New Geography

Tag: New York

  • King Bloomberg: New York City Mayor Run Amok

    When Mayor Bloomberg deployed his vast personal and political power to overturn the term limits law, he began to demystify the public relations image he had purchased at considerable expense.

    It was only then that New Yorkers began to recognize the danger of making Gotham’s wealthiest man its chief executive. That recognition is the reason his approval rating slipped by nine points in the latest Marist poll. The public chose a mayor; they didn’t expect an elected monarch.

    The latest furor over his unaccountable power is his unlawful refusal to send out property tax rebate checks that have been due since Oct. 1. “We have no money . .. . this is not a legal issue, it’s a fiscal issue,” he says, an argument that boils down to “I know better.”

    But the cupboards are bare because Bloomberg has emptied them for his own political ambitions. While the stock market was heading south, Bloomberg, one eye on a potential presidential run, raised his approval numbers by expanding the city payroll. Since 2004, he has hired at least 40,000 new city employees, while bringing his own mayoral staff to record levels.

    Similarly, to help clear the way for a third term, Bloomberg has been shoveling out considerable money in the form of newly negotiated union contracts with the Policeman’s Benevolent Association, DC37 and the Corrections Officers that run above the rate of inflation. If it wasn’t above an elegant gentleman such as the mayor to stoop to such measures, you might call this what Tammany Hall did: vote buying. Bloomberg is only too happy to raise property taxes on the unorganized middle class if that’s what it takes to keep the power of the city’s politically well-organized unions in his corner or on the sidelines come election time.

    *

    People assume that because of his successful career in business, Bloomberg is a manager and not a politician. That gets things exactly backwards.

    As mayor, he’s been little interested in management. When the Staten Island Ferry crashed, killing 11 people, the politically well-connected Transportation Commissioner was spared a reprimand, let alone fired. When the mayor was informed that a set of subway switches had burned out and couldn’t be replaced for months or even years, guaranteeing massive delays, Bloomberg nonchalantly said fine, that’s the way it will have to be. He reversed himself only after howls of public protest. When a blackout produced by Con Ed incompetence left more than 100,000 Queens residents without electricity for a week, Manager Mike declined even to visit the affected areas until the press began to hound him. Even then he declared, “I think [Con Ed CEO] Kevin Burke deserves a thank you from this city. He’s worked as hard as he can.” It took 13 construction-related deaths before the mayor was moved to replace the City Building Commissioner.

    Bloomberg touts himself as a CEO who can negotiate the best deal for the city. But part of running the city includes bargaining with people he can neither give orders to, nor buy like the City Council. That’s made Bloomberg a singular failure in Albany, where the mayor tried to steamroll his ill-conceived congestion pricing plan through the Assembly. The plan, which seemed designed as much to provide Bloomberg with a green issue for his presidential campaign as to decongest Manhattan, met with a skeptical response. Bloomberg’s reaction was to blame his defeat on “gutless” opponents. While arguing over whether to reauthorize Off Track Betting, the Mayor clashed with the normally mild-mannered Governor Paterson, whose support is essential for the city; Paterson came away describing the mayor to the Post’s Fred Dicker as “a nasty, untrustworthy, tantrum-prone liar who has little use for average New Yorkers.”

    While Bloomberg has been little interested in management, he has been superbly self-promoting. Early on he sold credulous journalists on the idea that he was a post-partisan mayor, a man who rose above conventional party politics. This is in a sense true. He has been only too willing to buy support from either of the major parties to achieve his own ends. A self-described “liberal Democrat,” he shipped out with the Republicans under a flag of convenience in order to run for mayor in 2001. He then abandoned the GOP to become an independent, and his staff is now exploring the chances of his running as a Democrat for re-election in 2009.

    But talk of party labels misses the point. Bloomberg runs his own personalized political party. He is not so much bi- or non-partisan as his own political pole, one that offers Michael Bloomberg as the sole program.

    *

    The traditional danger with party candidates is that they can be bought up by special interest groups. Bloomberg reverses the old game; he’s won office by buying up the interest groups.

    When in office, Bloomberg – like most mayors – used public funds to keep the organized interests happy while putting the city at fiscal risk. But Bloomberg adds a twist, by dipping into his own vast treasury to buy support through “anonymous” gifts to non-profit institutions.

    For years, our so-called “business savvy” mayor has only one strategy: Spend. In 2007, the city took in 41% more in taxes than it did in 2000. And yet that wasn’t enough to cover Bloomberg’s gargantuan vote-buying spree. During Bloomberg’s first six years as mayor, notes The Manhattan Institute’s Nicole Gelinas, city spending shot up about 50% – from $41 to $62 billion. That meant that even in the midst of an unprecedented boom, Bloomberg’s genius required the city to incur record levels of debt.

    One method of buying support has come in the form of lavish subsidies to his wealthy developer friends. Early in his administration, when Bloomberg was still presenting himself as a reformer, he promised to end the practice of “bribing companies” to stay in New York. Yet that is exactly what he did in the case of developer Jerry Speyer, part owner of Yankees, who is building the New Yankee Stadium, and Fred Wilpon, owner of the Mets. Between direct and indirect subsidies the city is committed to spend nearly a billion dollars on the two very profitable teams in what amounts to a transfer of money from working stiffs into the pockets of the wealthiest New Yorkers.

    The Industrial Commercial Incentive Program, meanwhile, designed to retain business that might flee the city’s onerous taxes, has doubled under Bloomberg. Today roughly 6,000 business received a half a billion dollars in the kind of rebate relief that the mayor now wants to deny to middle class homeowners.

    For those who object to his tax strategy, Bloomberg always has the same response: “we’re just not going to return to the dark old days of the ’70s, when service cuts all but destroyed our quality of life.”

    It’s not clear if this argument is willfully ill-informed or merely self-serving evasion. But it was John Lindsay’s tax hikes in the years leading up to the fiscal crisis that sent the city spiraling down into effective bankruptcy. The upshot was that in the 1970s, the city work force faced major layoffs, which only deepened the downturn. We’re again headed down that path. Even as Bloomberg hikes the wages of senior workers who are crucial to the leadership of their respective unions, and hence Bloomberg’s royal re-election bid, he’s threatening sizeable layoffs for the newest hires.

    The city was only rescued from the Lindsay/Beame policies when the stock market revived in the early 1980s. That was the beginning of the long boom built on highly leveraged financial firms that has now come to a definitive end.

