Our Next Economy: THE Creative City

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Change for New York

OUR NEXT ECONOMY: “THE CREATIVE CITY”

MARK GREEN

June 17, 2009

INTRODUCTION

New York City is in the midst of an economic meltdown that is far worse than the 1990s recession and probably even worse than the declines of the mid-1970s. When the mortgage and credit crises hit in September of 2008, we suffered especially because of our over-reliance on the financial sector for jobs and revenue. Those who question whether we need a more diversified economy need look no farther than 480 miles west to Detroit to see the perils of a one-industry town.

Whether you're a breadwinner in Queens, young professional in Brooklyn, journalist in the Bronx, doorman in Manhattan or former financier on Wall Street, this deteriorating economy is threatening you, your family, your neighbors, your community and our City as a whole.

We know how we got into this mess...but how do we get out? Where will the next generation of jobs come from? How can we enhance real income to reduce poverty and enlarge the middle class?

The answers lay in our human capital. For New York is a “State of Minds.” There is no place on earth that better combines our innovative skills, educational institutions, media community, tech sector, niche manufacturing, and creative arts – not to mention our excellent financial and legal services.

As a City we need to make sure that we develop new ideas and new policies that capitalize on these natural advantages so we never again lose a new industry like biotechnology and once again become a magnet for new small innovative firms. In an increasingly global information economy, New York City is unusually well-positioned to lead again. We can become “THE Creative City,” if we craft smart policies that play to our strengths.

PROBLEMS AND HISTORY

Because “a crisis is a terrible thing to waste,” according to economist Paul Romer, this meltdown presents an opportunity to free our City from an unhealthy dependence on big business and the financial, insurance and real estate (FIRE) sector in favor of investment in a balanced and diverse portfolio that also includes small businesses that span all sectors with emphasis on green manufacturing, biotechnology, as well as the intellectual, cultural, and education (ICE) sector. It is the creativity from the ICE sector and its small businesses that produce the innovation that has been our City’s best product and top export for generations, and it is what will make our City come back from this crisis stronger than ever.

I've worked on economic reform issues my entire public life. In the 1970s I co-wrote The Closed Enterprise System and The Big Business Reader on how to make our economic system more competitive and pro-consumer -- and was the head of Public Citizen's Congress Watch from 1977 to 1980, successfully pushing for changes in the federal antitrust laws. In 1986, I wrote The Challenge of Hidden Profits about the "corpocracy." From 1990-2001, as the New York City Consumer Affairs Commissioner and Public Advocate, I produced a series of reports "The Poor Pay More…for Less," helped change the way commercial carting is structured, reduced regulatory burdens by shrinking the number of lines of commerce requiring consumer licenses from 82 to 45, restricted tobacco ads to kids, issued a consumer's guide to hospitals, released annual "Ranking Banking" scorecards, and early on exposed how predatory lending and sub-prime loans threatened the equity of homeowners, especially in minority communities.

CORE VALUES

In this series of papers on how to put the “new” back in New York, we will focus on two main areas – workforce development to build our pool of talented employees and business development to support and attract employers. Before this paper discusses either, there are six core values – beyond educating our next workforce, which is the topic of a future paper – integral to any rethinking of our local economy:

• Seeking Simplification
• Achieving Affordability
• Thinking Green
• Rethinking Transportation
• Providing Real-Time Information Online
• Utilizing Expert Retirees

Seeking Simplification. In 1940, McDonalds was founded and has grown to become one of the largest franchises in the world. Anyone who has had fast food can tell you that McDonalds’ success is not from having the best burgers, fries, or milkshakes. Rather, they invented the “Speedee Service System” in 1948, to provide customers with an accessible, consistent and reliable product in a timely manner.

Government must finally catch up with the McDonalds’ model for success by creating a customer service-oriented government that provides its customers with an accessible, consistent and reliable product in a timely manner. While economic development services are funded on a federal, state and local level and administered by different agencies, the services must be delivered as a final consolidated product, because customers care about the end product. New Yorkers should be able to go up to a counter, order the services they want, and be asked about services they may need.

We have begun to implement some of these objectives through New York City Business Express, New York City Business Solution Centers, and Workforce1. These programs, in combination with 311, attempt to provide a single entry point for economic development. Unfortunately, once an applicant gets through the single point of entry, they are still presented with a dizzying array of separate agencies, programs and applications.

