September 11
Overview of Federal Disaster Assistance to the New York City Area Gao ID: GAO-04-72 October 31, 2003The federal government has been a key participant in the efforts to provide aid to the New York City area to help it respond to and recover from the September 11 terrorist attacks. The President pledged, and the Congress subsequently authorized, about $20 billion in federal aid. This federal aid was provided primarily through four sources: the Federal Emergency Management Agency (FEMA), the Department of Housing and Urban Development (HUD), the Department of Transportation (DOT), and the Liberty Zone tax benefits--a set of tax benefits targeted to lower Manhattan. These sources provided 96 percent, or $19.63 billion, of the committed federal aid to the New York City area. It has been over 2 years since the attacks occurred, and many efforts have been undertaken to aid the New York City area to cope with the disaster and its many impacts. GAO was asked to describe how much and what type of federal assistance was provided to the New York City area through these four sources and how the federal government's response to this disaster differed from previous disasters. We provided a draft of this report to FEMA, DOT, HUD, and Internal Revenue Service (IRS) for their review and comment, and all four agencies generally agreed with the information presented.
An estimated $20 billion of federal assistance has been committed to the New York City area through FEMA, HUD, DOT and the Liberty Zone tax benefits. While plans for use of $1.16 billion in HUD funds have not been finalized, $18.47 billion have been committed for four purposes. Initial response efforts, which includes search and rescue operations, debris removal, emergency transportation, and utility system repairs, totaled $2.55 billion. The largest single amount--$1 billion--has been set aside for the establishment of an insurance company to cover claims resulting from debris removal operations. Compensation for disaster-related costs and losses, which includes aid to individuals for housing costs, loans to businesses to cover economic losses, and funding to the city and state for disaster related costs, totaled about $4.81 billion. Infrastructure restoration and improvement, which includes restoration and enhancement of the lower Manhattan transportation system and permanent utility repair and improvement, totals $5.57 billion. Economic revitalization, which includes the Liberty Zone tax benefits and business attraction and retention programs, is estimated to total $5.54 billion. The amount of this funding is estimated, and will likely remain so, because the tax benefit amounts are not being tracked. The designation of $20 billion to assist the New York City area was the first time in which the amount of federal disaster assistance to be provided was set early in the recovery effort; normally, the level of assistance is determined as needs are assessed against established eligibility criteria. FEMA, in response to the designation of a specific level of funding and enhanced authority from the Congress, changed its traditional approach to administering disaster funds by expanding eligibility guidelines, initiating an early close-out process, and reimbursing New York City and state for nontraditional costs. Further, the designation of a specific level of assistance prompted congressional authorization of numerous forms of nontraditional assistance to be provided.
GAO-04-72, September 11: Overview of Federal Disaster Assistance to the New York City Area
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
October 2003:
September 11:
Overview of Federal Disaster Assistance to the New York City Area:
GAO-04-72:
GAO Highlights:
Highlights of GAO-04-72, a report to congressional requesters
Why GAO Did This Study:
The federal government has been a key participant in the efforts to
provide aid to the New York City area to help it respond to and
recover from the September 11 terrorist attacks. The President
pledged, and the Congress subsequently authorized, about $20 billion
in federal aid. This federal aid was provided primarily through four
sources: the Federal Emergency Management Agency (FEMA), the
Department of Housing and Urban Development (HUD), the Department of
Transportation (DOT), and the Liberty Zone tax benefits”a set of tax
benefits targeted to lower Manhattan. These sources provided 96
percent, or $19.63 billion, of the committed federal aid to the New
York City area.
It has been over 2 years since the attacks occurred, and many efforts
have been undertaken to aid the New York City area to cope with the
disaster and its many impacts. GAO was asked to describe how much and
what type of federal assistance was provided to the New York City area
through these four sources and how the federal government‘s response
to this disaster differed from previous disasters.
We provided a draft of this report to FEMA, DOT, HUD, and Internal
Revenue Service (IRS) for their review and comment, and all four
agencies generally agreed with the information presented.
www.gao.gov/cgi-bin/getrpt?GAO-04-72.
To view the full product, including the scope and methodology, click
on the link above. For more information, contact JayEtta Z. Hecker at
(202) 512-2834 or heckerj@gao.gov.
What GAO Found:
An estimated $20 billion of federal assistance has been committed to
the New York City area through FEMA, HUD, DOT and the Liberty Zone tax
benefits. While plans for use of $1.16 billion in HUD funds have not
been finalized, $18.47 billion have been committed for the following
four purposes:
Initial response efforts, which includes search and rescue operations,
debris removal, emergency transportation, and utility system repairs,
totaled $2.55 billion. The largest single amount”$1 billion”has been
set aside for the establishment of an insurance company to cover
claims resulting from debris removal operations.
Compensation for disaster-related costs and losses, which includes aid
to individuals for housing costs, loans to businesses to cover
economic losses, and funding to the city and state for disaster-
related costs, totaled about $4.81 billion.
Infrastructure restoration and improvement, which includes
restoration and enhancement of the lower Manhattan transportation
system and permanent utility repair and improvement, totals $5.57
billion.
Economic revitalization, which includes the Liberty Zone tax benefits
and business attraction and retention programs, is estimated to total
$5.54 billion. The amount of this funding is estimated, and will
likely remain so, because the tax benefit amounts are not being
tracked.
The designation of $20 billion to assist the New York City area was the first
time in which the amount of federal disaster assistance to be provided
was set early in the recovery effort; normally, the level of
assistance is determined as needs are assessed against established
eligibility criteria. FEMA, in response to the designation of a
specific level of funding and enhanced authority from the Congress,
changed its traditional approach to administering disaster funds by
expanding eligibility guidelines, initiating an early close-out
process, and reimbursing New York City and state for nontraditional
costs. Further, the designation of a specific level of assistance
prompted congressional authorization of numerous forms of
nontraditional assistance to be provided.
[End of section]
Contents:
Letter:
Executive Summary:
Purpose:
Background:
Results in Brief:
GAO Analysis:
Agency Comments:
Chapter 1: Introduction:
Many Agencies Play Significant Roles in Responding to Disasters:
Federal Disaster Assistance to the New York City Area Set at about $20
Billion:
Federal Response Provided to the New York City Area Represents Four
Broad Purposes of Assistance:
Chapter 2: Initial Response Assistance Totaled $2.55 Billion:
Search and Rescue Operations Totaled $22 Million:
Debris Removal Operations Totaled $1.70 Billion, Including Liability
Insurance Coverage:
Emergency Transportation Measures Totaled $299 Million:
Emergency and Temporary Utility Repairs Total $250 Million:
Testing and Cleaning Efforts Totaled $53 Million:
Other Initial Response Services Totaled $232 Million:
Chapter 3: Compensation for Disaster-Related Costs and Losses Totaled
$4.81 Billion:
Compensation of the City, State, and Other Organizations Totaled $3.32
Billion:
Assistance to Individuals and Families Totaled $807 Million:
Assistance to Businesses Totaled $683 Million:
Chapter 4: Almost $5.57 Billion Committed for Projects to Restore and
Enhance Infrastructure:
Projects Planned to Restore and Enhance the Lower Manhattan
Transportation System Total $5.01 Billion:
Permanent Utility Infrastructure Repairs and Improvements Total $500
Million:
Short-term Capital Projects Total $68 Million:
Chapter 5: Efforts to Revitalize the New York Economy Include Tax
Benefits and Assistance to Businesses:
Liberty Zone Tax Benefits Focus on Economic Revitalization:
$515 Million of HUD Funds Committed for Business Assistance and Other
Projects to Revitalize Lower Manhattan:
Chapter 6: Designation of a Specific Level of Assistance Led to a
Distinct Federal Government Response for this Disaster:
Designation of a Specific Level of Funding Altered the Traditional FEMA
Disaster Assistance Approach:
Designation of a Specific Level of Assistance Spurred Congressional
Appropriation and Authorization of Nontraditional Assistance:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Proposed Transportation Infrastructure Improvements for
Lower Manhattan:
Appendix III: Joint Committee on Taxation Estimated Revenue Effects of
the Liberty Zone Tax Benefits:
Appendix IV: Description of Liberty Zone Tax Benefits:
Appendix V; Liberty Zone Tax Benefits Bond Authority:
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Glossary:
Related GAO Products:
Tables:
Table 1: Initial Response Assistance, as of June 30, 2003:
Table 2: Compensation for Disaster-Related Costs and Losses, as of June
30, 2003:
Table 3: Infrastructure Restoration and Improvement, as of June 30,
2003:
Table 4: Economic Revitalization Efforts, as of June 30, 2003:
Table 5: Emergency Supplemental Funds for New York Disaster Relief
Appropriated, by Agency:
Table 6: Initial Response Assistance, as of June 30, 2003:
Table 7: Compensation for Disaster-Related Costs and Losses, as of June
30, 2003:
Table 8: Assistance for the City, State, and Other Organizations, as of
July 31, 2003:
Table 9: Assistance to Individuals and Families, as of June 30, 2003:
Table 10: Assistance to Businesses, as of June 30, 2003:
Table 11: Infrastructure Restoration and Improvement, as of June 30,
2003:
Table 12: Lower Manhattan Transportation System Restoration and
Enhancement, as of June 30, 2003:
Table 13: Economic Revitalization Efforts, as of June 30, 2003:
Table 14: Approved Liberty Bond Projects:
Figures:
Figure 1: Primary Purpose and Amount of Disaster Assistance Committed
by FEMA, HUD, DOT, and Liberty Zone Tax Benefits:
Figure 2: Timeline of Supplemental Appropriations and Other Related
Legislation Enacted by the Congress That Provided Assistance to the New
York City Area:
Figure 3: Allocation of Federal Assistance to the New York City Area by
the Federal Government:
Figure 4: Costliest Disasters for FEMA, HUD, and DOT:
Figure 5: Primary Purpose and Amount of Disaster Assistance Committed
by FEMA, HUD, DOT, and Liberty Zone Tax Benefits:
Figure 6: Amount of Assistance Committed to Initial Response
Activities, by Agency:
Figure 7: Urban Search and Rescue Teams Assist in Searching for
Survivors at the World Trade Center Site:
Figure 8: FEMA-Funded Debris Removal Operations Were a Major Component
of Initial Response Assistance:
Figure 9: FEMA Funded Interim Repairs to West Street:
Figure 10: FEMA Funded Efforts to Remove Debris from the PATH Tunnel:
Figure 11: FEMA Provided Funds to Build the Temporary PATH Terminal
Currently under Construction:
Figure 12: Buildings Needing Cleaning after September 11, 2001:
Figure 13: Amount of Assistance Committed to Compensate Disaster-
Related Costs and Losses, by Agency:
Figure 14: Map of LMDC Residential Grant Program Zones in Lower
Manhattan:
Figure 15: LMDC Published Its "It Pays to Live Downtown" in Multiple
Languages:
Figure 16: Areas of Lower Manhattan Assisted by ESDC Business Recovery
Grant Program:
Figure 17: Amount of Assistance Committed for Infrastructure
Restoration and Improvement, by Agency:
Figure 18: Current and Proposed South Ferry Subway Station Layout:
Figure 19: Workers Conducting Street Repairs in Lower Manhattan:
Figure 20: New York City Department of Transportation Map of Planned
Emergency Relief Program Road Repairs (excluding West Street):
Figure 21: Present West Street and West Street Design Concept with
Belowground Lanes:
Figure 22: Estimated Amount of Assistance Committed for Economic
Revitalization, by HUD and Liberty Zone Tax Benefits:
Figure 23: New York Liberty Zone:
Figure 24: Studio Daniel Libeskind's Memory Foundations Winning Design
for Rebuilding the World Trade Center Site Was Selected as Part of an
International Design Competition:
Figure 25: The World Trade Center Rebuilding Plans Include Recognition
of the Footprints of the Original Twin Towers:
Figure 26: Lower Manhattan Transportation Projects--Restoration and
Enhancement:
Abbreviations:
CDBG: Community Development Block Grant:
DOT: Department of Transportation:
EPA: Environmental Protection Agency:
ESDC: Empire State Development Corporation:
FEMA: Federal Emergency Management Agency:
FHWA: Federal Highway Administration:
FTA: Federal Transit Administration:
IG: Office of Inspector General:
HUD: Department of Housing and Urban Development:
IRS: Internal Revenue Service:
LMDC: Lower Manhattan Development Corporation:
MTA: Metropolitan Transportation Authority:
PATH: Port Authority Trans-Hudson:
SBA: Small Business Administration:
United States General Accounting Office:
Washington, DC 20548:
October 31, 2003:
The Honorable James M. Inhofe
Chairman
The Honorable James M. Jeffords
Ranking Minority Member
Committee on Environment and Public Works
United States Senate:
The Honorable George V. Voinovich
The Honorable Hillary Rodham Clinton
United States Senate:
In response to your request, this report discusses how much and for
what purposes federal assistance was provided to the New York City area
in response to the terrorist attacks of September 11, 2001. In
addition, this report describes the differences in the federal
government's response to this disaster as compared with previous
disasters.
If you, or your staffs, have any questions about this report, please
call me at (202) 512-2834. Major contributors to this report are listed
in appendix VI.
JayEtta Z. Hecker
Director, Physical Infrastructure Issues:
Signed by JayEtta Z. Hecker:
[End of section]
Executive Summary:
Purpose:
The terrorist attacks of September 11, 2001, resulted in one of the
largest catastrophes this country has ever experienced. The attacks and
their aftermath caused the loss of thousands of lives, billions of
dollars of property, untold numbers of jobs, and the displacement of
many individuals and businesses. In the New York City area, the attacks
killed nearly 3,000 people, injured thousands, and dislocated thousands
of workers and residents. The World Trade Center towers collapsed,
destroying or damaging numerous other buildings on and around the World
Trade Center site, and disabling major electrical, communications, and
transportation infrastructure in lower Manhattan.
The federal government has played a key role in the efforts to provide
aid after the attacks and has been providing the New York City area
with funds and other forms of assistance. The magnitude of the disaster
and the size and scope of the federal government's response in aiding
the city has generated significant interest in the nature and progress
of the federal assistance provided the New York City area.
Consequently, in a May 2, 2002, letter the Chairman and Ranking
Minority Member of the Senate Committee on Environment and Public Works
and Senators Hillary Rodham Clinton and George V. Voinovich asked GAO
to assess the federal government's response and recovery efforts to the
New York City area. They requested GAO to determine (1) how much
federal assistance has been delivered to the New York City area and for
what purposes and (2) how the federal government's response to this
disaster differed from previous disasters.
In performing its work, GAO focused on the primary sources of federal
assistance--the Federal Emergency Management Agency (FEMA), the
Department of Housing and Urban Development (HUD), the Department of
Transportation (DOT), and the Liberty Zone tax benefits[Footnote 1]--
that targeted different aspects of the recovery efforts in the New York
City area. To provide information on the amount and purpose of federal
assistance, GAO categorized the recovery efforts into four broad
purposes:
* Initial response efforts.
* Compensation for disaster-related costs and losses.
* Infrastructure restoration and improvement.
* Economic revitalization.
GAO briefed your staffs previously on the preliminary results of its
work and provided testimony summarizing these results in a September
24, 2003, hearing.[Footnote 2] GAO also issued a separate report on one
aspect of the response, FEMA's public assistance program.[Footnote 3]
Background:
After a disaster, the federal government, in accordance with provisions
of the Robert T. Stafford Disaster Relief and Emergency Assistance Act
(the Stafford Act),[Footnote 4] assists state and local governments
with costs associated with response and recovery efforts that exceed a
state or locale's capabilities. FEMA is the agency responsible for
coordinating federal disaster response efforts under the Federal
Response Plan, a signed agreement by 27 agencies and the Red Cross to
deliver federal disaster assistance. As a result, FEMA provides
assistance, through a variety of programs to state and local
governments. However, at times, the Congress directly funds agencies to
conduct specialized activities in response to particular disasters,
such as HUD's Community Development Block Grants for economic
development.
After the attacks on September 11, 2001, the New York City area was
faced with significant human and economic losses, over a million tons
of debris, and severely damaged infrastructure. In the days immediately
following the attacks, the President pledged at least $20 billion in
federal assistance to the New York City area to address these impacts.
Subsequently, over the next 11 months, the Congress enacted several
pieces of legislation to provide an estimated $20 billion in direct
funding and tax benefits[Footnote 5]. Of the assistance authorized by
the Congress, 96 percent is provided through four primary sources;
FEMA, HUD, and DOT--for funds directly appropriated to assistance for
the New York City area--and the Liberty Zone tax benefits--seven
provisions that provide specific federal tax benefits for businesses in
lower Manhattan damaged by the terrorist attacks.
Results in Brief:
About $18.47 billion in federal assistance has been committed to
specific projects for the New York City area primarily through FEMA,
HUD, DOT and the Liberty Zone tax benefits for: (1) initial response
efforts, (2) compensation for disaster-related costs and losses, (3)
infrastructure restoration and improvement, and (4) economic
revitalization. An additional $1.16 billion in HUD funds that have not
been committed to a specific purpose will most likely be directed to
infrastructure restoration and/or economic revitalization. Figure 1
shows the amount of assistance committed to the primary purposes.
Figure 1: Primary Purpose and Amount of Disaster Assistance Committed
by FEMA, HUD, DOT, and Liberty Zone Tax Benefits:
[See PDF for image]
[A] The Lower Manhattan Development Corporation's plans for $1.16
billion in HUD funds have not been finalized, as of June 30, 2003.
These funds are not included in the graphic and, according to HUD, will
mostly likely be directed to either infrastructure restoration or
economic revitalization.
[End of figure]
* Initial response activities totaled $2.55 billion. FEMA, DOT, and HUD
assistance funded many activities, including search and rescue
operations, debris removal operations, emergency transportation
measures, and emergency utility service repair. In addition, funds were
provided for environmental cleaning and testing in a widespread area of
lower Manhattan.
* Assistance to compensate for disaster-related costs and losses
equaled $4.81 billion. This funding, provided by FEMA and HUD,
compensated state and local organizations, individuals, and businesses
for disaster-related costs. Such compensation included funds to New
York City and State to rebuild damaged facilities, to individuals for
rental and mortgage assistance and for crisis counseling, and to
businesses for days of lost revenue and recovery loans.
* Funding to restore and improve infrastructure totaled $5.57 billion.
The majority of this assistance is a combination of FEMA and DOT funds
designated to rebuild and enhance the lower Manhattan transportation
system, including the construction or repair of transit terminals,
streets, and ferry stations. New York is currently evaluating projects
for which to use these funds. Planning studies evaluating
transportation improvement options are underway, and a portion of the
$1.16 billion of the remaining HUD funds may be committed for these
efforts. HUD has also committed funds to improve utility infrastructure
and to complete a variety of short-term capital projects.
* Efforts to revitalize the economy in lower Manhattan are underway and
are estimated to total $5.54 billion. The revitalization efforts
include an estimated $5.03 billion Liberty Zone tax benefit plan. The
tax benefits have several provisions, such as special depreciation
deductions, to reduce tax burdens and spur economic development in
lower Manhattan. The total amount of assistance provided by the tax
benefits will depend on benefit usage; however, the IRS does not track
the usage of these benefits, and consequently, the total amount of this
benefit will remain unclear. In addition, the Congress appropriated HUD
funds that made available $515 million to revitalize the lower
Manhattan economy, including incentives for existing businesses to
remain in the area and as well as to attract new businesses to lower
Manhattan. A portion of the $1.16 billion of the remaining HUD funds
may also be used for revitalization efforts.
The designation of $20 billion to assist the New York City area was the
first time in which the amount of federal disaster assistance to be
provided was set early in the response and recovery efforts and
resulted in two major changes in the federal approach to this disaster.
FEMA, in response to the designation of a specific level of funding,
changed its traditional approach to administering disaster funds, and
with congressional authorization, FEMA reimbursed the city and state
for "associated costs" that it could not have otherwise funded within
provisions of the Stafford Act to ensure that the entire amount of
funds appropriated to FEMA for this disaster would be spent for the New
York City area. In addition to the flexibility given FEMA, this
specific level of funding for the entire disaster prompted
congressional authorization of numerous forms of nontraditional
assistance to be provided by other agencies, including the first
geographically targeted tax program in response to a disaster.
We provided a draft of this report to FEMA, DOT, HUD, and the Internal
Revenue Service (IRS) for their review and comment, and all four
agencies generally agreed with the information presented.
GAO Analysis:
Initial Response Efforts Totaled $2.55 Billion:
Initial response assistance totaled $2.55 billion for activities, such
as search and rescue operations, debris removal operations, emergency
transportation measures, temporary utility repairs, testing and
cleaning efforts. FEMA activated 20 of its 28 urban search and rescue
teams from across the country to conduct search and rescue operations
immediately following the collapse of the World Trade Center towers.