    Bloomberg is so committed to his ideal of the “luxury city” run by and for the wealthy and organized interest groups that the Wall Street collapse took him completely by surprise. Like Lindsay’s successor, the hapless Abe Beame, Bloomberg seems not to understand what’s happening around him. His budget projections are based on the notion that the future economic path will be shaped like a U, but it’s more likely to look like an L.

    New York, which became ever more dependent on Wall Street’s high rollers to create each new job a thousand-dollar meal at a time, is going to have to rethink its economic future. Wall Street as we knew it is never coming back. The high taxes and over-regulation Bloomberg prefers pushes out the small- to medium-size businesses that will have to drive much of our economic growth in the future.

    *

    We’re likely to look back on the Bloomberg years as a time of lost opportunities to build on the gains of the Giuliani years. Between 2003 and 2007, the vast flow of revenues produced a boom that gave the city a chance to dig out from under its massive debt and restructure its labor contracts. Instead, Bloomberg’s agenda added costs that will plague the city long into the future.

    There is no better monument to Bloomberg failures as a CEO – of his arrogant inability to negotiate, of his purchased reputation – than with New York’s education system.

    Bloomberg, who has had whole subway cards plastered with ads and full-page spreads in the newspapers touting his educational “achievements,” has done a far better job of promoting himself than improving the schools. He has nearly doubled the education budget. Yet his “reforms” have created considerable chaos in the schools, which have now been re-organized three times to little educational effect. What the changes haven’t produced, Bloomberg’s vast PR operation notwithstanding, is improvement on the national education tests. His education legacy to date: the debts that will have to borne by a work force ill-prepared for the economy to come.

    Bloomberg says he’s beyond politics. He’s right. We’re living in his monarchy, subjects to his unwavering faith in himself.

    This article appeared originally in the NY Post.

    Fred Siegel, senior fellow of the Manhattan Institute’s Center for Civic Innovation, is writing a book on the making of modern liberalism.

  • Island of Broken Dreams

    A The New York Times editorial wonders why foreclosure rates are so high in the two Long Island counties it rightly calls the “birthplace of the suburban American Dream.” After all, the area has “a relative lack of room to sprawl.” which in Times-speak should be a good thing, since “sprawl” is by definition both bad and doomed.

    Yet it is precisely the constraints on new housing that has served as a principal cause for Long Island problems. Long Island was the birthplace of the suburban American Dream, in principal measure because new housing development was permitted to occur at land prices reflecting little more than its agricultural value plus a premium to the selling farmer. The same financial formula expanded the American Dream throughout the country and many parts of the world, at least until urban planners were able, in some instances, to drive the price of land so high that housing was no longer affordable to average households.

    Indeed, land use regulation throughout the New York suburbs downstate, in New Jersey and Connecticut has long since rationed land for development. As a result, once loose mortgage loan standards became the practice, house prices escalated. Throughout the New York metropolitan area, the Median Multiple – median house prices divided by median household incomes rose from 3.2 to 7.0, in the decade ending in 2007. In traditionally regulated markets – like Long Island in the past and still much of the country in the present – the Median Multiple has been 3.0 or less for decades.

    Various regulations have led to this precipitous decline in the area’s housing affordability, virtually all of them falling under the category of “smart growth.” There are the regulations that have placed large swaths of perfectly developable land off limits for housing. There are large lot zoning requirements that have forced far more land than the market would have required to house the same number of people, producing an entirely artificial “hyper-sprawl.” Much of this ostensibly has been done in the interests of controlling “sprawl.” Where quarter acre lots would have been the market answer, planning authorities often have required one-half acre, one-acre and even more as minimum lot sizes.

    In fact, however, Long Island’s housing cost escalation has not been visited anywhere with more traditional liberal land use policies. From the first world’s three fastest growing metropolitan areas of Atlanta, Dallas-Fort Worth and Houston, to much of the South (excluding Florida), to the Midwest, housing prices rose little relative to incomes during the period of profligate lending. The difference, of course, was that the liberal land use regulations in these places allowed sufficient housing to be built that supply kept up with demand, thus accommodating new demand. Speculators saw no potential windfall profits to bring them into the market.

    The Times is not alone in misunderstanding the dynamics of land use regulation and housing affordability. But there is a very clear, demonstrated relationship – where land use regulations constrain development, prices are forced upward. This is because scarcity raises prices of goods that are in demand.

    Fortunately, not everyone at the Times shares the wrongheaded views of its editorial department. Had the editors walked down the virtual hall of their own department, or taken the train down to Princeton, where he lives, they would have encountered someone who understands all this. He is Paul Krugman, Times economic columnist and, much more importantly, Nobel Laureate. In August of 2005, Krugman noted that house prices had escalated strongly in the more regulated markets, but had changed little in the less regulated markets. He further rightly associated the less regulated markets with more sprawl, not less. In January of 2006, Krugman noted: that the highly regulated markets accounted “for the great bulk of the surge in housing market value over the last five years.” Krugman further predicted “a nasty correction ahead.”

    Meanwhile the non-Nobelist Times also make a point to bemoan the high levels of racial segregation on Long Island. Is it beyond them to understand that the very policies they favor are at fault? When one considers that ethnic minorities tend to have lower than average incomes and that land rationing nearly doubled the price of housing relative to incomes, it’s not surprising that they have not moved en masse to expensive places like Long Island, with the exception of Hempstead and a few other pockets. There are costs to restrictive land use regulation. One of the most pernicious consequences is the denial of the American Dream to groups of citizens that have so long been excluded from the economic mainstream.

    It is time to recognize that the regulations that raise the price of housing – however well-intentioned – work against housing affordability and represent one of the prime contributors to the high levels of foreclosures in many communities across the country.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life”

  • Two-Timing Telecommute Taxes

    Telecommuting — or telework — is a critical tool that can help employees, businesses and communities weather the current financial crisis, and thrive afterward. However, right now, the nation is burdened with a powerful threat to the growth of telework: the telecommuter tax. This tax is a state penalty imposed on Americans who work for employers outside their home states and sometimes telecommute.

    Proposed bi-partisan federal legislation called the Telecommuter Tax Fairness Act would abolish the telecommuter tax. To help assure that the nation can take full advantage of the economic relief telework offers, Congress must pass this bill – either as stand-alone legislation or as part of a new economic stimulus package.

    Relief for Employees

    Working from home (or alternative sites close to home) can save struggling families money on gasoline, parking, train and bus fares, dry cleaning, business wardrobes and work-week meals. They can save on dependent care by providing some of the necessary care themselves during the time they previously spent commuting.

