F.36.380 LABORATORIO BEHRENS, C.A

Despite the pressures on politicians and community leaders to return to a period of normalcy as quickly as possible and because of federal incentives, public interest, and insurance retractions, more and more communities are looking at ways to reduce their future vulnerability. As disasters repeat themselves and the public sees the emotional and financial benefits of mitigation, communities are making the long-term investment in mitigation. For example, the devastating 1993 Midwest floods that occurred again in some areas in 1995 had a minimal impact in those towns where buyout and reloca- tion programs were undertaken after the 1993 flood. The following is a partial list of policy areas and tools that should be considered by decision makers as they develop their recovery plan:

• Land-use planning techniques, including acquisition, easements, annexation, stormwater management, and environmental reviews.

• Zoning, including special-use permits, historic preservation, setbacks, density controls, wetlands protection, floodplain, and coastal zone management. • Building codes, including design controls, design review, height and type, and

C A S E S T U D I E S

Financial incentives, including special districts, tax exemptions, special bonds,

development rights, property transfer, or use change fees.

Information and oversight, including public awareness and education, regional

approaches and agreements, global information systems, town hall meetings, and public hearings.

Critical Thinking

Why is the recovery period often called a “risk reduction window of opportunity”? What kinds of risk reduction measures are easier to perform during recovery than other times, and why are they easier?

Conclusion

As this chapter demonstrates, the federal government plays a significant role in initiating and funding the disaster recovery process. But for recovery to be effective, the planning and deci- sion making must be done at the local level. With a disaster comes disruption and tragedy but in the aftermath comes opportunity. Changes to FEMA’s Stafford Act now require communi- ties and states to have mitigation plans approved before the disaster. These plans, developed in the calm before an event happens, can become the blueprint for facilitating recovery and making communities less vulnerable in the postdisaster environment. Communities should strive to integrate preevent recovery and mitigation planning into their ongoing planning efforts. Such integration allows the political process to work, to include citizen participation, and to garner support for changes that will make their communities safer and more secure.

• •

Economic Recovery in New York City after September 11, 2001

Prior to September 11, the World Trade Center was the heart of a vibrant downtown business district. The massive complex consisted of seven buildings, including the twin World Trade Center Towers. These 110 story skyscrapers, built in 1970 by the New York Port Authority, contained nearly an acre of space on each floor. Combined, they represented 12 million square feet of office space—

14 percent of the office space in downtown Manhattan—and were the home to 50,000 employees. Together with the other buildings destroyed or damaged on that date, over 25 percent of the commercial office space in lower Manhattan was immediately uninhabitable.

The economic impact of the attack was immediate and severe. In addition to their physical space, many companies lost all or a large percentage of their workforce and operational equipment. The transportation system on which employees depended was destroyed. The nation’s financial system shut down, and air travel was suspended. Shipping ground to a halt, and companies that relied on just-in-time products for production were left without many necessary parts. TV and radio stations lost advertising revenue as reports of the attack went commercial free for days. Consumer spending and confidence were devastated and did not return for weeks. And the insurance industry, heavily invested in the city, realized the costliest single event in its history.

Conclusion 171

C A S E S T U D I E S — Cont'd

The exact financial impact figures related to the attack are still hard to obtain, as the means to measure them is not standardized. The human casualty figure, in flux for months, was finally set at 2,749. The economic figures are much more amorphous, for a number of reasons. First, the economy is dynamic and was affected by several other factors, such as the recession that was ongoing and various scandals (Enron, WorldCom), among other issues. Second, the recovery effort is still under way, and costs related to it will likely remain open until as late as 2015, when all the World Trade Center construction is scheduled to be completed. Insurance payments are still outstanding, and the federal government still has money yet to be allocated.

The economic recovery from the World Trade Center attacks started immediately. To limit the immediate impact on shareholder confidence, the New York financial markets were shut for a period of several days. The Federal Reserve bolstered the system by preparing to inject liquidity into the system to prevent defaults, and interest rates for short-term borrowing were lowered. The Federal Reserve also ensured the availability of U.S. dollars overseas, and Congress supported U.S. airlines with $10 billion in guaranteed loans. After electricity and communication were restored, just a few days later, the markets were ready to open and begin returning to normal operations.