Debris removal operations funded by FEMA included costs to recover and
identify the remains of victims. These activities included screening,
sorting, and disposing of nearly 1.6 million tons of debris from the
World Trade Center. As part of the $2.55 billion for initial response
efforts, FEMA has established a $1 billion insurance company to cover
the city and its contractors for claims resulting from debris removal
work at the World Trade Center site. FEMA and DOT funded emergency
measures to restore operation to the transportation systems, such as
temporary repairs to local roads. In addition, HUD funds have been
committed to reimburse utilities for costs associated with emergency
repairs to the utility infrastructure. FEMA also provided funds to
clean buildings in the lower Manhattan area damaged by debris and fires
and to monitor air quality. Table 1 shows how much each agency
committed, obligated, and disbursed for initial response efforts.
Table 1: Initial Response Assistance, as of June 30, 2003:
Dollars in millions:
Activity: Search and rescue operations; Funding
agency: FEMA; Total committed: $22; Total obligated: $22; Total
disbursed: $22.
Activity: Debris removal operations[A]; Funding
agency: FEMA; Total committed: 1,698; Total obligated: 698; Total
disbursed: 695.
Activity: Emergency transportation measures;
Funding agency: FEMA/DOT; Total committed: 299; Total obligated: 298;
Total disbursed: 298.
Activity: Temporary utility repairs; Funding
agency: HUD; Total committed: 250; Total obligated: 0; Total disbursed:
0.
Activity: Testing and cleaning efforts; Funding
agency: FEMA; Total committed: 53; Total obligated: 53; Total
disbursed: 42.
Activity: Other initial response services; Funding
agency: FEMA; Total committed: 232; Total obligated: 232; Total
disbursed: 114.
Activity: Total; Total committed: $2,554; Total obligated: $1,303;
Total disbursed: $1,170.
Source: GAO analysis of agency-provided data.
Notes: Numbers may not add due to rounding. Due to the expedited close-
out, FEMA data are reflected as of July 31, 2003.
[A] FEMA obligated $1 billion for its debris removal insurance program
to New York on September 3, 2003, which is not reflected in the table.
None of these funds have been disbursed yet.
[End of table]
Compensation for Disaster-Related Costs and Losses Totaled $4.81
Billion:
Approximately $4.81 billion in federal assistance has been committed to
compensate state and local organizations, individuals, and businesses
for disaster-related costs and losses. FEMA reimbursed the city and
state of New York and other organizations for a multitude of projects
through its public assistance program. In addition, the Congress
authorized FEMA to provide funding to the city and state for expenses
associated with the disaster but not reimbursable under the Stafford
Act, such as costs for heightened security throughout the area. FEMA
and HUD provided assistance to individuals and families that included
funds to lower Manhattan residents for mortgage and rental assistance,
crisis counseling, and family grants to cover disaster-related expenses
not covered through other programs. In addition, HUD funds were used
for a variety of business assistance programs, such as recovery grants
and loans, to compensate for economic losses and recovery efforts.
Table 2 shows how much each agency committed, obligated, and disbursed
to compensate for disaster-related costs and losses.
Table 2: Compensation for Disaster-Related Costs and Losses, as of June
30, 2003:
Activity: Assistance for state, city, and other
organizations; Funding agency: FEMA; Total committed: $3,319; Total
obligated: $1,857; Total disbursed: $1,593.
Activity: Assistance for individuals and families;
Funding agency: FEMA/HUD; Total committed: 807; Total obligated: 729;
Total disbursed: 546.
Activity: Assistance for businesses; Funding
agency: HUD; Total committed: 683; Total obligated: 574; Total
disbursed: 510.
Activity: Total; Funding agency: ; Total
committed: $4,809; Total obligated: $3,160; Total disbursed: $2,649.
Source: GAO analysis of agency-provided data.
Notes: Numbers may not add due to rounding. Due to the expedited close-
out, FEMA data are reflected as of July 31, 2003.
[End of table]
About $5.57 Billion Has Been Committed for Projects to Restore and
Enhance Infrastructure:
About $5.57 billion has been committed for projects to restore and
enhance infrastructure in lower Manhattan. The majority of this
financial assistance, $5.01 billion, is a combination of FEMA and DOT
funds to restore and enhance elements of the transportation system
supporting lower Manhattan. These efforts include a permanent
replacement for the destroyed Port Authority Trans-Hudson (PATH)
terminal and enhancements to the Fulton Street Transit Center and the
South Ferry Subway Station, although these latter two facilities were
not damaged in the attacks. New York is currently considering other
projects to fund with the allotted transit funds. At this point, a
small percentage of funding has been obligated for transportation
projects. HUD has funded several planning studies to determine whether
to commit funds to transportation improvement efforts. The attacks and
subsequent recovery efforts also heavily damaged utility infrastructure
in lower Manhattan, and HUD has committed $568 million to rebuild and
enhance utility infrastructure and to fund other short-term capital
projects for infrastructure improvements to the areas around the World
Trade Center site. As shown in table 3, most funds committed for
infrastructure restoration and improvement projects remain to be
obligated and disbursed, due to the long-term nature of such projects.
Table 3: Infrastructure Restoration and Improvement, as of June 30,
2003:
Dollars in Millions:
Activity: Rebuilding and improving lower Manhattan
transportation system; Agency: FEMA/DOT/HUD; Total committed: $5,006;
Total obligated: $238; Total disbursed: $54.
Activity: Permanent utility infrastructure
repairs; Agency: HUD; Total committed: 500; Total obligated: 0; Total
disbursed: 0.
Activity: Short-term capital projects; Agency:
HUD; Total committed: 68; Total obligated: 0; Total disbursed: 0.
Activity: Total; Agency: [Empty]; Total committed:
$5,574; Total obligated: $238; Total disbursed: $54.
Source: GAO analysis of agency-provided data.
Notes: Numbers may not add due to rounding. Due to the expedited close-
out, FEMA data are reflected as of July 31, 2003. This table does not
include $24 million appropriated to DOT for formula grants.
[End of table]
Efforts to Revitalize the New York Economy Include Tax Benefits and
Assistance to Businesses:
In an effort to revitalize the New York City area economy, the Congress
enacted the Liberty Zone tax benefits--estimated by the Joint Committee
on Taxation to be $5.03 billion--and appropriated $515 million to HUD
for revitalization programs. Estimates vary regarding what the ultimate
usage of the Liberty Zone tax benefits will be and IRS is not
collecting--nor is it required to collect--data on the Liberty Zone tax
benefit usage and financial impact. As a result, the actual financial
benefit of the tax provisions to the New York City area will remain
unclear. HUD is providing funds to revitalize the lower Manhattan
economy to attract and retain businesses through job creation and
retention grants. These funds will also supplement multiple planning
efforts to revitalize lower Manhattan, including coordinating the World
Trade Center site rebuilding and memorial design competition. In
addition to the $5.54 billion, the Lower Manhattan Development
Corporation has not yet committed $1.16 billion in HUD funds to
specific activities that will likely fund a mix of economic
revitalization efforts and transportation improvements. Table 4 shows
the amount of assistance committed for economic revitalization.
Table 4: Economic Revitalization Efforts, as of June 30, 2003:
Activity: Tax benefits:
Activity: Liberty Zone tax benefits; Funding
agency: IRS; Total committed/estimated benefits: $5,029[A]; Total
obligated: [B]; Total disbursed: [B].
Activity: Other revitalization efforts:
Activity: Job creation and retention grants;
Funding agency: HUD; Total committed/estimated benefits: 320; Total
obligated: 320; Total disbursed: 130.
Activity: Small firm attraction and retention
grants; Funding agency: HUD; Total committed/estimated benefits: 155;
Total obligated: 155; Total disbursed: 31.
Activity: Other planning efforts; Funding agency:
HUD; Total committed/estimated benefits: 40; Total obligated: 39;
Total disbursed: 12.
Activity: Subtotal; Total
committed/estimated benefits: 515; Total obligated: 514; Total
disbursed: 173.
Activity: Estimated total; Total committed/estimated benefits: $5,544;
Total obligated: $514[B]; Total disbursed: $173[B].
Source: GAO analysis of agency-provided data.
Note: Numbers may not add due to rounding.
[A] Revenue estimate by the Joint Committee on Taxation.
[B] Tax benefits are not obligated or disbursed.
[End of table]
Designation of a Specific Level of Assistance Led to a Distinct Federal
Government Response for this Disaster:
The $20 billion to assist the New York City area differed from previous
disaster response efforts in that it was the first time in which the
amount of federal disaster assistance to be provided was set early in
the response and recovery efforts, which altered the federal approach
to this disaster. FEMA, in response to the designation of a specific
level of funding for this disaster and enhanced authority from the
Congress, revised its historic approach to administering FEMA funds. In
an effort to ensure that all FEMA funds appropriated for this disaster
were spent for the New York City area, FEMA broadly interpreted its
provisions within the Stafford Act, and the Congress authorized FEMA to
compensate the city and state for "associated costs," such as increased
security, that it could not otherwise have funded within provisions of
the Stafford Act. In addition to the flexibility given to FEMA, the
Congress appropriated and authorized numerous forms of nontraditional
assistance, such as the Liberty Zone tax benefit plan and improvements
to the transportation infrastructure that exceeded normal replacement
cost.
Agency Comments:
We provided a draft of this report to FEMA, DOT, HUD, and IRS for their
review and comment, and all four agencies generally agreed with the
information presented. In commenting on the draft report, FEMA, DOT,
and HUD provided technical comments, which we incorporated into the
report as appropriate.
[End of section]
Chapter 1: Introduction:
The terrorist attacks of September 11, 2001, caused tremendous
emotional, physical, and economic damage in the New York City area.
Nearly 3,000 people--including passengers aboard the hijacked
aircrafts, individuals in and around the World Trade Center buildings
at the time of the disaster, and emergency workers responding to the
disaster--lost their lives in the disaster, and countless more were
devastated and disrupted by this human tragedy. In the aftermath of the
attacks, New York was faced with over a million tons of debris,
severely damaged utilities, and damaged and destroyed transportation
infrastructure.
The attacks had a substantial negative impact on the lower Manhattan
economy as well, strongly affecting businesses, both large and small.
Some businesses were destroyed, some were displaced, and others were
unable to conduct business due to street closures and the lack of
utility services. The New York City area lost about 83,000 private
sector jobs from September 11, 2001, through the end of December 2001
as well as the tax revenues that those jobs would have generated. The
damage or destruction of buildings by the terrorist attacks will result
in lower property-related tax revenues losses in 2003 and beyond. The
attacks seriously disrupted the entire New York City area
transportation network and continue to impact hundreds of thousands of
commuters.
Many Agencies Play Significant Roles in Responding to Disasters:
In accordance with provisions of the Robert T. Stafford Disaster Relief
and Emergency Assistance Act (the Stafford Act),[Footnote 6] when a
major natural catastrophe, fire, flood, or explosion occurs that is
beyond the capabilities of a state and local government response, the
President may declare that a major disaster exists. This declaration
activates the federal response plan for the delivery of federal
disaster assistance. The response plan is an agreement signed by 27
federal departments and agencies as well as the American Red Cross. The
plan supplements other federal emergency operation plans to address
specific hazards by providing a mechanism for coordinating delivery of
federal assistance and resources to augment efforts of state and local
governments overwhelmed by a major disaster or emergency. The Federal
Emergency Management Agency (FEMA) is responsible for coordinating the
federal and private response efforts. The Congress may also fund
specific agencies to assist disaster relief efforts for areas in which
they retain expertise, including the Department of Housing and Urban
Development (HUD) to administer funds for economic redevelopment and
infrastructure restoration, the Department of Transportation (DOT) to
provide assistance for road restoration, and other agencies for
activities such as providing small businesses disaster assistance loans
and public health or medical service that may be needed in the affected
area. Listed below is a description of the roles of specific agencies:
* FEMA. The disaster declaration from the President triggers FEMA's
role as coordinator of the federal response plan and initiates FEMA's
responsibility to deliver assistance through several programs it
administers. These programs include individual assistance to victims
affected by a disaster and hazard mitigation funds to state and local
governments to reduce the risk of damage from future disasters. In
addition, FEMA's public assistance program is typically the largest
disaster assistance effort. It is designed to provide grants to
eligible state and local governments and specific types of private
nonprofit organizations that provide services of a governmental nature,
such as utilities, fire departments, emergency and medical facilities,
and educational institutions, to help cover the costs of emergency
response efforts and work associated with recovering from the disaster.
The Stafford Act sets the federal share for the public assistance
program at no less than 75 percent of eligible costs of a disaster,
with state and local governments paying for the remaining portions.
* DOT. The Federal Highway Administration (FHWA), an agency of DOT, has
existing authority to assist in disaster relief. FHWA can provide up to
$100 million in emergency relief funding to a state for each natural
disaster or catastrophic failure event that is found eligible for
funding under its Emergency Relief Program. For a large disaster that
exceeds the $100 million per-state legislative cap, the Congress can
pass special legislation to increase the amount FHWA can provide to an
affected area. The Emergency Relief funds are available for permanent
repairs and for work accomplished more than 180 days after an event at
the pro rata federal-aid share that would normally apply to the
federal-aid facility damaged. For interstate highways, the federal
share is 90 percent. For all other highways, the federal share is 80
percent. Emergency repair work to restore essential traffic, minimize
the extent of damage, or protect the remaining facilities, accomplished
in the first 180 days after the occurrence of the disaster, may be
reimbursed at 100 percent federal share. Other agencies within DOT,
such as the Federal Transit Administration (FTA) and the Federal
Railroad Administration, have had limited roles in previous disaster
relief efforts.
* HUD. HUD has been provided authority to assist in disaster relief
efforts at different times in the last few decades, primarily through
its Community Development Block Grant (CDBG) program. Although the CDBG
program's primary purpose is community development, not disaster
assistance, supplemental CDBG appropriations have been made to provide
recovery assistance from past natural disasters, usually severe
hurricanes, earthquakes, or floods. Typically, HUD awards funds to the
affected state or local government, and then the funds are administered
at the state or local level.[Footnote 7]
* Other agencies and organizations. Many other agencies play active
roles in federal disaster relief. For example, the Small Business
Administration provides disaster loans to businesses for physical
damage and economic injury and to homeowners to help those with
disaster losses. The Department of Health and Human Services provides
critical services, such as health and medical care; preventive health
services; mental health care; veterinary services; mortuary services;
and any other public health or medical service, that may be needed in
the affected area. The Department of Agriculture and Forest Service,
among other things, are responsible for managing and coordinating
firefighting activities on federal lands and providing personnel,
equipment, and supplies in support of state and local agencies.
Federal Disaster Assistance to the New York City Area Set at about $20
Billion:
In the days immediately following the terrorist attacks in New York on
September 11, the President pledged to commit at least $20 billion to
help the New York City area recover from the terrorist attacks. The
President sent a letter to the Speaker of the House requesting that the
Congress pass emergency appropriations to provide immediate resources
to respond to the terrorist attacks. Over the next 11 months, the
Congress enacted three emergency supplemental appropriation acts that
provided more than $15 billion in direct federal assistance as well as
an estimated $5 billion tax benefit plan for the New York City area.
Figure 2 shows a time-line of the legislative actions to assist the New
York City area.
Figure 2: Timeline of Supplemental Appropriations and Other Related
Legislation Enacted by the Congress That Provided Assistance to the New
York City Area:
[See PDF for image]
[End of figure]
In addition, the Congress passed legislation providing details on how
appropriated funds could be spent. The Consolidated Appropriations
Resolution, enacted February 20, 2003, allowed FEMA to provide already
appropriated funds to the city and state of New York for costs
associated with the disaster that are unreimbursable under the Stafford
Act. In addition, the legislation required FEMA to provide $90 million
from existing appropriations to administer screening and long-term
health monitoring of emergency services personnel. FEMA was also
directed to provide up to $1 billion from existing appropriations to
establish an insurance company or other appropriate insurance mechanism
for claims arising from debris removal, including claims made by city
employees.
The funds appropriated to FEMA, HUD, and DOT, along with the Liberty
Zone tax benefits, constitute about 96 percent of all assistance
designated to the New York City area, as shown in figure 3.
Figure 3: Allocation of Federal Assistance to the New York City Area by
the Federal Government:
[See PDF for image]
[A] HUD funds include the $1.16 billion yet to be committed to a
specific purpose.
[End of figure]
In total, FEMA was appropriated $8.80 billion to its Disaster Relief
Fund for the New York City area. Of this amount, FEMA's public
assistance-related funds totaled approximately $7.4 billion for
activities such as debris removal and infrastructure restoration, while
the remainder of the funding was committed for individual assistance
and other nonpublic assistance. The Congress appropriated HUD $3.48
billion of CDBG assistance to provide the New York City area through
the Empire State Development Corporation (ESDC) and its subsidiary, the
Lower Manhattan Development Corporation (LMDC), to aid businesses and
individuals and spur economic revitalization. DOT received a total of
$2.37 billion to assist in the restoration and enhancement of the
transit system in the New York City area.
Other agencies also received funding as part of the emergency
appropriations; however, throughout the report we will focus on FEMA,
DOT, and HUD, as funds to these agencies constitute about 95 percent of
all appropriated funding provided to the New York City area. Table 5
provides a breakdown of all funds appropriated for recovery efforts in
the New York City area by agency.
Table 5: Emergency Supplemental Funds for New York Disaster Relief
Appropriated, by Agency:
Agency: Federal Emergency Management Agency; Appropriation: $8,799.
Agency: Department of Housing and Urban Development; Appropriation:
3,483.
Agency: Department of Transportation; Appropriation: 2,366.
Agency: Small Business Administration; Appropriation: 250.
Agency: Department of Labor; Appropriation: 249.
Agency: Department of Health and Human Services; Appropriation: 120.
Agency: Department of Justice; Appropriation: 75.
Agency: General Services Administration; Appropriation: 32.
Agency: Department of Treasury; Appropriation: 26.
Agency: Securities and Exchange Commission; Appropriation: 21.
Agency: Commodity Futures Trading Commission; Appropriation: 17.
Agency: Department of Education; Appropriation: 10.
Agency: Department of Commerce; Appropriation: 8.
Agency: Social Security Administration; Appropriation: 4.
Agency: Federal Drug Control Programs; Appropriation: 2.
Agency: Equal Employment Opportunity Commission; Appropriation: 1.
Agency: Department of Housing and Urban Development Office of
Inspector General; Appropriation: 1.
Agency: Export-Import Bank; Appropriation: [A].
Agency: Total[B]; Appropriation: $15,464.
Source: CRS, Congressional Budget Office, and GAO analysis.
Note: Numbers may not add due to rounding.
[A] This agency received less than $1 million in emergency supplemental
funds for recovery efforts in the New York City area.
[B] These figures represent direct appropriations, therefore, do not
include the $5.03 billion Liberty Zone tax benefits, the September 11
Victim Compensation Fund, or tax deferrals.
[End of table]
Not only were FEMA, HUD, and DOT the primary sources of assistance to
the New York City area, but each of these agencies provided more
assistance for the September 11 disaster than it had for any other
single disaster. For example, prior to September 11, FEMA disaster
assistance exceeded $1 billion in six other disasters, the largest of
them being the Northridge Earthquake in California in 1994. The $3.48
billion appropriated to HUD for the New York City area is nearly seven
times the amount of assistance HUD has provided for any other single
disaster. DOT was also appropriated more funds for recovery efforts
after September 11 than in any other disaster. Figure 4 displays
several large disaster relief efforts and how much of these efforts the
three agencies funded.
Figure 4: Costliest Disasters for FEMA, HUD, and DOT:
[See PDF for image]
[End of figure]
Federal Response Provided to the New York City Area Represents Four
Broad Purposes of Assistance:
Federal assistance provided to the New York City area for response and
recovery activities covered a wide spectrum of efforts and various
types of direct and indirect aid. To organize this discussion of the
overall funding provided to New York, we identified four broad purposes
of assistance. The first purpose includes initial response efforts to
save lives, recover victims, remove debris, and restore basic
functionality to city services, among other things. The second purpose
consists of government actions to compensate state and local
organizations, individuals, and businesses for losses of income and
housing resulting from the attacks. The third purpose of assistance is
the restoration and enhancement of the lower Manhattan transportation
and utility infrastructure that was severely destroyed by the
buildings' collapse and the subsequent response efforts. The last
purpose is the provision of federal aid to help revitalize the lower
Manhattan economy that was impacted by the disaster. Figure 5 shows the
amount of funds provided by the four primary sources--FEMA, DOT, HUD,
and the Liberty Zone tax benefits--for each purpose of assistance. The
remaining portion of HUD funds is in the planning stages and will most
likely be directed to infrastructure restoration and/or economic
revitalization activities.