    Telework can also relieve the considerable strain on Americans nearing retirement who have unexpectedly lost their pensions and must now continue working. Working indefinitely may be a hardship for many older employees. Some may not be able, physically, to continue making a daily round-trip commute. Some may need to move closer to their adult children who live out-of-state, either to receive physical help from them, or to help them with child-care costs by baby-sitting. If Americans who have been robbed of their retirements can work from home at least some of the time, they can stay on the job without having to travel as often or live as close to their offices.

    Relief for Employers

    Employers (both public and private) can use telework to slash real estate and energy expenses. When fewer employees work on-site every day, employers need to rent, heat, cool and light less office space.

    Implementing telework can also reduce recruitment and turnover costs: Employers offering flexibility can attract top-tier candidates from a wide geographic area, and generate loyalty among valued employees.

    Telework can reduce business interruption costs when an emergency or other major disruption occurs near the main office. If, for example, a severe storm, fire, bomb threat or transit strike affects the employer’s area, a staff trained to work remotely can keep operations running smoothly.

    And organizations adopting telework can become more productive. Employees can replace commute time with work time; concentrate better because they are less exposed to the frequent interruptions typical in busy offices; reduce absenteeism by completing tasks at home instead of taking whole days off when they have to meet non-work responsibilities, like caring for sick children, and reduce “presenteeism”, the phenomenon of employees showing up at the office when they are too sick to be productive and are likely to compromise the health and productivity of co-workers.

    Relief for Communities

    Telework can bring new Internet-based jobs to rural areas with sagging economies. It can also bring new home buyers to such regions: Americans who want to maintain their high paced, big-city careers in a slower paced, more scenic environment. A significant growth in the population of home-based workers in these communities can also produce growth in businesses catering to their needs, such as home office supply stores and business service providers.

    The Telecommuter Penalty Tax

    Despite the important help telework can provide during and after the financial meltdown, states may punish nonresident teleworkers by subjecting them to a telecommuter tax. New York has been particularly aggressive on this front.

    Under the “convenience of the employer” rule, when a nonresident of New York and his New York employer agree that the employee may sometimes work from home, New York will tax him on his entire income, both the income he earns when he works in New York, and the income he earns when he works at home, in a different state. Because telecommuters’ home states can also tax the wages telecommuters earn at home, they are taxed twice on those wages.

    In some cases, a telecommuter’s home state may give him a credit for the taxes he pays New York on the income he earns at home. However, even in such cases, the employee may be penalized for telecommuting. When New York taxes income at a higher rate than the home state, the telecommuter must pay taxes on his home state income at the higher rate.

    By subjecting nonresident employees to double or excessive taxation if they telecommute, a state like New York needlessly limits the strategies available for coping with our ailing economy.

    Harm to Employers

    By deterring telework, the telecommuter tax frustrates businesses trying to decentralize their workers and prevents them from exploiting telework’s business benefits.

    In addition, the hefty payroll obligations the telecommuter tax imposes on businesses can force companies to relocate. Indeed, The New York Times reported this year on a small business that planned to leave New York because tackling the state’s claims under the convenience of the employer rule proved too draining. (See David S. Joachim, “Telecommuters Cry ‘Ouch’ to the Tax Gods,” The New York Times, Special Section on Small Business, Feb. 20, 2008.)

    Further, by thwarting the growth of telework, the telecommuter tax encourages traffic congestion, a menace to productivity. Excessive traffic can, for example, cause employees to arrive late for work and delay customer deliveries.

    Harm to States

    In addition to employees and employers, telecommuters’ states of residence also suffer under the telecommuter tax. Consider a Virginia resident who telecommutes most of the time to his New York employer. If Virginia grants the telecommuter a credit for taxes paid to New York on his home state income, Virginia forfeits its tax revenue to New York. In so doing, Virginia effectively subsidizes public services in New York (like transportation, police, fire and other emergency services) while it makes the same services available to its resident who is working in Virginia. States currently struggling with steep budgetary shortfalls cannot afford to cede their own revenue to other states. The employee who telecommutes, meanwhile, suffers under a reduced budget for home state spending.

    Even the state imposing the tax loses. In addition to driving business away, New York’s telework tax policy can drive part-time telecommuters away. Because the convenience of the employer rule applies only to nonresidents who spend time working in New York, nonresidents can avoid the rule by avoiding the state: They can increase their telecommuting from part-time to full-time, or take jobs in their home states. When nonresidents stop traveling to New York for work, New York gives up the opportunity to tax any of their wages, and New York restaurants, hotels and other businesses lose the income these teleworkers would have generated on their commuting days.

    The Remedy

    The Telecommuter Tax Fairness Act would eliminate these ills, prohibiting states like New York from taxing the income nonresidents earn at home in other states.

    The bill has bi-partisan support in both Houses of Congress, including the support of lawmakers from Connecticut, Maine, Mississippi and Virginia. Outside Congress, the measure has been endorsed by advocates for telecommuters, taxpayers, homeowners and small businesses.

    To help assure that the greatest number of employees and businesses can maximize telework’s economic benefits – during the current crisis and afterward – Congress should pass the Telecommuter Tax Fairness Act. Whether as an addition to a new stimulus package or in a separate measure, Washington must see to it that telecommuter tax fairness becomes the law.

  • No More Urban Hype

    Just months ago, urban revivalists could see the rosy dawn of a new era for America’s cities. With rising gas prices and soaring foreclosures hitting the long-despised hinterland, urban boosters and their media claque were proclaiming suburbia home to, as the Atlantic put it, “the next slums.” Time magazine, the Financial Times, CNN and, of course, The New York Times all embraced the notion of a new urban epoch.

    Yet in one of those ironies that markets play on hypesters, the mortgage crisis is now puncturing the urbanists’ bubble. The mortgage meltdown that first singed the suburbs and exurbs, after all, was largely financed by Wall Street, the hedge funds, the investment banks, insurers and the rest of the highly city-centric top of the paper food chain.

    So, now we can expect some of the biggest layoffs and drops in income next to be found in the once high-flying urban cores. In New York alone, Wall Street has shed over 25,000 jobs – and the region could shed a total of 165,000 over the next two years.

    Not surprisingly, the property crisis once seen as the problem of the silly, aspiring working class and the McMansion nouveaus has now spread deep into the bailiwick of the urban sophisticates. For the first time in years, many Manhattan apartments are selling for well below purchase price, something unheard of during the boom. In Brooklyn, a 24% drop in sales over the last three months even has boosters talking of an imminent “Brownstone bust.”

