FOR IMMEDIATE RELEASE: March 7, 2002

SCHUMER: WHITE HOUSE MAKES GOOD ON $20 BILLION PLEDGE TO AID NY RECOVERY

President's decision to mean $10.5 billion for New York in FY02, including a $5.5 billion supplemental budget proposal and a $5 billion economic stimulus package for Lower Manhattan that sends total federal commitment over$20 billion mark

Lower Manhattan Small Businesses and Residents, NYC Commuters, Subway Riders, Verizon and Con Ed Customers, City's Liability All Taken Care of With New Funding

The Bush Administration is poised to make good on the $20 billion pledge the President made to New York in the days following the September 11 terrorist attacks, US Senator Charles E. Schumer said after a White House meeting this afternoon.

Standing with New York officials, the President said today that he will propose almost $5.5 billion for New York's recovery effort in the supplemental budget proposal he is sending to Congress next month and will back the $5 billion economic stimulus proposal for Lower Manhattan championed by Schumer, Senator Clinton, Governor Pataki and the Congressional Delegation. Along with the $10.7 billion in federal funds already allocated, this infusion will send the New York aid over the $20 billion mark.

"The exciting thing about this proposal is that it goes beyond the normal rescue and recovery activities in that it modernizes and transforms Lower Manhattan and doesn't simply replace what was destroyed -- much of which was obsolete," Schumer said. "This funding is going to bring downtown New York into the 21st century in a way that protects existing jobs, creates new jobs, and makes the world's financial capital more vibrant than ever."

Schumer, who helped secure the original $20 billion commitment, praised the President for keeping his word and said that the funding included in today's proposal will address a number of key areas that had previously been thought to be excluded from the federal aid effort, including:

• Nearly $2 billion in funding to build a new, state of the art intermodal transit facility that would connect the PATH trains with all subway lines running through Lower Manhattan;

• A $5 billion economic stimulus plan to retain jobs and investment in Lower Manhattan, including tax credits for businesses south of Canal Street, billions of dollars in bonding authority to encourage private development, and a variety of enticements to retain and attract businesses to Lower Manhattan.

• $2.75 billion in new FEMA funds to reimburse the city and state for expenses like overtime, lost equipment and environmental remediation;

• Federal help for restoring the destroyed energy and telecommunications infrastructure in Lower Manhattan;

• Liability insurance to ensure the completion of the clean up effort by protecting the City and contractors from potentially crippling law suits.

The New York provisions of the supplemental budget that will be submitted to Congress for approval next month are expected to win bipartisan approval. The Lower Manhattan stimulus package will be considered by the House today and the Senate later this week, and is expected to gain Congressional backing. The President has said he will sign the bill immediately.

"Nearly six months ago, I sat in the Oval Office and asked President Bush for $20 billion to help New York. Our city and our country had just been brutally attacked, and we desperately needed the President's help. Sitting with Senator Clinton, I made the pitch, expecting the President to offer $5 billion or say he'd get back to us. Instead, he looked right at us, and there were tears in his eyes and tears in mine, and he said, ‘New York needs help?' I nodded and without hesitation, without even flinching, he said, ‘You've got it.' Today, the President is making good on that pledge, in full, and then some."

"Thanks to this new funding, the pizza parlor on Cortlandt Street probably won't have to close. The family living on South End Avenue won't have to move. The commuters who now have to take two trains and a bus just to get to work can look forward to a state of the art intermodal transportation facility that rivals any in the world. Our utilities won't have to raise rates to rebuild the facilities destroyed on September 11. Our workers won't have to worry about their jobs leaving the city. Our businesses will be given a strong reason to stay. And that's just a small sampling of the ways this money helps real people, facing real problems."

The following is a breakdown of how the remainder of the $20 billion will be allocated:

$1.8 billion for transit upgrades: The new funding would provide $1.8 billion for a state of the art intermodal transit station that includes the rebuilding of the PATH train with an underground connection to all MTA lines in Lower Manhattan. The intermodal facility would connect the commuter lines via underground walkways and tunnels to the 1, 2, 3, 4, 5, 6, 9, A, C, E, J, M, Z subway lines and provide a walkway to the World Financial Center.

The cost estimate for the entire intermodal station is approximately $3 billion, including the rebuilding of the PATH, and the 1 and 9 subway stations. Some of these costs will be covered through insurance, some through FEMA, with the $1.8 billion going to the Port Authority and the MTA to cover the remaining expenses.