Figure 5: Primary Purpose and Amount of Disaster Assistance Committed
by FEMA, HUD, DOT, and Liberty Zone Tax Benefits:
[See PDF for image]
[A] The Lower Manhattan Development Corporation's plans for $1.16
billion in HUD funds have not been finalized, as of June 30, 2003.
These funds are not included in the graphic and, according to HUD, will
mostly likely be directed to either infrastructure restoration or
economic revitalization.
[End of figure]
This report assesses the federal government's response and recovery
efforts to the New York City area by determining how much federal
assistance has been committed for specific purposes, and how the
federal government's response to this disaster differed from previous
disasters. To respond to our objectives, we reviewed relevant
legislation, budget documents, funding plans, status reports, program
plan documents, and databases. Though federal assistance was
administered through 18 agencies in total, we focused on the primary
sources of federal assistance--FEMA, HUD, DOT, and the Liberty Zone tax
benefits--that targeted different aspects of the recovery efforts in
New York. Accordingly, we interviewed FEMA, DOT, HUD, and IRS
officials, as well as state and local officials and officials from
nonprofit planning and research organizations. All data are recorded as
of June 30, 2003, unless otherwise noted. We provided a detailed
description of the federal government's response and recovery efforts,
but did not evaluate the administration or impact of recovery funds.
While we reported on the differences between response to this disaster
and previous disasters, we did not evaluate the implications of these
differences. We conducted our work from June 1, 2002, through September
30, 2003, in accordance with generally accepted government auditing
standards. See appendix I for complete details on our objectives,
scope, and methodology.
[End of section]
Chapter 2: Initial Response Assistance Totaled $2.55 Billion:
Initial response assistance to the New York City area began immediately
after the hijacked aircraft collided with the World Trade Center towers
and totaled $2.55 billion. Efforts to search for and rescue victims and
clear more than a million tons of debris began immediately after the
disaster, as part of the initial response effort that was funded by the
Federal Emergency Management Agency (FEMA). In addition, the Department
of Transportation (DOT), Department of Housing and Urban Development
(HUD), and FEMA took measures to provide funds to restore operation to
utilities, transportation systems, and to monitor poor air quality
resulting from the debris and fires. Figure 6 shows the amount each
agency funded in this category of assistance, and table 6 shows how
much each agency committed, obligated, and disbursed to perform initial
response activities.
Figure 6: Amount of Assistance Committed to Initial Response
Activities, by Agency:
[See PDF for image]
[A] The Lower Manhattan Development Corporation's plans for $1.16
billion in HUD funds have not been finalized, as of June 30, 2003.
These funds are not included in the graphic and, according to HUD, will
mostly likely be directed to either infrastructure restoration or
economic revitalization.
[End of figure]
Table 6: Initial Response Assistance, as of June 30, 2003:
[See PDF for image]
Source: GAO analysis of agency-provided data.
Notes: Numbers may not add due to rounding. Due to the expedited close-
out, FEMA data are reflected as of July 31, 2003.
[A] FEMA obligated $1 billion for its debris removal insurance program
to New York on September 3, 2003, although none of these funds have
been disbursed yet. This information is not reflected in this table.
[End of table]
Search and Rescue Operations Totaled $22 Million:
The terrorist attacks on September 11 prompted the largest Urban Search
and Rescue operation in U.S. history, a $22 million effort. FEMA
oversees 28 national Urban Search and Rescue Task Forces across the
country, and 20 were activated to respond to the attacks in New York.
The teams operate under FEMA authority and were deployed as part of the
National Urban Search and Rescue Response System. Almost 1,300 members
of the Urban Search and Rescue teams and 80 dogs worked at the World
Trade Center site. Representatives from the rescue teams at the World
Trade Center site are shown in figure 7.
Figure 7: Urban Search and Rescue Teams Assist in Searching for
Survivors at the World Trade Center Site:
[See PDF for image]
[End of figure]
The rescue teams worked closely with officials from the Department of
Agriculture's Forest Service Incident Management Team. The Forest
Service Team members are activated by FEMA, as part of the Federal
Response Plan, to manage large emergency situations. The Forest Service
Team managed the rescue operation providing support for federal, state,
local, and voluntary workers busy at Ground Zero.
Debris Removal Operations Totaled $1.70 Billion, Including Liability
Insurance Coverage:
Immediately after the World Trade Center towers collapsed, the debris
removal operation began in order to help workers look for survivors.
Debris removal operations--including funds to establish an insurance
company to cover the city and its contractors for debris removal claims
resulting from work at the World Trade Center site--totaled $1.70
billion. New York City's Department of Design and Construction and
Department of Sanitation, with support from FEMA, the Federal Highway
Administration, and the U.S. Army Corps of Engineers, completed the
daunting task of removing debris piled 11 stories aboveground and
extended seven stories below street level and weighing nearly 1.6
million tons. FEMA provided $630 million to reimburse the city for the
costs associated with the 9 month operation to remove the debris from
the World Trade Center site and barge it to a landfill on Staten
Island, New York, for screening, sorting, and disposal--much less than
initial estimates that the operation would take 2 years and cost $7
billion. Figure 8 shows debris removal operations.
Figure 8: FEMA-Funded Debris Removal Operations Were a Major Component
of Initial Response Assistance:
[See PDF for image]
[End of figure]
As part of the debris removal operation, FEMA assigned the U.S. Army
Corps of Engineers to manage the sorting and disposal of debris at the
city landfill; FEMA paid $68 million for this service. The sorting
activities were an intense, meticulous effort to recover remains and
personal belongings of victims and to gather criminal evidence of the
terrorist attacks. The Corps of Engineers provided labor, heavy
equipment, conveyer belts, and screening equipment. It also provided
temporary buildings for the storage of supplies and to shelter workers,
worker decontamination facilities, and food service facilities.
As directed by the Congress, FEMA also committed $1 billion for an
unprecedented project to establish an insurance company to protect
contractors and New York City against liability claims resulting from
debris removal operations.[Footnote 8] According to New York City
officials, private contractors came to Ground Zero to do search and
rescue, recovery, and debris removal work in the immediate aftermath of
the terrorist attacks before entering into formal contract agreements
with New York City. Contractors and city officials were unable to reach
a final agreement on compensation for debris removal work because they
had not secured liability insurance coverage. City officials said that
liability insurance could not be obtained from a private insurance
company because of the unknown long-term risks and potentially large
number of liability claims. On the basis of input from insurance
experts, city officials and FEMA determined that the best solution was
to establish an insurance company with $1 billion in federal funds to
provide coverage for a period of up to 25 years. The insurance company
will cover debris removal contractors and New York City.[Footnote 9]
Emergency Transportation Measures Totaled $299 Million:
The collapse of the World Trade Center buildings and subsequent
recovery efforts wreaked havoc on lower Manhattan's transportation
system: subway stations and the PATH terminal, located under the World
Trade Center site were destroyed, sections of local roads were
impassable due to damage or recovery efforts, and subways and ferries
were overcrowded as commuters returned to work using different means or
routes of transportation. FEMA and DOT coordinated as part of several
work groups, which included a variety of transportation, public works,
public safety, and utility providers, to plan emergency/interim
projects to address shifts in travel demand after September 11,
capacity issues, and delays associated with revised travel patterns.
Another bi-state, interagency task force met regularly to discuss
ferry-related issues. Overall, FEMA and DOT funds for emergency
transportation measures totaled $299 million. Primary examples of the
emergency efforts to restore transportation around lower Manhattan are
described below.
* Clean-up and emergency repair of local roads and tunnels. During the
initial response after September 11, officials were focused on removing
debris quickly to look for survivors and victims and on restoring vital
utilities to the area. Many of the local roads around the World Trade
Center were damaged by the heavy truck traffic and emergency utility
work. FEMA provided $5 million to the New York City Department of
Transportation to repair local roads. Additionally, FEMA provided $6
million for interim repairs to West Street (Route 9A), a major
thoroughfare in lower Manhattan. West Street was damaged by the
collapse of the World Trade Center towers and surrounding buildings;
the interim repairs were completed in March 2002. Figure 9 shows the
interim West Street under construction.
Figure 9: FEMA Funded Interim Repairs to West Street:
[See PDF for image]
Note: West Street was damaged by the collapse of the World Trade Center
towers. FEMA funded interim repairs to the road that are highlighted in
yellow. Plans for permanent repairs to the street have not yet been
finalized.
[End of figure]
FEMA also provided assistance to the Port Authority of New York and New
Jersey (Port Authority) to remove debris and repair the PATH tunnels
that were extensively damaged and flooded after the collapse of the
World Trade Center buildings. The Port Authority had to repair the
tunnels to curb the flooding before workers could begin to clear away
debris, as shown in figure 10.
Figure 10: FEMA Funded Efforts to Remove Debris from the PATH Tunnel:
[See PDF for image]
Left: A view of PATH tunnels that suffered extensive damage and
flooding. Right: Port Authority workers completing repairs to allow the
tunnels to be used again; a FEMA-funded operation.
[End of figure]
* Construction of a temporary PATH terminal. The collapse of the World
Trade Center towers also destroyed the World Trade Center PATH terminal
located under the buildings. Prior to September 11, more than 67,000
passengers boarded the PATH system at the World Trade Center station
every day. FEMA provided $140 million to the Port Authority, which will
construct a temporary PATH terminal with these funds along with
insurance proceeds from the original terminal. The temporary terminal
is scheduled for completion in November 2003. Planners intend to use
portions of this temporary terminal, pictured in figure 11, as a basis
for the construction of an enhanced, state-of-the-art, permanent PATH
terminal that will be integrated with other portions of the New York
City transit system.
Figure 11: FEMA Provided Funds to Build the Temporary PATH Terminal
Currently under Construction:
[See PDF for image]
Note: The original PATH terminal was located under the World Trade
Center towers and was destroyed by the collapse of the buildings. The
temporary PATH terminal, highlighted in gray, is expected to be
operational in November 2003.
[End of figure]
* Expansion of ferry service. The private ferry fleet operating in New
York Harbor is the largest in the United States, with lower Manhattan
being the prime destination. To address commuter capacity that was
dramatically reduced by the cessation of lower Manhattan PATH service
and subway services near the World Trade Center site as well as vehicle
restrictions, FEMA also provided $48 million for emergency ferry
service. These FEMA funds reimbursed the Port Authority and other city
agencies for costs associated with operating additional ferries.
* Capital projects to improve commuter transportation. Recognizing the
importance of transit to millions of commuters in the New York City
area, FTA has committed almost $99 million for various transit capital
projects in New Jersey and New York. These projects include nearly $25
million for acquisition of five high-powered electric locomotives and
about $56 million for accelerated construction of modifications to New
Jersey Transit's main rail maintenance facility to meet increased
demand on the New Jersey transit system due to transit traffic that
could not access lower Manhattan following September 11. Additional
funds went toward other projects to upgrade infrastructure and to
improve passenger facilities.
Emergency and Temporary Utility Repairs Total $250 Million:
The collapse of the World Trade Center buildings and subsequent debris
removal efforts resulted in widespread damage to the energy and
telecommunications utility infrastructure. Utility firms worked
quickly to provide service for rescue operations in the days
immediately following the disaster and to stabilize delivery of service
to lower Manhattan, including the reopening of the New York Stock
Exchange 6 days after the attacks. The Congress appropriated funds to
HUD for the Lower Manhattan Development Corporation (LMDC) to reimburse
utility companies for uncompensated costs associated with restoring
service. The primary objective of this assistance was to prevent
consumers from bearing the burden of these costs in the form of rate
increases. LMDC and the Empire State Development Corporation (ESDC)
worked with utility providers, New York State Department of Public
Service, and transportation agencies to develop a program that will
provide reimbursement for emergency and temporary repair
costs.[Footnote 10] Eligible firms will be reimbursed up to 100 percent
of actual, incurred, uncompensated, and documented costs. The amount
awarded to each applicant will be considered based on various criteria
and requests will be subject to a multiagency review process to
validate costs.[Footnote 11] It is estimated that this reimbursement
will total $250 million. LMDC has designated ESDC to administer the
program, which will coordinate with New York State and city agencies to
avoid duplication of other federally funded programs.[Footnote 12]
Testing and Cleaning Efforts Totaled $53 Million:
The collapse of the World Trade Center buildings created a large cloud
of dust and debris that enveloped many buildings in lower Manhattan,
and covered an extensive area--up to a mile beyond the center of the
attacks. The Environmental Protection Agency (EPA) advised rescue
workers and lower Manhattan residents about the possible release of
asbestos and other dangerous contaminants from the collapsed buildings
and fires. As a result, concern about air quality prompted demand for
federal assistance in testing and cleaning the interiors of buildings
and residences in lower Manhattan. In addition, numerous other
buildings required exterior cleaning after the disaster, as shown in
figure 12.
Figure 12: Buildings Needing Cleaning after September 11, 2001:
[See PDF for image]
[End of figure]
FEMA worked with EPA officials to conduct clean-up efforts that
included vacuuming streets, parks, and other areas covered by dust from
debris and fires; washing vehicles used in the debris removal efforts;
and providing protective gear to workers. In addition, FEMA reimbursed
the New York City Board of Education for air quality testing and
cleaning public schools. Officials from FEMA, EPA, the Occupational
Safety and Health Administration, and New York City coordinated and
participated in a task force to complete residential cleaning efforts.
FEMA provided funds for the interior cleaning program, which was led by
the New York City Department of Environmental Protection and EPA--the
first program of its kind. Overall, environmental cleaning and testing
efforts cost $53 million.
In a December 2002 report, FEMA's Inspector General (IG) found that the
division of responsibilities between FEMA and EPA were not specific
enough so that either agency could determine when to deliver services,
noting that the program to test and clean residences began months after
the disaster.[Footnote 13] Specifically, after a disaster occurs, FEMA
relies on the expertise of EPA to provide air quality evaluations, and
EPA must confirm that a problem exists before FEMA can provide funds to
respond. Although EPA made announcements concerning possible
contaminants in the air, it did not identify any specific danger;
therefore, FEMA did not request EPA to perform any extensive studies.
The FEMA IG report recommended that in future disasters, FEMA enlist
the expertise of EPA earlier in the recovery effort so that it can
conduct necessary testing to determine if a threat exists so that
cleaning efforts can begin sooner.
Other Initial Response Services Totaled $232 Million:
FEMA committed an additional $232 million for initial response
assistance through the use of mission assignments and interagency
agreements. As part of its role in responding to disasters, FEMA may
assign work to or enter into agreements with other federal agencies to
handle aspects of the relief effort within their area of expertise.
These agreements are called mission assignments and interagency
agreements. Mission assignments were widely used in the first few
months after the World Trade Center disaster to provide assistance for
short-term projects. Typically, mission assignments are used for three
purposes: (1) to fund support of FEMA's response and recovery efforts,
such as funding for the General Services Administration, to provide
supplies and office equipment; (2) to fund provision of technical
assistance to a jurisdiction, such as funding for the U.S. Army Corps
of Engineers to provide assistance in maintaining water supply; or (3)
to fund a response activity that the state or locality cannot perform,
such as funding for the Department of Health and Human Services to
provide medical teams to the affected area. In this disaster, FEMA also
used interagency agreements for long-term projects, which are similar
to mission assignments in that they are funding agreements among
agencies to provide goods and services on a reimbursable basis. For
example, as authorized by the Congress, FEMA entered into an
interagency agreement with the Department of Health and Human Services
to conduct a $90 million project to screen and monitor emergency
services personnel for long-term health effects of work at the World
Trade Center site.[Footnote 14]
[End of section]
Chapter 3: Compensation for Disaster-Related Costs and Losses Totaled
$4.81 Billion:
Approximately $4.81 billion in federal assistance has been committed to
compensate state and local organizations, individuals, and businesses
for disaster-related costs and losses. During the months following the
disaster, the city and state of New York incurred significant costs to
replace damaged equipment, rebuild damaged facilities, and provide
increased security. In addition, thousands of businesses and
individuals were disrupted by the emergency response, debris removal,
and rebuilding efforts surrounding the World Trade Center site.
Residential occupancy rates dropped significantly in the area, and
about 18,000 businesses in New York City, representing approximately
563,000 employees, were disrupted or forced to relocate as a result of
the terrorist attacks. To address the costs and losses of those
affected by the disaster, the Federal Emergency Management Agency
(FEMA) and the Department of Housing and Urban Development (HUD)
committed funds to (1) reimburse state and local organizations for
disaster-related costs; (2) assist individuals and families, including
funds for rental assistance, crisis counseling, and family grants for
lower Manhattan residents; and (3) compensate businesses and nonprofits
for economic losses and recovery efforts as shown in figure 13 and
table 7.
Figure 13: Amount of Assistance Committed to Compensate Disaster-
Related Costs and Losses, by Agency:
[See PDF for image]
[A] The Lower Manhattan Development Corporation's plans for $1.16
billion in HUD funds have not been finalized, as of June 30, 2003.
These funds are not included in the graphic and, according to HUD, will
mostly likely be directed to either infrastructure restoration or
economic revitalization.
Note: Numbers may not add due to rounding. In this section, HUD funds
include business assistance programs and funds for the Residential
Grant Program, most of which were for retention and attraction.
[End of figure]
Table 7: Compensation for Disaster-Related Costs and Losses, as of June
30, 2003:
Dollars in millions:
Activity: Assistance for state, city, and other
organizations; Funding agency: FEMA; Total committed: $3,319; Total
obligated: $1,857; Total disbursed: $1,593.
Activity: Assistance for individuals and families;
Funding agency: FEMA/HUD; Total committed: 807; Total obligated: 729;
Total disbursed: 546.
Activity: Assistance for businesses; Funding
agency: HUD; Total committed: 683; Total obligated: 574; Total
disbursed: 510.
Activity: Total; Total
committed: $4,809; Total obligated: $3,160; Total disbursed: $2,649.
Source: GAO analysis of agency-provided data.
Notes: Numbers may not add due to rounding. Due to the expedited close-
out, FEMA data are reflected as of July 31, 2003.
[End of table]
Compensation of the City, State, and Other Organizations Totaled $3.32
Billion:
From the initial days of the disaster recovery effort, FEMA officials
worked closely with officials from the New York City Office of
Management and Budget and the New York State Emergency Management
Office to reimburse the city and state through its public assistance
program.[Footnote 15] This program is designed to reimburse state and
local organizations for disaster-related costs of repairing, replacing,
or restoring disaster-damaged facilities as authorized by the Stafford
Act. In addition, at the direction of the Congress, FEMA committed
funds to compensate the city and state for expenses that were
associated with the disaster, but not reimbursable within the
provisions of the Stafford Act--the first time that FEMA has been
granted such broad authority. Finally, FEMA committed funds for hazard
mitigation grants to help lessen the effects of future disasters. Table
8 reflects the amount of assistance FEMA has committed, obligated, and
disbursed to compensate the city, state, and other organizations for
disaster-related costs and losses.
Table 8: Assistance for the City, State, and Other Organizations, as of
July 31, 2003:
Dollars in millions:
Activity: Assistance for the city, state, and
other organizations[A]; Funding agency: FEMA; Total committed: $1,486;
Total obligated: $1,486; Total disbursed: $1,486.
Activity: Reimbursement of associated costs
authorized by the Congress[A]; Funding agency: FEMA; Total committed:
1,241; Total obligated: 68; Total disbursed: 0.
Activity: Hazard mitigation grants; Funding
agency: FEMA; Total committed: 377; Total obligated: 169; Total
disbursed: 2.
Activity: Other administrative costs[B]; Funding
agency: FEMA; Total committed: 215; Total obligated: 133; Total
disbursed: 105.
Activity: Total; Funding agency: Total
committed: $3,319; Total obligated: $1,857; Total disbursed: $1,593.
Source: GAO analysis of agency-provided data.
Note: Numbers may not add due to rounding.
[A] As our report was being finalized, FEMA obligated and disbursed and
additional $56 million to the city, state, and other organizations
through the public assistance program and $1.24 billion in September
2003 to the city and state for congressionally authorized activities
not reflected in this table. These funds are in addition to FEMA
assistance for initial response activities discussed in ch.1 of this
report.
[B] Administrative costs include grantee costs, contractor costs
associated with FEMA's public assistance program, and costs associated
with on-going programs.
[End of table]
Assistance for New York City, State, and Other Organizations Totaled
$1.49 Billion:
FEMA disbursed $1.49 billion to reimburse New York City, state, and
other organizations through its public assistance program to compensate
for disaster-related costs and losses. Of this funding, $643 million
was provided to the New York City Police and Fire Departments to pay
benefits and wages to emergency workers during response and recovery
efforts and to replace vehicles and other equipment. As first
responders, these departments suffered heavy casualties and damages and
received compensation for overtime costs, death benefits, and funeral
costs. FEMA also reimbursed costs to the city to relocate several
agencies' offices; establish a Family Assistance Center; reschedule
elections that were being held on September 11; and replace damaged
voting equipment.[Footnote 16]
FEMA also reimbursed other entities, including the Port Authority,
counties, and private nonprofit organizations; it also provided funds
to the state of New Jersey. Among the applicants receiving some of the
largest amounts was the Port Authority, which sustained substantial
losses of lives and property as a result of the terrorist attacks. The
Port Authority was reimbursed for costs to replace equipment it lost
when its World Trade Center facilities were destroyed and to reimburse
for office relocation costs. Additional funds were provided to all New
York counties for cancelled election costs and to private nonprofits,
such as Pace University for temporary relocation costs. FEMA also
provided $88 million to New Jersey for emergency protective measures.
