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NYC politicians hold key to RE comeback.

The entire New York real estate industry is eagerly awaiting an upturn in the economy in the hope that this will solve the vacancy problem in Manhattan. We should not have too much faith that this economic recovery will assist Manhattan as much as past economic growth periods have.

The major key to the long term viability of the Manhattan real estate market is in the hands of our political leaders. One can only hope that they will exhibit both more understanding of the current status and the guts to make politically unpopular decisions than our current and past leaders have exhibited.

The 1980's provided New York City with an unprecedented growth in tax revenues because of the rapid increase in real estate values. The Koch administration, more interested in its political popularity, rather than the long term viability of New York City, frivolously squandered this additional income through increased municipal employment and the ill fated belief that more money could make failed programs work despite the record income. It would be extremely difficult to find anyone who could dispute that both the quality of life and the quality of education in New York City declined during this period.

The Dinkins administration and the City Council are equally lost in understanding what has to be done. They continue to believe that more money will solve all problems.

With New York City real estate values declining at a faster rate than they rose during the 1980's, New York politicians refuse to understand that they must determine how to improve the city's quality of life, and to reduce the cost of doing business in New York, at the same time the tax revenues are decreasing.

Real estate taxes must be reduced to a greater extent than most people in the real industry would dare ask for, in order to allow landlords to become more competitive with competing areas.

If steps are not immediately taken to induce companies to stay in Manhattan, it will be too late. Numerous companies would be leaving New York at this time if they did not have expensive lease obligations that are impossible to unload in today's depressed market. As many of these leases expire over of the next few years, we have a last chance to entice these corporations not to leave. If too many of these companies leave New York, the New York economy will shrink to an extent that few people are willing to admit, unemployment will soar, and today's poor quality of life will be fondly remembered as the "good old times".

As real estate tax revenues decline, politicians must resist the urge to increase other taxes which will have a negative business impact. Any talk of increasing either the occupancy tax or the city income tax will be a kiss of death.

We must tie any wage increases given to union members into actual work productivity gains which will allow us to cut employment by attrition. We must determine which programs are failing to give our citizens value for the money being spent. If the labor leaders resist, we should go over the heads of such leaders and appeal directly to the workers. It will not have much of an impact on current employees, only on potential future employees.
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Title Annotation:Review and Forecast, Section II; return of New York, New York's commercial real estate market dependent on restructuring of municipal revenue policies
Author:Lilien, Stuart
Publication:Real Estate Weekly
Date:Jun 24, 1992
Previous Article:Leasing pace picks up for Manhattan markets.
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