Sometimes turning points are as clear as day, while at other times you only recognize one in hindsight.
During the 1978 baseball season, there were two very tangible turning points for my beloved New York Yankees. The first impacted the entire season, and the second was a turning point in what many baseball historians refer to as the greatest single game ever played.
The Yankees had come off a World Championship in 1977, but throughout the first half of the 1978 season were playing like anything but champions. The volatile relationship between fiery Yankee skipper Billy Martin and the self-proclaimed “straw that stirs the drink,” Reggie Jackson, came to a breaking point on July 17, 1978. In a seemingly insignificant at-bat, the power-hitting Jackson defiantly squared to bunt. He pulled the bat back, allowing the pitch to arrive out of the strike zone for ball one. Third-base coach Dick Howser signaled for Jackson to swing away on the next pitch. Jackson again squared to bunt, fouling off the pitch for strike one.
This time, Howser called Jackson down the third-base line and spoke to him directly about swinging away per Martin’s instructions. Reggie, in a blatant act of insubordination, stubbornly squared to bunt the next two pitches, fouling them both and striking out.
The result was that Billy Martin suspended Jackson for five games. On July 19, the Yankees trailed the first-place Red Sox by 14 games. Reggie went back to California for the break, and, with a more relaxed Yankee clubhouse, the Yankees won their next five games. Jackson’s at-bat was the turning-point in the Yankees’ 1978 season. But there was another significant turning point to come.
The Yankees continued to play great baseball for the rest of the season. During September, the Red Sox lost 14 of 17 games and, at one point, the Yankees had actually taken over first place in the division. The Red Sox were able to win their last eight games of the season, leaving the two teams with identical records for the regular season.
On Oct. 2, 1978, the Yankees traveled to Fenway Park for a one-game playoff that would decide which team would make it to the postseason. The Yankees sent their ace left-hander, Ron Guidry, to the mound to face off against Boston’s 6-foot-5-inch right-hander, Mike Torrez. Guidry had won 25 games that year and was a shoe-in to win the Cy Young Award as the league’s best pitcher. The two were locked in a classic pitcher’s duel, and after six full innings, the Red Sox were ahead 2-0.
In the top of the seventh inning, Chris Chambliss and Roy White combined for back-to-back singles. Coming to bat was the Yankees’ light-hitting Bucky Dent. Dent’s batting average that year was only .243, and he had managed to hit a mere four home runs all season. The first pitch to Dent was outside for a ball. The next pitch, an inside fastball, was fouled hard off Dent’s left foot, evening the count at 1-1. Dent, writhing in pain, called time-out and went to the Yankees’ on-deck circle for some medical attention from trainer Gene Monahan. As Monahan was tending to Dent’s foot, the next batter, Mickey Rivers, noticed that the Yankee shortstop’s bat was cracked and handed him his bat to complete his turn at the plate.
Bucky Dent sent the next pitch from Torrez sailing over Boston’s 37-foot “Green Monster” left-field wall, leaving a crowd of 32,925 in utter silence as the Yankees took the lead 3-2. The Yankees went on to win the game 5-4, and ultimately won their second World Championship in a row, beating the L.A. Dodgers, in a rematch of the 1977 Series, in six games.
Reggie Jackson’s at-bat was a turning point in the Yankee season, and Bucky Dent’s at-bat was a turning point in the one-game playoff. The importance of turning points in the history of New York is undeniable. We just may have seen one of these historic turning points last Wednesday, when Governor Andrew Cuomo gave his State of the State address.
We heard Governor Cuomo deliver an address that left a lifelong Democrat sounding more like a conservative Republican. His 47-minute speech was delivered in front of 2,000 spectators at the Empire State Convention Center, the first time a governor has not spoken from the Assembly chamber for a State of the State. Proving that things won’t be “business as usual” in Albany, the venue was selected so that members of the public could attend, not just lobbyists and legislators. His presentation also included PowerPoint slides, which had never been used by a governor before.
His speech was forceful and, at times, emphatically pro-business. He promised to “reinvent government” and to clean up the embarrassment of the cesspool that has become New York’s legislative body.
The governor set the stage by presenting the backdrop of the magnitude of the fiscal crisis facing the state. We’re all aware that next year’s budget deficit is approximately $10 billion. Additionally, the governor presented the following facts: Taxes in New York are 66 percent higher than the national average on a per-capita basis; pension costs (which are now $6.2 billion annually) have, and are projected to, increase 476 percent from 1999 through 2013; state spending growth has been nearly double the level of personal-income growth over the past 10 years; New York ranks No. 1 in state spending on education yet ranks 34 in student performance; New York ranks No. 1 in state spending on Medicaid and ranks 21st in terms of results; and, most disconcerting, two million people have moved out of the state over the past 10 years.
