Annual Report 2012

Page 3

A number of recent studies of global cities have concluded what many have long known - New York City ranks first in the world in overall competitiveness, financial clout, and the ability to attract the world's brightest and most creative minds.

What these studies also found is that no city can afford to rest on its laurels. With recent advances in technology and the ease with which capital and information flow in today's global economy, New York City increasingly finds itself competing not just with traditional power centers, such as London and Tokyo, but also with a host of emerging cities that have joined the battle for residents, businesses, and visitors.

Fulton Street Transit Center construction

Many of these American and international cities are gaining ground as a result of investments in quality-of-life initiatives as well as modern infrastructure and transportation systems so essential to a dynamic metropolis.

To ensure its future success and economic growth, New York must rededicate itself to continuous investment in infrastructure maintenance, upgrades and expansion. Without these investments, even considering all of the City's current success, its best days could soon be behind it.

A Decade of Success

Over a 10-year span, from 2002 through 2011, government agencies and authorities have invested $130 billion to maintain and improve the systems that sustain New York City. This extraordinary level of spending was made possible through contributions from the City, State, Port Authority of New York & New Jersey, Metropolitan Transportation Authority (MTA), and the federal government.

Over a 10-year span, from 2002 through 2011, government agencies and authorities have invested $130 billion to maintain and improve the systems that sustain New York City.

Most impressive, and potentially long-lasting, has been the government's aggressive expansion of the region's mass transit network. Even in the face of an economic downturn, the MTA has soldiered on with construction of the Second Avenue Subway and is on schedule to complete East Side Access to Grand Central Terminal, both of which will greatly alleviate overcrowding and provide long-awaited new transit options.

In addition, the MTA is working with the City to extend the #7 Subway line, which is key to unlocking the potential of Manhattan's Hudson Yards district.

In Lower Manhattan, work continues on MTA's Fulton Street Transit Center and the Port Authority's World Trade Center PATH Station. When completed, these projects will provide a grand new gateway to Downtown, and integrate multiple, previously disconnected transit lines. The Port Authority also recently opened the WTC Memorial and plaza to the public, while it and Silverstein Properties, developer of multiple towers on the site, work daily to create a dynamic new destination for workers, residents, and tourists.

Frank Sinatra School of the Arts in Queens

The City has made remarkable strides in efforts to upgrade public schools. Along with major financial support from Albany, the administration of Mayor Michael Bloomberg has invested $22 billion to modernize New York's school system. Since 2003, the City has completed 136 new school buildings and is on track to add 100,000 classroom seats by the end of 2013. Shining examples are visible in all five boroughs.

Since 2002, the Mayor and City Council have invested nine and a half billion dollars to improve, repair, and rethink the arteries that are the lifeblood of this City. Over that time, the City's Department of Transportation (DOT) has resurfaced 9,000 miles of road and expertly overseen a series of critical rehabilitation projects, including to such landmarks as the Brooklyn Bridge, Queensboro Bridge, and Times Square.

Rendering of future Fresh Kills Park

Mayor Bloomberg and his team also demonstrated commitment to sustainability and efficiency. In recent years, the DOT invested in the creation of Bus Rapid Transit, and in ferries, bicycle lanes, and public plazas, to name just a few innovations.

Thanks largely to its dedicated stream of revenue via water bills, the City's Department of Environmental Protection has invested nearly $3 billion over the past decade to improve and rebuild sewer lines, upgrade water mains, and further protect New York's watershed and water supply.

In addition to investing in systems that keep us functioning, the Bloomberg administration also understands the need to make New York City a more vibrant and attractive place to live. To that end, the City invested nearly $4 billion to improve New York's unrivaled network of parks, open spaces, and recreational facilities.

In addition to its first-rate stewardship of existing gems such as Central Park and Prospect Park, the Bloomberg administration has managed to add an incredible 725 acres of new parkland throughout the five boroughs. Most prominent among these new recreational amenities are Brooklyn Bridge Park, the High Line, and Fresh Kills Park.

Further, the City and State have invested heavily to improve and expand cultural institutions, libraries, and a wide range of hospital and healthcare facilities Citywide.

... the Bloomberg administration has managed to add an incredible 725 acres of new parkland throughout the five boroughs.

A view from Brooklyn Bridge Park

...we must continue and even increase investments in the systems and quality-of-life initiatives that are the lifeblood of a thriving global city.

UNFINISHED BUSINESS

The City has made tremendous strides in recent years, but there is plenty of work left to do. To maintain New York's prominence, competitiveness, and attractiveness to the next generation of entrepreneurs, immigrants, and innovators, we must continue and even increase investments in the systems and quality-of-life initiatives that are the lifeblood of a thriving global city.

Billions of dollars are required to modernize the region's three major airports, which lag behind our rivals in terms of efficiency, capacity, and amenities. While the Port Authority has undertaken a number of capital improvements to individual terminals, it also acknowledges that its current capital budget is not sufficient to accomplish all that is needed.

