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The Power of Partnership


Kathy Wylde has a billion-dollar BlackBerry. Her connections in government and the private sector are legendary: In the eighties, as the head of the Partnership's housing efforts, she won support from hud in Washington and from Albany to build an unprecedented number of affordable homes in New York, mostly financed with billions of dollars from private banks, playing a key role in the Bronx's revival. Her unflappable, down-to-earth manner masks a savvy core. When I called union leader Dennis Rivera and asked him why he joined this latest lobbying alliance, he said, "We have worked with Kathy in the past on housing. She's an incredible person, very good at getting people together from labor and business and government."

If Kravis has helped craft the Partnership's response, Speyer has emerged as this fiscal crisis's political-consensus builder -- an austere, no-nonsense mogul respected by his peers and well-liked by conservatives and liberals. In the months after the attack, George Pataki proposed a $54 billion relief package so staggeringly wide-ranging that it included a high-speed train to Schenectady. When the White House ignored it, Speyer was there to highlight some of Pataki's better ideas in a proposal the Partnership was forming with Schumer and Hillary Clinton. "I like to think that I have a relationship with the governor," Speyer says with typical understatement (in June, he contributed $25,000 to Pataki's re-election campaign).

Last month, on the Sunday of the memorial service for victims' families at ground zero, Speyer hosted the governor and both senators at the Partnership's offices. Together they put the finishing touches on $5 billion in tax incentives for companies that stay in lower Manhattan. And last week, a few days before shuttling to Washington, Mike Bloomberg dropped by Speyer's offices on Madison Avenue to see an early copy of the economic study. "It's an easy relationship," says Wylde. "We speak the same language."

The mayor-elect, it turns out, has been a Partnership member and a contributor to Kravis's nonprofit Investment Fund for years. While Rudy Giuliani stormed into office on a mission to tame the unions, Bloomberg is extending them an olive branch -- much the same way the Partnership has since September 11. Now the Partnership is supplying Bloomberg with the independent, nongovernment-sourced numbers he needs in the Capitol, just as the Manhattan Institute, the conservative think tank, provided Giuliani, in his first term, with ammunition against what he saw as the city's entrenched interests.

"The Partnership has replaced the Manhattan Institute," agrees Mitchell Moss, director of NYU's Taub Urban Research Center and an adviser to Bloomberg. "This study is an example of the forces they can pull together, in both research and leadership."

When lobbying a U.S. Senator, it's often helpful to bring along someone whose grandfather's portrait is hanging on the senator's wall. Earlier this month, Speyer and Wylde and a labor contingent including Randi Weingarten took the 7:30 a.m. shuttle to Washington. They brought with them David Rockefeller, now a spry 86 years old, coming out of retirement to champion the city during its new fiscal crisis.

And as it happens, David Rockefeller's maternal grandfather, Nelson W. Aldrich, a turn-of-the-century Rhode Island senator, is rendered in oil right next to Ronald Reagan and Richard Nixon in the ceremonial office of Senate Minorty Leader Trent Lott. When Lott points this out, Rockefeller mentions in his quiet but regal voice that he thinks it was a gift to Congress from his brother Nelson.

Lott gets the picture. He knows that his visitors are pushing their $5 billion tax-credit plan and that they also want that $20 billion the president promised before it's appropriated away to Duluth or Tampa. But he also knows the whole country is in a recession, that many in Congress feel burned by the pricey airline-industry bail-out. And so the dance begins.

Speyer gently reminds Lott that the terrorists attacked not just New York but America. Lott smiles and agrees. Rockefeller says the city's businesses need help. Lott smiles and says he understands. Deryck Maughan, a Citigroup vice-chairman, reports gravely that his colleagues are considering leaving downtown. Lott smiles and says the Senate is prepared to make a commitment, and so should Wall Street. Asked whom he likes in the World Series, Lott smiles and says he's a Yankees fan . . . but he also thinks very highly of the Diamondbacks.

To help their case in meetings with a half-dozen senators, the New York team has brought along some daunting statistics from its economic study. The Partnership estimates that the disaster will displace 125,000 jobs by the end of the year. Some of those jobs are lost to New York forever, Wylde says. But the bigger problem may be downtown's remaining 270,000 jobs -- all of which are at risk of being lost unless conditions improve soon.

As Wall Street goes, unfortunately, so goes the city. The study estimates that people who work in the financial-services and insurance industries represent only 10 percent of the city's jobs but generate 26 percent of the gross city product. The study doesn't try to predict next year's budget deficit, but the reality is that City Hall had counted on the Wall Street economy's expanding over the next several years. In the nineties, New York had confidently tripled its debt from $11 billion to $33 billion, which increased its debt service by almost 50 percent. Given projected expenses and tax shortfalls, conservative estimates put next year's deficit at $4 billion. And that may be optimistic.

The best recourse, the Partnership says, is to shore up the city's tax base by rewarding downtown companies for not leaving -- with a $4,800-per-employee tax credit for businesses that stay. But is Washington really interested in giving that kind of money to a city of billionaires? No Congress in history has ever used emergency funding to close an afflicted city's budget gap. A few senators on the Partnership's appointment list in Washington are openly skeptical. Montana's Max Baucus, the chair of the Senate Finance Committee and an ally to New York's senators, says he understands that the nation's fortunes rely on New York's fiscal health. But he urges the group to find ways for Congress to "think of New York as more of a part of America -- so they don't just think this is just for New York."

Leaders of the Partnership are aware that this is a hard sell. "If we think we can go and say, ?Help the financial-services industry,' and they'll say, ?Okay, here's a check,' then we're sadly mistaken," Kravis says. This is why they tried to give the aid package a free-market spin. Nowhere in their proposal is there money for rebuilding a single building. "The government should be focusing its efforts on things the private sector would never take care of, like the infrastructure," Kravis explains. "That's a salable point in Washington. It's just the way the government works."

"The incentives should go to the tenants, not the landlords," adds Speyer, one of the biggest landlords of them all. "Landlords should be driven by the marketplace like everybody else."

The partnership's report prescribes urgent care for tourism, small businesses, and the retail, health-care, and insurance industries. Curiously, though, rebuilding Wall Street may not be the cure-all people think it is. One surprise in the report is that while the attack wiped out about 29 million square feet of office space, 30 million square feet were made available around the city almost immediately. "I was surprised to learn that the tenants that remained were able to be absorbed," Kravis says. "I guess that means we have excess space."

So if Wall Street doesn't need space, what should New York build? Kravis has been working on problems like this for the past five years, ever since he founded, with Speyer's encouragement, the Partnership's New York City Investment Fund. "Jerry said, ?Look, I'm trying to come up with some interesting ideas.' And I said, ?Well, I have this idea: Go to 100 people and try to get $1 million each from them. We'll be the investor of last resort." The first fifteen calls they made, they got $15 million.

So far, the Fund has put $52 million into 48 projects; for every ill-fated, there's been a Royal Health Care, a Queens and Brooklyn managed-care organization formed by inner-city hospitals that paid the Fund back ahead of schedule. Even so, for several years the Fund had difficulty finding investments. Early on, city and state economic-development agencies called on Kravis to help bail out the Farberware plant, a factory in the Bronx that employed more than 400 people. After checking with some colleagues, he learned that the low-end pots-and-pans business was almost entirely located outside the U.S., where labor was cheap. "We said to the city, ?Had you not waited until it was too late, we could have saved them,' " Kravis says. When a highly lauded proposed paper-recycling mill in the Bronx came looking for an investor, the Fund crunched the numbers and found that even if the mill got every regional client, it would run at only 50 percent capacity. The Fund respectfully declined.

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