An Overview of Economic Losses
In NYC Due To Terrorist Attacks on
Dr. Surendra K. Kaushik
Research Assistance Provided By Jagadeesh Ambati
September 11, 2001
The Day when terror struck New York and Washington, D.C.
(Press Release from the City Hall on October 4, 2001)
Trade Center Attack Could Cost City Economy More Than $100
Billion Over 2 Years
The attack on the World Trade Center will likely cost the city
economy between $90 billion and $105 billion by the end of
fiscal year 2003, according to a preliminary report issued today by
City Comptroller Alan G. Hevesi.
That includes $45 billion for the value of buildings and people
already lost and $45 billion to $60 billion for on-going costs,
including lost economic activity over the next two fiscal years.
As a result, City taxes and other revenues will be $1.3 billion
less than previously expected in fiscal years 2002 and 2003. Insurance
is likely to cover only about a third of those costs, about $37 billion.
The City could lose 115,300 jobs this fiscal year, although there
will be an offset with some new jobs from clean-up, repair, construction
"You cannot reduce to dollars and cents the losses New Yorkers have
suffered from the vicious World Trade Center attack, just as there is no
way to put a dollar value on the heroism and determination of our
response," said Hevesi.
"But to obtain the resources we will need to rebuild and create a better and
stronger New York City, we must try to understand in dollar terms, what
the attack cost our economy."
"New Yorkers are the toughest, smartest, most resilient people in the world.
We will recover from this attack.
The federal and state governments have already proven that they are
committed to helping us," said Hevesi.
"What this study makes clear is that what the President and Congress have
committed so far is just a down payment on what it will take to ensure that
the terrorists don't succeed in destroying not just the two towers, but also
America's and the world's financial capital."
The report provides preliminary data and the Comptroller's Office will
continue to update the information and will cooperate with other efforts to
calculate costs, including the report being prepared by the New York City
Loss of Buildings and People -- $45 billion
Rebuilding the World Trade Center as smaller buildings is
estimated to cost $6.7 billion. Repairing and restoring other damaged
buildings will cost about $5.3 billion, for a total cost of $12 billion.
Replacing and repairing infrastructure will cost about $9.4 billion, including
$4 billion for subways, $3 billion for telephone, electric and other utility
systems, and $2.4 billion in losses for the Port Authority, including the
PATH train but excluding the Trade Center buildings.
The value of furniture and fixtures, employee property, computer
systems,vehicles, inventory in stores, etc., is another $12 billion. For
securities firms in the WTC complex, the technology losses alone are
estimated to be $3.2 billion.
It is impossible to put a real value on a human life and the pain of losing a
loved one. But for purposes of economic analysis, one way economists
ascribe an economic value to human life us by calculating how much an
individual would have earned over his or her expected working life.
On that basis, using the high average income for New Yorkers in general
and financial workers in particular, the cost to the City economy of 5,600
deaths is about $11 billion.
Continuing Costs & Loss of Economic Activity in FY 02 -- $42 billion
The City is initially paying for clearing the area and the most visible portion
of the cleanup, nearly half a million tons of steel, concrete and debris.
The Comptroller has already agreed to register four emergency
contracts totaling $1 billion for cleanup, with an additional $5 billion
projected for stabilization and remediation.
Another $7 billion in costs is expected for City government
personal-service costs (such as police, fire, and sanitation overtime)
and other-than-personal-service (OTPS) costs such as destroyed City
vehicles, road rebuilding, and burial costs.
Finally, $1 billion is the estimate of spending by private owners for
cleanup and repairs.
Treating those injured and the loss of work from trauma and the long-
term effects of the attack for victims, their families, and countless
other citizens could cost $3 billion.
Many companies lost business as a result of the attack and economic
activity will be affected for a long time.
The total amount of lost business activity is projected at $21
billion for fiscal year 2002. Wall Street firms were severely affected
by the closure of the NY Stock Exchange and many trading centers and
are projected to lose $7.5 billion in economic activity over fiscal year
Hotels, restaurants and theaters lost an estimated $2.3 billion.