City government should create a single unified application for jobseekers, as well as for businesses by sector. The application would meet regulatory requirements and qualify applicants for all available benefits. Service representatives would be cross-trained for particular sectors to serve the functions of numerous City agencies – so that a restaurateur would only need to file one form with one official who was responsible for all necessary paper work and inspections, instead of requiring inspections for occupancy from both the Fire Department and the Department of Buildings, as well as a whole host of other agencies. Through this proposed simplification, residents would win by focusing on their specific needs and the government saves on form processing, duplication and regulatory costs.

Such Job and Business Centers can be made more widely available to New Yorkers through a commitment to being multi-lingual, extending hours, providing child care, and using new technology. They should also help applicants gain access to other benefits like a free interview suit offered by a not-for-profit, or universal pre-kindergarten through the City, to alleviate socioeconomic pressures that might otherwise hinder the jobseeker’s or business’s success.

Better utilizing the Internet can also make our centers and the courses they offer more accessible. The program that we envision would follow the “TED.com: Ideas Worth Spreading” model (the YouTube just for great ideas) by working with our City’s educational institutions to bring innovative and compelling experts to lecture. Speakers would be digitized and accessible with multilingual captions or dubbing for jobseekers and entrepreneurs all over our City to watch from the comfort of their own home.

Simplified workforce and business development will allow us to escape “economic development by lottery” where new programs are designed to benefit only a small handful of firms or individuals. While these lottery programs might make a great press release or talking point for an elected official, we should focus instead on programs that are broadly accessible to a larger population of New Yorkers. Government must become proactive in offering services, rather than reactive and no longer force applicants to jump through hoops just to apply. We must re-orient government so that it treats residents like consumers who are always presumed to be right.

Thinking Green. As we discussed in “A Plan For A Greener City,” thinking green must be an integral value in our new economy from saving energy in our homes to energy audits of large commercial buildings to stricter appliance standards to investing in Green Jobs and Green Business.

Achieving Affordability. One of the best things we can do for economic development is to make this City affordable so that more people and businesses can choose to live and stay here. A Center for Urban Future study recently announced that New York City was the most expensive place to live in the country, with higher costs for rent, insurance, transportation and even groceries, so that salaries of $60,000 or $123,322 equal the standard of living for someone making $26,092 in Atlanta or $50,000 in Houston, respectively.

Affordable spaces are essential to economic diversity and can be created and preserved by integrating affordable housing, office space and manufacturing space into city planning. The City can fill funding gaps in stalled construction projects provided that developers agree to include more affordable components that reflect local area needs. Affordability and preservation of affordable spaces are essential for a sustainable City and must be integral in our City’s future development plans.

Rethinking Transportation. The life blood of the local economy is the transportation system that moves human and capital assets around on a non-stop basis. The more efficient our transportation system, the more capacity we can support, the faster people and assets can get around, and the larger our “opportunity circle,” or the length of time individuals are willing to travel to engage in business. Unfortunately, our City has failed to use tax revenues from our recent growth to improve our transportation system infrastructure to meet new demand, and New York City’s opportunity circle continues to shrink.

Phasing in Congestion Pricing would vastly improve transportation in New York City while we wait for infrastructure improvements to catch up with growth. The Partnership for New York City estimates that eliminating excess traffic congestion would add as much as $4 billion and 52,000 jobs to the regional economy, along with reducing losses of $2 billion in revenue and 8,674 jobs in the manufacturing sector, on an annual basis.

Transportation 2.0 would use technology to provide commuters and businesses with live information regarding traffic delays and service changes. Bringing technology to our transit stations would provide the added benefit of increasing safety by providing cell service in subways; so in the absence of working pay phones on most platforms, if someone sees something, they can say something. And we may not be able to get the trains to always run on time, but imagine if a train sent you a text message or a visual on-platform message that it was running 15 minutes late – or not at all due to flooding or an accident – you could stay at work generating more revenue for your family, business and the economy.

Providing Real-Time Information Online. Last month, President Obama launched DATA.GOV in order to provide the public with increased access to information collected by the Executive Branch of the Federal Government. Immediately after, the Sunlight Foundation launched “Apps for America: The DATA.GOV Challenge” to encourage the development of hundreds if not thousands of applications for people to use in understanding government information. Following their lead, our City should similarly make information immediately available to the public through a commitment to Open Data.

