Sandy’s Aftermath: How Much Federal Aid Can the City Expect?

Posted by Doug Turetsky, November 8, 2012

In the decade since the terrorist attacks on 9/11, New York City has faced several other disasters that drew federal aid, such as last year’s Tropical Storm Irene and the blizzard and tornadoes of 2010. As IBO’s George Sweeting points out, the city received federal aid for a far wider range of uses in the aftermath of 9/11 than it did following the weather-related events.

While Hurricane Sandy shares the climatic origins of Irene, the blizzard, and tornadoes, the extent of the physical devastation is more akin to 9/11. The number of lives lost due to Sandy, while tragic, paled in comparison to the World Trade Center attacks. But the widespread devastation in the wake of Sandy —from large swaths of Staten Island to the Rockaways to Coney Island, and once again, Lower Manhattan—has a price tag that puts it in a league with 9/11. Moody’s Analytics has estimated a cost of $12 billion for the New York City area.

[UPDATE: Gov. Andrew Cuomo estimated today that losses due to Hurricane Sandy could total $33 billion in New York State.]

The question for the coming days and weeks for New York City and other hard-hit areas is: Will federal disaster relief have the more limited scope of the typical response after a serious storm or will Washington respond with much broader types of aid as it did following 9/11?

Federal aid in the wake of storms usually has one fundamental component: emergency response and recovery. This immediate assistance may include rescue effort; emergency food and shelter; low-interest loans to residents and small businesses; unemployment payments; the cleanup of debris; and repair of damaged infrastructure such as roads, buildings, equipment, parks, and utilities. The $20.5 billion in aid provided after the attacks on the World Trade Center featured two other significant components: assistance for additional rebuilding and development and substantial budget relief for the city to make up for expectations of lost tax revenues.

The aid for rebuilding and development after 9/11 was substantial, totaling $11.3 billion in direct assistance and tax breaks. A large portion of this was dedicated to transportation projects such as the approximately $4 billion World Trade Center Transportation Hub and $530 million for the now Sandy-flooded South Ferry subway station. For a more detailed look at World Trade Center-related aid, see this IBO report. Washington also authorized lower-cost financing for development projects through the creation of tax-exempt Liberty Bonds estimated to cost the federal government $1.2 billion in foregone tax revenue. The use of these bonds became controversial as some were directed towards projects such as the new Goldman Sachs office downtown as well as the Bank of America building in midtown and the Bank of New York tower in Brooklyn. Good Jobs New York, a nonprofit that monitors local economic development deals, has already raised concerns about how decisions will be made if wide-ranging rebuilding aid comes the city’s way as part of Sandy relief.

Post-9/11 assistance also included nearly $2 billion in budget aid mostly for the city (a portion of this amount was for the state). About half of this aid came through a provision that allowed the city to refinance some of its tax-exempt bonds and as a result reduce its spending on debt service. The other half materialized when expenditures for the initial emergency response and cleanup turned out not to cost as much as expected; the city just got to keep the money.

Federal aid following the September 2010 tornadoes was typical of the sorts of aid that follow natural disasters. The cost of cleaning up and repairing the damage from the storm was $21.2 million. The Federal Emergency Management Agency provided $10.8 million, the state $1.8 million. The rest was on the city’s dime. That was also the year of the blizzard that paralyzed the city in the days after Christmas. Washington only provided some disaster aid to cover costs in Staten Island. Coupled with the costs of several other big storms, the city spent more than $100 million that fiscal year on snow removal and related road repairs, the vast majority at our expense. For more details on weather-related costs in fiscal year 2011, see this report, pg 49. Damage from last year’s Tropical Storm Irene cost the city about $55 million, with 90 percent of the expenses eligible for federal reimbursement.

With the dust still settling from Tuesday’s election, it remains to be seen how extensive federal aid for Sandy will be. A $12 billion proposal to supplement federal disaster cleanup and recovery funds has been introduced in the House, but the Senate appears to be waiting for updated estimates on the extent of the damage before it acts. Neither the House nor the Senate seems to be discussing the kind of broader aid that followed 9/11.