Reimbursements of Associated Costs to the City and State Total $1.24
Billion:
In addition to the traditional public assistance FEMA provided to city
and state agencies, the Congress authorized FEMA to provide funding to
the city and state of New York for expenses associated with the
disaster that were unreimbursable within the provisions of the Stafford
Act. The Consolidated Appropriations Resolution enabled FEMA to depart
from the Stafford Act criteria. The legislation ensured that FEMA would
be authorized to spend the entirety of the appropriated assistance for
the New York City area recovery efforts--$8.80 billion--by allowing the
city and state to be provided reimbursement for associated costs that
FEMA otherwise could not have funded.
As a result of the Consolidated Appropriations Resolution, FEMA
implemented an expedited close-out process to determine how much of the
$8.80 billion appropriated to FEMA remained available to reimburse the
city and state for disaster-related expenses. To do this, FEMA reviewed
each on-going public assistance project with appropriate New York
officials to deobligate any funds not expended as of April 30, 2003,
and set aside these funds to provide to the city and state as
reimbursement for associated costs authorized by Congress under the
Consolidated Appropriations Resolution. In addition, FEMA officials
reconciled how much they expected to disburse in its other programs--
including individual assistance and hazard mitigation--with the amount
of obligated funds and identified additional funds that could be
deobligated. FEMA reimbursed the city and state for associated costs
with the funds that were deobligated from unfinished projects and
remaining funds from other programs--approximately $1.24 billion. To
receive reimbursement for these associated costs, FEMA officials
required the city and State prepare grant applications for incurred
costs. Since FEMA provided the funds for projects already completed and
paid for, city and state officials will ultimately have discretion to
redirect as they deem suitable.
As of July 31, 2003, FEMA approved several proposals to reimburse
associated costs that were otherwise ineligible for reimbursement under
the Stafford Act and is discussing other proposals with city and state
officials. For example, FEMA provided funds to reimburse the state-
funded "I Love New York" campaign[Footnote 17] and costs incurred to
provide heightened security across the area. Other costs that are under
consideration include reimbursing the state for cost of living
allowances that the state has to pay on pensions of deceased police and
fire staff and New York State's cost share of the Individual and Family
Grant Program.[Footnote 18]
Hazard Mitigation Grants Totaled $377 Million:
FEMA has also committed $377 million in hazard mitigation grants to New
York State. Created in 1988 by the Stafford Act, the Hazard Mitigation
Grant Program provides funds to states affected by major disasters to
undertake mitigation measures.[Footnote 19] At the time of the
disaster, FEMA could provide mitigation grants to New York State in an
amount up to 15 percent above the total amount of other assistance
provided.[Footnote 20] However, in the New York City area recovery
effort, the President limited mitigation funds to 5 percent of the
funds appropriated within the total amount of funds. According to FEMA
officials, the agency recommended reducing the percentage of hazard
mitigation grant funds available to New York initially because it was
unclear how much the disaster would cost. FEMA officials told us that
New York officials requested less funds for the Hazard Mitigation Grant
Program than they were eligible so that they could use funds to
reimburse other associated costs.
Assistance to Individuals and Families Totaled $807 Million:
Not only were thousands of people unable to return to work or their
homes due to the damage and debris, the economic effect of the disaster
resulted in further job losses and increased vacancy rates. About $807
million in federal assistance was provided to individuals and families
through residential grants, mortgage and rental assistance, crisis
counseling, individual and family grants, and other assistance. Table 9
shows the amount of assistance committed, obligated, and disbursed by
FEMA and HUD to compensate individuals and families for disaster-
related costs and losses.
Table 9: Assistance to Individuals and Families, as of June 30, 2003:
Dollars in millions:
Activity: Residential grants; Funding agency: HUD;
Total committed: $281; Total obligated: $281; Total disbursed: $106.
Activity: Mortgage and rental assistance; Funding
agency: FEMA; Total committed: 200; Total obligated: 195; Total
disbursed: 194.
Activity: Crisis counseling; Funding agency: FEMA;
Total committed: 166; Total obligated: 99; Total disbursed: 99.
Activity: Individual and family grants; Funding
agency: FEMA; Total committed: 110; Total obligated: 104; Total
disbursed: 97.
Activity: Other individual assistance; Funding
agency: FEMA; Total committed: 51; Total obligated: 50; Total
disbursed: 49.
Activity: Total; Total
committed: $807; Total obligated: $729; Total disbursed: $546.
Source: GAO analysis of agency-provided data.
Notes: Numbers may not add due to rounding. Due to the expedited close-
out, FEMA data are reflected as of July 31, 2003.
[End of table]
Residential Grants Made Available $281 Million:
Access to residential communities in lower Manhattan was restricted for
months after September 11 due to continued recovery efforts. The Lower
Manhattan Development Corporation (LMDC) reported that occupancy rates
in neighborhoods near the World Trade Center site fell to approximately
60 percent after September 11. To provide compensation to those
affected by the disaster who remained in the area, address the vacancy
rate increases, and maintain a stable residential population, LMDC
developed and administered the Residential Grant Program with $281
million in HUD funds to provide incentives to attract residents to the
area.[Footnote 21] LMDC's program consisted of three different grants-
-a 2-year commitment-based grant, a September 11 residents grant, and a
family grant. Applicants could apply for all three types of grants;
each grants' value depended on the applicant's location and housing/
rental costs, as shown in figure 14.
Figure 14: Map of LMDC Residential Grant Program Zones in Lower
Manhattan:
[See PDF for image]
[End of figure]
* The 2-Year Commitment-Based Grant. LMDC provided grants of up to
$12,000 over 2 years to attract and retain renters and homeowners to
lower Manhattan. Renters who signed at least a 2-year lease on or
before May 31, 2003, were eligible for up to 30 percent of monthly
rent, and homeowners who purchased a home on or before the same date
and agreed to remain in the area for at least 2 years were eligible for
30 percent of monthly housing costs--although the grant amount varied
depending on zone. Corporations, universities, and other institutions
that purchased or rented residential housing in lower Manhattan were
also eligible for the grant.
* September 11 Residents Grant and Family Grant. LMDC provided a one-
time September 11 Residents Grant of $1,000 per household for those
individuals residing in lower Manhattan on September 11 that remained
in the area through the date of award to compensate for the expenses
they may have incurred as a result of the disaster. LMDC officials
expected that these grants may also provide an incentive for residents
to stay in the area. In addition, LMDC provided a one-time Family Grant
between $750 and $1,500 per household with children under 18 that make
a 1-year commitment to live in lower Manhattan.
LMDC officials said that, in administering the Residential Grant
Program, they attempted to be flexible in determining eligibility and
advertising the program given the multiplicity of housing arrangements
and diverse populations in lower Manhattan. There are many types of
buildings where individuals reside in New York City, and before
approving a grant, LMDC officials had to determine if an applicant's
reported home was a residential property and met all appropriate
housing standards. LMDC officials reported that to determine
eligibility for this program they had to verify the habitability of all
buildings in lower Manhattan. Their effort resulted in a collection of
current property information, such as the classification of buildings
that met current housing code that the city had not previously
recorded. Another useful side benefit of the program was the large
number of housing units repaired and brought up to housing code by
landlords seeking to get their properties eligible for the grants. In
addition, LMDC developed alternative applications to address the needs
of the applicants who lived in eligible areas but did not have
traditional lease agreements. To spread the word about the program,
LMDC organized "It Pays to Live Downtown" day where over 100 volunteers
visited every residential building in lower Manhattan to encourage
participation in the program. LMDC also conducted a publicity campaign
across New York City advertising the program in multiple languages with
posters like those in figure 15.
Figure 15: LMDC Published Its "It Pays to Live Downtown" in Multiple
Languages:
[See PDF for image]
[End of figure]
LMDC officials report that the occupancy rate of Battery Park City, a
lower Manhattan neighborhood, has risen from 60 percent to 95 percent
and that 50 percent of residents in "zone 1" are new to the area since
September 11. The Residential Grant Program closed May 31, 2003, but
LMDC extended the program deadline to June 14, 2003, for applicants
providing alternative lease documentation. As of June 30, 2003, LMDC
had approved over 31,000 applications totaling $177 million and had
disbursed $106 million in grants. According to LMDC officials,
applications surged in the last 2 weeks of the program; many
applications were still under review as of June 30, 2003.[Footnote 22]
Mortgage and Rental Assistance Totaled $200 Million:
Individuals suffering financial hardships as a result of September 11
could obtain mortgage and rental assistance from FEMA. Prior to
September 11, FEMA had provided a total of $18 million in mortgage and
rental assistance grants in all previous disasters, which provided rent
or mortgage payments to individuals in danger of losing their homes
through foreclosure or eviction as a result of a major disaster. After
September 11, FEMA committed $200 million through this program.
Eligible applicants received up to 18 months of assistance as part of
this program.[Footnote 23] Initially, applicants were eligible if they
resided in certain zones around the World Trade Center site and lost 29
percent or more of their income as a result of the disaster. FEMA, as
directed by the Congress, extended assistance to those who lost 25
percent of their income working anywhere in Manhattan, to those whose
employers were not located in Manhattan but were economically dependent
on a Manhattan firm; and to anyone living in Manhattan who commuted off
the island and who suffered financially because of post-September 11
travel restrictions.
In a December 2002 report that examined this program, FEMA's Office of
Inspector General (IG) noted that the unique nature of the disaster and
its economic impact required FEMA officials to expand eligibility
guidelines more broadly than ever before.[Footnote 24] This resulted in
FEMA having to re-evaluate applications, reverse previous
determinations to deny benefits, and attempt to contact applicants
initially denied but now eligible under the expanded guidelines.
Additionally, the report stated that FEMA was challenged to provide
outreach to the large, diverse population of Manhattan. To accomplish
this, FEMA translated all program information into seven languages,
promoted the program in 26 non-English papers, and set up a toll free
number where individuals could ask questions in 157 different
languages. FEMA's IG recommended that FEMA implement a broader, more
flexible program in order to respond to any future disasters that have
a widespread effect on the economy and result in large-scale individual
needs.[Footnote 25]
In a December 2002 report on charitable organizations' contributions
after September 11, we noted, among other things, that coordination
among charities--of which some provided rental assistance--and FEMA
could be enhanced.[Footnote 26] We reported that both charities and
individuals who were indirectly affected by the disaster (e.g., by job
loss) were confused about what aid might be available. We recommended
that FEMA convene a working group with involved parties to take steps
to implement strategies for future disasters that build on the lessons
learned in the aftermath of September 11. FEMA agreed with this
recommendation, noting that such a working group would foster enhanced
coordination and potentially lead to improvements in service to those
affected by disasters.
The deadline to apply for the Mortgage and Rental Assistance Program in
the New York City area was January 31, 2003, and as of July 31, 2003,
$194 million had been disbursed of the $200 million available. Even
though the period to apply for the program has passed, FEMA officials
expect all funds to be disbursed as applicants continue to receive
monthly assistance.[Footnote 27]
Crisis Counseling Assistance Totaled $166 Million:
The Crisis Counseling Assistance and Training Program, funded by FEMA,
led to the creation of "Project Liberty." Project Liberty is
administered by the New York State Office of Mental Health and provides
short-term outreach, education, and referrals to mental health
services, and other programs for long-term care. In the past, only
individuals from a declared disaster area were eligible to receive
counseling services; however, because of the broad impact of the
disaster, grants for this program were also provided to eligible
individuals in New Jersey, Connecticut, Massachusetts, and
Pennsylvania.
In addition to Project Liberty, the Department of Justice's Office for
Victims of Crime and various charities, such as the American Red Cross,
offered counseling services after September 11.[Footnote 28] In its
December 2002 report, FEMA's IG found that the availability of
counseling services from multiple agencies was confusing for victims.
In the event of a disaster that is also a criminal activity, FEMA and
the Department of Justice cooperate to provide services. However, the
IG recommended that more detailed and comprehensive guidance be
developed to minimize duplication and ensure victims obtain appropriate
services. Specifically, the IG recommended that a memorandum of
understanding officially detail the relationship and responsibilities
of FEMA and the Department of Justice and time frames in administering
crisis counseling assistance.[Footnote 29]
FEMA committed more than $166 million in grants to Project Liberty;
this sum is more than all previous counseling grants since 1974
combined. Of these funds, $99 million has been obligated and disbursed.
As of July 31, 2003, the program was still available and remaining
funds will continue to be disbursed until the program deadline, March
31, 2004.[Footnote 30]
Individual and Family Grants Totaled $110 Million:
FEMA is authorized by the Stafford Act to provide individual and family
grants for necessary expenses related to disasters that were not
covered through insurance, other federal assistance, or voluntary
programs. For the September 11 disaster, FEMA's Individual and Family
Grant Program provided eligible residents of New York City assistance
for home repairs, replacement of personal property, reimbursement for
air quality products, and repair or replacement of air conditioners.
The New York State Department of Labor was tasked with implementing and
administering the program.
In its December 2002 report on Individual Assistance, FEMA's IG
reported that the state program officials faced few challenges in
providing individual and family grants until a jump in applications
resulted in delays and required the New York State Department of Labor
and FEMA to dedicate additional staff to manage the program.[Footnote
31] The New York State Department of Labor officials experienced a
surge in grant applications in June 2002, particularly for air quality
product assistance. Applications do not typically increase at this
point in the recovery phase. FEMA officials reported that the increase
in applications occurred around the same time that EPA released reports
on air quality in lower Manhattan. The IG reported that although FEMA
officials could not have anticipated this surge of applications, they
could use lessons learned in this disaster and work with states to
develop contingency plans that can be implemented quickly to avert a
similar situation in future disasters.
The report also noted that the lack of inspections to verify property
damage, and the relaxed requirements to document whether an applicant
was eligible for advance payment of grant, may have increased the
likelihood of fraud in the Individual and Family Grant Program. The IG
reported that FEMA officials did not perform the typical inspections to
verify property damage because they determined it would not be cost-
effective for inspectors to examine damage to a single property item.
Instead, state officials established a self-certification process
requiring applicants to document damage and provide receipts for
purchases, or if an applicant self-certified that they were unable to
pay for equipment up front, FEMA provided advanced payment and
requested that receipts be provided after the purchase. These issues,
combined with the large number of applications, may have increased the
likelihood of fraud and abuse.
The application deadline for the Individual and Family Grant Program
was November 30, 2002. As of July 31, 2003, $97 million had been
disbursed of the $110 million available through this program.
Other Individual Assistance Totaled $51 Million:
In addition to Mortgage and Rental Assistance and Individual and Family
Grants, FEMA also committed other funds for temporary housing
assistance, including $34 million for programs that address short-term
needs such as lodging expenses and temporary housing repairs. In
addition, the Stafford Act authorizes FEMA to provide unemployment
assistance to individuals, as a result of the disaster, who are not
eligible for regular state Unemployment Insurance. For the New York
City area, FEMA provided $17 million for disaster unemployment
insurance administered by the state of New York.
Assistance to Businesses Totaled $683 Million:
Almost 18,000 businesses in New York City, representing approximately
563,000 employees, were disrupted or forced to relocate as a result of
the terrorist attacks. Approximately 30 million square feet of
commercial space was damaged or destroyed. Businesses near the World
Trade Center site suffered physical damage, but businesses all across
the city experienced the economic impact of the disaster. The Empire
State Development Corporation (ESDC), as a grantee of HUD funds,
administered a variety of assistance programs in cooperation with New
York City to compensate businesses for economic losses and to assist in
their recovery. Businesses could apply for multiple programs. Table 10
shows the amount of assistance committed, obligated, and disbursed by
HUD for businesses assistance.
Table 10: Assistance to Businesses, as of June 30, 2003:
Activity: Business recovery grants[A]; Funding
agency: HUD; Total committed: $578; Total obligated: $503; Total
disbursed: $488.
Activity: Business recovery loans; Funding agency:
HUD; Total committed: 41; Total obligated: 41; Total disbursed: 12.
Activity: Compensation to businesses for
disproportionate loss of workforce; Funding agency: HUD; Total
committed: 33; Total obligated: 0; Total disbursed: 0.
Activity: Bridge loans; Funding agency: HUD; Total
committed: 7; Total obligated: 7; Total disbursed: b.
Activity: Technical assistance grants; Funding
agency: HUD; Total committed: 5; Total obligated: 5; Total disbursed:
2.
Activity: Other administrative costs; Funding
agency: HUD; Total committed: 19; Total obligated: 19; Total disbursed:
9.
Activity: Total; Total committed: $683; Total obligated: $574; Total
disbursed: $510.
Source: GAO analysis of agency-provided data.
Note: Numbers may not add due to rounding.
[A] Business recovery grants include funds to small and large
businesses. HUD approved obligation and disbursement of all remaining
business recovery grants August 6, 2003.
[B] Although no funds have been disbursed for this program, $7 million
in other city and state funds have been provided in loan loss reserves
to private banks and nonprofit lenders. ESDC plans to reimburse these
funds in the future.
[End of table]
Business Recovery Grants Totaled $578 Million:
The Congress required that at least $500 million of the HUD funds to
compensate small businesses, not-for-profits, and individuals in New
York for their economic losses--the first time HUD funds have been used
for this purpose.[Footnote 32] ESDC estimates that businesses with
fewer than 200 employees account for 99 percent of all businesses
affected by September 11 and about 50 percent of all affected
employees. Accordingly, ESDC developed the Business Recovery Grant
Program, which offers grants to small businesses and nonprofits to
compensate for economic losses. As part of this program, businesses
with fewer than 500 employees in lower Manhattan, south of 14th Street,
were eligible for reimbursement of a number of days of lost revenue
depending on their proximity to the World Trade Center site. In
addition to small businesses, ESDC provided recovery grants to
businesses that have more than 500 employees outside of lower
Manhattan, but have facilities with fewer than 200 in lower Manhattan.
Firms receiving these grants include McDonalds, XEROX, and Starbucks.
The areas of lower Manhattan eligible for business recovery grants are
shown in figure 16.
Figure 16: Areas of Lower Manhattan Assisted by ESDC Business Recovery
Grant Program:
[See PDF for image]
[End of figure]
Prior to September 11, ESDC had never administered such a large HUD-
funded endeavor. ESDC officials worked closely with HUD officials to
efficiently provide services to businesses in the weeks following the
disaster and meet HUD's requirements for the Community Development
Block Grant (CDBG) program. HUD officials and its IG conducted several
reviews of ESDC's programs and issued various letters and
reports.[Footnote 33] Although the reviews generally concluded ESDC was
handling funds appropriately, HUD's IG and ESDC officials reported
challenges in providing assistance to affected businesses while
avoiding duplication of benefits from other federal programs, such as
the Small Business Administration (SBA) Disaster Assistance
Loans.[Footnote 34] HUD officials and its IG determined that ESDC did
not have adequate controls in place to avoid duplication of benefits
and HUD worked with ESDC officials to implement these procedures. ESDC
had to reevaluate previously approved applications to account for this
requirement. Another challenge ESDC officials encountered was that the
amount of eligible grant funds applied for in business recovery grants
exceeded the amount of committed funds due to a surge in applications
in the last 2 days of the program. Businesses could apply for the
program from January 25, 2002, through December 31, 2002. Over 19
percent of all applications were received in the last 2 days of the
program. As of June 30, 2003, ESDC reported that 2,166 businesses had
not yet received their approved grants.
To address this shortfall, ESDC redirected funds from other programs
and LMDC requested that HUD approve transfer of additional funds for
LMDC to transfer to ESDC in order to meet program commitments. Once the
transfer of funds is approved, $578 million will have been disbursed to
compensate businesses in lower Manhattan with $558 million provided
through business recovery grants for small and large businesses. As of
June 30, 2003, ESDC reported $475 million disbursed in recovery grants
to small businesses and $13 million for large firms--a total of $488
million. According to LMDC, the Business Recovery Grant Program will
have directly impacted more than 141,000 jobs when all grants have been
disbursed.
