The Future of Cities

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Text, Wednesdays with Woodward (registered trademark). A webinar series. The Future of Cities. Logos for Partnership for New York City, Big I New York, Travelers Institute, Travelers, Big I Connecticut, Bay Area Council. 

(SPEECH) 
Hello, everyone. Good afternoon and thank you for joining us today. My name is Joan Woodward, and I have the honor of leading the Travelers Institute, which is the public policy division and educational arm of Traveler's Insurance. Today's program is going to be terrific. It really is. It's part of our "Wednesday with Woodward" series--a series we started last year to explore issues impacting not only insurance but our personal and professional lives in these really uncertain times. And we're really pleased you're here, and we want you to stay connected with us. 

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Join our mailing list. Institute at travelers dot com. Connect, LinkedIn Joan Kois Woodward. Watch replays, Travelers institute dot O R G. Hashtag Wednesdays with Woodward. 

(SPEECH) 
So in addition to this webinar today, we host one almost every Wednesday, and we would love to connect with you. So join our mailing list at institute.travelers.com, connect with me directly on LinkedIn, or watch past webinars on travelersinstitute.org. So all of that is in the chat feature for you to take a look at. I'd like to share our disclaimer about today's program quickly, and then let's get started. 

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Disclaimer: Wednesdays with Woodward is an education webinar series presented by the Travelers Institute, the public policy division of Travelers. This Program is offered for informational and educational purposes only.  You should consult with your financial, legal, insurance or other advisors about any practices suggested by this program. Please note that this session is being recorded and may be used as Travelers deems appropriate. 

(SPEECH) 
Today, we'll dive into a really fascinating topic--the future of cities. The pandemic has a profound effect on our society, including where and how we live and work, and everyone in this Zoom call today is very well aware of that. As the US economy continues to reopen and recover, we'll take stock of demographic, economic, and societal trends that were changed or accelerated by the pandemic, and we'll also look at the impact on public policy and the priorities the governments in these cities, states, and the nation are grappling with today. 

It is my honor to introduce our terrific speakers for today. Both are champions for their cities. 

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Photos of Joan Woodward, Executive Vice President, Public Policy; President, Travelers Institute; Travelers, Moderator, Kathryn Wylde, President & CEO Partnership for New York City, Speaker, Jim Wunderman, President & CEO Bay Area Council, Speaker. 

(SPEECH) 
They're fostering these connections, synergies across government and industry in two of our really most vibrant cities--San Francisco and New York. But there's a lot of lessons learned. So if you're not in San Francisco or New York today, there's a lot of lessons learned of what these cities have done and how they've pivoted to reinvent themselves. So we think there's something in it for everyone. 

Our first speaker is Kathy Wylde. She's the President and CEO of the nonprofit Partnership for New York City, a leading business organization. Its mission is to work with the government, labor, and civics leaders to build a stronger New York City. She's an internationally known expert in housing, economic development, urban policy, and serves on a number of boards and advisory councils including the NYC Economic Development Corporation, the Fund for Public Schools, and the Governor's New York City Regional Economic Development Council. Welcome, Kathy. Thank you for being with us today. 

And then we have Jim Wunderman. He's our next speaker. He's President and CEO of the Bay Area Council, a CEO-led public policy and advocacy organization working to help shape the future of the Bay Area. The council serves as a leading voice for the business and the economy. Jim regularly appears in the list of California's top 100 political movers and shakers with government and business leaders seeking his counsel daily. He serves as a gubernatorial appointee on numerous boards and commissions including the Water Emergency Transportation Authority, the Blue Ribbon Transit Recovery Task Force, and the Too Small to Fail Advisory Council. I like that, Jim. Not too big to fail, but too small to fail. Jim also teaches executive leadership at UC Davis Graduate School of Management. 

So Jim and Kathy, welcome. We're thrilled you're with us today. I also want to thank our partners--the Partnership for New York City and the Bay Area Council, but also the Big I of New York and the Big I of Connecticut--two really fantastic organizations we work with a lot. We're going to kick off with opening presentations, and then I'm going to ask some questions of our guests, and then we want to hear from you, the audience. So submit your questions through the Q&A feature at the bottom of your screen. And you don't have to wait 'til the speakers are done. You can put your questions in that Q&A function at any time during the conversation. So with that, thank you again for being here. 

Kathy, let's turn to you first. What is going on in the city today, and what is your outlook for the very bright future? I know that you're an optimist by nature, so give us your thoughts. 

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Kathryn S Wylde. 

(SPEECH) 
Well, thank you, Joan. It's great to be with you. And the city today is open for business. And this has been--obviously, the vaccine was transformative in terms of being able to get everybody comfortable again. And not everybody is comfortable, but we are in New York City 50% vaccinated. So we're very happy with that. The current status--New York City was hit early and hard. Our economy was shut down officially, our brick and mortar economy, for almost a year for the most part. Still today, we only have about 15% of office workers back in their Manhattan office buildings. So we've had a slow recovery. 

Obviously, we were hard hit by tourism. In 2019, we had 66 million tourist visitors, and they were very important to our brick and mortar economy--our retail, restaurants, et cetera. And that still has not come back. We're starting to get a little regional tourism. So the city is waking up again. The vaccines have helped. The lessons of the pandemic in terms of our city and I think for major cities across America and around the world are pretty clear at this point. The COVID demonstrated to us the disparities in health care and the whole issue of the social determinants of health, where 80% of disease or health problems ends up coming from your housing conditions, your economic conditions, environmental conditions in your neighborhood. So this is a big takeaway in terms of the way we have to think about health in the communities of the city. 

And there were enormous disparities in the health impact in Black and brown communities. And of course, that was then exacerbated and became quite emotional just a year ago with the killing of George Floyd and the experience and the outflow of concern from the Black community and from those who recognized that these disparities were causing huge issues in our cities for a large group of people. 60% of the COVID deaths in New York--and we had over 800,000 cases of COVID so far, but 60% of the deaths were in the Black and Latino communities. So that had a major impact. 