Open 311 is one example that would take the next logical step with 311, by making information collected on the system available over the Internet in real time. This would allow the vast network of Internet users to develop their own applications with such important information. An application using Open 311 to share the top request for the day would reduce the burden on call centers with questions about, say, that “Maple Syrup” smell that turned out to be coming from New Jersey. By providing Open Data, we can allow our Internet community to turn boring data into information that is potentially useful to everyone.

Universal Internet is vital for making information accessible for local residents and became a reality last month with a $500 million high-speed wireless network for all 300+ square miles of New York City. While this network is currently reserved for first responders, we must expand universal Internet, whether through universal broadband or wireless to the general public so that everyone in the city has some form of access. New York City as a whole has some of the slowest Internet connections at a higher cost than most other cities in the country, which means jobs lost to more connected cities.

We must work with our phone and cable companies (that exist as limited monopolies which have access to much of our City’s infrastructure at little to no cost) to provide a better Internet at a lower cost. Another benefit to Universal Internet would be added public safety from the ability to display emergency messages to every web browser in the City in the event of another major emergency. Improvements to current commercial Internet connections coupled with cost reductions and the availability of Universal Internet will be one of the major catalysts New York City needs to leap into the twenty-first century as “THE Creative City.”

Utilizing Expert Retirees. The City of New York recently launched the New York City Civic Corps to help build sustainable-impact volunteer programs. We must also call upon our City’s vast networks of retired professionals to help rebuild the local economy. These “Professional Service Corps” (“PSC”) would expand on the National Executive Service Corps model that currently only serves non-profits to tap into our large pool of retired professionals to work with centralized city programs to assist with workforce and business development. Economic development programs like incubators would benefit from the life-long experience of senior business people who volunteered as chief financial officer, accountant, attorney, or other technical advisor, working with the a start-up firm once every week or two. Companies would gain valuable technical services and PSCs would develop a ground floor relationship with what might be the next Google or Amazon. Active PSCs who have become knowledgeable on City, State and Federal programs could be called upon to serve as economic ambassadors to attract or keep talent or companies in the New York City marketplace.

WORK FORCE DEVELOPMENT: Our Next Workforce

New York City has seen its Federal allocation under the Workforce Investment Act (WIA) fall by more than half between 2001 and 2008, spending $925 million in 2008 in City, State and Federal funds for workforce development. Spread out across more than 33 different programs, not including CUNY, New York City workforce development programs are fractured vertically and horizontally, with no integrated economic framework and little to no coordination between agencies. Further, many of our workforce development programs have emphasized short-term job placement rather than career development. As a result, we’ve placed numerous jobseekers in $7-per-hour retail positions rather than helping them earn, say, an industry-recognized computer repair certificate, which would help them earn more than twice as much with the opportunity for benefits and advancement. Workforce development programs also focus on “work-ready” jobseekers, often leaving those who need more help and training to change careers on their own.

Our workforce programs have failed to consistently work with employers or target a diverse array of sectors for development. In 2005, Mayor Bloomberg’s Commission on Construction Opportunity convened stakeholders representing employers, educational institutions, and workers, initially bridging the gap on job training and placement. The Commission, however, fell apart in 2007 when conflicts arose over prevailing wages and the Mayor walked away from the table. Workforce1 has recently opened up a transportation sector-oriented development center and plans to open two more for healthcare and hospitality, though the program admits that they are unsure whether these sectors will have demand for employees.

In order for New York City to remain competitive in the global marketplace, we must maintain a versatile workforce that is skilled enough to take on the demands of an evolving economy. Due to our large population, New York City has an advantage in being able to reabsorb employees from failed businesses into new growing sectors. In order to do so we must properly invest in workforce training and development with a commitment to the following values:

• Training
• Measuring
• Creativity

Training. In our earlier policy paper “A Plan For A Greener City,” we proposed a greater investment in Green Job training, which can be accomplished by expanding CUNY’s Green Energy Training and similar programs throughout the City. Our next Workforce1 Center should also focus on Green Jobs, both because its good for our environment and also because we know that our City, State and Federal governments have made billion dollar investments into the sector and we can expect rapid growth in the coming years.