Farley Post Office building which will house the future Moynihan Station

Governor Andrew M. Cuomo and the State Legislature deserve credit for salvaging the MTA's capital program by authorizing the funds to complete the final three years of its current fiveyear plan, allowing big-ticket expansion projects to continue moving forward. This solution, however, relies heavily on the issuance of new debt, rather than the types of dedicated, long-term financing necessary to maintain and upgrade the mass transit network into the future.

The Cuomo administration is also forging ahead with plans to build a new Tappan Zee Bridge. The key now is to fend off short-sighted opposition to the project, or well-intentioned "improvements" that could derail it, while also ensuring that the private sector is fully empowered to design and construct a suitable replacement. Similarly, the Port Authority is moving aggressively to replace the Goethals Bridge, linking Staten Island and New Jersey, using an innovative public private partnership to maximize efficiency and accountability during construction.

Other essential projects that need support from the public and private sectors include Moynihan Station and new proposals for a Trans-Hudson tunnel.

Albany must also continue to focus on investments that make the City more attractive and accommodating to current and future residents.

These two projects would alleviate overcrowding on commuter lines and provide long-term economic benefits to New York and New Jersey. As such, stakeholders from both States should come together on a workable plan that shares the burdens and risks.

In addition to maintaining and increasing capacity on the region's transportation infrastructure, our leaders in City Hall and Albany must also continue to focus on investments that make the City more attractive and accommodating to current and future residents. This means ongoing significant investment in public schools, parks and open spaces; continuing economic development initiatives underway at Willets Point, Atlantic Yards, and the 149th Street Hub; and supporting university expansion projects. New York City will be in a much better position to attract and retain entrepreneurs and emerging businesses if we are able to realize the planned expansions of Columbia and New York Universities, as well as Cornell's applied sciences campus on Roosevelt Island.

Rendering of Cornell/Technion applied sciences campus on Roosevelt Island

New York City has never lacked ideas to improve its quality of life and infrastructure.

REALIZING NEW YORK'S POTENTIAL

New York City has never lacked ideas to improve its quality of life and infrastructure. What we need is a determination among our elected officials to continuously finance and implement these projects, which often take years - if not decades - to fulfill.

Thanks to enlightened leadership, on the City and State levels, overall government spending has held up better than expected through the Great Recession and its aftermath.

There are real concerns, however, about the availability of capital funds in the coming years. After robust commitments of $9.1 billion in 2013, the City's capital budget number is expected to drop to $6.8 billion in 2014 and $5.1 billion in 2015. It will be up to the next Mayor and City Council to find the resources necessary to restore most if not all of this funding so the City can continue projects so vital to its success.

Aerial view of future Delta Terminal currently under construction at JFK Airport

Similarly, the MTA's current capital plan's reliance on debt financing is not sustainable over the long term. Having steered New York State through a budget crisis and the worst of the economic downturn, Governor Cuomo may now be able to address the MTA's financing issues, using some combination of direct State aid and the adoption of new, dedicated sources of revenue.

New York's congressional delegation has an important role as well. They must work together with legislators in other large cities to ensure America's urban centers get a fair share of federal financing for mass transit. While this has always been a struggle, the challenge is even greater today given the strong push in Washington to shrink spending.

Government also must change and improve the way it implements major infrastructure projects. The long-standing model, where government agencies and authorities depend on their own balance sheets and internal staff to implement massive projects, is not working as it should. Time and again, critical City-shaping projects have gotten bogged down under an avalanche of delays, cost increases, and changes in scope.

Croton Filtration Plant construction

As always, we must continue advocating sensible and sustainable growth in the years to come.

Fortunately, government is addressing this challenge. The Port Authority is currently pursuing a Public Private Partnership (P3) for the Goethals Bridge replacement, and Governor Cuomo is employing a "design-build" process for a new Tappan Zee Bridge, which also will make greater use of private sector expertise and efficiencies. The hope is that these pilot projects will open the door to further P3 ventures on strategic assets, such as the region's airports.

In another effort to improve how projects are conceived, designed, and built, the Cuomo administration recently created the New York Works Task Force, which will coordinate capital plans across 45 agencies and authorities, oversee investment in projects and access to funding, as well as provide greater transparency and accountability for individual projects. This effort is critically important given that, despite recent investments, 32 percent of the State's bridges and 40 percent of its roads are currently rated deficient.

THE INDUSTRY'S ROLE

The design, construction, and real estate industry must play a vital role in ensuring that New York City stays ahead of its growing global competition.

As always, we must continue advocating sensible and sustainable growth in the years to come. In doing so, we must strengthen our call for new, dedicated sources of financing outside the normal budgeting process. Ideas for exploration include, tolling East River crossings, congestion pricing, a gas tax increase, and other user fees.

We must also assist the government wherever possible in identifying additional P3s and proposing other innovative ways to build more efficiently. Part of this effort includes encouraging the State Legislature to pass P3 enabling legislation that would apply to a wide range of projects.

Finally, everyone in our industry must strive daily to identify ways to build better, smarter, and at lower cost to the taxpayer.

By working in partnership with government, we can prepare for the next economic boom while ensuring that New York City maintains its position as the financial, educational, and cultural capital of the world.