And we also had real recognition of the impact of the digital divide. When education went remote last March, we had 300,000 of our million one New York City public school students who had no digital devices in their home or access to the internet, and that immediately meant that they were the losers in terms of the educational experience. The small businesses, particularly those minority and immigrant owned, very small businesses in neighborhoods across the city were not--many of them didn't have websites--were not plugged into the online economy. So their ability to keep revenues flowing and keep working when basically the brick and mortar economy shut down was very, very difficult. And again, that was very hard on certain communities--much harder than others. 

And finally, those who lost jobs at the peak of the pandemic last July, we had a 20% unemployment rate that we hadn't seen since the Great Depression in New York City. And that had gone from less than 4% during the previous year. So that was a major issue. 

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Compared to Major U.S. Cities, NYC Suffered Greatest Job Loss and Weak Earnings Growth. Bar chart on left shows private sector jobs lost February 2020-March 2021 and bar chart on right shows change in average hourly earnings February 2020-March 2021 in New York City, San Francisco, Los Angeles, Boston, Chicago, San Jose, United States, Dallas and Tampa. Source: Bureau of Labor Statistics. 

(SPEECH) 
This slide shows a little bit about comparing New York to other cities. And you'll see the bright red line at the top of the slide really demonstrates job losses. Our net job loss during the pandemic was 585,000 jobs to date. And that job loss almost all came from low wage workers and from certain industries. And you'll see also in terms of the hourly earnings growth that New York is well below the US average and well below San Francisco. And I will let Jim speak to that later. 

And this is because in New York City, again, the losses of jobs were so much in the low wage area and it was just big numbers. New York has a more diversified economy than San Francisco in terms of we were not as able to have everybody work remotely or have large portions work remotely. And so this shows up in these numbers as you compare various cities and who did relatively better in terms of wage growth during the pandemic and who did relatively worse. 

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NYC COVID-19 Job Loss by Industry Bar chart shows change in employment by industry February 2020-March 2021 in Financial Services, Information, Construction, Arts, Entertainment and Recreation, Retail, Accommodation and Food Services. New York City lost a net 565,000 private sector jobs between February 2020 and March 2021. Source: Mayor’s Office of Management & Budgets, NYC. 

(SPEECH) 
Then moving forward, the concentration in industries of the key industries where job loss was concentrated in New York City, you'll see here--these were private sector jobs, by the way. Government didn't lay off anyone. Accommodation and food services is the big number. And whether that was restaurants or catering operations, hotels, as I mentioned, tourism--anything that had tourism. Retail had a big impact. All these face-to-face services. Arts and entertainment--Broadway has, of course, been closed and will not open again until mid-September, although tickets went on sale May 6 and they're selling like wildfire. So that's very good news. But the impact on those sectors--on the other hand, our overall economy. And those sectors represent 20% of the jobs in New York City but only 9% of the economy. 

So what kept us going--and our economic losses over the last year were only from the--total economic output was only down about 3.3%. So that actually went pretty well. So these are some of the long-term impacts that we're going to have. And the other big one is competitiveness of how cities are going to continue to compete. Now that we know you can work remotely in cheaper locations where lifestyle may be better instead of a studio apartment, you might have a home with a yard if you're somewhere else and not having to be within commuting distance of a New York City office. 

And that's a big question going forward. As I mentioned, only 15% of the workforce are back in the offices today. We've had a large and very successful remote work experience. Our agenda is to try and bring people back to the extent possible. What we know going forward--a lot of people are going to want to continue more flexible work schedules. So that's going to be a push and pull. In New York City, more than 80% of our workers use mass transit. There's still concern about will crowded mass transit with some homeless problems on it and with some crime problems--will mass transit be safe and healthy? I think until everybody's vaccinated, that's going to be an issue and make it difficult to reopen. 

So this is going to be a slow process in terms of bringing people back, and we think there are going to be long-term impacts of remote work that will mean that we're going to have to really compete for talent, for keeping them here. We also have relatively high costs, relatively high tax rates, and people have found that if they can work remotely, are they really going to come back and pay what--unfortunately, since April, we have the highest personal income taxes on high earners in the country. And that's going to be a challenge going forward for us. We had already suffered an experience, and I'll ask for the slide on the SALT deduction. 

We already experienced in 2017 federal tax reform. For the first time in 100 years, the we lost state and local tax deductibility. And that was a serious issue. And I raise it here because it was a serious issue for both New York and California and other states where big cities are located--New Jersey, Illinois. 

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A table. 11 states most impacted by S A L T cap include both high tax states and populous low tax states. California, total Salt deduction lost, 104.4 billion dollars. Number of filers affected, 3,157,000. New York, 64.9 billion lost, 1,709,000 filers affected. New jersey, 27.8 billion, 1,034,000. Illinois, 17.1 billion, 770,000. Massachusetts, 13.5 billion, 544,000. Texas, 12.7 billion, 865,000. Connecticut, 11.8 billion, 378,000. Virginia, 11.5 billion, 575,000. Maryland, 11.5 billion, 547,000. Pennsylvania, 11.5 billion, 551,000. Florida, 10.1 billion, 468,000. Source: estimates from the partnership for New York city based on analysis in hyperlocal responses to the Salt deduction limitation. Stanford Law Review, April 2019. 

(SPEECH) 
These states represent 57% of the US economy. So we're very important, these 11 states. We are net donor states to the federal treasury. We send in New York $24 billion more to Washington than we get back. But as a result of the loss of state and local tax deductibility from federal income tax filings, we lost $12 billion a year in New York state of discretionary income. We lost the equivalent of about 104,000 jobs a year that we would have if we can restore state and local tax deductibility. And we lost our competitive position with states that have no income taxes or very low-income taxes. 

So as the federal government today is considering moving forward with a bunch of new policies, many of them are going to be very important and help cities--investment in infrastructure, investment in childcare. But many of them are going to be a challenge to cities, and that is increasing taxes when we already have a big tax load. 

