated young Manhattanites. More: 11/15/07 Comment by John Tepper Marlin on NYC’s Real Estate Brokers Link with European Buyers, NY Sun. Comment posted by the NYSun 11/18. 1/4/08 Headline front-page story in the NY Sun: the price of real estate in gold. But no one pays in gold, whereas many pay in euros.
10/31: "The very smart budget director of the Province of Ontario said a few years ago: 'There's a smart way to cut the budget and a stupid way. The smart way is with a scalpel, cutting out the waste. The stupid way is to tell every agency to figure out themselves how to reduce their spending by 5% or 10% or whatever, with a minimum of damage. I've been in this business for 20 years, and I prefer the stupid way.' Which is to say, the stupid way is not so stupid..." 10/31/07 Comment by John Tepper Marlin on City Agencies Face Hiring Freeze, Budget Cuts, Crain's NY Business. 10/31: “Mayor Michael R. Bloomberg, responding to shrinking revenues from a cooling economy, imposed a hiring freeze for all agencies yesterday and directed commissioners to devise spending reductions of 2.5 percent this fiscal year and 5 percent in the next... Some members of the City Council, who must ultimately vote to approve changes to the spending plan, had said they would oppose cuts to the current budget. But Speaker Christine C. Quinn said yesterday that the mayor was taking responsible action.” 10/31/07 Tighten Belts, Bloomberg Tells Officials, Diane Cardwell, NY Times.
10/30: "This [budget cutting] is the right thing to do. If the economy turns around, the freeze can be lifted. But the earlier the adjustment, the less the pain." 10/30/07 Quote by John Tepper Marlin from interview, in City Agencies Face Hiring Freeze, Budget Cuts, Crain's NY Business. 10/29: " If Mayor Bloomberg proposes midyear budget cuts to soften the blow of lower than expected tax revenues, he may face stiff opposition.A former chief economist in the city comptroller's office until 2006, John Tepper Marlin, said that if he were at City Hall, he would act quickly to address the lower tax revenue projections. 'There is absolutely no point in waiting. You want to act immediately,' he said. Mr. Marlin said he agreed with Mr. Page's projections and added that if anything, 'it could be worse.' Unlike past mayors, Mr. Bloomberg is not afraid to deliver bad news, he said..." 10/29/07 Cited in interview for City Council To Oppose Any Midyear Budget Cuts, Grace Rauh, NY Sun.
10/25: "The pension fund that invests the retirement money for more than 320,000 current and former New York City employees [NYCERS] saw an 18.27% net rate of return for the fiscal year ending June 30... and 2.43% between July 1 and October 19 [or] 2.3% when expenses and fees to maintain the fund are factored in…. The city comptroller, William Thompson Jr., looks to invest all five of the city's pension funds in hedge funds... John Tepper Marlin noted that the returns are politically important...10/25/07 Cited in interview in City’s Pension Fund Soared…,, Jill Gardiner, NY Sun.
City Economic Development
CityEconomist has expertise in the following areas: - the connections between specialization of production and knowledge and economic growth, - comparative state and local government performance analysis, - links between tax systems and incentives and economic growth.
City Density and City Destiny
The six summaries below review the arguments for the importance of city knowledge density and for the type of government action that is needed to encourage growth in a local knowledge base. How Can Governments Help Cities Grow? States and localities seeking to make their cities prosperous typically hire a deputy for economic development to make deals with companies to lure them in town. They may use eminent domain to clear space. Unfortunately, benefits may be overestimated or costs underestimated... or both. Idea Cities Grow Serving as ports, railway terminals and manufacturing centers is of decreasing importance for cities. Tomorrow's cities may most reliably thrive if they serve as centers and marketplaces for ideas. Cities with more skilled people will grow, and their residents will earn more. Why Idea Cities Grow Why do idea cities prosper? Knowledge entrepreneurship was promoted in the 1930s by Karl Compton at MIT and Frederick Terman at Stanford. They saw the economic benefits of academic research and with government help transformed relationships between their universities and local businesses. Dense Cities Prosper More populous (denser) cities tend to have (1) higher average wages and (2) a higher proportion of skilled (educated) residents. What is cause and what is effect? What Cities Can Do Five ways cities seek to improve their economies: Improve the physical infrastructure (medium difficulty). Improve efficiency of city services (hard). Give businesses tax breaks (easy). Encourage creative people to move in (easy). Encourage knowledge entrepreneurship (medium difficulty). Creating Tech Jobs - Slide Show Boston and the Bay Area surpassed NYC in creating tech jobs because they became "dense" in tech areas. They intensified their tech knowledge through close business-academic-government communication, using the Compton-Terman model. NYC cannot be complacent and should be using the same model, the "Triple Helix" approach. More (slide show)>>.