Business Recovery Loans Available Up to $41 Million:
The Business Recovery Loan Program provides funding to community-based
lending organizations, which in turn provide low-cost working capital
loans to businesses that were adversely affected by the terrorist
attacks and to businesses that have subsequently located or will locate
new operations in lower Manhattan. Funds may be used for payroll, rent,
utilities, inventory, and, in certain circumstances, refinancing
existing debt. Loans are available to businesses based on their
location in lower Manhattan or economic relationship with a business in
that area.[Footnote 35] The program enhanced access to capital for
businesses, particularly to those that do not meet SBA credit or
eligibility criteria for disaster loans. The $41 million committed to
this program provided funds to eight community-based lenders. As of
June 30, 2003, ESDC had disbursed $12 million in program funds to
participating lenders, and the lenders have closed 201 loans.
Up to $33 Million Committed for Businesses with Disproportionate Loss
of Workforce:
As part of the federal assistance to the New York City area, the
Congress appropriated funds to HUD to compensate businesses that
suffered a disproportionate loss of employees due to the
disaster.[Footnote 36] LMDC provided $33 million for the program, which
will be developed and administered by ESDC.[Footnote 37] The program
targets firms in the World Trade Center or in the immediate surrounding
area that lost (1) at least 6 permanent employees, representing at
least 20 percent of the firm's workforce or 50 percent of its New York
City employees or (2) at least 50 percent of its New York City
workforce. To be eligible, firms must maintain 50 percent of an agreed
upon level of employment in New York City for 3 years. All funds will
be divided among eligible firms, and the amount for each business will
be based on the magnitude and proportionality of employee loss. As of
June 30, 2003, no funds have been requested, obligated, or disbursed
for this program.
About $7 Million Available for Lenders to Make Bridge Loans to
Businesses:
Through the Bridge Loan Program, ESDC provided loan loss reserve
subsidies to lenders that made bridge loans to businesses awaiting SBA
loan approvals.[Footnote 38] Eligible businesses are New York City-
based, commercial, industrial, retail, and not-for-profit
organizations that were affected by September 11 and applied for SBA
loans. Participating banks and community-based lenders offered bridge
loans to provide interim capital to businesses until the SBA loan was
approved. Upon approval of a SBA loan, the business paid off the bridge
loan with the SBA loan proceeds and if the loan was not approved, the
lender had the option to restructure the bridge loans as term
loans.[Footnote 39] The program closed January 31, 2003, as the SBA
loan stopped accepting applications for disaster loans. As of June 30,
2003, the loan loss reserve fund totaled $7 million to support the $33
million in loans provided by the lenders.
Technical Assistance Grants Totaled $5 Million:
The Technical Assistance Program provided grants to community-based
organizations and other technical service providers to allow them to
provide additional assistance to businesses affected by the disaster.
ESDC committed $5 million to this program and allowed for a maximum
grant of $250,000 per organization. Services may include help with
strategic planning, finance, insurance, and legal issues; and basic
business management such as marketing, member development, and
attraction efforts. Businesses took part in a variety of services,
including direct assistance, on-line activities, and workshops or
training seminars on various business recovery and marketing topics. To
apply for technical assistance, businesses must have fewer than 200
employees, have been:
affected by the disaster, and currently be located in lower Manhattan.
As of June 30, 2003, ESDC had 23 technical service providers under
contract that have assisted over 3,000 small businesses, representing
over 30,633 employees, and a total of $2 million has been disbursed
through this program.
[End of section]
Chapter 4: Almost $5.57 Billion Committed for Projects to Restore and
Enhance Infrastructure:
The terrorist attacks at the World Trade Center severely damaged the
public transportation system that was used by more than 85 percent of
commuters to lower Manhattan--the highest percentage of people
commuting to work by public transit of any commercial district in the
nation. About $5.57 billion has been committed for projects to restore
as well as enhance transportation and other infrastructure in lower
Manhattan. The majority of this financial assistance, $5.01 billion, is
a combination of FEMA, DOT, and HUD funds to restore and enhance
elements of the transportation system supporting lower Manhattan. The
attacks and subsequent recovery efforts also heavily damaged utility
infrastructure in lower Manhattan, and $568 million in HUD funds have
been committed to rebuild utility infrastructure and to fund other
short-term capital projects for infrastructure improvements to the
areas around the World Trade Center. The amount of assistance each
agency has committed is shown in figure 17. Since the infrastructure
restoration and improvement projects are in planning stages, most funds
remain to be obligated and disbursed as shown in table 11.
Figure 17: Amount of Assistance Committed for Infrastructure
Restoration and Improvement, by Agency:
[See PDF for image]
[A] The Lower Manhattan Development Corporation's plans for $1.16
billion in HUD funds have not been finalized, as of June 30, 2003.
These funds are not included in the graphic and, according to HUD, will
mostly likely be directed to either infrastructure restoration or
economic revitalization.
[End of figure]
Table 11: Infrastructure Restoration and Improvement, as of June 30,
2003:
Dollars in Millions:
Activity: Restoring and enhancing the lower
Manhattan transportation system; Funding agency: FEMA/DOT/HUD; Total
committed: $5,006; Total obligated: $238; Total disbursed: $54.
Activity: Permanent utility infrastructure
repairs; Funding agency: HUD; Total committed: 500; Total obligated: 0;
Total disbursed: 0.
Activity: Short-term capital projects; Funding
agency: HUD; Total committed: 68; Total obligated: 0; Total disbursed:
0.
Activity: Total; Total committed: $5,574; Total obligated: $238; Total
disbursed: $54.
Source: GAO analysis of agency-provided data.
Notes: Numbers may not add due to rounding. Due to the expedited close-
out, FEMA data are reflected as of July 31, 2003.
[End of table]
Projects Planned to Restore and Enhance the Lower Manhattan
Transportation System Total $5.01 Billion:
A wide variety of transportation restoration and enhancement projects
for lower Manhattan have begun or are in the planning process. DOT is
the lead agency in administering funds to restore improve the
transportation system in lower Manhattan, but agencies at all levels of
government are involved in the decision making process. The various
types of projects and their funding information can be seen in table
12.
Table 12: Lower Manhattan Transportation System Restoration and
Enhancement, as of June 30, 2003:
Dollars in millions:
Activity: Transit projects; Agency: DOT/FEMA;
Total committed: $4,550; Total obligated: $50; Total disbursed: $0.
Activity: Long-term transportation planning;
Agency: HUD; Total committed: 14; Total obligated: 0; Total disbursed:
0.
Activity: Street resurfacing and reconstruction;
Agency: DOT; Total committed: 242; Total obligated: 100; Total
disbursed: 9.
Activity: Ferry projects[A]; Agency: DOT; Total
committed: 100; Total obligated: 11; Total disbursed: 11.
Activity: Rail safety projects; Agency: DOT; Total
committed: 100; Total obligated: 77; Total disbursed: 34.
Activity: Total; Total committed:
$5,006; Total obligated: $238; Total disbursed: $54.
Source: GAO analysis of agency-provided data.
Notes: Numbers may not add due to rounding. Due to the expedited close-
out, FEMA data are reflected as of July 31, 2003.
[A] After June 30, 2003, Federal Transit Administration awarded grants
totaling $36 million for the Hoboken Ferry Terminal and $5 million for
a New York State Energy Research and Development Authority grant for a
study of environmental mitigation of ferry emissions. These data are
not reflected in the table.
[End of table]
Planning for $4.55 Billion Committed for Lower Manhattan Transit
Projects Continues:
Of the total amount the Congress appropriated to this disaster, $4.55
billion has been committed for transit projects in lower Manhattan. Of
this amount, the Congress appropriated $1.80 billion to Federal Transit
Administration (FTA) to replace, rebuild, or enhance the public
transportation systems serving Manhattan.[Footnote 40] In addition,
FEMA committed $2.75 billion for lower Manhattan transit projects for a
total federal commitment of $4.55 billion. In an August 2002 memorandum
of agreement between FEMA and FTA, FTA was identified as the lead
federal agency responsible for administration and management of the
combined $4.55 billion in federal funds. In February 2003, the Governor
of New York identified nine potential projects to be funded out of the
$4.55 billion in federal aid, noting that projects are in different
stages of development. The Governor specifically identified three
projects--the Port Authority Trans-Hudson (PATH) Terminal, the Fulton
Street Transit Center, and the South Ferry Subway Station--totaling up
to $2.85 billion in federal funds. FTA is working with the Port
Authority and the Metropolitan Transportation Authority (MTA) on
project development issues and implementing an oversight program before
disbursement of funds for these projects. FTA has not received any
formal correspondence from New York requesting any portion of the
remaining federal assistance.
PATH Terminal:
The original PATH terminal located underneath the World Trade Center
site was completely destroyed in the terrorist attacks. As part of the
initial response, a temporary PATH terminal, funded through insurance
payments and FEMA funds, is under construction and is scheduled for
completion in November 2003.[Footnote 41] The Port Authority is
requesting an additional $1.4 billion to $1.7 billion to build a
permanent PATH terminal that Port Authority officials report will be a
substantial improvement over the destroyed World Trade Center terminal.
According to plans, this terminal will serve PATH commuter trains and
four subway lines with concourses linking the terminal to the Fulton
Street Transit Center and the ferry terminal at the World Financial
Center. Portions of the temporary PATH terminal will be retained in the
construction of this permanent terminal. FTA officials report that the
Port Authority estimates the majority of the project to be completed in
2007, while some of the passenger concourses connecting to other
developments at the World Trade Center site will be completed in 2009.
Fulton Street Transit Center:
The current Fulton Street-Broadway Nassau Subway Station Complex
provides access to the most heavily used subway lines in lower
Manhattan and lies one block east of the World Trade Center site. The
complex is comprised of four separate subway stations serving nine
subway lines that serve 250,000 passengers entering, exiting, and
transferring at these stations daily. The complex was not damaged on
September 11, but according to MTA officials it is difficult to
navigate and not easily accessible. According to these officials, the
complex has crowded corridors and mezzanines, poor connections between
platforms, and entrances with little visibility from the street. In
addition, three neighboring subway stations that provide access to
different subway lines have no underground connections to the complex.
The MTA is planning a $750 million project to improve the existing
Fulton Street-Broadway Nassau Subway Station Complex to create a Fulton
Street Transit Center. According to plans, the project will create a
visible street level entrance pavilion to serve as a focal point for
the four subway stations. These renovations will include new and
expanded platforms and mezzanines, efficient connections between
platforms, linkage to the restored PATH terminal and neighboring subway
stations, a new underground pedestrian concourse, and upgraded station
entrances for better access for all users. FTA has issued a $50 million
grant to MTA for environmental review work and preliminary engineering
for this project.[Footnote 42] MTA is planning to complete the final
environmental impact statement by July 2004 and the final project in
December 2007.
South Ferry Subway Station:
The South Ferry Subway Station, which is located a half mile from the
World Trade Center site, serves the southern tip of lower Manhattan and
provides linkage to the Staten Island Ferry terminal and express
busses. The station--the final point on the 1 and 9 subway lines that
also run through the World Trade Center site--was not damaged on
September 11. However, according to MTA officials, the South Ferry
Subway Station is outmoded: only five cars of a 10-car subway train can
open onto the platform at one time; the tunnel is curved in such a
fashion that trains have to slow down substantially to negotiate it;
and it has no direct passenger connections to nearby subway stations.
MTA has proposed to improve the station so that it would accommodate
the length of a standard 10-car subway train and would provide
connection to the Whitehall Street Subway Station that serves two other
subway lines. According to an FTA official, the project will undergo an
environmental assessment in fall 2003 that will determine whether an
environmental impact statement is necessary. The estimated cost of the
project is $400 million, and the estimated completion date is 2007 or
2008. Figure 18 shows the current South Ferry Subway Station layout and
plans for the renovated station.
Figure 18: Current and Proposed South Ferry Subway Station Layout:
[See PDF for image]
[End of figure]
Long-Term Transportation Planning for Remaining Funds:
The permanent PATH terminal, the Fulton Street Transit Center, and the
South Ferry Subway Station would account for $2.55 billion to $2.85
billion of the $4.55 billion designated for lower Manhattan transit
projects--projects to be funded with the remaining $1.7 billion to $2
billion have yet to be determined. A February 2003 letter from the
Governor of New York to FTA identified nine potential projects to be
funded out of the $4.55 billion in federal aid, noting that projects
are in different stages of development. The Governor specifically
identified the permanent PATH terminal and improvements to the Fulton
Street and South Ferry subway stations totaling up to $2.85 billion in
federal funds. In April 2003, various New York City and state
agencies[Footnote 43] released a report entitled Lower Manhattan
Transportation Strategies that identified priority transportation
projects. High-priority projects highlighted in the report include
access to JFK Airport and Long Island, enhancement of West Street,
construction of a tour bus facility, and construction of World Trade
Center underground infrastructure. However, FTA has not received any
formal correspondence requesting any portion of the remaining federal
assistance for any other projects. LMDC has committed $14 million in
HUD funds to assist in the planning of these projects and has provided
funds to study alternatives to improve transportation to airports, West
Street planning (as discussed in the next section), and other studies
to address rebuilding efforts and their effect on economic
revitalization of lower Manhattan. In addition, a portion of the
remaining $1.16 billion in HUD funds may be directed to infrastructure
improvement activities depending on the results of on-going studies. To
date no decisions have been made on which of these projects will be
funded. For more information on the transportation projects highlighted
in the Lower Manhattan Transportation Strategies report, see appendix
II.
$242 Million Committed for Resurfacing and Reconstructing of Lower
Manhattan Streets; More Funding Possible:
The Federal Highway Administration (FHWA) is overseeing New York State
DOT and New York City DOT plans for resurfacing and reconstructing
lower Manhattan streets through its Emergency Relief Program. These
streets were damaged by the direct impact of the collapsed World Trade
Center buildings as well as wear and tear from debris removal
activities and from emergency telecommunications repairs. Of the $242
million appropriated for the Emergency Relief Program to New York, $132
million has been committed for New York City street repair and the
remaining $110 million has been committed for the reconstruction of
West Street.[Footnote 44]
Street Resurfacing and Reconstruction:
In addition to FEMA funds for local road repairs as part of initial
response efforts, FHWA has committed $132 million to resurface and
reconstruct about 400 city blocks of New York City streets. As of June
2003, over $100 million had been obligated to the Emergency Relief
Program, more than $9 million had been disbursed and 95 blocks had been
repaved. FHWA and New York State DOT officials anticipate that repairs
will continue through 2007. Figure 19 shows workers conducting street
repairs in lower Manhattan, and figure 20 shows a map of planned
Emergency Relief Program road repairs for lower Manhattan streets.
Figure 19: Workers Conducting Street Repairs in Lower Manhattan:
[See PDF for image]
[End of figure]
Figure 20: New York City Department of Transportation Map of Planned
Emergency Relief Program Road Repairs (excluding West Street):
[See PDF for image]
[End of figure]
West Street (Route 9A):
West Street, also known as Route 9A, is a key regional and local
transportation corridor for Lower Manhattan and a major utility
corridor. Prior to September 11, it served 170,000 people per day
walking, biking, and riding in vehicles. Falling debris from the
collapse of the World Trade Center buildings destroyed the roadway,
including two northbound lanes that crossed part of the World Trade
Center site. The street was further damaged from wear and tear from
numerous heavy vehicles used in response and recovery efforts as well
as from emergency utility repairs to restore power and communications.
As discussed in chapter 2, FEMA provided $6 million for interim repairs
to West Street; however, significantly more funds are projected to be
needed to permanently repair West Street and to improve pedestrian
movement around the roadway.
FHWA estimates the cost to simply replace West Street to pre-disaster
conditions to be $110 million. However, New York State DOT is
considering a more extensive renovation and enhancement of West Street.
Planners hope to permanently restore the functionality of the roadway
while also improving pedestrian movements, enhancing green areas, and
supporting economic recovery and development. Four options for
enhancing the street are under consideration:
1. An improved at-grade roadway with pedestrian bridges that would cost
an estimated $185 million and would be completed in 2005.
2. A pedestrian deck over the highway crossing to the World Trade
Center site that would cost an estimated $700 million and be completed
in 2006.
3. An 1,100-foot short bypass with two lanes in each direction above
ground and four lanes below ground that would cost an estimated $850
million with a completion date of 2007.
4. A long bypass that would cost an estimated $2.90 billion with a
completion date of 2011.
Figure 21 shows the present West Street and the design concept for an
improved West Street intersection with belowground lanes.
Figure 21: Present West Street and West Street Design Concept with
Belowground Lanes:
[See PDF for image]
[End of figure]
Left: Present West Street intersection with Morris Street. Right:
Design concept of same intersection with landscaped promenade.
In an April 2003 speech, the Governor of New York announced that
enhancing West Street was one of his top priorities for the remaining
$1.7 billion to $2 billion of the $4.55 billion under FTA control and
his support for the $850 million short bypass alternative. For the
environmental review process, all four options will be considered as
well as additional options that may arise in the public scoping
meeting. As options are planned and considered by New York State DOT
and other officials, LMDC will use HUD funds to reimburse some costs
associated with planning efforts. Specifically, LMDC has committed
funds to assist New York State DOT's technical services related to the
repair and restoration of West Street, including planning for future
enhancements.
$100 Million for Ferry Terminals in New York and New Jersey:
The ferry system is an integral part of lower Manhattan's
transportation system. FHWA was appropriated $100 million in
Miscellaneous Highway funds for ferry and ferry facility construction
projects in New York and New Jersey.[Footnote 45] FHWA transferred
administration of most of this money to FTA, which worked with a task
force of representatives from New York and New Jersey to identify ferry
projects for funding. As of June 30, 2003, FTA has disbursed $11
million for the West Midtown (Manhattan) Terminal, and has committed
funds for the renovation of the Hoboken (New Jersey) terminal and the
Colgate/Sussex Pier (New Jersey). FTA plans disbursement of $5 million
to support efforts by the New York State Energy Research and
Development Authority and Rutgers University to research, demonstrate,
and implement mitigation of pollution from ferry boats in New York
Harbor. FHWA will administer $22 million for administration of two of
the projects--the Weehawken Intermodal Ferry Terminal (New Jersey) and
the South Amboy Ferry Terminal (New Jersey).
Safety Projects for New York Rail Tunnels Totaled $100 Million:
As part of the effort to enhance the New York area transportation
system, the Federal Railroad Administration was appropriated $100
million to enhance the fire and life safety in New York rail tunnels.
In June 2002, the Federal Railroad Administration and Amtrak entered
into a grant agreement for $77 million to do this work. The funds will
be used to modernize ventilation systems, install communication
systems, improve emergency exits from the tunnels, and structurally
rehabilitate four East River tunnels, two Hudson River tunnels, and the
subterranean section of Penn Station. As of July 2003, almost $34
million of the grant funds have been disbursed to Amtrak for the safety
projects that will be completed in 2006 or 2007. The remaining $23
million will be obligated and disbursed to Amtrak once it completes the
design of anticipated improvements in the New York City rail tunnels.
Permanent Utility Infrastructure Repairs and Improvements Total $500
Million:
The Congress also appropriated HUD funds to provide assistance to
utility firms as they complete permanent repairs and improvements to
the damaged infrastructure around the World Trade Center site. These
funds will go to LMDC, which will work with ESDC to administer $250
million for emergency repairs, as previously discussed. In addition,
$500 million has been committed for for permanent repairs and
rebuilding, including $15 million for program administration. The goals
of the permanent repair program, according to LMDC, are to prevent
businesses and residences from bearing the cost of rebuilding and to
enhance the redevelopment of lower Manhattan by supporting investment
in energy and telecommunication infrastructure. LMDC officials worked
with utility firms, businesses, and state and local agencies to develop
the program in order to help utility firms while developing an improved
system to attract new businesses to the area. Specific categories of
reimbursable projects include:
5. $330 million for costs incurred to permanently replace, restore, and
enhance infrastructure to deliver service;
6. $50 million to construct a carrier neutral lateral conduit to
enhance telecommunications diversity and competition;
7. $20 million for the provision of fully redundant telecommunications
services to critical businesses and government facilities to enhance
public safety;
8. $22 million to compensate providers for new regulatory mandates due
to increased security measures; and:
9. $60 million for utilities and the city or state to pay for service
interference costs as a result of reconstruction of local roads.
Eligible businesses include investor-owned utility service providers
with service areas in lower Manhattan that incurred expenditures
related to damage from the disaster, excluding any funds from insurance
and other federal assistance for reimbursement for lost revenues.
Applicants will have until December 31, 2007, to apply for certain
programs.[Footnote 46]
Short-term Capital Projects Total $68 Million:
LMDC worked with community groups, local businesses, and city and state
governments to select $68 million in short-term capital projects for
HUD funding as part of their effort to improve accessibility and the
appearance of lower Manhattan. In addition, a portion of these funds
has been committed by LMDC to conduct an outreach campaign to keep
residents informed of rebuilding efforts. These projects are also part
of the Governor's priorities for the overall lower Manhattan rebuilding
effort, including:
* Parks and Open Space Enhancements. LMDC has proposed several projects
to improve and expand parks along the Hudson River and East River, as
well as other neighborhood parks, as part of a larger effort to attract
residents and revitalize the area. LMDC has committed an estimated $29
million for these projects.