    Even San Francisco – arguably the most recession-resistant big city due to its large concentration of nonprofits and “trustifarians” – is seeing prices drop for the first time in years. Far more vulnerable are fledgling neo-urban markets like Los Angeles, Atlanta, Oakland, Calif., San Diego, Memphis, Tenn., Miami and Dallas. Sales are down in most of these markets, as are prices.

    Signs of the times: desperate developers offering goodies to buyers. One downtown Los Angeles property owner has even offered to buy a Mini Cooper for anyone bold enough to buy a loft. Others, in Oakland, Boston and Atlanta, are resorting to auctions to offload their product. Foreclosures have taken place in several other markets, including Charlotte, N.C., and Philadelphia.

    Not surprisingly, many new projects conceived at the height of the bubble are being canceled, and some newly minted condominiums converted into rentals. The rental option makes immediate sense but does not help create the ambiance of luxury so coveted by wannabe cool cities. High-end buyers generally do not covet the idea of having a bunch of college-student renters enjoying a similarly granite-counter-topped unit next door. This is not necessarily good news for expensive restaurants or boutiques either.

    In addition, just if anyone is checking, even at the peak of gas prices, there remains virtually no evidence of any massive movement of the bourgeoisie back into the burghs. One assumes that the now plunging oil prices will not hurt suburban commuters.

    In reality, what we have is a market that is stuck in almost all geographies. Rather than shift people into the urban cores, or vice-versa, the mortgage crisis is simply stopping everyone in their tracks. Even if people wanted to move into the core cities, they could not sell their suburban houses to make the down payments.

    Nor is there ample reason to believe the urban migration will pick up in the near future. Crime has soared in some cities such as Oakland and Chicago. (“Obamastan” has suffered more murders this year than much larger New York and Los Angeles.) Overall, urban crime remains three times that of suburbs; a suddenly rising instance of mayhem threatens many urban recoveries.

    And in the end, it’s really all about the economy. The looming massive layoffs in many key urban markets – notably New York, Chicago and San Francisco – cannot possibly help. Finance has remained one industry that has continued to cluster in core cities, even as most others moved to the suburbs and smaller towns.

    Moreover, it is not just New York. Now, as the butcher’s bill for mortgage mania comes due, Chicago, Boston and San Francisco are all facing large-scale layoffs. The office market in the Windy City, for example, is being decimated by cutbacks at JPMorgan Chase, Merrill Lynch, Lehman Brothers and Wachovia, as well as at the commodity exchanges. So far, the less finance-dependent suburban market appears less impacted.

    A recent visit to Chicago confirmed these trends. The once ballyhooed Trump Tower, once seen as the nation’s tallest luxury condominium, remains incomplete, with a massive crane still perched at its top and troubled by persistent rumors of failing financial support. Another hyped project, Santiago Calatrava’s 2000-foot, 150-story Chicago Spire, is stuck in the ground because the developer has stopped paying his “starchitect’s” bill. All this is not too surprising, given a reported 73% drop in downtown home sales for the first half of the year.

    For a decade or more, city leaders have kept thinking that something from outside – demographic changes, high fuel prices or changing consumer tastes – would create a revival for them. This allowed them to avoid doing hard, nasty things like cutting often-outrageous public employee pensions, streamlining regulations, cutting taxes levied on businesses or improving often-dismal schools and basic infrastructure.

    Maybe the current downturn can be a wake-up call for city boosters. Overall, since 2000, the average job growth in cities has averaged less than one-sixth that of suburbs, according to research by my colleagues at the Praxis Strategy Group. This has been particularly notable in higher-paying blue collar positions in manufacturing and warehousing, but increasingly applies also to higher-end business services.

    Cities should start realizing that their biggest problem is not a shortage of cultural venues and performance artists but a chronic lack of decent, middle class jobs. And to be sure, older cities do possess critical advantages such as already existing, if often tattered, transportation systems and the best strategic locations. Their old industrial districts possess an existing infrastructure and, in some cases, a residual pool of skilled labor and some decent job-training facilities. If properly prodded, local universities could also become part of the solution by seeding new entrepreneurial ventures.

    But such a return to basics may be nullified by the prospect of an urban Democrat coming into the White House and a Congress dominated by the likes of Speaker Nancy Pelosi, Charles Rangel and Barney Frank. This will revive hope that largely suburban middle-class taxpayers will now bail out bloated city budgets and often-absurd projects (convention centers, stadia and associated nonsense).

    City leaders and land speculators may also play the Al Gore card of combating “global warming” to block new roads, single-family housing estates and even the transfer of jobs to the supposedly energy-inefficient suburbs. However, over time, the suburban-exurban majority is unlikely to support this approach. To experience a real renaissance, cities need to learn how to make themselves more congenial again to those – industry, entrepreneurs and the middle class – who have found themselves forced to head to the fringes for almost a half century.

    This article originally appeared at Forbes.

    Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.

  • New York’s Decentralized Economy?

    Even before the Wall Street meltdown, the New York area was going through its own de-clustering. No it hasn’t – and probably never will – become a multi polar area in the style of Los Angeles, Houston or Phoenix, but the trend to deconcentrate jobs has been inexorable over the last thirty years, according to a new report by our friends at the Center for an Urban Future.

    The report states:

    “In 1975, New York City accounted for 53.1 percent of all private sector jobs in the 17-county metro region. But by 2005, the five boroughs’ share was just 47.2. Most of the ci ty’s losses occurred in Manhattan, which had 33.9 percent of the region’s private sector jobs in 1975 but only 28.8 percent in 2005.”

    None of this is particularly worrisome in that the shrinkage of the city’s jobs slowed considerably in the past decade up to 2005. The whole region showed some growth. But what happens now with an estimated 150,000 or more jobs expected to be wiped out due to the financial crisis? This may prove the biggest crisis faced by the city since the “Ford to City: Drop Dead” days of the 1970s.

    Both the Giuliani and the Bloomberg legacies surely will now be tested.

  • Gentrification from the inside out in Brooklyn’s Ditmas Park

    Twenty some years ago my husband, 2 young sons and I moved from our cramped 16-foot wide attached row house in Brooklyn’s trendy Park Slope to a free-standing, 7-bedroom Victorian house in the Ditmas Park section of Flatbush with stained glass windows, pocket doors, original wood paneling, a back yard, front porch, driveway and 2-car garage in a little-known, tree-lined neighborhood about 10 minutes away – on the other, high-crime side of Prospect Park. Friends thought we’d taken leave of our senses!

