The Streets Were Paved with Gold - Ken Auletta [122]
It’s also difficult to blame only the federal government for New York’s extraordinarily high living costs. Half the excessive living costs of upper-income families here, says Herb Bienstock of the Bureau of Labor Statistics, “is attributed to higher personal income taxes.” These are the people who own—and relocate—businesses. The Bureau gathers household living costs for three types of families. In late 1976, a low-income family’s cost of living in New York was 8 percent above the national average; an intermediate family, 16 percent above; an upper-income family 25 percent above. Removing the extremes, the intermediate New York family’s costs are comparable to those of a family in Boston or Newark, for example, but considerably above those of all other cities. Beginning in 1972, however, this gap began to narrow as New York’s living costs have risen more slowly than the nation’s.
New York City is also plagued by uniquely high energy bills. Mayor Beame’s first five-year economic development plan, offered in December 1976, admitted that energy costs in New York outdistanced those in each of the twenty-three major metropolitan areas. Many New Yorkers blame Con Edison, the giant, inefficient utility company. Yet the city’s plan acknowledged that 25 percent of the consumer’s bill was attributable to city taxes, though even when taxes are eliminated, Con Ed’s costs exceed those of neighboring areas. The city’s official bond prospectus, issued in May 1977, shows how much more expensive electricity is in New York. A modest industrial firm with a maximum demand of 75 kilowatts would receive a monthly electricity bill of $1,261 from Con Ed. In Houston, the same firm would pay $455; in Los Angeles, $589; in Chicago, $718. New York is also unique within its own region. The same firm would pay the Long Island Lighting Co. $766; in Stamford, Connecticut, the cost would be $756; in Greenwich, $693. A similar pattern prevails for gas prices. According to the Bureau of Labor Statistics, in 1974 the gas bill for 40 therms in the New York metropolitan area was $13.59—almost double the cost of most cities. In Detroit, the same gas costs $7.63; in Cleveland, $6.50; San Francisco, $5.63; Chicago, $7.52; Dallas, $4.31; Pittsburgh, $7.54.
New York’s economic climate is also fairly special. Until recently, a succession of mayors and governors paid little heed to economic development, starving their development efforts of tools and resources. While the city reclined, the State of Alabama’s development office summoned its own jet plane to fly executives south; Georgia opened development offices in Brussels, Tokyo, Toronto and São Paulo; Indiana retained the national Gallup organization to conduct surveys to determine which firms might want to relocate there. Most states and cities, unlike New York, offered businesses cheap land and tax inducements. In 1975, the city’s Economic Development Administration budgeted just $7,400 for surveys and travel expenses. In 1976, New York ranked 17th in the money spent to promote tourism, its second largest industry. The city government earmarked $500,000—one-sixth Las Vegas’ tourism budget.
Steep taxes don’t make for a good economic climate. Fortune condemns Northern states for thickheadedly missing the point behind the Sunbelt’s surge: “It’s booming in great part because it’s pro-business—and Northern cities, by and large, aren’t.” That’s an exaggeration, but it contains the skeleton of truth. The Fantus Company, a business location consulting firm based in New York, regularly ranks the business climate of the fifty states. Using such indices as costs, taxes, regulations, tax breaks, etc., they once found that of the top ten states, seven were in the Sunbelt. The worst state: New York. An April 1977 Fantus memorandum to the Foundation Committee for Economic Development in New York City concluded, “The existing economic environment in New York City is not conducive to the creation of new jobs.… At this point in time, New York City cannot offer, to a prospective client, the quality