* West Street Pedestrian Connections. LMDC plans to fund construction
of a temporary pedestrian bridge and enhance an existing pedestrian
bridge in an effort to aid foot traffic flow once the temporary PATH
terminal is opened. The original bridge was destroyed during the
disaster, and due to increased pedestrian traffic, LMDC has committed
an estimated $21 million to complete the projects.
* Building and Streetscape Improvements. LMDC, in cooperation with the
Alliance for Downtown New York, a community group, has identified
several areas that continue to be affected by recovery efforts and will
provide funds to repave sidewalks, improve signs and lighting, and
provide new benches. The total cost of the project is estimated to be
$20 million, of which LMDC has committed $4 million. Other particular
areas of focus include the New York Stock Exchange, where LMDC has
committed $10 million to the Downtown Alliance to install security
barriers to secure pedestrian and vehicular paths and to beautify the
area, and the Liberty Street area, where LMDC has committed $2 million
to building owners to improve the exterior facades of damaged
buildings.
* Millennium High School. LMDC has committed an estimated $3 million of
HUD funds to renovate space for a new Millennium High School. The
school will be the only open-admission public high school for lower
Manhattan residents and is intended to attract families to the area.
[End of section]
Chapter 5: Efforts to Revitalize the New York Economy Include Tax
Benefits and Assistance to Businesses:
The terrorist attacks of September 11 disrupted New York City's economy
and resulted in billions in lost income and tax revenues. The attacks
caused tens of thousands of job losses and severely impacted lower
Manhattan's commercial and retail sectors. In response, the Congress
enacted the Liberty Zone tax benefits, estimated by the Joint Committee
on Taxation to result in $5.03 billion in lost federal revenue, and
appropriated funds to HUD, of which $515 million will aid in
revitalizing the lower Manhattan economy. The tax benefits are
generally targeted to a defined area of lower Manhattan--the "Liberty
Zone." Estimates vary regarding what the ultimate usage of the Liberty
Zone tax benefits will be and the ultimate benefit amount is unlikely
to be known. In addition, the Empire State Development Corporation
(ESDC) and the Lower Manhattan Development Corporation (LMDC) are
coordinating to administer HUD funds for business assistance programs
designed to attract and retain thousands of jobs in lower
Manhattan.[Footnote 47] LMDC has also undertaken multiple planning
efforts to revitalize lower Manhattan, including the coordination and
planning of the rebuilding design and memorial competitions. Figure 22
shows a breakdown of economic revitalization assistance, and table 13
shows the amount of assistance committed for economic revitalization.
Figure 22: Estimated Amount of Assistance Committed for Economic
Revitalization, by HUD and Liberty Zone Tax Benefits:
[See PDF for image]
Note: Numbers do not add due to rounding.
[A] The Lower Manhattan Development Corporation's plans for $1.16
billion in HUD funds have not been finalized, as of June 30, 2003.
These funds are not included in the graphic and, according to HUD, will
mostly likely be directed to either infrastructure restoration or
economic revitalization.
[End of figure]
Table 13: Economic Revitalization Efforts, as of June 30, 2003:
Activity: Tax benefits:
Activity: Liberty Zone tax benefits; Funding
agency: IRS; Total committed/estimated benefits: $5,029[A]; Total
obligated: N/A[B]; Total disbursed: N/A[B].
Activity: Other revitalization efforts:
Activity: Job creation and retention grants;
Funding agency: HUD; Total committed/estimated benefits: 320; Total
obligated: 320; Total disbursed: 130.
Activity: Small firm attraction and retention
grants; Funding agency: HUD; Total committed/estimated benefits: 155;
Total obligated: 155; Total disbursed: 31.
Activity: Other planning efforts; Funding agency:
HUD; Total committed/estimated benefits: 40; Total obligated: 39;
Total disbursed: 12.
Activity: Subtotal; Total
committed/estimated benefits: $515; Total obligated: $514; Total
disbursed: $173.
Activity: Estimated total; Total committed/estimated benefits: $5,544;
Total obligated: $514[B]; Total disbursed: $173[B].
Source: GAO analysis of agency-provided data.
[A] Revenue estimate by the Joint Committee on Taxation.
[B] Tax benefits are neither obligated nor disbursed.
[End of table]
Further, additional funds may be made available for revitalization
efforts. There is $1.16 billion in HUD funds not yet committed to
specific activities, and LMDC is undertaking several studies and
working groups to identify and prioritize transportation and economic
revitalization efforts for these remaining funds.
Liberty Zone Tax Benefits Focus on Economic Revitalization:
In Title III of the Job Creation and Worker Assistance Act of
2002,[Footnote 48] the Congress instituted tax benefits primarily
targeted to the Liberty Zone, the area of New York City severely
impacted by the terrorist attacks defined as the area south of Canal
Street, East Broadway (east of its intersection with Canal Street), or
Grand Street (east of its intersection with East Broadway) in lower
Manhattan. Figure 23 shows a map of the Liberty Zone boundaries.
Figure 23: New York Liberty Zone:
[See PDF for image]
[End of figure]
The act contained seven provisions that provide specific federal tax
benefits designed to assist New York. A detailed description of these
seven provisions is contained in appendix IV; the general parameters of
each tax provision are discussed below.
* Business Employee Credit. Businesses in the Liberty Zone--or
relocated from that area to elsewhere in New York City due to physical
damage to their workplace--that employ 200 or fewer workers can receive
federal tax credits of up to $2,400 per qualified employee during
calendar years 2002 and 2003.
* Special depreciation allowance. In the Liberty Zone, qualified
property is allowed an additional first-year depreciation deduction of
30 percent of the adjusted basis of the property, thereby permitting
taxpayers to more quickly deduct the cost of the property. This benefit
extends through 2006 for personal property and through 2009 for real
property.
* Tax-exempt private activity bonds (termed Liberty Bonds.) Up to $8
billion in bonds on which the interest income is exempt from federal
taxes may be issued to finance the acquisition, construction,
reconstruction, and renovation of commercial and residential real
property as well as utilities primarily inside the Liberty Zone. The
Mayor of New York City is responsible for approving bonds totaling up
to $4 billion, and the Governor of New York is responsible for
approving the same amount. As much as one-fourth of the bonds can be
used for commercial projects in New York City but in areas outside the
Liberty Zone. The bonds must be issued by December 31, 2004. As of May
2003, $876 million in Liberty Bonds had been issued. For details on
Liberty Bonds that have been issued, see appendix V.
* One additional refunding for certain bonds that were previously
refunded. Until December 31, 2004, the Mayor of New York City and the
Governor of New York State may designate issuance of federal tax-exempt
bonds to pay principal, interest, or redemption price on municipal
bonds previously issued and refunded for facilities in New York City.
For advanced refunding bonds, the Mayor and the Governor are
responsible for designating $4.5 billion each for a total of $9 billion
through December 31. As of June 2003, New York State had released $3.68
billion and New York City had issued $1.64 billion of these bonds. For
details on refunding that have occurred, see appendix V.
* Increased expensing. Taxpayers may expense an increased amount of
qualifying property used in the New York Liberty Zone. This benefit is
available through December 31, 2006.
* Extension of replacement period for certain property involuntarily
converted in New York Liberty Zone. Taxpayers have an extended period
in which they do not have to recognize gain on involuntarily converted
Liberty Zone property, such as gain resulting from insurance
reimbursements for property damaged or destroyed in the terrorist
attacks that exceed the property's replacement value to 5 years instead
of the standard 2 years.
* Five-year life for leasehold improvements in the Liberty Zone.
Qualified improvements to leased nonresidential property in Liberty
Zone can be depreciated over a 5-year period instead of the standard
39-year period through December 31, 2006.
Amount of Liberty Zone Benefits Unclear and Likely to Remain Unknown:
The amount of benefits to New York that will result from the Liberty
Zone tax provisions is unclear and likely to remain unknown. Before the
Job Creation and Worker Assistance Act was passed, the Joint Committee
on Taxation estimated the amount of revenue projected to be lost to the
U.S. Treasury from the Liberty Zone provisions. However, an estimate of
lost revenue is not necessarily the same as an estimate of the benefits
received by taxpayers. Furthermore, uncertainties exist with any
estimate. For example, the actual usage of the benefits before
authority expires, such as in the case of the New York Liberty Bonds,
is uncertain. Also the Internal Revenue Service (IRS) is not tracking
actual use of the Liberty Zone benefits and, consequently, little data
will be available on the value of the tax benefits to the Liberty Zone.
Further, even if IRS were to collect data, it would at best only be
able to make an estimate, not a verifiable measure of the tax benefits.
Estimates of the revenue impact and the benefits to taxpayers of the
New York Liberty Zone tax provisions differ. The Joint Committee on
Taxation estimates the revenue effects of all tax legislation
considered by the Congress. Following its standard estimating
conventions, the Joint Committee estimated that all seven of the
Liberty Zone benefits, combined, would reduce federal revenues by
almost $5.03 billion over the 2002-2012-time period. A study
commissioned by the New York City Economic Development Corporation to
estimate the benefit to taxpayers of the Liberty Zone Provisions
determined that the size of the benefit would be considerably less than
the Joint Committee's estimate of the revenue cost. However, this tax
benefits study analyzed only four of the benefits (the special
depreciation allowance, the increase in expensing treatment for
business property, the extension of the replacement period for
involuntarily converted property, and special treatment of qualified
leasehold improvements) and used assumptions and analyses that differed
from those of the Joint Committee. For example, the study discounted
the value of revenue effects in future years and extended the timeframe
for assessing the financial impact by over 40 years.[Footnote 49]
As with many tax benefits, usage of the Liberty Zone tax benefits will
depend on a variety of difficult to predict economic factors. For
example, an economic downturn could slow rebuilding efforts in the New
York City area, reducing the use of benefits such as depreciation
allowances. Conversely, an economic upturn could increase benefit usage
above existing estimates. For one component of the Liberty Zone tax
benefits, the Liberty Bonds, it is unclear whether all of the bonds
will be used before the December 31, 2004, sunset date for the bond
authority. The New York City Economic Development Corporation and ESDC
reported that commercial bond issuers do not expect to be able to fully
utilize the $6.4 billion nonresidential portion of the Liberty Bonds by
the sunset date. These officials said that the bonds might not be fully
utilized due to continued weakness in the New York commercial real
estate market, major insurance litigation affecting resources to
rebuild, and uncertainty regarding development plans for the World
Trade Center site. Further, the officials cited zoning changes and
environmental reviews as reasons for delays. The New York State
Department of Taxation and Finance reports that the state is still
assessing potential projects and expects to seek a congressional
extension to the December 31, 2004, sunset to ensure its ability to
issue future Liberty Bonds. In contrast, officials from both the New
York Housing Finance Authority and the New York Housing Development
Corporation report that they expect to issue all residential Liberty
Bonds before the sunset date.
Most Liberty Zone tax benefit usage is not being monitored by federal,
state, or local agencies, and the total amount of the benefits accruing
to New York is likely to remain unknown. We recently reported that IRS
plans to collect little information related to the number of taxpayers
using the Liberty Zone benefits.[Footnote 50] Typically, IRS would only
collect these data if it would help the service administer the tax laws
or if it was legislatively mandated to do so, neither of which is the
case with most of the Liberty Zone benefits. IRS is nevertheless
collecting some data on the Business Employee Credit and the two bond
benefits, but to collect more information on the use of the benefits,
IRS would need to change forms, processing procedures, and computer
programming, all of which would add to taxpayer burden and IRS's
workload. Further, the earliest IRS could make these changes would be
for tax year 2004 returns. As a result, IRS would not have information
for 2 of the years that the benefits were in effect, which is
significant because most of the benefits expire by the end of 2006.
Finally, if IRS were to collect data on the use of the Liberty Zone
benefits, it could not produce a verifiable measure of the revenue loss
due to the benefits, but only be able to make an estimate. This is
because the IRS would have to make assumptions about how taxpayers
would have behaved in the absence of the benefits. Because the Liberty
Zone benefits are federal benefits, New York City and New York State
are not tracking them, though they do collect and record data regarding
the bonds issued under the Liberty Zone provisions.
$515 Million of HUD Funds Committed for Business Assistance and Other
Projects to Revitalize Lower Manhattan:
In addition to the Liberty Zone tax benefits, the Congress appropriated
funds to HUD to revitalize lower Manhattan. ESDC and LMDC are
administering $515 million to provide programs to attract and retain
businesses to the area and for other projects to revitalize lower
Manhattan. Damage around the World Trade Center site displaced an
estimated 1,025 firms employing more than 75,000 workers, and many more
were displaced by subsequent recovery efforts. Of the $515 million
committed for a variety of economic revitalization efforts, ESDC is
administering $475 million to provide incentives for existing small and
large businesses to remain in the area and to attract new businesses to
lower Manhattan. LMDC has also committed $40 million to help plan and
coordinate rebuilding and revitalization efforts and to determine how
to prioritize remaining funds for future projects. In addition, LMDC
may provide a portion of the $1.16 billion remaining HUD funds for
other economic revitalization efforts.
Job Creation and Retention Grants Total $320 Million:
ESDC designed the $320 million Job Creation and Retention Grant Program
to target businesses with at least 200 employees that need assistance
to maintain or establish a business in lower Manhattan. ESDC's goal is
to help retain or create 80,000 jobs with the program. In addition to
grants, eligible businesses can receive loan guarantees and low cost
loans, and all applications are evaluated as part of a multistage
review and approval process.[Footnote 51] To determine whether to
provide assistance and how much to offer, ESDC considers criteria such
as the risk of the company leaving lower Manhattan, location, and
economic impact for the New York City area. Companies granted funds
must maintain a workforce in New York City for a minimum of 7 years and
penalties for not meeting the terms of agreement are stiff to maximize
impact.
As of June 30, 2003, 72 businesses accepted retention grant offers from
ESDC for a total value of $251 million and, of this, $130 million had
been disbursed to 34 businesses. ESDC reports that if all accepted
grant offers are approved, the program will retain or create more than
70,000 jobs in New York City. ESDC anticipates that businesses will
continue to apply for the program as they evaluate the commitment
requirements. ESDC officials also expect program demand may exceed
available funds, and reported that they would request additional
allocations from LMDC of noncommitted funds if needed. The program will
be available until December 2004.
Small Firm Attraction and Retention Grants Total $155 Million:
ESDC is also administering a similar program that targets attraction
and retention of smaller firms. ESDC has committed $155 million in HUD
funds for its Small Firm Attraction and Retention Program. Businesses
with fewer than 200 employees can receive up to $5,000 per employee if
they were located in the restricted area around the World Trade Center
or $3,500 in other lower Manhattan locations. Firms are provided
assistance in two payments, one upon approval, and the second 18 months
after approval date. Through this program, firms must meet certain
conditions based on their location and lease. For example, to receive a
grant, businesses must renew their lease or enter a new one for at
least 5 years beyond their existing commitment. Businesses that have a
long-term lease that does not expire by December 31, 2004, are not
eligible for this program, and as we reported in November 2002,
business advocacy groups have criticized the program for excluding
these businesses.[Footnote 52] Business advocates argue that those
businesses also had a demonstrated commitment to the area, which should
make them eligible and not place them at a disadvantage relative to new
businesses. ESDC officials replied that the program was designed to
provide incentives to businesses at risk of leaving, not for those that
already had long-term commitments to the area.
As of June 30, 2003, 951 businesses received $31 million through the
Small Firm Attraction and Retention Grant Program, as part of their
first installment of assistance. ESDC officials report that the
progress of the program is reflective of the complexity of small
businesses' decisions to commit to the area, and accordingly, they
expected the pace of this program to be slower than their other
programs. The program will continue to accept applications through
December 31, 2004.[Footnote 53]
$40 Million Committed for Other Planning Efforts:
LMDC's primary role is to help plan and coordinate rebuilding and
revitalization of lower Manhattan, and as of June 30, 2003, LMDC had
committed about $40 million of HUD funds to planning
activities.[Footnote 54] LMDC has launched several public awareness
campaigns to promote its programs that provide information on the
progress of rebuilding and allow public input in rebuilding and
revitalization efforts. LMDC has also funded a summer-long festival and
a cultural campaign to bring people to the area and has conducted
environmental, economic impact, and other planning studies. For
example, as part of the $10 million congressional requirement to
promote tourism in the area, LMDC has begun a $5 million joint
initiative with museums located in lower Manhattan to promote the area
as a "cultural destination." In addition, LMDC has announced a tourism
and marketing campaign to attract visitors to Chinatown, a neighborhood
in lower Manhattan. However, the most prominent public awareness and
planning initiatives undertaken by LMDC involve the organization of the
World Trade Center site rebuilding and memorial selection competitions.
* Design competition to rebuild the World Trade Center site. LMDC's
main focus throughout several stages of the rebuilding design selection
process was to encourage public involvement and comment. In total, LMDC
received 406 design submissions and used funds to embark on an outreach
campaign, which included exhibits of the seven finalist plans, townhall
style meetings, public hearings, and a mailing to all families who lost
members in the disaster. The competition culminated with the selection
of the Studio Daniel Libeskind's Memory Foundations for design of the
new site plan as shown in figure 24.
Figure 24: Studio Daniel Libeskind's Memory Foundations Winning Design
for Rebuilding the World Trade Center Site Was Selected as Part of an
International Design Competition:
[See PDF for image]
[End of figure]
* Memorial selection process. LMDC has reported that the selection of a
permanent memorial and integration of the plan with the World Trade
Center rebuilding efforts is its primary mission. The search for a
design for the memorial was open to anyone worldwide that wished to
apply. LMDC received over 5,000 designs for the memorial, and a jury
will evaluate entries. The jury consists of 13 members with a wide
range of backgrounds and experience, including a victim's family
member, a lower Manhattan business owner/resident, artists and
architects, and representatives from the Mayor and the Governor of New
York. LMDC coordinated an outreach campaign and a public forum to allow
family members and the public to provide input into the decision making
process for selecting a final plan. A decision is scheduled to be
announced in the fall of 2003, and a rendering of the proposed location
of the permanent memorial is shown in figure 25.
Figure 25: The World Trade Center Rebuilding Plans Include Recognition
of the Footprints of the Original Twin Towers:
[See PDF for image]
[End of figure]
In addition, LMDC may direct a portion of remaining HUD funds, $1.16
billion, to other economic revitalization programs and is coordinating
several efforts to develop plans to prioritize and spend the funds.
LMDC officials said that the remaining funds would most likely be
directed to cultural activities, transportation improvements, and
affordable housing initiatives, although the allocation of funds has
not been finalized.[Footnote 55] In order to gain public input on how
to prioritize plans to spend the remaining funds, LMDC organized a
series of community workshops where over a 100 stakeholders from
neighborhoods in lower Manhattan will present city representatives and
LMDC officials with proposals for future projects. In addition, LMDC
told us that it will analyze the results of several on-going studies,
including an affordable housing study, and could possibly fund proposed
initiatives. Finally, in June 2003, LMDC published a request for
proposals from cultural institutions around the world to gauge their
interest on locating at the World Trade Center site as part of the new
facilities. As part of this effort, LMDC also solicited their input for
creating an interpretive museum of the events of September 11 and the
1993 World Trade Center bombing. With the information obtained through
this request, LMDC will determine if it will provide a portion of
remaining funds to support the proposals.
[End of section]
Chapter 6: Designation of a Specific Level of Assistance Led to a
Distinct Federal Government Response for this Disaster:
The most significant difference in the federal government's response to
this disaster was the upfront designation of a specific level of
funding for disaster assistance. The designation of $20 billion to
assist the New York City area was the first time in which a target
level for the total amount of federal disaster assistance was set early
in the response and recovery efforts. FEMA, in response to the
designation of a specific level of funding and greater authority from
the Congress, changed its approach to administering disaster funds.
With the specific level of funding functioning as a floor or minimum
level of assistance, FEMA may have been unable to fully disburse the
targeted level of assistance through traditionally eligible projects--
despite FEMA's efforts to broaden its traditional eligibility
guidelines. With congressional authorization, FEMA reimbursed the City
and State of New York for "associated costs" that it could not have
otherwise funded within the provisions of the Stafford Act to ensure
that the entirety of FEMA's appropriated funds for the disaster would
be spent for the New York City area. At the same time, the target level
of funding functioned as a cap, requiring the city and state to
establish priorities for newly authorized reimbursement of associated
costs, which led FEMA to establish an expedited close-out process. In
addition to the flexibilities given FEMA, this specific level of
funding for the entire disaster also prompted congressional
authorization of numerous forms of nontraditional assistance to be
provided by other agencies. For example, the Congress passed
legislation authorizing the Liberty Zone tax benefits--the first
geographically targeted tax program in response to a disaster. Further,
the Congress both authorized and appropriated several billion dollars
to be administered by DOT for transportation infrastructure
improvements beyond replacement of damaged facilities. In addition, the
Congress authorized new forms of compensation with HUD funds to
businesses for disaster-related losses.
