WTC Records Folder 0139 label, 2001

NYC 9/11 Public Portal Document

Securities Industry Profits, Bonuses and Capital Gains Realizations As is often noted the securities industry is a major part of the City's economic base. With only 5 percent of employment, the industry accounts for almost 19 percent of the City's earnings. It is now clear that the World Trade • Center attacks will significantly effect this key sector. Although the stock market was well off its earlier peak set back in March 2000 even before the events of September 11, the impact of the attack on the market and on the securities industry has been severe. The Dow has fallen nearly 6 percent since September 10 and with the attacks so heavily effecting Wall Street, New York Stock Exchange Member firms are expected to show losses for the third quarter and only modest improvement in the fourth quarter. For the year profits may fall to $5 billion, down from $21 billion in calendar year 2000. As a result FIRE sector bonuses are expected to drop by over two-thirds. The • declines in the market will also have a major effect on capital gains realizations, and realizations could fall by 45 percent.

Real Estate Market Finally, it sl•ould be noted that uncertain economic times could have a chilling effect on the City's real estate market. The City last year took in over $875 million in taxes on real estate transfers and mortgage recordings. If declines in activities mirror what was seen in fiscal year 1990 when Iraq invaded Kuwait, activity could fall by 30 percent. In addition, real property taxes and payments-in-lieu-of-tax (Battery Park City Authority and Port Authority properties are liable for PILOTs) will be effected by the attacks. The attacks destroyed and damaged properties which were expected to contribute almost $200 million in property taxes or PILOTs annually.

Revenue Impact (FY) (S's millions) 2002 2003 Personal Income Tax Losses Due to ($580) ($439) - ($613) Declines in Jobs, Bonuses & Capital Gains

• Business Income Tax Losses Due to Securities Industry Profit Declines ($247) (S15)-($247)

Sales and Hotel Tax Losses Due to Tourism. Travel and Trade Declines ($358) (S145) - (S358)

• Real Property Tax/PILOT/ Commercial Rent Tax Losses Due to Physical Damage ($85) ($123) -($155) Real Estate Transfer Tax Losses ($264) ($176) - (5264) Audit Losses ($51) ($23) Total ($1,585) ($921) - ($1,660)

A Note about the Methodology • New York City OMB has developed a 70-equation econometric model of the New York City economy that is linked directly to the history and outlook for the nation to develop local forecasts. Key indicators forecast are non- agricultural employment by sector, wage rates, CPI, personal income, gross city product and office space vacancy rates and asking rental rates.

These indicators are then used as input to the various tax models which also rely on econometric techniques. The personal income tax forecast also relies on a micro-simulation model based on samples of tax returns. As a result of • the attack we currently do not have access to our offices and all of our traditional estimating tools. Therefore the results discussed here should be considered preliminary.

NYC-WTC 000136657