So let me say that we've got pluses and minuses from the experience of the pandemic in terms of what we've learned. The basis for policy direction's going forward. 

But cities are going to have to change. We're going to have to be more competitive. We're going to have to be more thoughtful about how we deal with the income and racial disparities in our very dense, diverse population. So with that, let me turn it over to Jim Wunderman who represents the other side of the country. But, as you saw in some of the slides, San Francisco and New York also have a lot in common. Jim-- 

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Jim Wunderman. 

(SPEECH) 
Yeah, thank you. Thank you very much, Kathy, and I appreciate the opportunity to be here. And thanks, Joan, and Travelers for putting this forward. And Kathryn is correct that we are experiencing a lot of the same issues. And much of what you just said is true for San Francisco and true for the Bay Area. 

San Francisco alone lost 58,000 jobs during the pandemic, about 400,000 and change in the pandemic. We estimate about half of small businesses have actually closed. There's a 20% vacancy rate in the financial district in downtown San Francisco. It's actually higher, but that's the official rate, and about 20 million square feet of vacant space on the market and sublease space, which is a lot. It may not be as much for New York, but it's a lot for us. 

So there are a lot of commonalities between what you said, your experiences in New York, and what happened in San Francisco. The pandemic hit us a little bit later. And the state and the local governments kind of rushed in quickly to be able to shut down the economy faster. And so we've been faster to shut down and slower to reopen. And that's frustrated a lot of businesses and it's held our economy back. 

So the recovery of California's economy and the Bay Area's economy, relative to the rest of the country, has been a lot slower. I'm actually doing this from Florida. And having traveled here a couple of times, this is a way more open place and it's proclaiming itself as way open for business, compared to California has been much more cautious. 

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Slide, San Francisco and the Bay Area, what's next? A photo of the San Francisco skyline. 

(SPEECH) 
So what I've done is prepared some slides that I'll try to run through very, very quickly. And I'll try not to cover so much of what Kathryn covered. But then we can certainly talk about it. So let's just run the slides through. Again, I'm going to try to be pretty quick about this. 

So Joan mentioned what our mission is, but if you read that it's a pretty high mission for a business association that's been around for a little over 75 years to make the Bay Area a better place for everybody and to maintain its sustainability and its competitiveness.  

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Bay Area council. Our mission. We engage business and civic-minded leaders to solve the most challenging regional issues to ensure the Bay area is the most innovative, sustainable, inclusive and globally competitive place in the world. Despite its challenges, S F Bay area remains an attractive place to live and work. Photos of road cyclists, wine glasses, a campus, the golden gate bridge. 

(SPEECH) 
And we've taken a lot of hits. We've been the butt of some jokes in national press. And some companies have announced leaving or moving their headquarters and some other things. 

So I would like to say despite all the challenges, which are very real, the Bay Area, San Francisco remain a very, very attractive place on balance with phenomenal opportunities for people to have a very, very good life and great careers and do great things. And it's still very much, as you'll see, the hub of innovation. 

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Logos for companies including Anthem, Google, M U F G, Waymo, Visa, Blue California, Uber, United, Webcor, U S Bank, Accenture, Comcast, Lyft, Sutter health, The Packers, Air B N B, Intel, Amazon. 

(SPEECH) 
These are members of the Bay Area Council. We have about 350 members. And these are sort of obviously a subset, but they're sort of representative of the whole. So although it's not as diverse an economy as New York, because it's a bit tech heavy, it's still a diverse economy overall. And we do have some very, very big companies--the Googles and the Facebooks and Apples--and some others, which really take up a lot of space--these incredibly successful companies that have made a lot of difference in the world and have created to their size and their scope sort of creates their own controversies these days. 

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The S F Bay Area is the Birthplace of Biotech, home to a booming industry, and some of the largest companies and most promising startups. U C S F, Genentech, Gilead Sciences, Bio Marin, 400 to 500 others. 

(SPEECH) 
We're also very proud to have been the birthplace of biotechnology. And this is a boom area for us, and I think other parts of the country that have biotech. We're seeing a lot of the real estate movement in our area focused around biotechnology and the related life science field. So we feel very bullish on the growth of this particular industry. And coming out of the pandemic, obviously a very important industry. 

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A graph, Economic dominance, I P O pipeline. Private companies in I P O pipeline with valuations over 1 billion as of September 23, 202. Bay Area, 115. New York, 34. Los Angeles, 18. Boston, 12. Seattle, 7. Chicago, 6. Waltham, 3, Charlotte, 3, Denver, 3, San Diego, 3, DC, 2, Pittsburgh, 2, Miami, 2, Raleigh Durham, 2, Austin 2, Atlanta 2. Source C B Insights. 115 of 235 U S based unicorn companies are based in the bay area. 8 of 13 of those valued over 10 billion are based in the Bay Area. A cartoon unicorn. 

(SPEECH) 
And these are the unicorn companies. So these are the future big companies that are private today. A lot of them will be public at some point in time. Some of them will go away. Some could argue that there's some overvaluation going on in the market. But you could see how the Bay Area overperforms when it comes to these companies. 

And to the good news for New York, New York is in a strong second place now, with LA not too far behind. And some of the second-tier cities that we'll probably talk about during the presentations, they don't really do so well in this area. So it's really the Bay Area, New York, and LA and Boston. 

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A graph, Economic Dominance, Bay Area Share of Venture Capital Investment, showing rising investment from 2015 to 2020 to around 50% of the share. 

(SPEECH) 
And the Bay Area has consistently received somewhere close to 50% of all venture capital-- 40% to 50%--dropped a little bit in the last iteration, going into the pandemic. And it'll be interesting to see whether that downward slope continues to be a trend, or whether that was a little bit out of whack. But it's a bit of a concern that we had that drop. Still to be a 30%, 35% of all venture capital when we're at 3% of the population in the country is still pretty good. And there's still a lot of innovation spark that is happening in our region today. 

