That ‘70s Woe: We’ve Been in a Bad State Before

Now and then, commercial real estate stands at the ready to help New York rally

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New York City seemed ready to fall apart during the 1970s.

The manufacturing industry, which was a key part of the city’s economy, fled to states in the South, then out of the country, where costs were cheaper. As a result, the city lost about 500,000 manufacturing jobs between 1969 and 1975.

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Meanwhile, the city’s population declined — in a movement known as “white flight,” as middle-class families fled to the suburbs and beyond — while its budget ballooned to pay for union contracts and social services. Jobs became harder to come by, and the city turned into a grim place to live for many.

Trash filled the streets, crime rose sharply, the murder rate skyrocketed past 1,000 per year, while newspapers and nightly broadcasts were filled with images of buildings in the Bronx burning.

“It was a painful time,” said Mitchell Moss, a professor of urban policy and planning at New York University, and the director of the Rudin Center for Transportation Policy and Management. “People would put signs in their car saying ‘no radio,’ so people wouldn’t break-in.” Sometimes, they broke in anyway.

Bryant Park, a Midtown oasis, now a major selling point to attract office tenants to the area, was a haven for drug addicts at the time.

“I would sit in my office, and look out the window each March, and think ‘wouldn’t it be great if spring never came,’ so nobody would look at me and say, ‘You were hired a year ago to fix this, why is this still violent and terrible?’” said Dan Biederman, president of Biederman Redevelopment Ventures, who is credited with transforming Bryant Park into what it is today. “I was depressed on nice days.”

After then-Mayor Abraham Beame threatened to lay off more than 1,000 police officers in 1975, the police union printed thousands of “Welcome to Fear City: A Survival Guide for Visitors to the City of New York” to hand out to tourists.

The grim reaper-emblazoned pamphlet warned visitors of highly exaggerated dangers awaiting them in the Big Apple. (“Avoid public transportation. Subway crime is so high the city recently had to close off the rear half of each train in the evening so that the passengers could huddle together and be better protected.”) It offered an ominous “good luck” to tourists.

While there was fear in the streets, there was also panic at Gracie Mansion. The city teetered on the edge of bankruptcy in 1975, as it faced the possibility of missing its debt payments, while banks refused to market the city’s debt to allow it to borrow more money.

“We didn’t have the confidence that the city’s finances were in order,” Moss said. “There was a municipal budget, which had grown under [Mayor John] Lindsay while the economy was shrinking. The key part here is that [Beame] was unwilling to acknowledge the depth of the problem.”

Instead, Beame pleaded with the federal government for help. But President Gerald Ford repeatedly turned down any hope of a bailout, leading the New York Daily News to pen the immortal headline “Ford to City: Drop Dead.”

As Kim Phillips-Fein, author of “New York’s Fiscal Crisis and the Rise of Austerity Politics,” wrote in her book: “For the president, as for much of the nation, New York City stood for urban liberalism, an example of the central role that government might play in addressing problems of poverty, racism and economic distribution. Ford challenged New York’s network of municipal hospitals and its free public university as lavish, unnecessary extravagances. The federal government should not give a penny in bailout funds that allowed New Yorkers to continue these indulgences, he said.”

If some of this has started to ring some bells, you’re not alone. As the city continues to deal with the fallout from the coronavirus pandemic — which has taken the lives of more than 23,000 New Yorkers — it’s dealing with another crisis that has some pontificating, once again, about the death of New York City.

“Some of the problems are very similar,” Douglas Durst, chairman of The Durst Organization, said. “Crime, lack of sanitation, abandonment of buildings, and businesses closing. The symptoms are very similar, but the causes are very different.”

The city is now faced with a $9 billion, two-year revenue shortfall; has already cut billions out of next year’s budget; and is mulling laying off 22,000 workers. Mayor Bill de Blasio has asked the state to allow it to borrow money to pay for operating expenses, which is one of the key reasons the city nearly went bankrupt in the ‘70s.