That last fact, regarding the exodus of millions of New Yorkers, is directly linked to the state’s onerous tax burden. In what were probably the most important lines from his speech, the governor stated, “What made New York the Empire State was not a large government complex; it was a vibrant private sector that was creating great jobs in the State of New York. New York has no future as the tax capital of the nation.”
This was music to the ears of the business community, and seemed to underscore the fact that the governor plans on sticking to his campaign pledge of no new taxes, and a cap on property taxes.
The governor acknowledged that we need radical reform, and we need it now. It is clear that he is going to try to fundamentally restructure and realign the $135 billion annual web of overlapping state agencies. There are an eye-popping 10,500 local governments in the state, creating significant redundancies and inefficiencies and leading to massive amounts of waste, fraud and abuse. The governor acknowledged that today’s fiscal crisis cannot and, more importantly, should not be solved with temporary budget fixes. Structural reforms need to be put in place, which was acknowledged when he said, “What we do today will determine the course of this state for decades to come.”
One of the methods the governor has proposed for coming up with a plan to address the crisis consisted of creating expert panels to develop recommendations to reform and reduce the expensive Medicaid program in the state; to cut the number of state agencies by 20 percent; and to address the burdensome and growing obligations of unfunded public mandates. These panels will be charged with determining how to bridge the $10 billion budget gap without borrowing or increasing taxes. The idea of these panels is unprecedented, particularly given that they will be made up of so-called “stakeholders.” Undoubtedly, some of the most powerful, and often adversarial, special interests will be participants on these panels.
The one criticism of the governor’s speech was that it was short on specifics in terms of items to be cut from the budget. This was clearly intentional. Why give his opponents even more time to spend millions upon millions of dollars running negative TV commercials blasting the proposed cuts? The governor will deliver his proposed budget on Feb. 1 outlining target reductions to drastically curb spending on health care, education and government operations. It is unlikely the panels will come up with anything tangible by then, but their involvement in the process will slow down their criticism of the inevitable cuts to come.
So today we are at a turning point. We have a budget crisis of unprecedented proportion. We have a governor who understands that the State of New York simply spends too much money. He also understands that increasing tax burden on New Yorkers would effectively kill the proverbial golden goose. There is also national attention on the fiscal health of states and municipalities and the unsustainable compensation arrangements made with public-sector unions. It is also a time when private-sector and public-sector unions are at odds with each other, as private-sector members pay taxes and public-sector members are paid with taxes. The stars are all aligned for fundamental and necessary changes in the way the state operates.
In order to take advantage of this opportunity, it is imperative that the private sector step up to the plate (I can’t get away from these baseball analogies). It is tempting to criticize the government for its action or inaction. Business leaders and private-sector citizens, myself included, are quick to jump all over our elected officials for policy we don’t agree with and decisions that seem like lunacy. Now is the time for the business community to man up, as they say. Governor Cuomo needs our support to combat the public-relations onslaught that is certain to follow after his proposed budget cuts are announced. Governor Paterson wilted under this pressure. We need to do all we can to support the governor in his response to this assault.
The business community, the real estate community and regular New Yorkers who are tired of the path that the state is on have an opportunity to make this turning point truly historic. Organizations like the Committee to Save New York have achieved tremendous traction raising support for this media battle.
The implications for the real estate industry are significant. On a macro basis, our industry needs more companies and individuals moving into our state than moving out. Increased populations will bolster underlying real estate fundamentals. A pro-business approach, along with reasonable tax policy, will draw businesses here.
More granular impacts on our real estate industry revolve mainly around tax policy. To the extent that a property tax cap is indeed implemented, it will provide a better environment for investors to deploy capital into the investment property market, and home buyers will be more comfortable buying cooperatives, condominiums and single-family residences. Additionally, tax pass-through burdens on the commercial tenants that occupy 400 million square feet of office space in this city will be reduced, abating what is already a competitive disadvantage relative to other states on an occupancy cost basis.
A potential downside for the real estate industry is that Assembly Speaker Sheldon Silver has tighter rent-regulation guidelines as a key objective of his agenda. New York’s rent-regulation system is up for renewal in 2011, and it could be that rent-regulation concessions are simply thrown in to effectuate support for the governor’s larger agenda items. It appears the speaker is already posturing for such a trade-off.
Just as there were two significant turning points in the Yankees’ 1978 baseball season, so too is there a potentially profound turning point facing New Yorkers now. Years from now, it is possible that we will look back on 2011 and realize that it was a significant turning point in the history of our great state. It is important that we each do all we can to ensure that we remember 2011 as vividly for victories in governance as we fondly remember 1978 for victories on the baseball diamond.
Robert Knakal is the chairman and founding partner of Massey Knakal Realty services and in his career has brokered the sale of more than 1,125 properties, having a market value in excess of $7 billion.