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A graph, Economic Dominance: GDP Growth Pre-COVID, Indexed G D P Growth by Metro  Area 2012 to 2018 showing lines of growth for Boston, LA, New York, San Francisco, San Jose, Seattle, Washington DC. San Jose has risen most sharply. 

(SPEECH) 
And you can see coming out of the Great Recession, the San Jose area, San Francisco did really, really well compared to other major metros--led the country in growth. So we had trouble, frankly, handling all of the growth that was taking place. I think San Francisco itself had a 7% annual growth rate during that period. 

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A graph, Contrast to economic growth, Prohibitively expensive housing, continuing to skyrocket amidst Covid. Median Home Sale Price by Metro Area May 2015 to April 2021. Lines for San Francisco at 1,520,000 and San Jose at 1,355,000 dollars rise high above the lines for Oakland, 950,000, Los Angeles, 793,000, New York, 635,000, Boston, 605,000, D C, 503,000. 

(SPEECH) 
Our Achilles heel are our way out of whack housing prices. So you could see it costs about double or so to own a house, buy a house, in our region compared to other regions in the country. And it's one of the major--it is the major reason why people have second thoughts about the Bay Area. 

And you'll see rents are the same. 

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A graph, Zillow Rent Index by Metro Area, with bars descending from San Jose at $2,861, San Francisco at 2,828, New York at 2,530, L A at 2,469, Boston at 2,343, and D C at 2,004. Data, Redfin. 

(SPEECH) 
They softened a little bit in the pandemic, as they have in the other major cities. So we'll see whether they stay softer or they go back up. There's some indication that they're heading back up again, but we'll see. But they're still very, very high. And they keep a lot of folks out who really should be in. We become less a middle-class area and more a place really for the wealthy, and somewhat the poor, with no in between. 

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Homelessness Crisis. Bay Area Homelessness. Photos of tents on a street and a person laying on the ground near a cup. 

(SPEECH) 
And that is a problem for us, and I think for major cities around the world, because this trend-- it isn't only about us. And at the end of the day, what's happened in our region, it's happened in other places, but certainly in California and in the Bay Area, it's got a terrible homelessness crisis. And it's visible everywhere. This problem that used to be sort of focused in San Francisco, is in San Francisco, it's in San Jose, it's in Oakland. It's in our suburban communities. It's growing and it's spreading. 

And we've done some work at the Bay Area Council and we put out another study to address this. But it's an extremely vexing, difficult problem. If you take a look toward the bottom, you can see the cities that have the biggest homeless populations and homeless populations per capita. 

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A graph, Total homeless per 10 K overall residents, 2020, showing highest rates in New York, San Francisco, D C, Boston, Seattle, L A, Portland, Santa Clara. 

(SPEECH) 
But take a look at this sort of teal next to San Francisco, City and County, and how that compares to New York. 

So in our case, 60% of the homeless population is actually on the street. And that compares to 5% in New York. So 60% unsheltered versus 5%, similar in Washington and Boston. Those are cities and states that have a right to shelter law. And without getting into it, we don't have that. And it's terrifically difficult to get people into shelter and into temporary housing. 

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A graph, Bay Area Population Change, showing net domestic loss from 2001 to 2010, then from 2016 to 2020. 

(SPEECH) 
And this is an issue--California for the first time in its recorded history since 1900 actually lost population in 2020. We don't know whether that's a trend. But you can see the trend here is on net domestic migration, the yellow bars below. We've been seeing this--it used to be people used to come to California. I came to California in 1980. I'm a New Yorker who went to California. I guess I liked the songs that said I was supposed to think about that. And I enjoyed coming there and so did a lot of other people. 

But that trend is reversed. People in California are, on a net basis, leaving for other parts of the United States. And we haven't been losing population, we've been gaining, because of immigration and live births. But in this most recent iteration, we actually lost population on a net basis. And we'll see how that trend continues. 

And this is where people are going. 

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A map of the U S showing top 50 cities that gained movers during Coronavirus, and the top 50 cities that lost movers. Gains in Texas, Vegas, Sioux Falls South Dakota, East Hampton New York, and losses from New York, San Francisco, LA, Chicago. 

(SPEECH) 
They're leaving San Francisco, they're leaving New York, at least temporarily. And they're going to these other cities where the cost of living is less. And they may have less amenities and some other niceties that go along. Some of the cities may argue that they have lots of advantages. But they don't have the kind of amenities known for in New York and San Francisco and LA, but they're cheaper. 

And that at least is the current trend. Whether people come back to New York and San Francisco and the other cities, we'll see. The history of our cities is we've been down before. People have predicted our doom. And we've historically come back. And I believe we will come back again. 

(DESCRIPTION) 
Remote work enables people to work from home. Nearly half of all bay area residents have an occupation that is remote work eligible. A chart showing remote work eligibility by job location, San Francisco 51% of jobs remote eligible, Santa Clara county 51%, San Mateo County 51%, Bay Area 45%, Sacramento County 40%, Alameda County 40%, San Diego County 39%, Orange County 39%, Marin county 39%, Contra Costa County 38%, Los Angeles County 38%, Sonoma County 32%, Fresno County 30%, Solano County 28%, Napa County 26%. 

(SPEECH) 
And as Kathryn mentioned, this remote work is the wild card, because now people can live where they want. A lot of people can live where they want, and they can work where they want. The trend is now that with the vaccinations, people are beginning to head back and companies are beginning to announce timing for when people are going back to work. And most people will end up going back to an office. 

But in a poll that we recently did before the pandemic, we had about 58% of job holders who worked at their office five days a week. And according to the poll, only 38% of folks will do that after the pandemic. So this is a real shift. And I think there's some tremendous challenges to New York and San Francisco in terms of this, because as you could see in the slide, in San Francisco, half the jobs in the city a remote work eligible. If only 10% of those folks end up working, going somewhere else, that would be a 5% reduction in the labor force, which would be very, very significant. 