Designation of a Specific Level of Funding Altered the Traditional FEMA
Disaster Assistance Approach:
The specific level of funding that was targeted by the President and
passed by the Congress changed the traditional approach taken to
administer FEMA funds. Ordinarily, FEMA assistance has no dollar limit.
When a qualifying disaster event occurs, the President declares that a
major disaster or emergency exists. This declaration activates numerous
FEMA disaster assistance programs. The funding for responding to a
specific disaster is not set; instead, the only factor limiting the
amount of assistance for response and recovery efforts is reimbursement
eligibility under the Stafford Act. Historically, FEMA approves all
applications for grants and other assistance if--and only if--the
applications meet the program requirements under the act. For example,
compensation to rebuild a public road would be an eligible project, but
compensation to improve a public road would not be. Economic losses to
a city from reduced tourism associated with a disaster would not be
eligible. Further, as some projects can be long term and are reimbursed
upon completion, it traditionally takes many years to fully reconcile
how much assistance was provided for certain disasters.[Footnote 56]
In responding to September 11, however, this traditional practice was
not followed, as the President pledged at least $20 billion in federal
assistance to the New York City area, and subsequent to that pledge,
the Congress, in authorizing this specific level of federal assistance,
appropriated over $8.80 billion to FEMA. This was the first time that a
specified amount of funds had been designated to FEMA to respond to a
disaster.[Footnote 57] FEMA officials administered programs
accordingly, within the capped amount of funding, to ensure that all
funds were provided to the New York City area.
In order to respond to the new types and the amount of damage resulting
from the attacks and to ensure that the entire amount appropriated for
this disaster was expended, FEMA expanded eligibility guidelines for
many of its programs. FEMA officials said that they broadly interpreted
the Stafford Act to provide assistance for several projects. For
example, FEMA partnered with EPA to implement a program to clean the
interior of private residences--the first of its kind--and determined
these costs were eligible for reimbursement under the Stafford Act. In
this instance, FEMA determined that the dust associated with the
collapse of the World Trade Center towers was a type of debris, and,
therefore, costs associated with interior cleaning could be reimbursed.
Further, the Congress reinforced FEMA's flexible approach to
eligibility for assistance in two ways. First, the Congress authorized
FEMA to expand the eligibility guidelines of certain programs due to
the unique circumstances of the disaster.[Footnote 58] For example,
nearly a year after September 11, the Congress authorized FEMA to make
the Mortgage and Rental Assistance Program more broadly available and
directed FEMA to review applications that had been previously denied.
With these new eligibility requirements, FEMA provided funds to
individuals working anywhere in Manhattan and to those whose employers
were not located in Manhattan, but who were economically dependent on a
Manhattan firm. Further, the Congress authorized FEMA to establish an
insurance company to manage a $1 billion insurance fund and to settle
claims filed by, among others, city and contractor workers who suffered
ill health effects as a result of working on debris removal
operations.[Footnote 59] Although FEMA regularly reimburses applicants
for insurance costs that are part of a contract for services, FEMA has
never reimbursed for insurance to cover a city for suits brought by its
own employees.
Second, despite FEMA's broadened eligibility guidelines interpretation
and the Congress' authorization of certain activities, it still
appeared that there were not enough projects eligible within the
authority provided by the Stafford Act for which the New York City area
could be reimbursed to reach the $8.80 billion target level for FEMA
assistance. As a result, in February 2003, the Congress passed the
Consolidated Appropriations Resolution that ensured that FEMA would
spend the entirety of the FEMA-appropriated assistance for New York by
authorizing the agency to reimburse associated costs that it otherwise
could not have funded, such as reimbursing the city and state for costs
to provide increased security and for cost of living adjustments for
pension benefits of deceased police and fire staff. This is the first
time that FEMA has been given such expansive authority to fund projects
outside of provisions of the Stafford Act. New York officials believe
this was necessary because the Stafford Act was too restrictive for
responding to a major terrorist event, as it does not allow FEMA to
reimburse affected communities for many costs related to the disaster.
With the authority granted by the Consolidated Appropriations
Resolution, FEMA adapted its programs and conducted an expedited close-
out process that allowed for disbursement of remaining funds to New
York years sooner than in past disasters. As part of the expedited
closeout process, FEMA deobligated funds for eligible Stafford Act
projects in order to determine how much was available to reimburse the
city and state for incurred costs associated with the disaster. FEMA
recently completed the close-out process and disbursed $1.24 billion to
the city and state for associated costs. Since these funds were
provided for costs already incurred, the city and state have the
discretion to ultimately redirect the funds, including determining
whether to fully fund projects that were incomplete at the end of the
close-out process. The expedited close-out process, developed to
maximize the early availability of funds to New York, resulted in FEMA
reconciling the most expensive public assistance disaster in its
history years before the process is typically accomplished.
As a result of the different approach taken to respond to this
disaster, FEMA recently initiated an effort to develop a concept for
redesigning its public assistance program. As we noted in our August
2003 report on FEMA's public assistance program efforts in New York, a
working group of the Public Assistance Program Redesign Project was
formed at the request of the director of FEMA's Recovery Division and
held its first meeting in May 2003.[Footnote 60] Members included FEMA
public assistance and research and evaluation staff and state program
managers. The project was established to suggest proposals to improve
the public assistance program and make it more efficient and capable of
meeting community needs for all types and sizes of disasters, including
those resulting from terrorism. Among other things, the project seeks
to transform the program to one that is flexible enough to meet the
demands of disasters of all types and sizes and eliminate redundancies
in decision-making and processes. The working group will examine
potential options for redesigning the program that include an annual
block grant program managed by the states, a disaster-based state-
managed program and a capped funding amount per disaster. The working
group plans to develop a basic design concept for revising the program
by September 30, 2003.
Designation of a Specific Level of Assistance Spurred Congressional
Appropriation and Authorization of Nontraditional Assistance:
The specific level of funding that was targeted by the President and
passed by the Congress also spurred congressional authorization of
other forms of nontraditional assistance for the New York City area.
The Congress passed an estimated $5.03 billion in Liberty Zone tax
benefits--the first geographically targeted tax program in response to
a disaster. The Congress also authorized DOT to fund transportation
projects to improve the overall transportation system substantially
beyond pre-disaster condition, not just to restore infrastructure
directly impacted by the disaster. Further, the Congress eliminated the
state and local matching requirement for transportation funding for the
entire relief effort. The Congress also directed HUD to use Community
Development Block Grant (CDBG) funds to compensate businesses for
economic losses--the first time CDBG funds have been used for this
purpose.
Congress Passed First Tax Benefit Package in Response to a Disaster:
To address the economic impact of the September 11 attacks on New York,
the Congress passed the estimated $5.03 billion New York Liberty Zone
tax benefit package.[Footnote 61] This was a unique way for the
Congress to provide assistance for the area affected by the disaster.
According to IRS officials, never before has the Congress passed a tax
benefits package in response to a disaster. Further, this tax package
was targeted to a geographic area, which has not generally occurred in
the past. IRS officials told us that tax plans typically target
individuals or businesses on the basis of classifications such as
income level rather than on the basis of the geographic location of the
individuals or businesses. (See chapter 5 for a detailed discussion of
Liberty Zone tax benefits.):
Congress Authorized DOT to Rebuild Damaged Infrastructure and Improve
Transportation Systems:
In most disasters, DOT is only authorized to provide funds to rebuild
or restore damaged infrastructure back to its pre-disaster condition.
For example, if part of a highway were damaged in a disaster, the
amount of assistance provided would be restricted to the estimate of
the cost to rebuild the highway to its pre-disaster condition, rather
than funding improvements to the highway. However, in response to
September 11, the Congress authorized DOT to not only restore
transportation infrastructure directly damaged in the disaster, but
also to enhance the overall lower Manhattan transportation system. As a
result, the Congress has appropriated funds that are being used to not
only rebuild the directly damaged PATH terminal, but to redesign and
renovate two other subway stations that were not damaged by the
disaster. Additionally, the Congress appropriated funds that are being
used for ferry terminal improvements, including the construction of new
stations in New Jersey. Figure 26 shows the sites of three large
transit projects: the permanent PATH terminal at the World Trade Center
site that is being built to replace the damaged PATH terminal, and the
Fulton Street Transit Center and South Ferry Subway Station
improvements that are enhancements of parts of the transportation
system not directly damaged by the disaster. (See chapter 4 for a
detailed discussion of infrastructure restoration and improvement
projects.):
Figure 26: Lower Manhattan Transportation Projects--Restoration and
Enhancement:
[See PDF for image]
[End of figure]
Congress Eliminated the State and Local Matching Requirements for DOT
Assistance:
The Congress eliminated the state and local matching requirement for
DOT assistance for the entire disaster relief effort, by passing the
2002 Supplemental Appropriations Act, which stipulated 100 percent
federal share for all DOT funded projects with no time limit on
federal-aid highway projects related to the New York City terrorist
attacks. The DOT assistance included $242 million of Federal Highway
Administration (FHWA) funds and $1.80 billion in FTA funds for capital
investment grants with no state and local matching
requirement.[Footnote 62] Historically, DOT funding has required a
state and local cost share; for FHWA projects this share has ranged
from 80 percent to 90 percent and for FTA projects it has ranged from
50 percent to 80 percent. By the Congress authorizing all DOT funding
be provided with no state and local matching requirement, New York
achieved significant savings.
Congress Authorized HUD Funds to Compensate Losses and Promote Tourism:
In previous disasters, HUD funds were typically provided to address
long-term effects of the disaster, including economic, infrastructure,
and housing redevelopment efforts. HUD funds have been used in the past
to provide funds for some emergency relief efforts, if they are not
already provided for by FEMA, such as debris removal, reconstruction of
damaged property posing an immediate threat to public safety, and
emergency reconstruction of essential utilities.
However, after September 11, the Congress directed HUD to focus on
different aspects of relief efforts than in previous disasters. For
example, programs to compensate for economic losses, such as the
Business Recovery Grant Program and to retain and attract residents,
such as the Residential Grant Program, are a unique use of CDBG funds,
according to HUD officials. In addition, HUD officials explained that
although funds have been used for business incentive programs in the
past, attraction and retention efforts have not been attempted on such
a large scale. HUD officials said that over 20,000 businesses have been
helped through the Business Recovery Grant Program and nearly 40,000
applications have been received for the Residential Grant Program that
closed May 31, 2003. Furthermore, the Lower Manhattan Development
Corporation is administering additional HUD funds to promote tourism
initiatives in lower Manhattan, some aspects of which have previously
been ineligible.
[End of section]
Appendix I: Objectives, Scope, and Methodology:
In a May 2, 2002, letter, the Chairman and Ranking Minority Member of
the Senate Committee on Environment and Public Works and Senators
Hillary Rodham Clinton and George V. Voinovich requested us to assess
the federal government's response and recovery efforts to the New York
City area. They requested that we determine how much federal assistance
has been delivered to the New York City area, and for what purposes;
and how the federal government's response to this disaster differed
from previous disasters.
To determine how much federal assistance has been designated to the New
York City area, we reviewed relevant legislation. We also obtained and
reviewed appropriate budget documents, funding plans, status reports,
and other documents including, executive orders, presidential
correspondence, and OMB and CBO reports. We also interviewed OMB and
CRS officials to get their perspectives on the budgetary data.
To determine for what purposes federal assistance has been and will be
used, we interviewed officials from FEMA, HUD, FTA, FHWA, the Federal
Railroad Administration, and IRS. We also interviewed New York State
and New York City officials, including officials from the Lower
Manhattan Development Corporation (LMDC), the Empire State Development
Corporation (ESDC), the New York State Department of Transportation,
the Metropolitan Transit Administration, and Port Authority of New York
and New Jersey. These officials told us for what purposes and through
what programs federal assistance is being provided. We also interviewed
officials from nonprofit planning and research organizations to gain
their perspectives on use of the funding in the New York redevelopment
process. We reviewed relevant agency documentation of program plans and
execution including budget documents and databases.
Though federal assistance was administered through 18 agencies in
total, we focused on the primary sources of federal assistance--the
Federal Emergency Management Agency (FEMA), the Department of Housing
and Urban Development (HUD), the Department of Transportation (DOT),
and the Liberty Zone tax benefits--that targeted different aspects of
the recovery efforts in the New York City area. We collected agency
financial data through June 30, 2003, though we do footnote significant
items that arose during the report processing period. To illustrate the
wide spectrum of federal disaster assistance being delivered to the New
York City area, we categorized the recovery efforts into four broad
purposes: initial response efforts, compensation for disaster-related
costs and losses, infrastructure restoration, and economic
revitalization. We also focused on the progress of recovery efforts but
did not evaluate the administration or impact of recovery funds;
however, we identified our related reports and other agencies'
Inspector General reports and reported on those findings. While we
reported on the differences between response to this disaster and
previous disasters, we did not evaluate the implications of these
differences.
To determine how the federal government's response to this disaster
differed from the established process for responding to disasters, we
interviewed federal, state, and local officials; and nonprofit planning
and research groups. We also compared agency historical data to
documentation from the New York response and recovery.
We experienced several limitations while attempting to collect
financial data for the four primary sources of federal assistance.
First, it was difficult to coordinate a final date for our data
collection period due to the expedited close-out implemented by FEMA.
We decided to reflect FEMA data as of July 31, 2003, in order to
provide information on funds made available by the expedited close-out
for disaster-related costs as authorized by the Consolidated
Appropriations Resolution. In addition, due to the expedited close-out,
we were not able to review projects in FEMA's National Emergency
Management Information System (NEMIS), FEMA's primary information
system that manages disaster grant funding. Instead, we relied on
published FEMA reports, which are compiled using information from
NEMIS, as well as the knowledge of public assistance program managers
of funding for specific projects. Neither of these limitations led to a
material weakness in our efforts to conduct this work. We conducted our
work from June 1, 2002, through September 30, 2003, in accordance with
generally accepted government auditing standards.
[End of section]
Appendix II: Proposed Transportation Infrastructure Improvements for
Lower Manhattan:
Projects under consideration for remaining lower
Manhattan transit funds ($1.7 billion to $2.0 billion): JFK airport/
Long Island access; New York cost estimate: $2,000-$5,300.
Projects under consideration for remaining lower
Manhattan transit funds ($1.7 billion to $2.0 billion): West Street;
New York cost estimate: $400-$900.
Projects under consideration for remaining lower
Manhattan transit funds ($1.7 billion to $2.0 billion): Tour bus
facility and WTC subgrade infrastructure; New York cost estimate: $500.
Projects under consideration for remaining lower
Manhattan transit funds ($1.7 billion to $2.0 billion): Commuter
ferries; New York cost estimate: $150-$200.
Projects under consideration for remaining lower
Manhattan transit funds ($1.7 billion to $2.0 billion): Street
configuration and circulation; New York cost estimate: $100.
Projects under consideration for remaining lower
Manhattan transit funds ($1.7 billion to $2.0 billion): Other lower
Manhattan projects which may require additional funds; New York cost
estimate: [Empty].
Projects under consideration for remaining lower
Manhattan transit funds ($1.7 billion to $2.0 billion): Newark Airport
access; New York cost estimate: $525.
Projects under consideration for remaining lower
Manhattan transit funds ($1.7 billion to $2.0 billion): Linking metro-
north to 4/5 at Grand Central Station; New York cost estimate: $50-$75.
Projects under consideration for remaining lower
Manhattan transit funds ($1.7 billion to $2.0 billion): LaGuardia
Airport ferry; New York cost estimate: $3-$6.
Source: Lower Manhattan Transportation Strategies, April 24, 2003,
LMDC, the Port Authority, MTA, New York State DOT, NYC.
[End of table]
[End of section]
Appendix III: Joint Committee on Taxation Estimated Revenue Effects of
the Liberty Zone Tax Benefits:
Liberty Zone benefit: 1. Expansion of Work
Opportunity Tax Credit to eligible Liberty Zone employees; JCT estimate
of revenue effect 2002-2012: -$631; Termination date: 12/31/03.
Liberty Zone benefit: 2. 30% bonus depreciation
for property placed in service in the Liberty Zone; JCT estimate of
revenue effect 2002-2012: -1,568; Termination date: 12/31/06; (12/31/09
for nonresidential real property and residential rental property).
Liberty Zone benefit: 3. Authorize issuance of
tax-exempt private activity bonds for rebuilding the portion of New
York City damaged in the September 11, 2001 terrorist attack; JCT
estimate of revenue effect 2002-2012: -1,228; Termination date: 12/31/
04.
Liberty Zone benefit: 4. Allow one additional
refunding for certain previously refunded bonds for facilities located
in New York City; JCT estimate of revenue effect 2002-2012: -937;
Termination date: 12/31/04.
Liberty Zone benefit: 5. Increase expensing for
business property used in the Liberty Zone by $35,000; JCT estimate of
revenue effect 2002-2012: -37; Termination date: 12/31/06.
Liberty Zone benefit: 6. Extension of replacement
period for certain property involuntarily converted in New York Liberty
Zone; JCT estimate of revenue effect 2002-2012: -318; Termination date:
N/A.
Liberty Zone benefit: 7. 5-year life for leasehold
improvements in the Liberty Zone and interaction with general business
tax provisions; JCT estimate of revenue effect 2002-2012: -310;
Termination date: 12/31/06 (leasehold improvements).
Liberty Zone benefit: Total; JCT estimate of
revenue effect 2002-2012: -$5,029.
Source: Joint Committee on Taxation (JCX-13-02).
[End of table]
[End of section]
Appendix IV: Description of Liberty Zone Tax Benefit[Footnote 63]s:
Liberty Zone tax benefit[A]: Business employee credit; Benefit summary:
The work opportunity tax credit (WOTC) was expanded to include a new
targeted group for employees who perform substantially all their
services for a business in the Liberty Zone or for a business that
relocated from the Liberty Zone elsewhere within New York City due to
the physical destruction or damage of their workplaces by the September
11, 2001, terrorist attacks.; The New York Liberty Zone business
employee credit allows eligible businesses with an average of 200 or
fewer employees to take a maximum credit of 40 percent of the first
$6,000 in wages paid or incurred for work performed by each qualified
employee during calendar years 2002 and 2003. Unlike the other targeted
groups under WOTC, the credit for the new group is available for wages
paid to both new hires and existing employees.; Example of the benefit:
An employee works at a small company located in the Liberty Zone from
June 1, 2002, to October 31, 2002, and receives $3,000 in wages a
month. The company can claim a credit for 40 percent of the first
$6,000 in wages paid ($2,400).; Effective dates: Wages paid or incurred
for qualified employees during calendar years 2002 and 2003.
Liberty Zone tax benefit[A]: Special depreciation allowance; Benefit
summary: The special depreciation allowance provides an additional
deduction for eligible properties. Eligible Liberty Zone properties
include new tangible property (e.g., new office equipment), used
tangible property (e.g., used office equipment), and residential rental
property (e.g., an apartment complex) and nonresidential real property
(e.g., an office building) if it rehabilitates real property damaged or
replaces real property destroyed or condemned as a result of the
September 11, 2001, terrorist attacks.; For property inside the Liberty
Zone, the special depreciation allowance allows taxpayers to deduct 30
percent of the adjusted basis of qualified property acquired by
purchase after September 10, 2001, and placed in service on or before
December 31, 2006 (December 31, 2009, in the case of nonresidential
real property and residential rental property). For property outside
the Liberty Zone, a special depreciation allowance is available for
taxpayers but only with regard to qualified property--such as new
tangible property and non-Liberty Zone leasehold improvement property-
-that is acquired after September 10, 2001, and before September 11,
2004, and is placed in service on or before December 31, 2004. However,
recent legislation (the Jobs and Growth Tax Relief Reconciliation Act
of 2003, P.L. 108-27) has increased the deduction to 50 percent for
qualified property both within and outside the Liberty Zone that is
acquired after May 5, 2003, and placed in service on or before December
31, 2004.; Example of the benefit: On December 1, 2002, a real estate
development firm purchases an office building in the New York Liberty
Zone that costs $10 million and places it in service on June 1, 2003.
The building replaces real property damaged as a result of the
September 11, 2001, terrorist attacks. Under the provision, the
taxpayer is allowed an additional first-year depreciation deduction of
30 percent ($3 million).; Effective dates: Residential rental property
and nonresidential real property: Acquired by purchase after September
10, 2001, and placed in service on or before December 31, 2009; New and
used tangible property:; Acquired by purchase after September 10, 2001,
and placed in service on or before December 31, 2006.