Crime has started to increase (though, nowhere near the levels in the 1970s), there’s a constant stream of news stories about people ditching the city for the suburbs, and office leasing activity has plummeted.

“We’ve had 45 years of young people preferring to live in the cities, but some of them are disappointed,” Biederman said. “Before the last six months, they were complacent, because they never lived through when the city was disgusting.”

The Metropolitan Transportation Authority has started to warn of doomsday cuts if it doesn’t get $12 billion in federal aid, while de Blasio and Gov. Andrew Cuomo have pleaded with the federal government for funds to survive.

It seems improbable that the White House will step in this time. James Whelan, president of the Real Estate Board of New York, said his members have been lobbying top officials in Washington for help, but the efforts have been futile so far.

“We very much appreciate how critically important it is that the state, the city, the MTA and the Port Authority secure federal aid to see them through this crisis,” Whelan said. “To say it’s a frustrating situation is an understatement.”

This time around, President Donald Trump didn’t tweet to the city to drop dead, but he did label it an “anarchist jurisdiction,” along with several other cities. A White House memo released last month claimed that the city “permitted violence and the destruction of property to persist and have refused to undertake reasonable measures to counteract these criminal activities.”

The move could lead the government to withhold millions in federal funds.

One of de Blasio’s failures, according to Moss, is that he’s been too reliant on the federal government for help, instead of seriously considering measures he could take. These include controlling pensions costs, limiting spending, and implementing a hiring freeze.

“The mayor’s problem is that he’s constantly focusing on what Washington can do for New York, not what New York can do for New York,” Moss said. “There’s been very little effort to understand that we can’t expect Chuck Schumer and Nancy Pelosi to be Santa Claus. The mayor should not believe in Santa Claus.”

Whelan said that the current administration has lacked the “clear fiscal discipline” the city had under the leadership of Gov. Hugh Carey and Mayor Ed Koch as it came out of the crisis of the 1970s, and instead hopes a Joe Biden presidency will solve all of its problems.

“There’s this mistaken belief that, under a Biden administration and a Democratic Senate, that all these issues will go away,” Whelan said. “It will definitely help, don’t get me wrong, but the city has structural deficiencies that are going to persist.”

Two of the key ways that the city was able to pull itself out of ruin in the 1970s — help from the state and from the real estate community — either aren’t in the cards or haven’t been tapped yet.

In the 1970s, Carey ordered the state to start to oversee New York City’s finances, took over its debts, and stretched out the payments over a longer period of time, while earmarking part of the city’s tax bases to cover the payments.

“Hugh Carey was able to mobilize the business and the labor unions, but the city had to make severe cuts in order to get federal underwriting of the bonds,” Moss said. “The state filled the gap of leadership.”

It’s unlikely the state can step in again; it has its own $14.5 billion revenue shortfall to deal with. “We’re not going to get a bailout, because the city’s problems are occurring while the state is facing problems,” Moss said. “The state is not in a position to do what it did in the ‘70s.”

In the 1970s, the state helped the city avoid defaulting on its loans, while the real estate community also filled the city’s coffers to make the payments after developer Lewis Rudin helped to convince landlords and business owners to prepay $600 million in property taxes.

“There was a community interest within the city and within the business community to work together,” Durst said. “But that has to start with an initiative with the city to reach out, which has been somewhat lacking.”

In May, the de Blasio administration created several coronavirus advisory councils, including one with key real estate figures, but Durst said the city’s efforts were more “marketing than really trying to attack the problems.”

“Obviously, the city is up against hard times, you would think they would want to get any help they can,” Durst added. “The real estate community should be working hand-in-hand with the city government to look at the problems to figure out solutions.”

