The Long Crisis by Benjamin Holtzman

Author:Benjamin Holtzman
Language: eng
Format: epub
Publisher: Oxford University Press
Published: 2020-07-15T00:00:00+00:00

5

The Trouble with Development

when mayor abraham Beame took office in January 1974, he faced the unenviable challenge of boosting an economy that was entering its sixth year of fiscal turbulence. New York had never recovered from the national recession of 1969; a subsequent nationwide recession that took hold in late 1973 may very well have dampened Beame’s enthusiasm for his new position. One government study assessed the period after Beame took office as the “worst economic downtown since the 1930’s” for “the New York-New Jersey Metropolitan Area.”1 New York suffered from job loss, a waning tax base, and stagnant development. In the period between 1970 and 1975, for example, the city experienced substantial declines in nearly all major employment categories, from finance, insurance, and real estate (FIRE) positions falling by 37.5 percent to manufacturing jobs plummeting 238.4 percent.2

Making matters worse, city officials found themselves with limited fiscal resources to promote economic development. For much of the twentieth century, officials drew significantly from their own budget or from federal and state funding to spur economic growth. Yet even before the fiscal crisis, Beame administration officials struggled to allocate resources to foster development. “Construction work has come to a virtual standstill in New York city. Builders, developers and bankers are shying away from making further investments,” Deputy Mayor Stanley Friedman observed. And the city itself “has no money to provide public sector capital.”3 Friedman and other Beame administration officials faced a difficult problem: how to spur economic growth in a city with a weak economy, a dubious climate for investment, and a constrained municipal budget.

In response, officials turned to tax incentives. Tax exemptions and abatements could kindle development by promoting new construction, renovations, building conversions, and infrastructure improvements. They would, as Friedman put it, “create a climate which is conducive to private capital investment, thereby demonstrating the city’s desire to encourage investment and development here.”4 The private sector, unsurprisingly, enthusiastically embraced this idea. Richard J. Glover, executive vice president of the 34th Street-Midtown Association, urged city officials to provide tax incentives to induce development. “The Midtown area is suffering from an increasing amount of vacant, however, sound structures. The renewal and revitalization of these buildings will contribute substantially to the upgrading of deteriorating areas such as Times Square,” Glover wrote. Simply put, “at a time when . . . city sources for funding are extremely scarce, an incentive for private investment is necessary.”5 A number of civic associations also supported the idea. The independent Citizens Budget Commission, for example, noted: “Given the need to revitalize the City’s economy, tax relief may be the only major source of local government aid available for development because the City is in no position to allocate funds for anything but the most essential government service functions.”6

During the 1970s, New York’s Democratic and liberal municipal leaders turned to tax abatements and exemptions as economic levers to spur development. As scholar Paul Peterson would argue early the next decade, the most important tool urban leaders had in their constrained kit to improve tax revenues, capital investment, and jobs was land use.

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