These initial actions, however, were superficial, intended to limit the extent of damage that already had been sustained. It was apparent from the start that a much greater amount of recovery actions would be needed in the years to follow. Numerous organizations, government agencies, and other groups have participated in this recovery, several of which are profiled next.

FEMA

The response to the attacks on the World Trade Center marked a significant change in the way in which FEMA allocated funds. In a “normal” disaster, FEMA first determines the needs as defined by established eligibility criteria, then distributes funds from its general disaster relief fund. Congress does not give money for a specific disaster; rather, it allocates money to this pool, from which FEMA operates. There is no predefined upper limit for the disaster; as a result, disaster funding projects can be open for years after the event occurs (events related to the Northridge earthquake, for example, were still being funded nearly 10 years after the event).

In this incident, however, the amount of money that was to be allocated was established early in the process. FEMA received $8.80 billion of the $20 billion in federal funds allocated by Congress, and FEMA was given enhanced flexibility in determining how the money should be used. This strategy allowed FEMA to establish an early closeout process, forcing the city and state to establish priorities early on. It also allowed FEMA to distribute funds in ways that normally would not have been possible under the Stafford Act, such that all of the $8.80 billion would be allocated. This flexibility has been vital to the economic recovery of the area. It

went beyond simply getting people back on their feet, to helping lower Manhattan reestablish itself as core of the New York City economy. FEMA funds have been used to assist owners with the cleaning of World Trade Center dust from their private residences, reimburse the city from losses associated with a reduction in tourism, pay for increased security as a result of the attacks, and fund cost-of-living allowances for the beneficiaries of the pensions of the firemen and police officers killed in the attack.

HUD

The Department of Housing and Urban Development is responsible for the second largest allocation of funds to the World Trade Center site. HUD funds were used to reimburse utility companies for emergency repairs immediately after the attacks. They assisted both individuals and businesses with compensation for disaster-related losses, through mortgage and rental insurance, crisis counseling, grants for disaster- related expenses, and businesses recovery grants and loans. HUD also has been instrumental in both the infrastructure and economic recovery of the World Trade Center site. It spent $568 million to not only return the utility infrastructure of the site to normal but to improve it. HUD’s Community Development Block Grant has been used to fund several programs, among them the Small Firm Attraction and Retention Grant Program, the Job Creation and Retention Program, the Employee Training and Assistance Program, and the Business Recovery Loan Fund. These funds have been vital to retaining the businesses that make up the economic heart of lower Manhattan.

DOT

The U.S. Department of Transportation has been involved with the effort to rebuild and improve the transportation systems damaged and destroyed at the World Trade Center site. Because of the large number of workers that commute there, having a robust and efficient system is vital to the economic recovery of the site. DOT has been involved in restoring operation to the transportation systems and providing temporary repairs to the roads during the response phase. It is now involved in the permanent replacement of the Port Authority Trans-Hudson (PATH) terminal and improvements to the Fulton Street Transit Center and South Ferry Subway Station.

IRS

As part of the $20 billion package allocated for New York City, Congress approved the Liberty Zone tax benefit, worth approximately $5 billion. This amount is not money provided by the government; rather, it is a tax break targeted specifically to companies surrounding the World Trade Center site in lower Manhattan, deemed the Liberty Zone. Among its provisions are a business employee credit, special depreciation allowance, tax-exempt private activity bonds (Liberty Bonds), and increased expensing. Some of these breaks have already expired, whereas others will continue on for several more years. The $5 billion figure is an estimate, and the IRS is not tracking the actual usage of these benefits.

Conclusion 173

State and Local: Empire State Development Corporation

The state of New York’s economic development corporation is aiding in the economic recovery of the region through its NY Incentives Program, designed to help small business owners realize the benefits of doing business in the area by assisting with the various economic incentive programs.

Lower Manhattan Development Corporation

The Lower Manhattan Development Corporation is a state-city corporation designed to oversee the redevelopment and improvement of the World Trade Center site and the entire lower Manhattan area. Created shortly after the attack by Mayor Giuliani and Governor Pataki, it consists of eight board members appointed by the state and eight appointed by the city. It consults with citizen groups on issues such as transportation and infrastructure, residential and commuter concerns, economic development, tourism and the arts, and memorial planning. It approved the plans for the rebuilding of the World Trade Center site and the included memorial site. Most important, it is in charge of channeling the funds received from the federal government.