Liberty Zone tax benefit[A]: Section 179 expensing; Benefit summary:
Taxpayers with a sufficiently small investment in qualified section 179
business property in the Liberty Zone can elect to deduct rather than
capitalize the amount of their investment and are eligible for an
increased amount over other taxpayers. For qualified Liberty Zone
property placed in service during 2001 and 2002, under section 179
taxpayers could deduct up to $59,000 ($24,000 under the general
provision plus an additional $35,000) of the cost. The investment limit
(phase-out range) in the property was $200,000. For qualified Liberty
Zone property placed in service after 2002 and before 2007, taxpayers
could deduct $60,000 ($25,000 under the general provision plus the
additional $35,000) of the cost.; However, recent legislation (P.L.
108-27) has further increased the maximum deduction for qualified
Liberty Zone property placed in service after 2002 and before 2006 to
$135,000 and has increased the investment limit to $400,000. For 2006,
the maximum section 179 deduction allowed for qualified Liberty Zone
property returns to $60,000 and the investment limit is $200,000. To
calculate the available expensing treatment deduction amount for
qualified Liberty Zone property, every dollar for which 50 percent of
the cost of the property exceeds the investment limit is subtracted
from the maximum deduction allowed.; Taxpayers outside of the Liberty
Zone may also expense qualified property under section 179. However,
the maximum deduction for non-Liberty Zone property is $35,000 less
than the maximum deduction allowed for Liberty Zone property. The
investment limits for Liberty Zone and non-Liberty Zone property are
similar. However, in contrast, in calculating the available expensing
treatment deduction amount for non-Liberty Zone properties, every
dollar invested in the property that exceeds the investment limit is
subtracted from the maximum deduction allowed.; Example of the benefit:
In 2002, a taxpayer purchases and places in service in his or her
Liberty Zone business several qualified items of equipment costing a
total of $260,000. Because 50 percent of the cost of the property
($130,000) is less than $200,000, the investment limit, the section 179
deduction of $59,000 is not reduced, and the taxpayer can deduct this
amount.; Effective dates: Effective for section 179 property placed in
service after September 10, 2001, and on or before December 31, 2006.
Liberty Zone tax benefit[A]: Leasehold improvement property; Benefit
summary: Qualified Liberty Zone leasehold improvement property can be
depreciated over a 5-year period using the straight-line method of
depreciation. The term "qualified Liberty Zone leasehold property"
means property as defined in section 168(k)(3) and may include items
such as additional walls and plumbing and electrical improvements made
to an interior portion of a building that is nonresidential real
property. Qualified Liberty Zone leasehold improvements must be placed
in service in a nonresidential building that is located in the Liberty
Zone after September 10, 2001, and on or before December 31, 2006. The
class life for qualified New York Liberty Zone leasehold improvement
property is 9 years for purposes of the alternative depreciation
system.; Taxpayers can also depreciate leasehold improvements outside
of the Liberty Zone. These taxpayers can depreciate an addition or
improvement to leased nonresidential real property using the straight-
line method of depreciation over 39 years. Qualified leasehold
improvement properties outside the Liberty Zone can qualify for both
the 39-year depreciation deduction and the special depreciation
allowance. However, leasehold improvements inside the Liberty Zone do
not qualify for the special depreciation allowance.; Example of the
benefit: In 2004, a taxpayer buys and places in service $100,000 in
additional walls for a leased office building in the Liberty Zone. For
each tax year from 2004 through 2008, the taxpayer can deduct up to
one-fifth of the cost of the property.; Effective dates: Effective for
property placed in service after September 10, 2001, and on or before
December 31, 2006.
Liberty Zone tax benefit[A]: Replacement period for involuntarily
converted property; Benefit summary: A taxpayer may elect not to
recognize gain with respect to property that is involuntarily converted
if the taxpayer acquires qualified replacement property within an
applicable period. The replacement period for property that was
involuntarily converted in the Liberty Zone as a result of the
September 11, 2001, terrorist attacks is 5 years after the end of the
taxable year in which a gain is realized provided that substantially
all of the use of the replacement property is in New York City. The
involuntarily converted Liberty Zone property can be replaced with any
tangible property held for product use in a trade or business because
taxpayers in presidentially declared disaster areas such as the Liberty
Zone can use any tangible, productive use property to replace property
that was involuntarily converted.; Outside of the Liberty Zone, the
replacement period for involuntarily converted property is 2 years (3
years if the converted property is real property held for the
productive use in a trade or business or for investment), and the
converted property must be replaced with replacement property that is
similar in service or use.; Example of the benefit: A taxpayer held a
truck for productive use in a Liberty Zone business, but it was
destroyed in the September 11, 2001, terrorist attacks. Several years
ago, the taxpayer paid $50,000 for the truck and, over time,
depreciated the basis in the truck to $30,000. If the insurance company
paid $35,000 in reimbursement for the truck and the taxpayer used the
$35,000 to purchase replacement property of any type that is held for
productive use in a trade or business within 5 years after the close of
the tax year of payment by the insurance company, the taxpayer would
not recognize a gain.; Effective dates: Effective for involuntary
conversions in the Liberty Zone occurring on or after September 11,
2001, as a result of the terrorist attacks on that date.
Liberty Zone tax benefit[A]: Private activity bonds; Benefit summary:
An aggregate of $8 billion of tax-exempt private activity bonds, called
qualified New York Liberty bonds, are authorized to finance the
acquisition, construction, reconstruction, and renovation of certain
property that is primarily located in the Liberty Zone. Qualified New
York Liberty bonds must finance nonresidential real property,
residential rental property, or public utility property and must also
satisfy certain other requirements. The Mayor of New York City and the
Governor of New York State may each designate up to $4 billion in
qualified New York Liberty bonds.; Example of the benefit: The Mayor of
New York City designates $120 million of qualified New York Liberty
bonds to finance the construction of an office building in the Liberty
Zone.; Effective dates: Effective for bonds issued after March 9, 2002
(the date of enactment of the Job Creation and Worker Assistance Act of
2002), and on or before December 31, 2004.
Liberty Zone tax benefit[A]: Advance refunding bonds; Benefit summary:
An aggregate of $9 billion of advance refunding bonds may be issued to
pay principal, interest, or redemption price on certain prior issues of
bonds issued for facilities located in New York City (and certain water
facilities located outside of New York City). Under this benefit,
certain qualified bonds, which were outstanding on September 11, 2001,
and had exhausted existing advance refunding authority before September
12, 2001, are eligible for one additional advance refunding. The Mayor
of New York City and the Governor of New York State may each designate
up to $4.5 billion in advance refunding bonds.; Example of the benefit:
The Governor of New York State designates $70 million of advance
refunding bonds to refinance bonds that financed the construction of
hospital facilities in New York City.; Effective dates: Effective for
advance refunding bonds issued after March 9, 2002, and on or before
December 31, 2004.
Sources: P.L. 107-147, IRS, and GAO.
Note: GAO-03-1102.
[A] The Liberty Zone tax benefits were enacted as part of the Job
Creation and Worker Assistance Act of 2002, P.L. 107-147.
[End of table]
[End of section]
Appendix V: Liberty Zone Tax Benefits Bond Authority:
For advanced refunding bonds, the Mayor of New York City and the
Governor of New York State are responsible for designating nearly $4.50
billion each for a total of $9 billion in advance refunding bonds
through December 31, 2004. As of June 2003, New York State had released
$3.55 billion through the Metropolitan Transit Administration and $138
million through the Dormitory Authority of the state of New York and
New York City had issued $1.64 billion of general obligation bonds with
the New York City Water Authority releasing $190 million and the New
York State Environmental Facilities Corporation releasing $236 million.
For Liberty Bonds, up to $8 billion may be issued. The Governor is
responsible for $4 billion of these bonds and the Mayor is responsible
for $4 billion. Up to $2 billion of these bonds can be used for
projects in New York City but in areas outside the Liberty Zone. Up to
$800 million may be issued for Liberty Zone retail development and up
to $1.6 billion can be used for residential rental projects in the
Liberty Zone. The bonds are available through December 31, 2004. The
Joint Committee on Taxation has estimated that the provision will
reduce federal receipts by $1.23 billion, which represents tax revenue
lost when tax-exempt bonds are sold instead of taxable bonds. Table 14
shows approved Liberty Bond projects implemented by both the city and
state of New York.
Table 14: Approved Liberty Bond Projects:
Dollars in millions:
Project: New York City:
Project: 7 World Trade Center; Type: Commercial; Amount: $400.
Project: Atlantic Terminal, Brooklyn; Type: Commercial; Amount: 114.
Project: New York State:
Project: Fulton Market; Type: Commercial; Amount: 10.
Project: Front Street Block; Type: Commercial/Residential; Amount: 47.
Project: Battery Park City Site 19b; Type: Residential; Amount: 110.
Project: 20 River Terrace; Type: Residential; Amount: 100.
Project: 10 Liberty Street; Type: Residential; Amount: 95.
Project: Total; Amount: $876.
Source: May 29, 2003, Liberty Bond Report.
[End of table]
[End of section]
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
JayEtta Z. Hecker (202) 512-2834 Jack Schulze (202) 512-4390:
Acknowledgments:
Leo Barbour, Kevin Copping, Matthew Ebert, Colin Fallon, Kara Finnegan
Irving, and John McGrail made significant contributions to this report.
[End of section]
Glossary:
Committed Funds:
Administrative reservation of an allotment of funds in anticipation of
their obligation (i.e., a projected budget/spending plan).
Disbursed Funds:
Funds are provided to the state/grantee.
Obligated Funds:
Funds have been set aside for use as part of a contract/purchase order.
[End of section]
Related GAO Products:
Tax Administration: Difficult for IRS to Determine if $5 Billion in
Liberty Zone Tax Benefits will be Realized Using IRS Data. GAO-03-1102.
September 30, 2003.
Disaster Assistance: Information on FEMA's Post 9/11 Public Assistance
to the New York City Area. GAO-03-926. August 31, 2003.
Small Business Administration: Response to September 11 Victims and
Performance Measures for Disaster Lending. GAO-03-385. January 29,
2003.
Major Management Challenges and Program Risks: Federal Emergency
Management Agency. GAO-03-113. January 2003.
September 11: More Effective Collaboration Could Enhance Charitable
Organizations' Contributions in Disasters. GAO-03-259. December 19,
2002.
September 11: Small Business Assistance Provided in Lower Manhattan in
Response to the Terrorist Attacks. GAO-03-88. November 1, 2002.
September 11: Interim Report on the Response of Charities. GAO-02-1037.
September 3, 2002.
Review of the Estimates for the Impact of the September 11, 2001,
Terrorist Attacks on New York Tax Revenues. GAO-02-882R. July 26, 2002.
Review of Studies of the Economic Impact of the September 11, 2001,
Terrorist Attacks on the World Trade Center. GAO-02-700R. May 29, 2002.
FOOTNOTES
[1] The Liberty Zone tax benefits are benefits targeted primarily at
the area of New York City damaged on September 11, designated as the
New York Liberty Zone.
[2] See U.S. General Accounting Office, Disaster Assistance: Federal
Aid to the New York City Area Following the Attacks of September 11th
and Challenges Confronting FEMA, GAO-03-1174T (Washington, D.C.: Sept.
24, 2003).
[3] See U.S. General Accounting Office, Disaster Assistance:
Information on FEMA's Post-9/11 Public Assistance to the New York City
Area, GAO-03-926 (Washington, D.C.: Aug. 29, 2003).
[4] P.L. 93-288, 88 Stat. 143 (1974), as amended.
[5] The $20 billion federal assistance to New York does not include
financial assistance to victims as part of the September 11 Victim
Compensation Fund of 2001. It also does not include financial benefits
being provided by the Internal Revenue Service providing administrative
tax relief to individuals and businesses in the period following the
terrorist attacks.
[6] P.L. 93-288, 88 Stat. 143 (1974), as amended.
[7] The Empire State Development Corporation (ESDC) is the New York
State entity designated by the Governor to administer the first of
three CDBG appropriations for New York. ESDC is a corporate
governmental agency of the state of New York and is currently engaged
in housing and economic development and special projects throughout the
state. In November 2001, ESDC's board of directors authorized the
creation of the Lower Manhattan Development Corporation (LMDC) to
assist in the economic recovery and revitalization of lower Manhattan,
to develop programs and distribute assistance appropriated in the
second and third CDBG appropriations for New York.
[8] P.L. 108-7.
[9] As of September 3, 2003, FEMA obligated $1 billion for insurance
coverage; however, no funds will be disbursed until details are
finalized.
[10] A total of $750 million in HUD funds was authorized for
infrastructure rebuilding. Other funds to improve and enhance
infrastructure will be discussed in chapter 4.
[11] Criteria include: (1) assurance of dollar benefit of funding on
consumer rates, (2) the extent to which funds will be used to repair or
replace equipment and infrastructure facilities that will provide a
direct benefit to the public, and (3) consideration of pursuit of
insurance claims to cover losses.
[12] These funds have not been disbursed to utility companies; however,
HUD approved LMDC's plan for distributing these funds on September 15,
2003, and HUD officials expect the disbursement of these funds to begin
shortly.
[13] FEMA, Office of Inspector General Inspections Division, FEMA's
Delivery of Individual Assistance Programs: New York - September 11,
2001, (Washington, D.C.: Dec. 2002).
[14] P.L. 108-7.
[15] For more details on FEMA's public assistance program, consult U.S.
General Accounting Office, Disaster Assistance: Information on FEMA's
Post 9/11 Public Assistance to the New York City Area, GAO-03-926
(Washington, D.C.: Aug. 31, 2003).
[16] House Report 107-593.
[17] The "I Love New York" public awareness campaign was designed to
attract visitors back to the city after the terrorist attacks.
[18] As this report was being finalized, applications for these
associated costs were approved and funds were obligated and disbursed
to the city and state.
[19] Mitigation actions include activities such as elevating buildings
in flood-prone areas or creating tornado-resistant structures.
[20] The Disaster Mitigation Act of 2000 increases this amount to 20
percent of total estimated federal assistance for states that meet
enhanced planning criteria. For states without an approved enhanced
plan, the Consolidated Appropriations Resolution of 2003 reduces the
amount available for mitigation grants to 7.5 percent of the other
assistance provided. However, neither of these provisions were
applicable on September 11, 2001.
[21] Although the Residential Grant Program and its incentives helped
to revitalize the economy of lower Manhattan, we categorized it as
compensation for disaster-related losses because of its short-term
nature and intended effect on the city in terms of restoring pre-
disaster occupancy rates.
[22] As this report was finalized, LMDC announced that it planned to
redirect $50 million originally committed to the Residential Grant
Program for a program to develop affordable housing.
[23] In all disasters, self-employed or business-owner applicants are
advised to apply first to the Small Business Administration (SBA) for
an Economic Injury Disaster Loan before FEMA assistance can be
provided. Assistance provided by SBA is part of the more than $20
billion designated to New York, but is not a primary source and,
therefore, not specifically discussed in this report.
[24] FEMA, Office of Inspector General Inspections Division, FEMA's
Delivery of Individual Assistance Programs: New York - September 11,
2001 (Washington, D.C.: Dec. 2002).
[25] Because FEMA's Mortgage and Rental Assistance Program had been
rarely used in past disasters, it was eliminated with the passage of
the Disaster Mitigation Act of 2000, which made the nationwide program
unavailable for disasters declared after May 1, 2002.
[26] GAO-03-259.
[27] Eligible applicants can receive up to 18 months of assistance.
[28] The Department of Justice's Office for Victims of Crime provided
counseling assistance in this disaster since the attacks were criminal
acts. Counseling assistance provided by the Department of Justice is
part of the more than $20 billion designated to New York, but is not a
primary source and, therefore, not specifically discussed in this
report.
[29] FEMA, Office of Inspector General Inspections Division, FEMA's
Delivery of Individual Assistance Programs: New York - September 11,
2001 (Washington, D.C.: Dec. 2002).
[30] FEMA officials told us that, although details have not been
finalized, limited extensions for parts of the program may be granted.
[31] FEMA, Office of Inspector General Inspections Division, FEMA's
Delivery of Individual Assistance Programs: New York - September 11,
2001 (Washington, D.C.: Dec. 2002).
[32] P.L. 107-117.
[33] HUD staff have conducted a series of HUD Management Review
Reports: May 2002, January 2003, and July 2003. HUD's IG has also
released two audit reports: an interim report in May 2002 and a final
report in March 2003.
[34] As part of the about $20 billion in federal assistance designated
to New York, the Congress made special appropriations to SBA for
disaster assistance; however, since it was not a primary source of
funds, we did not include specific information about the program in our
review. For more information on SBA disaster assistance and other
business assistance, see U.S. General Accounting Office, September 11:
Small Business Assistance Provided in Lower Manhattan in Response to
the Terrorist Attacks, GAO-03-88 (Washington, D.C.: Nov. 1, 2002).
[35] Eligible businesses could be (1) located on or south of 14th
Street in Manhattan as of September 11, 2001; (2) located in the five
boroughs of New York City, but outside of lower Manhattan, that were
adversely affected because at least 10 percent of their revenues were
derived from sales or services to other businesses located on or south
of 14th Street in Manhattan; or (3) newly located on or south of 14th
Street in Manhattan since September 11, 2001.
[36] P.L. 107-206.
[37] Although these funds will provide businesses with incentives to
remain in the area, such as programs discussed in chapter 5, the
primary objective of this program is to compensate businesses for
losses.
[38] A bridge loan is a short-term loan that is intended to provide
financing until a more permanent arrangement is made.
[39] In the original Bridge Loan Program, New York City and state
shared equally in providing participating lenders with a 20 percent
loan loss reserve subsidy for approved bridge loans. ESDC will use HUD
funds to reimburse the city and state for their loss reserve
expenditures at a later date.
[40] P.L. 107-206.
[41] Details of the temporary PATH terminal--for which FEMA provided
$140 million in public assistance funds--are described in chapter 2.
[42] The National Environmental Policy Act of 1969 directs federal
agencies, when planning projects or issuing permits, to conduct
environmental reviews to consider the potential impacts on the
environment by their proposed actions.
[43] LMDC, the Port Authority, MTA, the New York State DOT, and the
city of New York.
[44] Since initial estimates only reflected surface damage and since
several additional projects have been planned, FHWA has raised the
total estimated cost of street repairs to over $251 million, exceeding
the authorized funds. FHWA officials emphasized that the estimated
total costs could shift higher or lower than $251 million as the
projects progress and if costs exceed available funds, other highway
funds or New York City or New York State funding could be used.
[45] P.L. 107-117.
[46] HUD approved the plan September 15, 2003.
[47] In chapter 3, we discussed LMDC's $281 million Residential Grant
Program funded by HUD to retain and attract residents to lower
Manhattan. While we have categorized this program as primarily
compensation for losses, it is clearly also contributing to lower
Manhattan's economic revitalization.
[48] Job Creation and Worker Assistance Act of 2002 (P.L. 107-147).
[49] The Joint Committee compares the revenue projected to be collected
if a particular legislative change is enacted to the revenue projected
to be collected under present law. The Committee's standard practice is
not to discount the value of future revenue effects, nor to consider
any effects of the legislation after a 10-year time period.
[50] U.S. General Accounting Office, Tax Administration: Information
not Available to Determine Whether $5 Billion in Liberty Zone Tax
Benefits will be Realized, GAO-03-1102 (Washington, D.C.: Sept. 2003).
[51] A review committee comprised of ESDC and New York City Economic
Development Corporation staff considers proposals and authorizes a
level of financial assistance to offer an eligible company, based on a
number of criteria. Once a company accepts the offer, they complete an
application and the project is submitted to the ESDC Board of Directors
for approval. If approved, then a Grant Disbursement Agreement is
executed, and, after a payment requisition with supporting documents is
submitted, the grant is disbursed to the company.
[52] U.S. General Accounting Office, September 11: Small Business
Assistance Provided in Lower Manhattan in Response to the Terrorist
Attacks, GAO-03-88 (Washington, D.C.: Nov. 1, 2002).
[53] Except for those applicants who enter into new leases between
September 1, 2004, and December 31, 2004, who will have until April
2005 to submit a completed application.
[54] A portion of these funds is for administrative purposes.
[55] LMDC may use a portion of remaining funds for infrastructure
projects, including proposals from on-going transportation planning
studies, as discussed in chapter 4.
[56] For example, as of June 2003, the Northridge, California,
earthquake was still an open FEMA disaster 9 years after it occurred
due to large and long-term reconstruction efforts.
[57] In the past, direct congressional appropriations are not made for
a specific disaster, but rather to supplement funds in FEMA's Disaster
Relief Fund.
[58] Further discussion and additional examples of public assistance
projects that we identified as nontraditional can be seen in
GAO-03-926.
[59] P.L. 108-7.
[60] GAO-03-926.
[61] Job Creation and Worker Assistance Act of 2002 (P.L.107-147)
[62] Capital investment grants provide funding for mass transportation
and other high-occupancy vehicles.
[63] GAO-03-1102.
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