Health Services as an Economy-Building Knowledge Industry
In a seminar presented in London, UK on "Density and Destiny" to the London Deanery, National Health Service and University of London, February 7, 2006, attended by senior NHS officials and University of London professors, CityEconomist noted the role of cities as knowledge centers and the importance of city density for skills specialization, innovation and advanced education and training. More (slide show).
Economic and Policy-Related Reports for the City of NY, 1992-2006
Report on impact of 9/11 WTC attack, issued in October 2001, won a National Conference of State Legislatures Citation for its “speed and depth of analysis.” Was a major document relied on for several months by NY State and City officials while negotiating for $20 billion in Federal aid. Revisiting the data a year later, on September 4, 2002, the study generated more than 100,000 visits to the Comptroller's web site in 10 days.
Reports on NYC teenage unemployment in 1993 and 1998 were both front-page NY Times news and led to the creation by the City and local businesses of more summer jobs for NYC youths.
Ireland Peace Bond proposal (1994), adopted by the Comptroller, contributed to incentives for peace talks and cease fire in Northern Ireland.
Expert testimony in Con Edison cases presented the consumer and small-business case against rate increases (1996) and proposed merger case (2000). The testimony helped reduce the impact on the affected ratepayers of higher rates and helped avert an unfavorable merger.
Study of the NYC sports economy (1996) made clear for the first time the far greater economic importance to NYC of the sports associations (NBA, MLB, NFL, NHL) than the teams (Yankees, Mets) and was widely used in subsequent debates over the appropriateness of taxpayer support for a proposed Yankee or Jets Stadium on the Upper West Side.
Study of the NYC Software/IT Industry (1999) showed the special character and opportunities of the software industry in the City. Presented the case for special units to assist the industry in developing broadband capacity in the City and at Verizon. The Verizon office was subsequently created.
Report on the mix of NYC taxes was published initially as an issue of Economic Notes and then as "Local Government Tax Policy: Measuring the Efficiency and Equity of New York City's Tax Mix, 1984-1998" in Public Budgeting & Finance, June 2000 (co-authored with Janine Berg and Farid Heydarpour). Won the Jessie Burkhead Award (2000) for the best article by a practitioner and was used in the 2005 Charter Revision debate over the need in NYC for a Rainy Day Fund.
Net Loss: Secondary Effects of City Budget-Cut Proposals John Tepper Marlin, Senior Policy Adviser, headed the project team. This report showed how short-term budget cuts could require greater longer-term expenses. For example, assistance to disabled or elderly people to allow them to stay in existing facilities can prevent more costly government intervention or services.
Estimated economic impact of WTC 1993 attack, the only official government estimate for three months. Initiated estimate of gross city product measure in 1992. This GCP estimate has been used for determining the onset and ending of NYC's recessions by the Comptroller's Office. It has also been used frequently in the form of a daily rate, initially by the Comptroller's Office and subsequently by mayoral agencies, to provide a framework for estimates of the economic impact of events on NYC.
Reports for the Federal Government
National Commission on Productivity and Quality of Work Life: New York State Survey Commissioned the Council on Municipal Performance (John Tepper Marlin, President) to prepare a study of performance indicators for a sample of local governments throughout New York State. Developed a questionnaire for use by counties throughout the state. Documented the uneven state of performance measures, while providing some comparisons among communities that did develop indicators. Conducted four workshops throughout the state to review the measures. Consulting Associate: Professor Lewis Friedman.
Department of Housing and Urban Development 1. Via a competitive process, commissioned the Council on Municipal Performance to prepare a guide for localities on contracting municipal services, edited by John Tepper Marlin and published by Wiley. This book was used as the basis for a series of seminars on public-private comparisons in different parts of the United States. 2. Through a competitive process, commissioned a guide for local governments on auditing, which was prepared by consulting associate Peter F. Rousmaniere. The first edition sold out and a second edition was printed.
United States Information Agency Commissioned John Tepper Marlin to give several talks and work with local business and government leaders in Kharkiv, Ukraine, to consider projects to convert military facilities to civilian use. Recommended using tank factories to build freight trucks and military airfields to create a distribution center like that of Federal Express in Memphis that might attract high-value manufacturers and consolidators. The largest private publisher in the world since 1998, Bertelsmann AG, has established just such a regional distribution network in Kharkiv.
Federal Deposit Insurance Corporation - Study of deposit insurance in different parts of the world, published in The Banker's Magazine. - Study of the quality of bank credit in different states, published in The Journal of Money, Credit and Banking.
Consulting Associates Technology-Based Economic Development, DAVID HOCHMAN Community Development: JOHN WEISER, Brody Weiser Burns Pandemic Simulation: CLARK ABT