The technology support field is a prime example of problems with the state of training. A “work-ready” candidate can often be placed in a call center at minimum wage to read trouble-shooting scripts to customers over the phone. But some who are placed in these call centers return to workforce centers as their jobs get outsourced shortly after they are hired, and those lucky enough to see their job stay local, get stuck because they need more training to qualify for a living wage job, but can’t afford it, and no longer qualify for any assistance. The few jobseekers that win the training voucher lottery are often steered towards non-standard or low value technical certificates because they are easier to pass, leaving the job seeker with a spent voucher, an inability to qualify for a new one, and no better off than they were before.

Our workforce development strategy must expand to encompass those who might not be “work-ready” and to help them make a transition away from hourly jobs to high quality jobs that offer a career path, benefits, and a living wage. Training vouchers must be expanded to allow for residents to receive multiple grants over time. Our next workforce training program should focus on working with educational institutions, employers, jobseekers and workers to provide industry recognized training or certificates for the unemployed and underemployed that are currently valued and actively sought by employers.

Measuring. The New York City Workforce Investment Board along with 33 other programs currently invest in workforce development based on scant and scattered sources of information from Federal and State agencies without much original research or investigation into the City’s economy. In order to invest our near billion dollars more wisely, we must improve our Labor Market Information System (LMIS), which studies and publishes labor market information. Some improvements include, (a) expanding the breadth of the sectors and the depth of its research, (b) learning information from primary sources such as jobseekers and local businesses, (c) providing new data to the public in accordance with open data standards, and (d) integrating information feeds from other City and State agencies, so that workforce development benefits from up to the minute understanding of our economy.

Many New Yorkers check the morning paper to see how their investments are doing. We must do the same as a City and audit our workforce development programs on a regular basis for training, placements and retention. Are jobs seekers in fact gaining industry standard certification through training and placed along with a high percentage of classmates in long term jobs with companies? As long as we are checking in we should also gather information regarding current and projected hiring needs so that we can integrate employers’ real needs into the LMIS. By checking on our investment, we can make sure that our dollars go to good training programs associated with growing job sectors.

Creativity. In the past year the number of jobs in finance, insurance and real estate (FIRE) sector significantly decreased while jobs in the information, culture and education (ICE) sector have demonstrated ongoing and continued growth. The ICE sector workers are also referred to as members of the “Creative Class” which economist Richard Florida defines as a “fast-growing, highly educated, and well paid segment of the workforce on whose efforts corporate profits and economic growth increasingly depend, in sectors from technology to entertainment … high-end manufacturing to the arts. They do not consider themselves a class and share a common ethos that values creativity, individuality, difference, and merit.”

The Creative Class has grown from 10 percent of the national workforce at the turn of the 20^th Century, to 20 percent in 1980, to 30 percent as we entered the 21^st Century – and surely far higher in New York City. The cultural sector is also on the up swing, with people looking for things to do instead of things to buy during difficult economic times, and volunteering is booming as a large part of this trend. Attendance and spending at movie theatres and cultural institutions is on the upswing with 10 percent to 25 percent increases over last year at the Brooklyn Academy of Music, and notable increases for “pay-as-you-will” times at local cultural institutions. In addition to boasting current growth and high quality jobs, the Creative Class is highly entrepreneurial with no or low barriers to entry for information and cultural sub-sectors, making them essential for fueling start-ups and small business.

This creative community can be attracted and retained through training, community building, and tax incentives. Our City will be providing more than 2,400 Individual Training Account (“ITA”) vouchers over the next two years, which should be targeted for green, biotechnology and information jobs. We must build creative communities by hosting or funding events for jobseekers, educators, businesses and investors in the sector. “NY Tech Meetup” gathers almost one thousand creative class members into a room on a monthly basis to meet, greet, and share the next big ideas with other entrepreneurs, businesses, investors, and service professionals. Each one of these presenters could be the next YouTube, Facebook, or Twitter, and will generate revenues for whatever location happens to be their host. In building these communities, we can emphasize New York City’s best asset – location, location, location – and remind the creative class through events like these that this City has the resources and talent pool they need to prosper.

Tax incentives like a two year exemption from unincorporated business tax will provide a less costly environment for Creative Class entrepreneurs to join our City as freelancers while encouraging them to start-up a small business in their own right – or join one. Other related high profile tax incentives like Assemblyman Jonathan Bing and State Senator Daniel Squadron’s Open Source Tax Credit, should be implemented on a City level.