$2.75 billion in FEMA funds: The new funding will include an additional $2.75 billion go to the Federal Emergency Management Agency to reimburse the City and State for expenses like overtime, lost equipment, destroyed or damaged public facilities (including some transit and road repair projects), environmental remediation, and other needs. With $6.35 billion already allocated, this proposal brings the total FEMA money to just under $10 billion. To date, the recovery effort has spent about $1 billion.

Schumer said that if the total FEMA expenditures do not reach the $10 billion total, the Office of Management and Budget has guaranteed that it will channel the unused portion to New York in other ways. FEMA currently projects the City and State reimbursements will be in excess of $9 billion.
Contractor liability: The Administration said it would help resolve the outstanding liability issues that could jeopardize the finances of New York City as the clean up progresses. This would allow the City and general contractors to use a portion of the $2.75 billion in FEMA money to purchase private insurance policies. With the city and the contractors potentially liable for up to $1 billion, the insurance will help the City and the contractors working on the cleanup complete their efforts by protecting them from potentially crippling lawsuits. At the same time, it guarantees that anyone who has a valid claim for damages related to the cleanup of the site will be able to recover.

$167 million to rebuild Lower Manhattan's streets and roads: The new funding includes $167 million for the West Side Highway and related federal highway repairs, in addition to $75 million already allocated in December. The State estimates that the repairs could cost between $200 and $300 million. With federal emergency highway aid capped at $100 million per incident, Schumer said he was originally pessimistic about the prospects of securing the full amount of needed aid since a waiver from the cap requires Congressional approval. In the White House's FY03 budget, the President requested the statutory approval necessary to secure the waiver. Regular street (non-federal) repairs are eligible for assistance through FEMA.

$750 million to rebuild Lower Manhattan's destroyed telecommunications and energy infrastructure: The new funding includes $750 million in Community Development Block Grants to go toward restoring Lower Manhattan's lost telecommunications and energy infrastructure. This money will be channeled through the Lower Manhattan Development Corporation to help utilities like Con Ed and Verizon rebuild destroyed power and telecom facilities. This assistance will help prevent the utilities from having to pass rebuilding expenses onto New York's rate payers through long-term rate increases.

This assistance is essential to redeveloping Lower Manhattan, and will allow the utilities to build a more modern communications and energy infrastructure capable of handling future demand at no additional cost to the ratepayers. In addition, the new infrastructure will help companies in Lower Manhattan obtain additional power to meet their energy needs while providing a state-of-the-art telecommunications system downtown.

The Tax Package:
The new funding includes the Liberty Zone Tax Package – a $5 billion economic stimulus package for Lower Manhattan developed by Schumer, Clinton, Rep. Charlie Rangel (D-NY), Rep. Amo Houghton (R-NY), Rep. Tom Reynolds (R-NY), Rep. John Sweeney (R-NY), Senate Majority Leader Tom Daschle (D-SD), Senator Robert Torricelli (D-NJ), Senate Finance Committee Chairman Max Baucus (D-MT) and House Ways and Means Committee Chairman Bill Thomas (R-CA). Included in the Job Creation and Worker Assistance Act of 2002, the Lower Manhattan economic stimulus package will be voted on in the House on Thursday and in the Senate on Friday. The $42 billion bill is expected to easily pass both the House and the Senate and should be signed by the President within days. The seven part economic stimulus plan includes:

Giving companies a $2,400 per employee Work Opportunity Tax Credit (WOTC). This $2,400/ per year/ per employee tax credit applies to every business of 200 employees or less on or south of Canal Street for the next 2 years (starting December 31, 2001 and running through December 31, 2003). The WOTC credit would provide badly needed relief to approximately 1,000 small businesses, encouraging them to retain employees and stay in Lower Manhattan. The WOTC credit would also apply to any business that moves to Lower Manhattan during the two year period, and is expected to generate sorely needed new business activity. The WOTC credit is a direct tax credit, and not a tax deduction, which means that the entire $2,400 per employee credit is deducted from a businesses' final tax bill, reducing the total amount of taxes the company actually pays (by contrast, a tax deduction merely reduces the amount of income that can be taxed). The cost to the federal government for the WOTC credit is expected to be approximately $630 million.

