Testimony of Bettina Damiani
Before the
The U.S. House of Representatives Committee on Homeland Security
Subcommittee on Management, Integration, and Oversight
July 13, 2006
9/11 Federal Assistance to New York:
Lessons Learned in Fraud Detection, Prevention, and Control
Good morning and thank you for inviting me to testify about the allocation of Federal funds after the September 11, 2001 attacks on New York City.
My name is Bettina Damiani, and I direct Good Jobs New York, a project of Good Jobs First (GJF) and the Fiscal Policy Institute (FPI).
Shortly after the attacks on Lower Manhattan, GJNY launched “Reconstruction Watch” to track the resources earmarked for economic development. GJNY had been created two years earlier to monitor economic development incentives in New York City, so we felt qualified to help bring transparency to these new resources.
I’m here today to discuss how decisions by Congress enabled a process by which subsidies were granted to large companies and luxury housing developers with minimal input from New York taxpayers.
This was egregious considering that the brunt of the economic attacks were felt in low-wage industries such as restaurants, air transport, retail, and garment manufacturing. Federal resources did little to help these workers or the heroic cops, firefighters, and emergency workers that we saw on television during the weeks following the attack
For instance, Congress removed requirements that public hearings be held and that the majority of funds must benefit low and moderate income communities
New York took full advantage of these waivers by creating a process for distributing funds that was not respectful of inclusiveness, transparency, or equity.
The Empire State Development Corporation – an authority under the direction of Governor Pataki - and its subsidiary, the Lower Manhattan Development Corporation, were charged with distributing the funds. The boards of these authorities are composed of corporate executives and real estate interests, and the LMDC board charged with the allocation of over $2 billion in cash grants didn’t include experts in affordable housing or workforce development and, aside from one member, did not have community representation.
The limited vision of these boards resulted in the lack of response to those who needed it most.
Such as workers from the famed Windows on the World restaurant located in the World Trade Center. A collaborative effort by some of the workers to open a restaurant - called Colors - led them to apply for LMDC funds. After getting the run around for years, the group finally opened a restaurant in Greenwich Village but without any 9/11 assistance. They may do fine there but there’s no synergy of them being a part of the rebuilding efforts.
This is not surprising considering the composition of the board and lack of framework and deadlines associated with the LMDC process.
Those with ties to board members seemingly had better luck.
Board members recused themselves from votes at least 27 times as over $100 million went to groups with which they were associated. We’ve never implied that board members did anything illegal. Nevertheless, this large number of recusals gives an appearance of favoritism. Additionally, almost every vote was unanimous raising questions about where the important decisions were really being made.
Maybe, if Congress hadn’t waived the income requirements, 9/11 funds would have aided those who truly needed assistance to start or expand a small businesses. Instead hundreds of millions of dollars in cash was handed to some of the biggest names in business, including Bank of New York, Deloitte & Touche, and Goldman Sachs, even while high profile recipients such as American Express and HIP Healthcare publicly stated that these subsidies had no impact on the decision to move back downtown.
The lack of public hearings - the LMDC has held one hearing last year - denied New Yorkers a key empowerment tool at a historic moment.
The LMDC decision to opt for a write-in comment period instead of public hearings prevents a more accountable, face-to-face dialog between the public and board members and is a deterrent to broad public participation.
However, LMDC has made steps towards better transparency and fairer allocation of resources by releasing a framework intended to assist neighborhood groups and to promote open space. More recently the LMDC has funded improvements to parks in Chinatown and the Lower East Side.
Another lost opportunity was Congress’ design of Liberty Bonds. Removing the requirement that 20% of the units be for low and moderate income tenants showed disregard for New York City’s notorious affordable housing crisis.
I think the majority of Americans would be vexed to learn that the rents in 9/11 subsidized studio apartments often start at $2,000 per month. And the handful of “affordable” studios often start around $1,500 per month.
Officials’ response was $50 million for the creation of 232 affordable units and preservation of nearly 3,000 units. To put this in perspective, Bank of New York received $40 million from the same pot of 9/11 funds.
While this tax-exempt financing tool could have diversified our economy by supporting smaller, growing businesses. Instead the bonds went to finance high-end office space such as $1.65 billion Goldman Sachs and $650 million for Bank of America to locate on one of the most desirable blocks in one of the premiere businesses districts in the world – Midtown Manhattan.
The early design of relief and recovery programs had a lasting impact on the fairness of the rebuilding effort. In the future, it is critical for Congress to consult a broad coalition of local groups in the early stages of program design, so that groups representing an array of business and individual needs can be an active part of the process.