    Built early last century, our neighborhood Long has been known for its architecture, with the largest concentration of Victorian houses in America. It’s the kind of neighborhood sensible new urbanists dream about it; the only block in New York with subway stations at each end. This was a tribute to the clout of the neighborhood’s original developers who had a strong commitment to building “suburbs in the city,” and secured the best in public transportation for their customers.

    Driveways help preserve the neighborhood’s low density, while also allowing ample street parking. But before and after WWII, entire blocks of houses were torn down and apartment buildings erected in their place. Today, blocks of beautiful, 3-story Victorian houses with large front porches alternate with blocks of 5 and 6-story apartment buildings.

    Not surprisingly, the people in the houses differed, in terms of race and social class, from the people in the apartment buildings. They rarely interacted. The subway tracks demarcated the neighborhood; one side was mixed, the other predominantly black and lower middle class. When crime exploded in the 1960s and welfare tenants were moved into some of the apartments, much of the middle class – white and black – fled. By the early 1990s many assumed that nothing could be done about the collapse of the quality of life. It wasn’t unusual for police officers in that era, many of whom lived in suburban Suffolk County, to respond to crime victims condescendingly by asking, “What do you expect if you live in a neighborhood like this?”

    Little changed even after the extraordinary Giuliani/Bratton efforts brought down crime, little changed in the mid-1990s. The district’s once thriving shopping street, Cortelyou Road, still had no bank, no coffee shop, no diner, no sit-down restaurant, no children’s store, no real estate office. So there wasn’t much pedestrian traffic – or “eyes” – on the main commercial street, still dominated by 99 cent stores competing with 97 cent stores.

    Most neighborhood residents, if possible, shopped elsewhere. Frustrated by this situation, in 2001 I founded “Friends of Cortelyou,” a (very) small group dedicated to recruiting new businesses to our commercial strip. A couple of “friends” and I went to lunch, dinner, and coffee at places that we liked in other neighborhoods in Brooklyn. We introduced ourselves to owners and managers as Friends of Cortelyou, trying to convince entrepreneurs to expand into our still “below the radar” neighborhood.

    To us, the broader, social implications of local shopping were clear; people who walked to local stores on local streets, instead of driving or taking the subway to more developed neighborhoods would generate the everyday interaction that defines a lively neighborhood. Cortelyou’s commercial strip is only 7 blocks long, and a few new stores could have a significant impact.

    I figured that someone who had taken a chance in Brooklyn’s Ft. Greene, that edgy, racially (and income) diverse neighborhood might see the potential in ours which US News and World Report described as the “most diverse neighborhood in America.” One owner, a half Martiniquen, half Jewish former Parisian was hooked; he saw the possibilities for commercial development and knew first-hand the advantages of being first (namely, cheap rent and “buzz”).

    The former Parisian negotiated to take over the lease of an existing corner bar. When he ran into trouble securing “the last $30,000”, we put out a call to about 40 neighbors to raise the last start-up capital. Thirty six different neighbors agreed to loan (or give) $1000 each to back someone who would open a new restaurant in our neighborhood!

    One incredible woman, Susan Siegel, decided she wanted to bring a farmers market to the neighborhood. She worked on this full time, and a year later it opened! Some Cortelyou grocers objected to having it on their strip; a few vocal homeowners objected to unlocking a public school yard and using it to house the market. Ironically the fight over the market swelled into a local “pro-development” movement, made up of people alive to the new possibilities, and sparked a neighborhood newsletter.

    Once it opened in 2002, the Farmers Market became an informal community center, a literal common ground, for our neighborhood. The Market became a place where the full range of neighborhood residents could come together to buy fresh fruits and vegetables and to catch up on what’s happening in the schools, the playgrounds, and stores including a highly successful organic food co-op. Until then, only the homeowners were organized but now new co-op owners, home owners, and renters all came, mingling freely with each other, and with “veterans”, in a way that had not previously been the case.

    At that time we realized we needed more new and engaged residents. I tried to persuade two local realtors to sell the co-op apartments; they were far cheaper than co-ops in other good (or “good enough”) neighborhoods, and seemed like the way to bring in young or single people. But the realtors were dismissive explaining, “there’s not enough money,” or “too much work” in selling coops to make it worth their while.

    I realized I’d have to take this on myself. So I got a real estate license, affiliated with a Park Slope broker, and began selling co-ops in one building in our area. Other agents in that office didn’t mind; for them, too, it was too little money and too much work. Selling real estate and developing the neighborhood were two sides of a coin; the combination turned out surprisingly to be more fun and satisfying than I had imagined. Within two years I co-founded Brooklyn Hearth Realty, an agency I currently own with two partners, young, dynamic neighborhood residents who moved here in the twenty-first century.

    The neighborhood buzz kept growing. Jim Heaton, a local advertising executive initiated an online newsletter, FREND, and also designed a logo for Friends of Cortelyou. We had the logo printed on t-shirts and oversized shopping bags, and sold them to raise money for the few activities we sponsored that required financial support. We initiated and hosted “Welcome Receptions”, at first in our homes, then in the new restaurants that we recruited for the new residents. These turned out to be very popular, and were one more mark of distinction for our neighborhood. Local businesses joined in as sponsors.

    FREND served to “connect” nearly a thousand people and families to the new initiatives, particularly around the Farmers Market and crime, but the on-line contribution really blossomed in 2003 when Ellen Moncure and Joe Wong revived the Flatbush Family Network (FFN). This site has become an invaluable source of neighborhood and childrearing information for the many young families who live here. For many people moving into this neighborhood, FFN provides an initial introduction and orientation to life in this neighborhood. For those who live here, it’s a convenient, ongoing source of information and support.

    All this really began to congeal by 2002. New stores began to open on Cortelyou Road. One of the early successes was the Picket Fence restaurant. Picket Fence was followed by a vintage furniture store (opened by Nicole Francis, a staunch FOC member), a Mexican restaurant, a café, a bar, a bagel shop, a dance studio, a real estate office, wine store, furniture store, children’s store, natural food store, new flower shop/bar, and Tibetan Café. Meanwhile the long-established food co-op and the pizza shop both expanded and upgraded. The Farm on Adderley broke new ground in 2005, attracting attention and customers from far outside the neighborhood. The owners of that restaurant opened another a few blocks away the following year, and just opened the flower shop/bar a month ago. Once seemingly on its last legs, the neighborhood now pulses with a contagious energy.