BUSINESS DEVELOPMENT: Tomorrow’s Businesses

The time has come for New York City and America to place the same emphasis on small business as was done during the Clinton era. In so doing, we must avoid the old model of pouring resources into recruiting or retaining large businesses or extravagant stadium complexes. For example, the City of Buffalo has invested in malls, stadiums and national franchise sports teams, only to discover that these investments could not attract or retain the creative talent or smaller businesses their city was desperately seeking.

Our concept of corporate retention must be rethought in order to avoid continuing a system that is broadly criticized as “corporate welfare.” Bear Stearns received more than $100 million in tax incentives over the past two decades in exchange for a promise to maintain 5,700 jobs in New York City for 50 years and create 13,300 new jobs; now, Bear Stearns is gone along with 9,284 jobs and the promise of 13,300 new jobs for which we already paid. In 2004, New York City Economic Development Corporation gave $10 million in tax breaks to Pfizer in return for the promise to increase employment at its Brooklyn Plant; some three years later and after Pfizer had collected the $10 million, they announced that they were closing the plant. While it might seem safer to invest in corporate titans like Bear Stearns which we might believe are “too big to fail,” history has shown us that such investments have had poor returns, often costing taxpayers millions.

Small Business. We have seen private sector jobs flow from New York City over the past thirty years into the 12 surrounding sub-metropolitan counties in New Jersey, Long Island, Westchester and north. In 1975, New York City accounted for 53.1 percent of all private sector jobs in the metropolitan region, as compared with 47.2 percent in 2005. Most small businesses leave to escape several common challenges including a lack of affordable spaces, high health care costs, regulatory burdens and access to funding.

New York City health insurance continues to increase at a staggering 13 percent, with average monthly family health insurance premiums rising from $3,866 last April to $4,354 this April. For perspective, monthly premiums now exceed the cost of renting a three-bedroom apartment in a luxury doorman building on Manhattan’s Upper East Side. As a result, healthier and younger New Yorkers drop coverage and leave insurers with an even sicker and costlier client pool. Should an uninsured person get injured and be unable to pay their medical bill, taxpayers are left holding the bag.

Regulatory challenges facing small businesses are numerous, confusing, and duplicative. A small business such as a restaurant and bar might need to contact or file paperwork with a dozen City agencies, a half dozen State agencies and a hand-full of Federal agencies, each of which would require its own duplicative paperwork and inspections. While the City’s Business Solution Centers might offer some guidance in getting a small business started, even the newly launched NYC Business Express portal fails to touch on all the requirements or offer adequate guidance about which government loans and tax incentives for which a business might qualify.

Small business access to government funding and assistance is essential given all of the money our Federal, State and City governments are investing into these programs. When it comes to federal support for small business, much of it comes from the Small Business Administration’s primary lending program – 7(a) loans – that dropped 40 percent in 2008 as compared to 30 percent nationwide; and SBA microloans plunged 35 percent in the New York region while the nation saw a nine percent increase. Crain’s New York Business noted that many small business owners searched the stimulus for a boost only to get the message that “AIG is too big to fail, but small businesses are too small to care about.”

Small business can be grown and preserved in New York City by providing affordable spaces, inexpensive health insurance, and a less costly regulatory burden. City officials should support State Senator Jose Serrano and Assembly Member Micah Kellner’s legislation to provide tax incentives for property owners who lower rents for small businesses along the construction path of the Second Avenue Subway. New York City should use this legislation as a model with a local version for the entire City, so that property owners can get real property tax relief and small businesses can have an affordable space to grow. While the Federal government works its way towards universal healthcare, the City government should also investigate opening its health insurance plans to small businesses, so that the businesses can benefit from increased bargaining power and so that City benefits from lower rates coming from a larger and healthier risk pool. Simplified business development proposed earlier would help to reduce regulator burdens businesses face. And in order to help see these and other changes through, small businesses must also gain a seat at the table in the Partnership for New York City that merged with the centuries old New York Chamber of Commerce and Industry where small business once had a special voice.