On the other hand, our cities are tremendously attractive for people--a lot of people could come to San Francisco and come to New York to live, and work in a company that's not in San Francisco or New York, because those are great places to be. And I wonder if that won't end up being the trend if we get it right when it comes to dealing with our challenges around transportation and around homelessness and housing and those things. 

(DESCRIPTION) 
Working together to solve the biggest challenges of our times. A city with an orange sky. A man installs solar panels. People march for climate and racial justice. 

(SPEECH) 
So the things--you can see that slide in the upper left--that's what the Bay Area looked like last summer when we had five of the six biggest wildfires in state history burning at the same time. So our environment, climate change--this is a new set of challenges. We're working very, very hard to address sea level rise, floods, drought. This is becoming very real, very fast. And I think we're working hard on these issues. 

We've led the way in our state toward clean energy. There's some economic advantages to that obviously, as well as environmental edges. But I think the young folks--some would say the key is, where does the labor market want to be? And I think the young labor market wants to be in places which are getting ahead of the curve on issues around the environment and the way the racial equity, social justice, those kinds of things. So we're working hard on those things, not just because it's the right thing to do, but it's economically important that we do it. 

And transportation--we have a bigger region now. People moved from San Francisco and some of the inner-city locations out farther away to places like Sacramento. And we've been working before the pandemic hit, seeing this trend, which has been exacerbated by the pandemic--toward creating a transportation system that's a truly interconnected regional system, much more like what you have in New York and working on improving there. 

It doesn't work nearly as well in the Bay Area. So we have a lot of catching up to do, but we're focused on doing that. But we believe we can address these issues. And we come from a creative, determined place of innovators. And hopefully, maybe there's some ways we can work on these things together as well. So thank you very much, and I look forward to the conversation. 

(DESCRIPTION) 
Woodward. 

(SPEECH) 
All right, well, Jim, Kathy, thank you so much for your opening thoughts, and a lot of parallels. But there are differences, as Jim you pointed out, with the homelessness and the housing issues, the real estate, et cetera. So lots to talk about. I'm going to talk to my audience members for a moment. Put your questions in that Q&A function. That's the one we use for our webinars. Q&A--just type it there. If you don't want me to read your name, put anonymous as well. 

So let's kick it off. Let's start where you ended, Jim, which is a lot of things are changing in cities. But let's talk about the trend moving to the second-tier cities, because we know people are moving to the low-cost cities or low-tax states, like Florida or Texas, of course. But those second-tier cities are seeing a boom-- Salt Lake, Boise, Nashville, you know even places like Buffalo. People are moving out of the city, moving maybe more upstate. 

How concerned are you that people are not going to come back? As we just heard Jim say, younger people do want to be in the city. There's a lot more. The theater's coming back, as you say, Kathy. So how do you get people to recommit to our city centers? 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
Well, I think, again, this is a matter of recognizing what people are looking for--public safety being the first thing, whether that's health safety or safety from crime. We have had increase in incidents of crime. It's nothing like it was in the '90s, but we've had enough so that people are nervous about being on the subway. So it's those two elements. It's making sure everybody's vaccinated and people feel comfortable on that side. 

Historically, our population growth in New York has been through foreign immigration. Immigration policies have become tighter and tighter over recent years. There is talk in Washington of reopening immigration policies, lifting the cap on H-1Bs, et cetera. But we haven't seen Washington make any progress on that front for quite a while. So that's a big part of this issue. 

So I think there's a combination--bringing people back, yes, safe, affordable, healthy city, with Broadway reopening, cultural institutions, et cetera. But opening our--opening America's doors to immigration and reforming our immigration policy, so it both provides a path to immigration. 

We have half a million undocumented immigrants in New York City. That population suffered most in the COVID-- they're the dishwashers in the back of the restaurants, and the low-end small business workers. And they didn't get unemployment insurance for the most part. They didn't get that benefit. So a lot of our economic hardship in the city is very concentrated among that group. So dealing with immigration reform I think it's a top issue for both New York and California. 

(DESCRIPTION) 
Woodward. 

(SPEECH) 
Great, thanks Kathy. Jim, what are your thoughts about these second-tier cities? I mean, we know the census--with the census you're losing one representative in California. Kathy, you're losing one in New York. And they and people are walking with their feet to these other second-tier cities. And how is it that you kind of reverse that trend? Or do you think that trend is here to stay? 

(DESCRIPTION) 
Wunderman. 

(SPEECH) 
Well, I think the trend is here to stay because the businesses that are spreading to those places are the growing businesses of our time. They're the knowledge industries. And it's not realistic that we're going to be housing all of that. And so as more and more businesses are kind of tech-related businesses, they're going to go to look to do some of the work where the talent is, where it doesn't have to come, or it doesn't have to afford the higher cost of housing. 

And I say for the country, this is overall a pretty much a good thing. I like seeing this happen. On the other hand, I think that San Francisco and New York for the very, very talented people and the super creative class, are going to remain very attractive for that group, provided we don't discourage them. And Kathy mentioned the SALT, the deductibility. When you have such high tax rates and you can't deduct it, it really has a material impact. And we see that in California, and the issue she brought up with immigration some other issues. 

So we have some problems that we have to solve. But getting through the pandemic and returning to the place where the New York’s and San Francisco’s can reoffer the amenities that made them attractive in the first place, and if we can solve for the crime and solve for homelessness and maybe, in our case, do something about housing prices, and start building housing like we need to do, then I think that in the end we're going to come out pretty darn well. 

And I think overall, this movement to the second-tier cities, while it will continue, it may not be as big a story as it's been. 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
Now I think this is not a zero-sum game. Movement to the second-tier cities that have suffered, is and have had since--the Rust Belt cities, et cetera, they've had a history of decline. Having them come back-- Buffalo certainly has had a big resurgence in the last few years-- those cities coming back is good for our big cities as long as we have this population flow from overseas, because those cities coming back means that our role as donor states, the burden on New York and California in terms of supporting the federal treasury is reduced, as everybody is doing better. So we're all for that. 