Port Authority

The Port Authority of New York and New Jersey was founded in 1921 to enhance regional commerce and transportation in the New York City metropolitan area. It has a 12-member board, with 6 members appointed by the governor of each state. The Port Authority built the World Trade Center in 1970 and owned it until July 2001, when it leased it to a private party. It owns the land today and is working closely with the Lower Manhattan Development Corporation to rebuild the World Trade Center and its transportation infrastructure.

Other Agencies

Numerous other agencies are involved in the rebuilding of the World Trade Center site and lower Manhattan. Among them are the Metropolitan Transit Authority, NYC Planning Commission, NYC DOT, NYC Department of Environmental Protection, and NYC Economic Development Corporation. Local community groups, arts

societies, architects, and regional planning associations are also involved.

Insurance

Many of the insurance claims from the World Trade Center attack have yet to be settled. Estimates of actual payout range from $30 to $70 billion, depending on the estimate source and date. The two World Trade Center towers, each insured for $3.5 billion, were reimbursed for only $3.5 billion total because the two attacks were considered to be part of a single event. For the insurance industry as a whole, this attack was a watershed event. Insurance companies normally operate with thin profit margins and a reliance on actuary tables to determine the likelihood of events, but acts of terrorism are potentially bankrupting and nearly impossible to predict. The answer from the U.S. government has been the passage of the Terrorism Risk Insurance Act of 2003, which provides federal sharing of public and private compensation for insurance of commercial property.

Charitable Contributions

Although charity is present at most disasters, it was especially prevalent in the World Trade Center disaster, especially in regards to funds collected for victims and victims’ families. An estimated 600 charities registered with the IRS with the explicit intention of collecting funds related to the disaster. The top 35 of these funds had collected nearly $2.7 billion by October 2002. The largest of these, the American Red Cross Liberty Fund, had collected over $1 billion dollars. (In addition to the funds collected, the American Red Cross served an estimated 11.5 million meals and provided 50,423 disaster workers in the first two months of the disaster.)

Of the money collected by the charities, over 70 percent had been distributed by October 2002. Much of the money went to victims’ families, in an effort to recoup lost salaries. The GAO reports that the average nonuniformed victims’ families received $90,000 in cash assistance, and uniformed families, because of charities established especially for them, received an average assistance of $715,000 (Port Authority police), $905,000 (NYC police), and $938,000 (NYC firefighters). Other examples of areas where charities donated money to help include mental health counseling, health-care provision, employment assistance, and legal and financial help.

Sources

Civic Alliance to Rebuild Downtown New York. 2002. “Listening to the City.” February 7, 2002.

Cooper, J. C., and K. Madigan. “Consumers Have Done Their Part. Now, Businesses Will Have to Pitch in as Faster Recovery Requires More Capital Spending and Hiring,” BusinessWeek, September 16, 2002, p. 19.

Fiscal Policy Institute. “Economic Impact of the September 11 World Trade Center attack, Preliminary Report.” September 2001.

GAO. “Review of Studies of the Economic Impact of the September 11, 2001, Terrorist Attacks on the World Trade Center.” GAO-02-700R, May 2002.

GAO. “More Effective Collaboration Could Enhance Charitable Organizations’ Contributions in Disasters.” GAO-03-529, December 2002.

GAO. “Overview of Federal Disaster Assistance to the New York City Area.” GAO-04- 72, October 2003.

Kadlec, D., B. Baumohl, M. Sieger, and A. Zagorin. “Up from the Ashes,” Time, September 24, 2001, pp. 80–82.

Lenain, P., M. Bonturi, and V. Keon. “The Fallout from Terrorism: Security and the Economy,” OECD [Organisation for Economic Cooperation and Development.] Observer, May 2002, pp. 9–13.

Loomis, C. J. “Insurance after 9/11,” Fortune, June 10, 2002, pp. 110–115.

Lowenstein, Ronnie. “Federal Aid to New York City in the Aftermath of September 11th: How Much, and for What?” February 11, 2002. Testimony of Ronnie Lowenstein, director, New York City Independent Budget Office before the Joint Hearing of the City Council Finance, Lower Manhattan Redevelopment, and State and Federal Legislation Committees.