Retail and wholesale trade lost $1.7 billion, insurance $1.3 billion.
Lost rent from destroyed and damaged buildings is about $1.75 billion.
About $700 million will be recouped as companies move to other
locations in New York City, so the net loss is about $1.05 billion.
Wages lost to the City economy because businesses locate elsewhere
will be about $3 billion in FY 02.
The City could lose 115,300 jobs this year, including 17,500 in retail
and wholesale trade, almost 15,000 in the securities industry, almost
29,000 in service industries including 7,000 in airlines alone, 8,000 in
restaurants and 6,000 in hotels.
Continuing Costs & Loss of Economic Activity in FY 03 -- $3
billion to $18 billion
The long-term impact of the attacks depends on how quickly the
national and local economies recover and on the location decisions that
There is not enough space in Manhattan for all the firms displaced from
the World Trade Center. Some are moving out of the City. Some may
return when there is new space, others may not.The impact on the
city's economy in FY 03 could range from $3 billion to $18 billion.
Offsets Insurance -- $37 billion·Life insurance payouts could
total $4 billion, slightly more than one-third of the economic
loss of $11 billion.
Property/casualty Insurance payments are estimated at $17 billion, half
the total loss of $34 billion.
Business interruption insurance may provide $11 billion of the
$21 billion lost.The remaining $5 billion will come from coverage such
as unemployment insurance, Workers' Compensation (which provides
both death benefits and disability benefits), and health insurance.
Federal and State Aid
The federal government has appropriated $20 billion for recovery aid
for New York,Washington and Pennsylvania, but it is still unclear how
much of this the City will receive.
Clearly, given the costs, this will not be enough. The level of state
financial assistance is also unclear at this time.
"It is essential that New York City receive an appropriate amount of aid,
given the costs, and that this aid come quickly and with as few strings
as possible," Hevesi said.
Reduction in Taxes & Other Revenues -- $1.3 billion in FYs 02 and 03
Reduced economic activity will mean lower incomes for businesses and
residents and lower City taxes and other revenues. In FY 02, tax
revenues are projected to be $738 million less than currently projected,
including $338 million less in sales and hotel taxes, $189 million in
business taxes, $112 million in personal income taxes, $45 million in
commercial rent tax and $45 million in parking violations.
In FY 03, taxes and other revenues are projected to be $567 million
less than currently projected, including $195 million in property taxes,
$135 million less in sales and hotel taxes, $95 million in business taxes,
$50 million in personal income taxes, $38 million in commercial rent tax
and $37 million in parking violations.
"Our goal must be to be the most business-friendly city in
America," said Hevesi."We must help local businesses re-
establish themselves as quickly as possible.” The study makes
the following recommendations:
Expedite payment of disaster grants and loans to help
businesses get back to normal operations as quickly as possible.
Provide tax incentives and utility cost breaks to keep
businesses in New York City.Support and expedite microlending
activities to help small businesses.
Rebuild on the Trade Center site as quickly as possible. Establish a
state and city authority with the power needed to ensure that the site and
neighboring buildings are cleared or safely repaired and that
well-thought-out reconstruction plans are developed and implemented with
Establish a security commission led by the police commissioner.
The commission should seek to develop security procedures that balance
the need to protect New Yorkers and the nation, while also promoting an
efficient flow of people and goods necessary to conduct business.
The commission should foster cooperation among companies to
share and keep down security costs. As much as possible, technology
should be used to allow effective scanning for potential weapons while
allowing New Yorkers to go about their business as quickly as possible.
September 11, 2001
The Day when terror struck New York and Washington DC
25 Million Square feet of commercial office space has been destroyed.
Retail sales plunged 2.4 percent in September.
Delays are a real threat to the U.S. economy. If it takes longer to move goods and
people, the nation's productivity is likely to fall.
The insurance industry estimates its costs alone have reached $30 billion.
And in New York City, the costs of rebuilding, of lost jobs, and of lost revenues
could reach to more than $100 billion over the next two years.
An estimated $3 billion has flowed out of equity funds since the attacks.
Wall Street firms expect to lose $1 billion in profits this year. More than 300
companies around the country have cut profit estimates since the attacks, blaming
the terrorism for a slowdown in business.
