Thompson:'We Are Ready For Trying Times'
New York City Comptroller William C. Thompson, Jr., addressing the current turmoil on Wall Street and uncertainties about New York City's economic future, insisted this week, "We are ready for the trying times that no doubt are ahead."
"With every downturn New Yorkers have encountered, our city has rebounded stronger than before," Thompson said, addressing a breakfast hosted by Citizens Union and New York University's Robert F. Wagner Graduate School of Public Service. "That is the spirit of New York City. We are fighters. We are resilient. We are innovators."
Thompson's remarks addressed the challenges facing New York City's economy amid this week's Wall Street chaos, offered assurances to members of the New York City Pension Funds, and highlighted steps taken by the City and Comptroller's Office to weather any fiscal storm.
"As we gather, New York faces greater challenges than perhaps at any time since 9/11 and the recession that gripped our city then," Thompson said. "It will take months if not years to understand the full impact of the current crisis in international financial markets, but one thing is certain: The crises roiling the economy are already having a disproportionate impact on families here in the nation's financial capital. It is important for me to reassure the approximately 640,000 retirees, beneficiaries, and City employees who are invested in the system that their money is safe and secure," the Comptroller said.
New York City accounts for roughly six percent of the nation's population but is responsible for about $1.25 trillion - or nine percent - of the $13.8 trillion total gross domestic product for the United States, in large measure due to the significance of the finance industry to our local and national economy. The securities industry represents about five percent of jobs in the city and about 20 percent of all wages.
Thompson serves as investment advisory to the five New York City Pension Funds, with assets amounting to more than $100 billion. Accordingly, his office has been closely monitoring the financial scenario playing out on Wall Street.
"The current turmoil on Wall Street will obviously have major adverse impacts on New York City's economy," he said. "Before the startling events of the past week, we had forecast a loss of 25,000 jobs in the city's financial services sector. Considering that Lehman Brothers had over 12,000 employees in the city and the immediate vicinity, and AIG has almost 7,500 in New York City alone, the job losses may be ever deeper than what we originally forecast."
Thompson estimated that a loss of only 25,000 jobs in the securities industry could cause a loss of another 37,500 spread throughout the city's economy. And this, he noted, did not even include the impact of losses related to the Bear Stearns collapse.
Furthermore, he noted, the Wall Street dislocations will impact the city's tax revenue. The financial industry accounted for more than 45 percent of the city's business income tax collections in recent years, amounting to about $5.5 billion in Fiscal Year 2008 alone. However, Thompson noted those collections already were expected to drop by 10 percent during the current fiscal year.
The Comptroller detailed steps undertaken by his office and the Pension Funds to diversify their portfolio beyond the traditional asset classes, an approach that has helped them brace for difficult economic times. Those steps have included increasing the amount invested in private equity, real estate and other asset classes to ensure long-term health of the portfolio.
"In the long-term, we are well-positioned to survive the current crisis," he said. "New York City has weathered other troubles on Wall Street before, such as the financial crisis of the 1970s, the stock market in 1987 and the burst of the dot-com bubble a few years ago."
Among the steps taken were pay-asyou go capital spending, prepaying city expenses as much as two years ahead of time, establishing a retiree health savings account to set aside money garnered in flush times for leaner times ahead, and working together to ensure that General Obligation bonds are issued in a cost-effective way. "New York City has acquired its reputation as a premiere place to live and do business by keeping crime down, pursuing exciting new economic development initiatives, by luring new industries like motion pictures and high tech, and by supporting a thriving entertainment and hospitality industry," he said. "We must continue to do all we can to maintain that reputation."