Malik, A. 2002. “World Trade Center,” GBER 2, no. 1: 5–10.

New York Senate Finance Committee. “Financial Impact of the World Trade Center Attack.” January 2002.

Conclusion 175

Federal Action Plan for the Red River Valley Floods

In April 1997, the Red River flooded its banks, displacing more than 60,000 people and affecting communities especially hard in Grand Forks, North Dakota, and East Grand Forks, Minnesota. On April 7 and 8, a presidential disaster was declared for severe spring storm conditions in North Dakota, South Dakota, and Minnesota. Following an April 22 visit to these communities, the president announced that all emergency measures and costs of debris removal under the Stafford Act would be covered 100 percent by the federal government so that the state and local governments could concentrate their resources on response and recovery efforts. The president also announced the formation of an interagency task force to develop a long-term recovery plan for the affected states. James Lee Witt, the director of FEMA at that time, chaired the effort.

“New York City Expected to Recoup Most Losses of Sept. 11,” Wall Street Journal, November 16, 2001, p. A2.

Office of the State Comptroller. “The Impact of the World Trade Center Tragedy on the Metropolitan Transit Authority.” Report 9–2002, 2002.

Ratajczak, D. “Will Insurance Be a Buffer or a Drag to the Economy during This Recovery?” Journal of Financial Service Professionals, 56, no. 3, May 2002, pp. 18–20.

“Rescue and Recovery Effort after the September 11, 2001 Attacks,” available at www.wikipedia.com.

Starkman, D., and A. Frangos. “Before Ground Zero Rebuilding, $1.3 Billion Has Already Been Spent,” Wall Street Journal, February 25, 2004, p. A1.

“United States: Two Years on; New York City,” The Economist, September 13, 2003. “Working Together to Accelerate New York’s Recovery: Update of the NYC

Partnership’s Economic Impact Analysis of the September 11th Attack on New York City,” New York City Partnership and Chamber of Commerce, February 11, 2002. “World Trade Center Assistance: Aid Received, Aid to Come.” In New York City

Independent Budget Office, Inside the Budget, p. 117. New York: New York City Independent Budget Office, July 31, 2003.

“World Trade Center Disaster: Tracking Federal Aid for Cleanup and Rebuilding.” In New York City Independent Budget Office, Inside the Budget, p. 89. New York: New York City Independent Budget Office. September 28, 2001.

“World Trade Center Memorial and Cultural Program, Amended General Project Plan.” New York: Lower Manhattan Development Corporation, September 16, 2003. “WTC Business Assistance Report.” New York: New York City Economic Development

Corporation and New York State Empire State Development Corporation, February 13, 2003.

C A S E S T U D I E S — Cont'd

The Federal Action Plan for Recovery identified three priorities for federal long-term recovery efforts: mitigation of flood hazards, housing, and reestablishing community sustainability. In conjunction with state and local governments, the action plan detailed a wide range of grants, loans, and technical assistance that the federal government would provide to ensure that community recovery needs were addressed. The president also ordered several federal departments to implement efforts to make the communities more disaster resistant. He directed the U.S. Army Corps of Engineers to aggressively pursue the development and implementation of structural and

nonstructural flood protection works for the cities of Grand Forks and East Grand Forks. FEMA and HUD were directed, in partnership with the states, to implement an accelerated program to purchase flood-damaged residences in the most severely devastated areas. FEMA, HUD, the Army Corps, the Economic Development

Administration, and the SBA were directed to use all available authorities to

support state and local rebuilding efforts and to incorporate mitigation to make the communities disaster resistant. The president also asked the affected communities to vigorously pursue mitigation and manage development wisely to avoid future flooding events. He encouraged the residents of these communities to purchase and maintain flood insurance.

To address the issue of immediate and long-term housing availability and maintain community continuity during the recovery process, the president directed FEMA to continue providing temporary housing on an expedited basis by providing emergency home repair grants, travel trailers to be sited next to unlivable damaged residences under repair, mobile homes for those facing longer-term displacement, and rental assistance. HUD, the Department of Commerce, the EDA, the USDA, and the SBA were directed to establish a recovery office in Grand Forks to help