Creative Agglomeration. Information has become the gold of the new economy, emerging as the new essential product driving American economic growth. While we lose our dominance in the financial markets, New York City remains at the enviable intersection of the information economy as a major hub for the information, culture and education (“ICE”) sector. This creates what Richard Florida has called a “huge network and agglomeration effect,” an advantage that comes from having “a large critical mass of … professionals, covering many different specialties, along with lawyers, accountants, and others to support them, all in close physical proximity.” These creative class professionals learn from and support one another, growing on their own momentum. This City is a magnet to the brightest and most creative for all three areas in the ICE sector with information publishers from Time Warner to Condé Nast and McGraw Hill, cultural institutions from the MET to the MOMA, and educational institutions from Columbia and NYU to the world class Fashion Institute of Technology. The resulting talent pool allows for cross pollination across the ICE sectors and situates New York City as the perfect place to become “THE Creative City.”

Information technology is a different type of small business. Consider its unusual resilience. While periods of economic distress are usually associated with caution and reduced risk taking, technology entrepreneurs think recessions are a good time to start businesses. Some notable technology companies starting during economic downturns include Microsoft, Apple, Dell, Compaq, Intel, and AOL. Reduced space and labor costs deepen talent pools of jobseekers who are willing to gamble on starting or joining new ventures. Simply stated, New York City’s location at the epicenter of the economic crisis ironically stimulates information technology and can spur the next generation of Web 3.0 start-ups.

We can build a “THE Creative City” with a strong creative core through a mix of targeted tax incentives, program campaigns, and education. We must continue tax incentives like the New York City Film Tax credit, expanding it to other creative industries such as the technology sector and then keeping it current with competing incentives from other cities.

City programs that facilitate seed and start-up investment, technology transfer, or institutional investment are just as essential to starting creative businesses as tax incentives. We must continue to hold more events to get investors, universities, employers and talent into the same room, like NYU Polytechnic Institute’s “Build the Broadband Economy” held earlier this year. In order to compete with the West Coast’s Stanford University, which has spun out the likes of Google and YouTube, professors in our City must be able to pick up the phone and get to investors who can turn projects incubated at local universities into multi-million dollar – or billion dollar – international phenomena.

Seed money to build a start-up business usually involves an investment of a quarter million dollars or more. But NYC Seed was recently appropriated only $2 million, which led it to announce that their smallest investment would be $200,000 or more, meaning that only 10 companies or fewer would benefit. In this economic crisis, we should offer micro-seeds of $50,000 or less to as many creative entrepreneurs as possible, so that $2 million would seed 40 companies or more. While $50,000 may not be much for most small businesses, it is just enough for an ICE sector where someone already has a career but might need additional capital to turn their art or website into a full time job and the next big thing. Additionally, micro-seeds would gain access to shared conference rooms and presentation spaces along with technical services for business plans, formation and first round investors. By lowering our initial investment, increasing their number and providing support, New York City is likely to generate many more jobs.

Mayor Bloomberg’s new incubator program that encourages Wall Street refugees to begin start-ups is a good idea that must be developed and expanded. New incubator space will accommodate start-ups with up to ten employees, for a total 100 people, at a cost of $200 (half the market rate) per person, per month, for six months with an option to renew. In order to provide more affordable spaces, the City should allow other offices interested in providing space under similar terms the opportunity to join the City as an incubator space and receive a tax incentive. Although The Wall Street Journal notes that the City is “already teeming with cash-strapped start-ups” and that the current plan is little more than affordable office space, our proposed Professional Service Corps could fill this gap by helping start-ups with the valuable technical services they need to accelerate into mature businesses.

Manufacturing. The average manufacturing job in New York City pays over $12,000 more per year than retail or restaurant jobs and often provides union benefits. Manufacturing jobs also provide employment to a more diverse workforce that consists of 78 percent people of color, 64 percent immigrants, and 82 percent living outside of Manhattan, according to the 2004 American Community Survey and the 2000 Census. These jobs offer gateway employment for non-English speaking immigrants and New Yorkers with little education and minimal job skills – and these workers feed into and bolster the City’s dwindling middle class.

When Mayor Bloomberg took office in 2002, a City boasting one million manufacturing jobs in 1950 was only a distant memory. In 2000 manufacturing jobs were down to just over 175,000, and our City had roughly 12, 500 acres of land zoned for manufacturing. Less than a decade later, New York City lost 75,000 more jobs in manufacturing and now has 10,746 acres of land zoned for manufacturing, with another 1,800 on the chopping block, accounting for a loss of 20 percent of our manufacturing space.