We're against the negative competition, where people are saying--where Florida, in particular, has been aggressive, where low-tax states are saying come to us, trying to take our companies, competing for talent, and offering them great deals, naming streets after companies so that they move there. I mean, that negative competition is not healthy for our country. And that's why we need to be very careful about that. 

(DESCRIPTION) 
Woodward. 

(SPEECH) 
Right, I mean, it's been going on a long time, right Kathy, in terms of companies being bribed to move their headquarters, et cetera, et cetera. 

And that is not a healthy situation. And we ought to get over that because we are in a global economy now. And we should all be supporting each other in this effort. 

Yeah, exactly. All right, let's talk about housing for a second. We are in a very interesting situation. Mortgage rates are historically low. Low inventory--houses are selling for well over asking prices in many places around the country. So what do you think is going to happen to the housing market in the cities that you're in, and generally? I mean people--I know everyone in my circle has looked around their home and either done a project over the pandemic or bought that second house or improved--bought a bigger house, or just staying at home, thinking about working remotely. Is the housing market going to come back? Is it coming back now? What's the situation in New York and San Fran? 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
Well, in New York our housing market really hasn't suffered nearly as much as we thought, except selectively. Where the housing market has been weakest is where prices were highest and people who had a lease or basically found they didn't want to pay rent when they couldn't live here for a year. They had relocated someplace else, so they dropped their lease. 

So we had a falloff in the residential market, but prices are higher now in Brooklyn than they were before the pandemic. So a few places, the Upper East Side in Manhattan, has lost value, high-end condos have lost value. But that's kind of a good thing because we were such a seller's market for so long. Prices had been going up so aggressively. So I see that as a positive. I think we're going to offer more housing opportunity for more people. 

(DESCRIPTION) 
Wunderman. 

(SPEECH) 
Yeah, we said we're going to lose population, so you think housing prices would have dropped. They've gone up record levels in the last year, especially in the suburban communities. So one of the things that's happened, I think, is a lot of renters took the moment, with historically low mortgage rates, to become buyers. And it is completely a seller's market out there. We're back to multiple offers and crazy bids and all of that kind of stuff. 

I think one of the interesting things that's happening in the Bay Area, which is mostly a suburban region at the end of the day, is that there's sort of a rise of the suburbs going on that's interesting. And the suburbs were sort of seen as boring and yesterday's news. And the pandemic pushed people to the suburbs and, I think, caused the suburbs to look inward a little bit, and come up with some creative ways to function during the pandemic that have made them more interesting places and busier. And I think we're starting to see some movement toward redeveloping some of the old shopping centers and the things that have fallen out of favor. 

So I think this could be a time when we see some rethinking of our entire regions that could also be very, very good. And people want to live in the cities and they're going to go back to the city. 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
That's true, the suburban popularity is true in New York too. Of the households we've lost, and the Postal Service says we've lost 336,000 households net from New York City, and some of them coming back, but whatever. But people have moved to within 100 miles to 500 now. I mean they haven't moved far away. And so that's that dynamic I think is going to result in rethinking our public transportation systems-- that New York City has the longest commute in the country--60 minutes each way. We're going to be seeing office complexes grow again in the suburbs, or at least WeWork offices or spots to work. So people don't want work from home but they want an office closer to home. And that's probably going to happen. But again, our economies have regionalized over the last decades. And that's not a bad thing. 

(DESCRIPTION) 
Woodward. 

(SPEECH) 
OK let's move on to talk about the federal proposal, the Infrastructure Bill that President Biden has put out there. And there's a lot of different ingredients of the Infrastructure Bill. Normally, you think of roads and bridges, electrical grids, highways, and railways, et cetera. But he's expanded the definition of what an infrastructure project is to include nursing homes, home health care, childcare services. So the question for both of you is, what do you want to see in an Infrastructure Bill? And then the other side of that question is, how to pay for it? 

So Kathy you just talked about New York raising taxes on wealthy individuals. There's another federal proposal in the Infrastructure Bill. Do you think the SALT tax will be repealed in that larger Infrastructure Bill? What are you looking for? What are you lobbying on for, say? Kathy let's start with you first. 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
Well, I'm sure that Jim and I are both lobbying for the repeal of the SALT cap, because the SALT cap is devastating to America's most productive economic centers. And just the redistribution of that talent and that wealth is going to hurt this country. So it will cost about $80 to $88 billion a year to reinstate it. That has to be paid for. We understand that that's somebody else's problem. We helped pay for the corporate tax cut in 2017. And we're going to leave it up to Congress to figure out how they want to balance this. 

So we've got to come to a balance between having competitive tax rates, both state and local and federal, personal and corporate, and also looking at our tax code in a different way. We have all sorts of crazy loopholes, benefits. We're not treating taxation equally. And I think in that sense, the re-examination of the various taxes, tax benefits, and tax inconsistencies are very important to do. And we should get at it and we should all be supporting that effort. Some of that has been proposed. Some of it hasn't. 

But I talked to a senior tech executive last week. I said so I haven't earned income, I pay 55% of my income in personal income taxes. He gets his money out of a combination of capital gains and rolling over his investments in high-tech companies and he pays 22% in taxes. And he's a lot richer than me. So that's not that's not a healthy situation for anybody. That contributes to this divisiveness in the country of thinking, who's getting away with what, the class warfare kind of stuff. 

So I think revamping our tax code to look at how we can do revenues more equitably is a good thing, while maintaining our competitiveness globally for both corporate and personal income. If we don't do both, we're going to be losers. 

(DESCRIPTION) 
Wunderman. 

(SPEECH) 
Jim, yeah, I certainly agree. That's tough. It's really tough restructuring taxation. And we need to do it both at the federal level and certainly here in California. We've got a pretty crazy system going right now that needs to be addressed, with way too much focus on the personal income tax, which is about three quarters of our state's general fund coming from that 13.3% high rate, which I don't know whether to congratulate Kathy or offer my condolences on New York now taking--I had a chart that showed California as the highest in the country. I couldn't use that chart anymore. 