Part of the problem is that “politicians are making the real estate industry the villain of the city when, really, they’ve always been there for the city,” Durst said, pointing not only to its role in helping to resolve the fiscal crisis of the 1970s, but in the 1990s to increase property taxes to help pay for crime-stopping measures. Recent years have seen a flood of progressive Democrats fill seats in Albany and City Hall, after blasting the real estate community and pledging not to take any fundraising dollars from it.

Whelan agreed with Durst’s sentiment. While REBNY has been joining task forces and coordinating with the city on efforts like getting office workers back and keeping construction sites safe, Whelan said that the city’s desire to work with real estate on other matters has been “lacking.”

“I think there is a yearning; I think there is a desire on parts of the business and the real estate community [to help],” Whelan said. “The message of City Hall, particularly from the mayor, is everyone working together for a common purpose. That’s an inconsistent message.

“Now’s not the time for ideology,” Whelan added. “Now’s the time to focus and build public confidence in the city’s future.”

Last month, more than 160 business leaders — including RXR Realty CEO Scott Rechler, Rudin Management CEO William Rudin (son of Lewis), and MAG Partners CEO MaryAnne Gilmartin — penned an open letter criticizing de Blasio’s leadership, and called on him to immediately address quality-of-life issues so the city can recover.

“There is widespread anxiety over public safety, cleanliness and other quality-of-life issues that are contributing to deteriorating conditions in commercial districts and neighborhoods across the five boroughs,” the letter said. “We need to send a strong, consistent message that our employees, customers, clients and visitors will be coming back to a safe and healthy work environment.”

REBNY has not been sitting idly by either. Whelan said a big focus of the group is to help “those most in need, in terms of, keeping a roof over their head.” In March, REBNY launched Project Parachute with $4.3 million raised by owners aimed at providing services and rental relief for residents struggling during this time.

The initiative — managed by nonprofit Enterprise Community Partners — has already doubled its contributions since it launched, and REBNY has coordinated its efforts with City Hall.

The real estate community may be lying in wait to help again this time around — and is still filled with plenty of civic-minded owners — but other industries that stepped in to help during the 1970s no longer have ties to the city. Banks like JPMorgan Chase and Goldman Sachs are now global conglomerates with New York City just one spot on the map, and tend to be more concerned about the health of the Treasury Department than the Big Apple, Moss said.

“During the ‘70s, we had a very civic-oriented corporate sector,” he said. “Savings banks and commercial banks that were state-chartered, most of the leadership would have ties to the city and they were committed to the city. That is hardly the case today.”

While real estate’s role was important, Moss said it was Lewis Rudin’s ability to get other businesses, along with the nonprofit and labor communities, to pitch in that was key.

“You can’t do it with one leg of the stool,” Moss said. “Rudin understood that the city’s future required people working together from all sectors, not just one.”

For Biederman to turn around Bryant Park, he said, “it was a combination of some good work by the government, a couple of nonprofits, and then the private sector.” Biederman created the private Bryant Park Corporation in the 1980s to take over the park, and later created business improvement districts around Midtown to clean up the litter.

“The politics today are very different,” Biederman said. “If Bryant Park was like it was in the 1980s today, and I came along and said this needs to be privately managed, I’m not sure I can get that deal done today.”

But, even if the city doesn’t seem to have learned the lessons from the ghosts of the 1970s, it might not matter. Whelan said the situation today is a lot closer to the aftermath of Sept. 11 than the 1970s.

“Everybody was saying at the time, ‘Oh my god, Lower Manhattan is not going to recover,’” Whelan said. “When you beam 18 years later, it is accurate to say that Lower Manhattan was probably one of the huge success stories in terms of economic recovery.”

Even if leaders don’t look for cues on how to recover from the 1970s, the measures put in place to pull the city out of financial ruin continue to benefit New York.

“We went from a financial system that was incoherent and not really accountable to one which is far more accountable and has far more oversight,” Moss said. “The crisis of the 1970s left the city with a much stronger set of mechanisms for its management and spending of money. Thank god, we have it now.”