    That energy gave birth to the Ditmas Park Blog, founded in early 2007 by Ben Smith and Liena Zagare. The blog sends local information and gossip beyond the neighborhood’s families, reaching growing numbers of singles as well. This was the first institution to target singles as much as families, extending the neighborhood’s expanding demographic boundaries. Zagare, her finger on the neighborhood’s pulse, went on to found the Ditmas Workspace in summer, 2008. She created a shared workspace in a former doctor’s office. Another former doctor’s office, also on the ground floor of a large house, has a neighborhood yoga studio and several artists working in small, separate spaces. That’s the “new use of old space” that’s helping to reconfigure our neighborhood for the 21st century.

    Much of what I’ve described occurred during the boom times of 2002 through the first half of 2008. Although Brooklyn’s market stayed strong through the summer of 2008, we now face an uncertain future in a very volatile economic climate. Perhaps people will stay closer to home, like the woman who stopped in my office on Cortelyou the other day who said, “I’m not going out as much, and trying to save money. So I’m going over to my friend’s with a bottle of wine.” After all, you can save money on transportation and on babysitting by staying closer to home.

    As I write this, the owner of a successful Manhattan restaurant is looking closely at Cortelyou, hoping to open in a “real neighborhood” where customers support local businesses. No one knows yet where the economy is headed, or what this means for our neighborhood. But we now have a vibrant neighborhood. This is no longer just a location where the houses are a comparative bargain. It’s an area with an identity.

    Jan Rosenberg taught Sociology at LIU’s Brooklyn Campus for 28 years; her studies of other Brooklyn neighborhoods, and of cities, inspired her work in Ditmas Park. She is cofounder of Brooklyn Hearth Realty.

    Photos courtesy of Joanna Grazda and Mark Gilman.

  • Manhattan Sinking

    Anyone in New York recently can see that the swagger is now gone. With the economy losing its primary engine – a relative handful of financial hotshots- the whole plutonomic system seems to be under major stress. The state and city budgets also seem to be heading south in a big way.

    You can see this strolling through Soho and peering into empty restaurants and nearly empty shops. Clerks and waiters now actually seem to want you to enter. The $350 children’s sweaters are now on the sales rack, for about a third the price.

    Wall Street area is in even worse shape, says friend of the New Geography, Jonathan Bowles of the Center for an Urban Future. Yet there are signs of dynamism. Jonathan and I went to lunch on 32nd Street, also known as Little Korea. Here the restaurants and stores, many of them tied to the global garment trade, seem as busy as ever. Good value, hard work and plain old sticktoitivness will still pay off, even in a recession.

    New York will bounce back but the impetus likely won’t come from the investment bankers or the fashionistas. Instead, look for the Koreans, Indians, Africans and other newcomers — and the skilled media and other artisans now mostly living in Brooklyn and Queens — to pick up the slack. A more affordable, less luxury-obsessed city is good news for them. It makes running a business or buying a house or condo a possible dream. These are the folks most capable of reinventing the city in the post-bubble age.

  • Rebuilding the Idea of the City: The Present Crisis in Perspective

    New York long was a product of the harbor economy. Before there was a Times Square or a Grand Central Station, Lower Manhattan, then ringed with docks, was oriented to the railroads and factories of the Jersey coast to its west and the merchants and manufacturers of Brooklyn across the East River. The decline of Lower Manhattan as an economic engine is in large measure a reflection of the fall of that harbor economy as first Manhattan and then its partners in Brooklyn and Jersey City de-industrialized.

    Still, there’s cause for optimism. In the last two decades, the old harbor economy of trade and industry, severed by the collapse of manufacturing, has been re-knit on the basis of the service economy. By the middle of the 1970s, even as New York was at its nadir, the growth in service sector jobs began to exceed the decline in manufacturing jobs. And despite the impact of 9/11, New York continues to attract the key element of the modern economy, talented people; college applications are up for next year.

    One sign of New York’s vitality is that so many places want to be considered the city’s ‘sixth borough’ — Fairfield County, Conn., Jersey City and even Philadelphia. This dispersion has brought both opportunities and challenges to New York itself.

    My optimism has been tempered by two questions and a frightening possibility. First, attempts to accommodate all the interest groups has slowed the entire rebuilding of Lower Manhattan. Second, the Bloomberg administration — for all its posturing about rebuilding downtown — continues to focus as well on expanding the far west side of Manhattan and downtown Brooklyn as well as various new stadia. With a recession already underway, one that is centered in part on the critical financial industry, it would seem more prudent for the city to narrow its priorities.

    Perhaps a better focus would be to seek how to revive the harbor economy first envisioned by ironmaster and former Manhattan mayor Abraham Hewitt, the son-in law of Peter Cooper, and the corporate lawyer and anti-Tammany reformer Andrew Haslett Green. Their vision was one of a vast united city united by new bridges across the East River as well as a rebuilding program for the city’s crumbling docks, streets and transit facilities. In the late 19th Century, basic infrastructure and opportunity were inextricably intertwined.

    The upshot was extraordinary. New York became “the engineers’ city.” New York City bonds were issued to build bridges across the Harlem and East Rivers, and tunnels under the Hudson connecting New York to New Jersey as well as the subway system that became the city’s circulatory system for labor. These tied Brooklyn and Lower Manhattan together into a single economic unit. With this New York became not only the largest city in the U.S. but its busiest port, a paradise for small manufacturers and a headquarters city for national corporations.

    New York’s consolidation also promoted a rapid expansion of the urban area. Even at a time when centralization seemed to be in the saddle, the wildly crowded and extraordinarily expensive downtown began to shed some of its functions. Given the extraordinary cost of land, those who stayed increasingly worked in skyscrapers like the Woolworth Building, which opened in 1913.

    In the 1920s, even as New York surpassed London as the world’s financial center — a designation that may not be reversing again — the functions of the downtown were narrowing. The opening of Penn Station in 1910 gave Long Island and New Jersey easy access to midtown. It helped set off a real estate boom in Times Square, which was intensified three years later when Grand Central Station opened. The Holland Tunnel followed in 1927. Not surprisingly in the 1920s most new construction was in midtown, a trend that continued even into the depression years when Rockefeller Center was built, with midtown beginning to eclipse Lower Manhattan.

    While midtown grew, the port thrived; in the 1920s half of U.S. export and import traffic moved through the harbor. Eighty-five percent of the traffic landed on the New York side and then had to be moved across the Hudson on “lighters.” This was the so-called “Manhattan Transfer.” The problems of cross-harbor traffic were magnified by the control exerted on both sides of the harbor by the local political machines.