We're 14.7 in New York City because we have both a city and a state tax. 

But we've been waiting a long time for the federal government to get back in the game of infrastructure in the country. And I would include housing along with that. And so we really need the federal government to be a major partner in our infrastructure. I'd add water and related to that, and you mentioned childcare, which probably isn't part of infrastructure, but the human investment that President Biden has talked about. 

You know you mentioned I'm on the Too Small to Fail Advisory Board. This is about investing in young children, something we haven't done in the country, which is incredibly important. And from a social equity standpoint, we've got to get to kids at a very, very young age and create an equitable situation, so that even when they enter kindergarten, they're ready to go to school and succeed. And if we do that, I think it's going to pay huge dividends for the future of our country. So, very, very glad to see it, will lobby for it. As Kathy said, these things have to get paid for. Just leaving a debt behind isn't the solution. So one way or another, we're going to have to pay up for this. But I'm excited about it. 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
The reason taxes are so high in our states and cities that are highly urbanized, dense economic centers, is because the federal government hasn't kept up with the expectations in the country in a number of ways, whether it's on minimum wage, where our minimum wage in California--we are at $15 an hour. And we're waiting for the rest of the country to catch up. Or whether it's on investment in transit, where we have had to invest in transit locally, where we have input on new taxes. We passed the country's first congestion pricing zone to pay for our mass transit, because the federal government wasn't paying for it. 

So that infrastructure expenditure and investment in broadband that they're including and the resiliency we're going to need for climate change--it's very important, top priority. Absolutely. 

(DESCRIPTION) 
Woodward. 

(SPEECH) 
Terrific, OK, we are going to take audience questions now. We have a whole bunch coming in, so kind of rapid fire here. A number of audience members, including Lonnie Burks, asked the question, how are cities addressing vacancy rates in commercial buildings and corporate real estate? And how are you thinking about, potentially, some of these high rises going into foreclosure in your cities? Kathy, go first. 

Not a big problem here in terms of the office buildings. The problem is that the retail ground floor commercial spaces where we've got vacancies, because of this rapid accelerated shift to e-commerce from the brick and mortar retail economy to the making space for deliveries economy. So that is, logistics and the delivery space and all that is more of a problem for us accommodating all the trucks and moving to cargo bikes, whatever. That's more of an issue than having empty buildings. We're pretty sure that our commercial real estate will stabilize. They've had some losses. They have some devaluation. But that's after two decades of nothing but up. So this is a stabilization that I think is going to take place and not be a problem. 

(DESCRIPTION) 
Wunderman. 

(SPEECH) 
Yeah, for us, San Francisco proper is where the problem is. And a lot was built, and a lot was under construction when the pandemic hit. And as I mentioned earlier, we've got $20 million feet of vacant space, which is a lot in San Francisco. And there is a lot of consternation over this. And at the same time, we're not seeing a huge drop in commercial rents. Not a huge amount of deals getting done, but the ones that are happening are happening at around $70 a foot, where they were getting toward $90 a foot before the pandemic. So it's certainly a drop, but it isn't the bottom falling out at this point. So I think there's some confidence in the commercial real estate sector and in the business environment that things will come back. 

There could be some conversions to housing that probably wouldn't be a bad thing. But that may only cover certain types of buildings where that can happen. But it would make sense in building a downtown community that's more of a 24/7 kind of community, because people, they want to live this life. And if we can create that kind of place in San Francisco, I think we've been on that trend, I think we could do more. So we'll see if that happens. 

But there is worry about it. And we have a number of course members in the commercial space and they are in a bit of a tizzy about it. But I think overall, there's confidence that people are going to start getting back. And there'll be competition for space again. Some newcomers, some of these unicorns will pop up. We're already seeing a couple of companies put-- Airbnb put space up, Uber put space up, and some company you never heard of all of a sudden wants to lease 150,000 or 300,000 feet. This has been the trend for a while. 

(DESCRIPTION) 
Woodward. 

(SPEECH) 
OK, great. I'm to move on to JoAnn Murray, my friend JoAnn in New York is asking a question about, can bicycles and public transportation really replace cars with people's strong desires to travel, always in cars. I mean bicycle--there's some new pathways in New York and San Francisco, right? 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
We've got a proposal being taken very seriously to turn 25% of our streets into alternative vehicle uses for bikes or for buses and for restaurants to be able to expand in their operations in the streets. And one of the recovery recipes for our restaurants and small business is the free sidewalk and street space where, after they have 100% occupancy inside, they'll be able to add tables outside that are rent free, if they're working if they're operating in the streets. And that's a key to how they're going to pay that back rent that they didn't pay for the last 14 months or whatever. 

So these have become much more complicated issues, I would say. And we're looking at--we really are going to have to think about how to redesign our streets and get people back on transit. But Citi Bike, our bike sharing program, has reached an all-time high in recent weeks, in terms of utilization of bicycles. And we're liable to look more like Paris when this is over. 

(DESCRIPTION) 
Wunderman. 

(SPEECH) 
We've seen a lot, in San Francisco especially, but in other cities, we've seen a lot of conversion of existing road infrastructure for bikes and bridges to bikes and bike lanes and spent some money on this. And you see bikes--it's a big deal. And the return to mass transit is a more critical issue at this point, where our Bart system is at about 16%. I'm the chair of the region's ferry system, we're at about 12% ridership. We have all taken actions to make bikes more, better accommodated on our transit system. So I think when all of this shakes out and people start coming back in earnest, we'll just see a lot more bikes and a lot more accommodation of this. 

But historically, we haven't seen the mode shift away from the single occupant vehicle to the level that we should. And in this next iteration, for us, I think it's really up to improving our mass transit system. And we're working really hard on this. You mentioned I'm on this transit recovery task force. We have 28 agencies that operate very independently. We're trying to have a common wayfinding system and fare structures. And we want to take a page out of New York, which is really doing a better job of creating a mass transit system that's much more easily usable. It has its own challenges, but way ahead of us. 