"This tax credit is the critical difference between thriving and barely surviving for countless small businesses in Lower Manhattan," Schumer said. "So many small businesses are struggling to stay afloat. So many others are considering leaving the neighborhood or even the city altogether. This tax credit gives them the help they need to stay in New York and stay in Lower Manhattan."

Issuing new private activity bonds with triple tax exempt financing. This provision authorizes the issuance of $8 billion in tax exempt bonds to replace office space, residential rental and public utilities. The provision allows the City or State to issue tax free bonds to finance the construction of new office space and residential rental space in Lower Manhattan ($6 billion) and anywhere else in New York City (up to $2 billion), making it more attractive for developers to begin new construction and making many projects economically feasible that would otherwise be simply too expensive to finance. Normally, developers issue taxable bonds that yield high rates, making the cost of the bonds, and in turn the cost of construction, more expensive. By authorizing tax exempt bonds, the developers can sell the bonds at lower rates, bringing down development costs. The $8 billion in bonding should facilitate the construction of more than 20,000,000 square feet of office space, attracting major development and spurring the local economy. The $2 billion authorized outside of lower Manhattan would enable developers to build office towers in Long Island City and downtown Brooklyn, allowing New York City to retain back office jobs currently moving to New Jersey and beyond. The cost of this provision to the federal government is estimated to be $1.2 billion (the cost to the federal government comes in lost revenue from tax exempt bonds that are purchased instead of taxable bonds).

"We lost over 20 million square feet of office space on September 11, and every day we wait to replace it is another day we lose businesses to New Jersey and other states," Schumer said. "The new tax exempt bonds mean new construction and new development now, and that means new jobs in New York City."

30% bonus depreciation for any property used in the zone. This provision allows 30% of the cost of office equipment, new technology and other property to be depreciated in the first year of owning that property for businesses in lower Manhattan – a significant acceleration over normal IRS depreciation rates. The accelerated depreciation makes it cheaper to purchase new equipment (by allowing companies to write off a greater portion of the cost of the equipment in a shorter period of time), enticing businesses to locate or expand in Lower Manhattan. This provision will cost approximately $1.5 billion and runs through 2007.

Advanced refunding of municipal bonds. This provision allows the City, the MTA, the NYC Municipal Water Finance Authority and NYC hospitals to refinance municipal bonds and take advantage of better rates. Under this provision, the municipal agencies would repay outstanding bonds by issuing new bonds at lower rates, saving the City alone over $200 million. The estimated cost to the federal government is approximately $930 million (the cost comes from lost income that would come from taxable bonds; normally, federal law only allows one advanced refunding of municipal bonds in order to keep tax exempt bonds from eliminating revenue generated by taxable bonds).

"Advanced refunding of municipal bonds is just like refinancing a mortgage. In this case, the City and other agencies take advantage of better rates, and in the process, save hundreds of millions of dollars. And with a budget deficit of nearly $5 billion, every dollar we save the City is money that doesn't have to be squeezed out of the budget," Schumer said.

Increasing Section 179 Expensing. Currently, federal law allows companies to write off $24,000 in equipment every year, reducing its annual taxable burden (items expensed are balanced against corporate profits). Under this provision, companies in Lower Manhattan would be able to expense $59,000 in equipment each year, until 2006. This provision would cost approximately $37 million.

Deferring taxes on insurance proceeds. When property is destroyed, the IRS considers the insurance proceeds not spent to replace the lost property an involuntary conversion, which is taxable after three years. If a company realizes an involuntary conversion from property destroyed on September 11, and reinvests the property in lower Manhattan, it would not have to claim any gain on that property for five years. This provision would cost approximately $300 million (the cost to the government accounts for both the time value of the money deferred and the flexibility afforded by two extra years that allows companies to recognize the gains in years where the proceeds can be balanced by other losses).

Accelerated depreciation for leasehold improvements. Currently, leasehold improvements (improvements made to office space) can be depreciated over 39 years. This provision, available to lessors and lessees, would accelerated the depreciation period to five years for leasehold improvements made within Lower Manhattan. The cost of this provision is $595 million, lasting through 2006.

"It's been a tough six months – for everyone in this room, for everyone in New York, and for everyone in this country. We've struggled, but as a city, as a state, as a delegation, we've worked together, we've fought hard, and today, we persevered," Schumer said.

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