Claims for first-time unemployment benefits jumped by 71,000 in the
latest week to 528,000, the highest in eight years.
Retail sales plunged 2.4 percent in September, their biggest drop in nine years
With occupancy rates nationwide still down nearly 12 percent last week, hotels are
desperate for customers.
Economies like Singapore, Malaysia and Taiwan rely heavily on shipments to the
United States, their largest market. Japan is typically the key Asian trading partner
and No. 2 destination for Asian goods.
Effects Felt at Home and Abroad
The Philippines, Thailand and Indonesia have also yet to work themselves free
from the effects of the Asia crisis that started in 1997. With structural problems at
home and a worsening of already weak overseas demand, there will be little to
help them, experts say.
Even the most robust economy in Asia, China, has been relying more and more
on sales to the United States, particularly of electronics goods. Those will now
take a sharp dip, as will other countries' key shipments, such as South Korean
and Japanese car exports.
New York Gov. George Pataki pitched a $54 billion recovery plan to the
White House and Congress that he acknowledged included items not directly
related to the Sept. 11 terrorist attacks. But he told them he wanted to send them
a proposal they could work on now so the money could get back to New York
businesses as quickly as possible.
Under the governor's three-part plan, $34 billion would go toward
rescue and rebuilding efforts, $20 billion to economic recovery efforts,
including creation of a "Liberty Zone" for economic development in
Manhattan, and $100 million for security measures.
Japan, the world's second-largest economy, has increasingly relied on the United
States to lead it out of a prolonged slump. It is about to enter its fourth recession
in a decade.
While officials at the meeting signaled their agreement that New York is entitled
to more than the $20 billion in emergency money approved last month, two key
questions came of the discussion: what costs were directly connected to the
terrorism, and when New York should get the money.
The answer to the first question is dependent on insurance payouts, state
officials have said. And Pataki requested that the money be approved as quickly
But Pataki argued that a quick payout could help hold off further
economic damage to 9,000 small businesses destroyed by the attacks.
and barred from reopening due to recovery operations.
Gov. George Pataki is proposing a $54-billion aid package to help pay
costs related to the New York City rescue effort, rebuilding and
economic revitalization. It includes $15 billion for basic rescue and
response costs, $19 billion for rebuilding and redevelopment costs and
$20 billion for economic recovery and revitalization costs.
Here's a breakdown:
$5 billion for construction costs including demolition, debris removal and re-
mediation of the World Trade Center site.
$5 billion for emergency security measures.
$900 million for utility costs, including repairs to utility lines and buildings.
$378 million for victim assistance.
$323 million for other city costs, including burials, reimbursement to the city
Board of Education, and miscellaneous personnel and nonpersonnel service
$8.2 billion for replacement of the World Trade Center and hotels.
$2.4 billion for MTA capital costs to cover safety and security concerns.
$1.7 billion to fix infrastructure damage to the Metropolitan Transportation
•$1.3 billion for Port Authority security enhancements.
•$1 billion for cleanup of private buildings and debris removal.
•$850 million for subway station reconstruction.
•$250 million for reconstruction of city roads, water mains and sewers.
$245 million to cover MTA losses in toll and fare revenue.
$163 million to cover reduction of tax subsidies to the MTA because of economic
ECONOMIC RECOVERY/ REVITALIZATION
This part of Pataki’s plan does not include a specific breakdown of money requested
in most cases, but lists types of costs, including:
Acceleration of the MTA's five-year capital program of railway track improvements,
station rehabilitation, modernization and safety improvements.
Acceleration of work on East Side highway access, and preliminary engineering
studies for the Second Avenue Subway.
Modernization of crossings at the border between New York State and Canada and
improving security to enhance trade.
Acceleration of the state's five-year capital program of bridge rehabilitation, road
paving and intelligent technology projects.
Creation of a "Liberty Zone" in lower Manhattan that would include tax incentives
and grants for businesses as a way to rebuild 25 million square feet of commercial
office space destroyed Sept. 11.