(DESCRIPTION) 
Woodward. 

(SPEECH) 
OK, another question coming in from Cory Manders here--how do you see the implementation of smart technologies, such as self-driving cars, high-speed automated transit, video identification systems impacting the future of our cities? Do you see self-driving cars in downtown areas, or is this really just so far out you can't even think about this? 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
I think they'll be in California before New York. 

(DESCRIPTION) 
Wunderman. 

(SPEECH) 
We have three cities in the Bay Area that are testing them right now, so if you went to those cities you could see them on the streets. This is a fairly recent development. But there's been a lot of testing going on. And some of the companies, Cruise and Waymo particularly, have really focused on our region. And Uber was doing that for a while. So I think that they sort of see San Francisco as ground zero for this. Although they're testing in other cities, Pittsburgh, Pennsylvania and Phoenix are also hotbeds for this. I think it will ultimately be a national movement. 

It may take longer than maybe some of the companies would like. But ultimately, I think this newer generation that's coming into the world will never learn how to drive. 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
But more generally, I think we found out the slow rollout from the Small Business Administration of the PPP loans and the symbolic step with the systems. With our unemployment system in New York State-- we got a call last March when they were getting flooded with more unemployment applications than they ever had. And the call was for COBOL programmers, because they were still using 1970s equipment to try and manage government functions. That's where we really have to invest in terms of. We do not have smart cities and states, or for that matter, such as smart federal government. And this has to be a big focus and should be part of the infrastructure plan. 

(DESCRIPTION) 
Woodward. 

(SPEECH) 
But let's go there. Question coming in about what skill sets are your member companies looking for. A lot of companies--we're hearing that they have all these job openings. And we're still over 6% unemployment in the country, which I think is 6% is pretty darn good, given the fact that we were almost 15% nationwide a year ago. But a lot of job openings and people--do they not want to work because they're getting the unemployment benefits? So I think it ends in September, the accelerated unemployment benefits. But what's going on there? 

(DESCRIPTION) 
Wylde. 

(SPEECH) 
We've got--in New York City, we have an 11.4% unemployment rate still, which is double the nation's. So we've really got a big unemployment problem. And we have about 350,000 vacant job postings. That's our skills gap, which is gigantic. We don't have people to fill the jobs that are available. And it's not because these are entry-level jobs for people. 80% of the jobs that are listed, that list their requirements, require an associate degree or better. 

So this is a matter of not having invested in workforce development in this country or this city in the way that we had to. And what happened was we accelerated the digital economy by a decade. The jobs have changed immediately. Now we no longer have waiters and menus. We take pictures with our camera and punch in what we want at a restaurant. I mean, everything has changed so fast in the last year, at least in New York. California may have been there, but it's changed so fast for us. And we've got a lot to make up. So the workforce investment that we have to make in the next few years is just enormous. 

(DESCRIPTION) 
Wunderman. 

(SPEECH) 
Quickly, one of the things we're trying to do is work with our major companies, especially the tech companies, to provide apprenticeship programs. And Governor Newsom is really pushing on this, calling for 500,000 apprenticeships in the State, because those are the companies that have a lot of the job postings. And there is a tremendous skills gap. And there's just a lot of young folks coming up who just don't have the skills that they need to do the jobs that the companies want. 

There's also a need for soft skills and people who can interact in a collaborative environment effectively and communicate well, and so forth. So it's a mixture of things. But there is a gap. And I think for organizations like Kathy's and ours, this is a big responsibility that we have is to pull together the private sector and the education sector to create a better match in a world that's changing much more quickly than it ever changed before. We're confronting that challenge every day. 

(DESCRIPTION) 
Woodward. 

(SPEECH) 
Well, this has just been fascinating. And Jim and Kathy, I, unfortunately our time is up. And I cannot thank you enough for sharing your insights and your ideas about how to get our cities back on their feet. We are so grateful that you're both in those cities, working hard to make it happen for the citizens. And we're going to work with both of you on all the changes you talked about and trying to accelerate the pace of change for our economic development. So thank you so very much for your time and again, we appreciate it. 

Let me also talk about upcoming webinars. So please join us on June 9th for former FDA Commissioner Dr. Mark McClellan. He's going to talk about the outlook for tackling the global pandemic with vaccines and the outlook there. June 16, we're going to take a behind-the-scenes look at the New York Stock Exchange. And then June 30, we're going to talk about ESG, environmental, social, and governance issues with the former SEC Commissioner Paul Atkins and our own Yaffit Cohn. And then July 14, can you innovate like a unicorn? We're going to talk about innovation, even in older companies, companies that have been established for a very long time. 

And Jim Wunderman, we appreciate your thoughts today on unicorns and how to innovate. So we hope to draw some parallels there. Again Kathy and Jim, I cannot be more grateful towards you for your time and your ideas today. So thank you both. 

Thanks. 

Thank you. 

Nice to be with you. 

And take care, my friends. Please get your vaccine, and let's all get back to quote unquote normal. We'll see you in a few weeks. Have a nice Memorial Day. Appreciate you being with us. 

(DESCRIPTION) 
Upcoming webinars. June 9, A bright future, tackling a global pandemic. Former F D A commissioner Mark McClellan, M D, PH D. June 16, Behind the scenes at the N Y S E, everything you want to know about SPacs, I P O's and direct listings, NYSE Head of Capital Markets, Amanda Hindlian. June 30, built to last, the connection between E S G issues and a company's long term success. Former S E C Commissioner Paul Atkins and Travelers' Chief Sustainability Officer Yafit Cohn. July 14, Can you innovate like a unicorn? Travelers chief innovation officer Kevin Smith, Travelers Beth Maerz, The Alchemy Crew's Sabine VanderLinden. Register, Travelers institute dot O R G.