New York City on the Rocks

It isn’t just New Yorkers who are worried about the Big Apple’s ability to recover from the pandemic. It may not be fair to say that as New York goes, so goes the nation, but it is not too far off the mark.

Then again, considering who New Yorkers elect to govern them, one is not overly surprised.

Happily, or unhappily, as you will, the city has an Independent Budget Office that analyzes the city’s fiscal health. As of now, the news is bleak.

The Wall Street Journal reports on the unfolding crisis. First, with businesses shut down, with the city of lockdown, with the wealthy decamping for more tax friendly climes, the numbers do not add up:

The Covid-19 pandemic will cast a long shadow over New York City’s economic recovery, impacting employment levels, real-estate sales and tax revenue for years to come, according to the city’s fiscal watchdog.

In a report released Wednesday, the Independent Budget Office predicted the city will collect $11.3 billion less in tax revenue through fiscal year 2023, compared with estimates the office compiled before the pandemic.

The extended lockdown has cost the city more than half a million jobs:

During the  second quarter of 2020, nearly 878,000 jobs were lost in the city, the report says. About 20% of those jobs came back in the third quarter of 2020, according to the IBO. While jobs will slowly return in the next three years as more people are vaccinated and social-distancing measures ease, employment in the city will likely stay below 2019 levels, the report said.

As for real estate, both commercial and residential, the picture is bleak:

The city’s real-estate industry also continues to struggle, as many Manhattan offices remain empty because employees have been able to work remotely, the report says. Remote working and the desire for more space also prompted some New Yorkers to move to the suburbs and other parts of the country.

The property markets are drying up, impacting tax revenue. The same applies to sales taxes:

The report predicts property sales in 2020 will be the lowest since 2010, the year following the financial crisis. Taxable real-estate sales are expected to be just $59 billion in 2020, compared with around $100 billion a year earlier, the report says. The number is expected to rebound a bit to around $80 billion in 2021.

The city’s other revenue streams have taken hits as well. Sales tax collections fell by $438 million, or 5.6%, in 2020, records show. The IBO predicts another year of decline, with a decrease of $367 million for 2021.

Around half the jobs in leisure and hospitality are gone. In part because so many people are hunkering down, in part because the governor and mayor have locked the city down, in part because people are too afraid to go out, in part because tourists are no longer welcome:

But the city’s leisure and hospitality industry has been devastated by the pandemic and faces a long road to recovery, the report says.

At the end of 2019, nearly 466,000 people worked in that industry, which includes restaurants bars, and other entertainment. The IBO estimates that by the end of 2020 nearly 217,000 of those jobs were lost.

The city’s hotel occupancy rates also have plummeted. The rate was around 40% in October 2020, compared with 92% during the same month in 2019.

Around 200 of the city’s 700 hotels in the city have shut down for good or temporarily, and 63 are being used by the city to house homeless individuals, according to the IBO.

“The city’s restaurant and nightlife industry has been absolutely devastated by the pandemic,” he said in an email. “Countless small businesses have permanently shuttered and jobs lost, while so many more are teetering on the edge of survival.”

So, there you have it. New York City is dying on the vine. Or perhaps it's just that the pandemic is exposing the rot at its core. It is not a happy day in the Big Apple.