Payment of 100 percent of reimbursement of COBRA premiums for workers.
Creation of a "Liberty Zone" in lower Manhattan that would include tax
incentives and grants for businesses as a way to rebuild 25 million square feet
of commercial office space destroyed Sept. 11.
Payment of 100 percent of reimbursement of COBRA premiums for workers.
Extension of unemployment insurance benefits beyond the current 26 weeks.
Strengthening security to protect New York State water supplies,
transportation, infrastructure, communications structures.
"Going forward, economic indicators will show the full ramifications of these
attacks," Labor Secretary Elaine Chao said. "What that means is that
[President Bush's] economic stimulus package will be a major factor in helping
The loss of jobs — 199,000 last month — was the largest decline
since 259,000 in February 1991, when the United States was fighting the
Gulf War and its economy was in a recession. The unemployment rate was
steady at 4.9 percent despite the huge number of job cuts, in part because the
work force — the number of people employed or looking for work — grew by
840,000 people in September.
In a visit to the Labor Department Thursday, Bush pledged to provide $3
billion in aid for workers who were displaced or lost their jobs in the wake of
the Sept. 11 attacks.
The "Back to Work" package, as Chao dubbed it, will extend
unemployment benefits by an additional 13 weeks for individuals living
in states directly affected by the attacks, and in states where unemployment
jumps to more than 30 percent for three consecutive months.
'Economy in Recession’
The president is also calling for accelerating individual income tax cuts scheduled
to take effect over the next few years and a stimulus package that will also
include tax incentives to encourage businesses to invest. The total stimulus
package is expected to be between $60 billion and $75 billion. The president
Friday urged Congress to pass already-signed tax relief for individuals and
businesses as quickly as possible.
Most economists now concede the U.S. economy is likely moving
backwards rather than forwards. Gross domestic product — the most broad
measure of an economy's strength — increased at a 0.3 percent annual pace
between April and June, the slowest in eight years.
Estimated job losses announced in various industries
Raytheon Aircraft: 750
Rockwell Collins: 2,600
AMR (American, American Eagle, TWA): 20,000
US Airways: 11,000
British Airways: 7,000
Air Canada: 5,000
Swiss Air: 9,000
KLM Royal Dutch Airlines: 2,500
America West: 2,000
Midway (shut down): 1,700
Virgin Atlantic: 1,200
Scandinavian Airlines: 1,100
Air Transat: 800
American Trans Air: 1,500
Frontier Airlines: 440
National Airlines: 300
Vanguard Airlines: 150
Sun Country: 200
Aer Lingus: 2,500
Textron (Cessna,Bell Helicopters): 2,500
Mandalay Resort Group, Las Vegas: 4,500
MGM Mirage, Las Vegas: 3,000
Wyndham International: 1,600
Park Place Entertainment, Las Vegas: 1,500
Other Las Vegas Hotels: 3,000
Navigant International: 800
Rosenbluth International: 800
Shedd Aquarium: 44
LSG Sky Chefs: 4,800
Gate Gourmet: 3,000
Ford Motor Company: 5,000
General Electric: 4,000
Brinton US Axminster: 300
Sun Microsystems: 3,900
Nortel Networks: 10,000
Advanced Micro Devices: 2,300
Excite At Home: 500
Banks and Brokerages
Credit Suisse First Boston: 2,000
September 11, 2001
Effect on Small Businesses in Lower Manhattan
The city estimates that 14632 businesses in the area close to
WTC were destroyed ,damaged or significantly disrupted.
50,000 people who worked in the wtc are no longer there as
clients and customers.
Before Sep'11 only few enterprises have business interruption insurance
and many didn't know it exists.
1800 businesses have sought S.B.A loans.
340 have been approved
12000 businesses who requested applications did not even
The S.B.A should extend the grace period from 5 months to one year or
Insurance will probably cover about $17 Billion of property
damage,$4 Billion for loss of life and perhaps $18 billion in
Source:Fred P.Hochberg,“Small Business, Badly Damaged”,
New York Times, October 17, 2001, p.A23.
The information presented was compiled from the
The New York Times
Ground Zero, Lower Manhattan