    As a response harbor congestion during World War I — at one point trains were literally backed up to Pittsburgh — the new bi-state Port of New York Authority turned very effectively to constructing the Lincoln Tunnel and the Outerbridge, Goethals, George Washington and Verrazano bridges linking New York to New Jersey by car and truck. By 1950 New York had it all, including a vast and varied manufacturing sector, the largest port and undisputed dominion over the financial, cultural and media life of the nation.

    What Went Wrong and Right
    In the early 1970s the harbor economy fell apart. Even though the financial sector grew, the fastest growth was in government workers engaged not in basic city services but rather in social services and make-work health care jobs. Between 1960 and 1975 spending tripled in constant dollars, while the city population was declining slightly. The money went to public assistance, health social services and housing. Redistribution rose from 26 percent of NYC expenditures in 1961 to 36 percent in 1969 and has stayed at about one-third.

    This change in economic character transformed New York from a city that fared well in recessions to one more susceptible to wide swings in employment and growth. Taxes rose, city services deteriorated and businesses fled.

    The city, of course, is in much better shape today, largely due to the reforms of mayors Koch and Giuliani and some favorable trends in the global economy. New York is clearly a better place to live and work than it was just two decades ago.

    In part, the decline of manufacturing finally began to pay off for New York. De-industrialization, a disaster for some sections of the city, had been an opportunity for others to upgrade their quality of life by turning manufacturing lofts into living spaces. Old manufacturing districts like SoHo became “funky.” First, they attracted artists who were soon followed by Wall Street yuppies. New York became a magnet for twenty-somethings, a dating bar for young college graduates. Brooklyn also is bustling with business and shopping districts, with a wave of gentrification beginning in the brownstone neighborhoods of Park Slope, Carroll Gardens and Fort Greene.

    “The restoration of the brownstone belt,” explained Carl Weisbrod of the Downtown Alliance, “was a crucial element in the revival of Lower Manhattan. Just as at the turn of the century, Brooklyn’s tony neighborhoods were once again the neighborhood of choice for many location decision-makers, senior managers in investment banks, partners in law firms, and bank executives.”

    With the nexus between Manhattan and Brooklyn restored — intertwined by the best mass transit connections anywhere in the county — the chance to reinvent the great harbor economy is better now than any time in fifty years. Instead of turning its back on the harbor that created and sustained the city or centuries, the future depends, in large part on n turning the waterfront into an asset.

    It’s beauty and recreational possibilities can make downtown into an attractive live-work location. And then there are the extraordinary possibilities presented by 172 acre Governors Island, a five-minute ferry ride from either Lower Manhattan or Brooklyn’s Red Hook, Governors Island, with its golf course, playing fields and historic buildings.

    The future of the city once again will depend on capitalizing on the waterfront. Born a harbor city, New York can be reborn once again as a city the lives and thrives on its waterways — if the city can decide that this again represents its priority for the future. We will probably have to wait for a Mayor with a name other than Bloomberg for that process to start.

    Fred Siegel is a Professor of History at Cooper Union in New York.

  • A New Model for New York — San Francisco Anyone?

    From the beginning of the mortgage crisis New York and other financial centers have acted as if they were immune to the suffering in the rest of country. As suburbs, exurbs and hard-scrabble out of the way urban neighborhoods suffered with foreclosures and endured predictions of their demise, the cognitive elites in places like Manhattan felt confident about their own prospects, property values and jobs. So what if the rubes in Phoenix, Las Vegas, Tampa and Riverside all teetered on the brink?

    Now only a deluded real estate speculator — or a flack for Mayor Michael Bloomberg — could deny that the mortgage crisis wolf is now at Gotham’s door. Having underwritten and profited obscenely from the loans that launched the crisis, Wall Street is now reeling from the collapse of several of its strongest linchpins, including Lehman Brothers and Bear Stearns, while Merrill Lynch has become little more than an annex to Charlotte-based Bank of America. AIG has been forced on the federal teat and other giants, even Citibank, could be next.

    With perhaps tens of thousands of high-paying jobs about to evaporate, and with them the rich bonuses that fueled Mayor Bloomberg’s grandiose vision of a “luxury city,” New Yorkers should brace themselves for hard times. Bloomberg’s brave talk about media, tourism, bioscience or the arts making up the difference should not be taken too seriously. In reality New York has never been more dependent on Wall Street than it is today, in large part because most other middle class sectors, like manufacturing and warehousing, declined massively over the past seven years.

    As a result, nearly one out of four dollars earned in New York — although accounting for less than five percent of all jobs — are tied to the financial sector. Overall job growth has been slow in finance, and stood well below historic highs even at the crest of the boom, and are now dropping radically. This means, as a result, a group of relatively few big earners are more and more important as overall employment in finance declines.

    Tourism certainly cannot make up the balance since it is a notoriously low wage sector and may soon be subject to a major decline in visitors due to higher airline prices and a growing downturn in Europe. New York has a decent bioscience sector, but Gotham is far as dominant here as in finance or media. There’s strong competition from a host of places, notably St. Louis, Houston, Boston, San Diego and Silicon Valley.

    So where can a plutocratic Mayor look for inspiration for the future? He may not like it but arguably the best model for New York may be San Francisco. More than any American city, San Francisco epitomizes one possible future for American urbanism of the “luxury” variety.

    The parallels between San Francisco and underlying trends in New York, and to some extent Chicago, are striking. Like New York on a smaller scale, San Francisco was once a corporate headquarters town and a powerful financial center. But starting in the 1980s and 1990s that all started to change. Corporations fled for the suburbs, or got merged with firms located elsewhere. It started with the exodus of Crocker Bank. In 1998 its most important company, started by an Italian immigrant in the city, the Bank of America, fled to North Carolina. Like New York, it has flushed away virtually its entire industrial sector and lost ground as a port.

    Yet through this all, San Francisco managed to reinvent itself. First it anchored itself to Silicon Valley, becoming the playground, advertising and media center for the nerdistan to the south. Then, after the collapse of the dot.com bubble, the city fell back on its intrinsic appeal as a place, relying largely on tourism and its ability to attract high-end residents.

    This discreet charm has allowed San Francisco to enjoy a reasonable economic comeback, not so much as a corporate or economic center, but as a high-end destination for the nomadic rich, the culturally curious and the still adolescent twenty and even thirty somethings. Many of this last group have strong skills sets and remain a powerful asset to the city.