According to the Deputy Mayor for Economic Development, the “Bloomberg administration recognized a basic fact of the modern economy, the transition from large significantly industrial economy to a postindustrial economy.” Manufacturing was forced out when large chunks of industrial space was converted to residential or commercial uses, both illegally and through rezoning. These changes simply priced many manufacturers out of existence with the average rent doubling to $12-$18 a square foot. Community groups cautioned that new zoning proposals did not balance the need for affordable housing and affordable manufacturing space in a way that kept the middle class in New York City. They argued that any zoning changes that allowed residential and commercial development to move in replacing manufacturing spaces should have been coupled with (a) requirements to build affordable housing components within the new construction, and (b) preserving sufficient manufacturing space so as not to cost our City jobs. Other critics suggested that the zoning changes appeared to be responding to immediate pressure from developers, rather than planning for a 2030 economy.

A clear casualty of our City’s choice to move away from manufacturing zones has been the distinct lack of biotechnology lab space that otherwise might have been developed there. The New York City Economic Development Corporation has noted that although local academic medical centers have been a great source of spin-off companies, none of the twelve that came out Columbia alone last year were able to remain because they couldn’t find affordable lab space. While New York City is building 1.5 million square feet of biotechnology lab space at East River Science Park and Brooklyn Army Terminal, it won’t begin leasing until 2010, while Boston and Cambridge are building 10 million square feet, with 1.6 million square feet already available.

In the wake of heavy casualties to manufacturing and our middle class, Mayor Bloomberg launched the Industrial Business Zone (IBZ) program in 2006, to protect and rebuild what remained of the City’s manufacturing core in key locations. The IBZs provided a tax credit of $1,000 per relocated employee not to exceed $100,000 or actual costs, as well as free technical services for regulatory compliance and accessing financial and business assistance. Unfortunately, IBZs only promised not to rezone manufacturing and still permitted hotels, big-box retail, or large office buildings to build as of right, which still put manufacturers at risk of being forced out through high rents. Furthermore, the New York Daily News reported that only $26 million of the $522 million in allocated business tax incentives have gone to industrial firms, while $274 million have gone to big commercial projects. The East Williamsburg Valley Industrial Development Corporation notes that the few remaining manufacturers owe their existence to the economic downturn’s temporary alleviation of pressure from landlords seeking residential or commercial conversions that caused many to come back to the table to renegotiate leases.

Manufacturing remains integral to a sustainable and economically diversified City, even one that is post-industrial. While we may not build cars here, we have become a City of intelligent niche manufacturers, who make everything from gloves for Michael Jackson to parts for the Hubble space telescope and military equipment that keeps our soldiers safe abroad, as described in a recent New York Daily News article. Experts warn that instead of simply changing targets from supporting FIRE to ICE, we must continue to diversify including reinvesting in the manufacturing sector that is likely to grow the green, technology, creative and other niche sectors.

The manufacturing sector can be saved through some simple and straightforward changes that include amending the zoning code, launching local campaigns and partnerships, as well as improving tax incentives. IBZs can provide a framework for keeping manufacturing space affordable and increasing investment, but will need tougher restrictions to keep higher-rent big-box retail outlets, entertainment, bars and clubs out of designated areas. A codification of the Mayor’s promise not to rezone IBZs to mixed use or residential areas will increase confidence that any future changes would be subject to larger review as well as the political process.

The City should also launch a “Made in NYC” campaign to get the marketplace to support local manufacturing. Along the same lines, we should work with Chambers of Commerce in each borough as well as the Partnership for New York City to build industry-centered events connecting manufacturers with current and potential clients. IBZ tax credits should be expanded from a relocation benefit which will help subsidize conversion of existing manufacturing space into affordable biotechnology or green manufacturing spaces, to help keep those growing sectors in our City.

CONCLUSION

Our City faces an economic crisis because of our over-reliance on the finance, insurance and real estate, (FIRE) sector. With the room created by this burst bubble, New York City has the new opportunity to invest in its workforce and businesses, with a focus on biotechnology, green jobs and information jobs, culture and education (ICE). Even as the financial sector is globalized, through smart investments in these sectors, a commitment to simplified regulatory procedure and more real-time online information, New York City can maintain its prominence as an economic power and transform itself into the “THE Creative City.”