    You can see the changes just by walking the streets. Three decades ago, when I worked in the City, San Francisco was still in large part a city of suits and blue-collar workers; today it’s black-garbed cool and casually elegant. There are more wealthy residents and decidedly less minorities, even Hispanics, and ever fewer children.

    This pattern could represent the future — and even the present — in parts of New York and even on the fringes of Brooklyn. We have seen that the “baby boom” in Manhattan does not last much past age five. When Wall Streeters lose their ability to pay for nannies, summer camps, private schools, etc, many affluent families may not be able to hang out that long.

    But then again there are those residents there will not lose their jobs. These include those tied to “luxury” industries, media, and non-profits. Not to be ignored also are the growing ranks of trustifarians, wealthy people living off their parents or grandparents’ labor. These are not the prototypical New Yorker on the make, like Charlie Sheen in “Wall Street,” but they have spending power, connections and often political influence.

    None of these groups are likely to disappear because of a mere trifle like a financial system collapse. These are committed denizens of the urban pleasure dome, content either to live minimally or (for the time being at least) pursue such generally non-remunerative activities like working in the arts or making documentary films.

    Of course, cities like New York and Chicago, also likely to be hard hit by the securities industry meltdown, may not be able to live as richly in hard times like San Francisco. Parts of Manhattan and Manhattanized Brooklyn might endure a metropolitan recession, but it may be tougher on the mostly minority, poor and working class residents who inhabit the outer reaches of the outer boroughs . These residents will suffer from the inevitable cutbacks in city services as well as the loss of retail, hospitality and construction jobs.

    In contrast, “The City,” as San Francisco likes to be known, is both small, compact and surrounded largely by affluent, low-density suburbs. It effectively has no real analogue to the outer boroughs. To see the dark side of America’s urban reality, you increasingly have to go east across the Bay to the crime-infested streets of Oakland, where the once proud dream of civic renaissance appears to be slowly fading.

    Of course, New Yorkers may reject this vision of their future. San Franciscans, have long prioritized joie de vive over imperial visions. In contrast, New Yorkers derive much of their civic self-esteem from their city’s role as the “capital of the world.”

    But if New Yorkers want to keep this slogan to be more than a marketing jingle, they will have to transcend the lame “luxury city” zeitgiest. Spending nearly four billion on new sparkling sports stadiums, and even Bloomberg’s media mastery, won’t get it done. It will take hard work, a commitment to infrastructure and broad-based job growth.

    It’s hard to know if New York still has the stomach for this kind of hard work. As someone whose familial roots in the city span over a century, I hope so. New Yorkers are a resilient lot, as they have shown many times in the past. But if they have lost their appetite for hard struggle, well, they can always consider becoming the next San Francisco.

    Joel Kotkin is Executive Editor of NewGeography.com

  • New York City Bracing for Lehman’s Demise

    With the sale of Lehman Brothers seen as imminent — possibly as soon as this weekend — New York’s commercial real estate market is bracing itself for the loss of a key financier responsible for tens of billions of dollars in commercial loans.

    “It would be one less major player,” a commercial real estate finance expert at New York University Schack Institute of Real Estate, Lawrence Longua, said. “It is probably more of a psychological effect, but it is one more piece of bad news.”

    The Treasury Department and the Federal Reserve stepped in yesterday to help Lehman Brothers put itself up for sale, according to a report published on the Web site of the Washington Post last night. The sale has yet to be finalized, but could be announced this weekend before Asian markets open Monday morning, the report said. Among the companies that have been named as possible acquirers include Bank of America Corp., the French bank BNP Paribas, Germany’s Deutsche Bank AG, and Britain’s second-largest bank, Barclays.

    The deal comes on the heels of Lehman’s announcement Wednesday of a $4 billion third-quarter loss and a plan to spin off its weaker assets, including between $25 billion and $30 billion of commercial real estate investments, into a separate publicly traded company.

    The news sent its shares into a tailspin. They dropped 40% yesterday, to $4.22, and have lost more than three-quarters of their value since Monday; Lehman Brothers stock is down more than 90% since its high of $67.73 last November.

    The news comes as a blow to an already beleaguered Manhattan commercial market. The bank has been a key player, financing office buildings, hotels, and retail centers, and boasts a portfolio with investments in America, Europe, and Asia. Last year, Lehman Brothers partnered with Tishman Speyer Properties in the $22.2 billion acquisition of Archstone-Smith Trust, an apartment building operator.

    “They are a large player in real estate transactions, and this adds to the fact that we are still not at the bottom of this market,” a partner at the law firm Orrick who heads up its New York real estate practice, Alan Pomerantz, said. “They are an important financial capital markets player in the New York City marketplace, and a group of very smart people would be scattered elsewhere.”

    Among some of its notable deals was financing real estate firm Broadway Partners’ buying spree in 2006 and 2007, during which it purchased two portfolios of properties from Beacon Capital totaling more than $8 billion. The bank also helped Broadway Partners acquire a number of Manhattan buildings, including 340 Madison Ave., 450 W. 33rd St., and 280 Park Ave.

    Lehman, which said about 58% of its real estate portfolio is in debt, while 26% is in equity, and 16% is in securities, also was a lender for SL Green Realty Corp.’s $475 million mortgage financing of 1166 Sixth Ave., and the $625 million refinancing of 1515 Broadway.

    In addition to hurting the lackluster Manhattan commercial lending landscape, Lehman’s possible demise could also throw into play the bank’s one major brick-and-mortar asset: its 38-story headquarters at 745 Seventh Ave., at 49th Street. The building boasts more than 1 million square feet of floor space and could be worth as much as $1.1 billion, according to the executive vice president and principal at CRESA Partners, Robert Stella. Lehman Brothers paid $700 million for the building in 2001.

    The last time the Treasury Department facilitated the sale of an investment bank — J.P Morgan’s acquisition of Bear Stearns earlier this year — one result was that J.P. Morgan moved its employees into Bear Stearns’s Midtown headquarters, abandoning its plans to move into new headquarters at the World Trade Center site.

    There are also many questions remaining over how Lehman will structure its spin-off. “I am still uncertain how they are going to finance this new vehicle,” the managing director of research firm Real Capital Analytics, Daniel Fasulo, said. “Not only are they supposed to provide new equity, but they are supposed to be loaning the new entity $7 billion. Where is that $7 billion going to come from? Right now I have a lot more questions than answers.”

    This article was first published by the New York Sun.