Looking Ahead

LOOKING AHEAD by Wally Dobelis

Some significant business mergers of past weeks seem to confirm that the corporate world continues to move toward more consolidation and specialization, with some progress in improving the huge US balance of trade deficit. One of mergers involves our 23rd Street neighbor, Metropolitan Life Insurance Company, a major local employer.

The Met, second largest US life insurance provider, is acquiring another insurer, Travelers, a major component of Citigroup, for $11.5B, at a 13.5 P/E ratio. It is a good buy, if one understands life insurance dynamics. Citigroup claims that they want to concentrate on credit cards, non-retail banking and their Smith-Barney brokerage subsidiary, and insurance moves too slowly. The Met’s return on equity (ROE) is 11% compared to Citicorp’s 19%. On the other hand, Met’s earnings growth actually has been 22% since the 1999 demutualization, compared to Citicorp’s 14%. This from the Economist, who also notes that the insurer’s book value, has gone up, holding down the ROE. I would state it differently – new business requires outflow in excess of first year’s premiums that is recaptured over the lifetime of the policy.

It is ironic that Citigroup was formed in 1998 by Travelers purchasing Citibank. Sanford Weil, the insurance man behind the Citigroup merger, must have had an epiphany; he sold Travelers casualty and liability companies in 2002. Anyway, it is good news for the essential life insurance industry, an original social benefactor and protector of widows and orphans that has also turned into a provider of retirement funds, employee benefits and means for estate preservation. Assuming prudent investment of the reserves, a legal requirement enforced by state laws, and with death benefits protected against federal income taxation, ordinary life insurance is a major vehicle for inter-generational transfer of funds. The insurance industry and the public will gain from the merger. Citicorp can concentrate in banking and security marketing, eliminating the conflict of interests between investment banking and insurance/annuity sales. The insurers will continue consolidating, and help defray the US trade deficit, as the Met does, by spreading employee benefit plans abroad, to such new industrial countries as China, India, Mexico, South Korea and Taiwan.

Another important consolidation is Proctor & Gamble’s buying of Gillette Company, for $57B. A lethargic company producing traditional consumer goods is acquiring a more dynamic younger companion that has progressed from musty razors to high-tech shavers (Mach3), batteries (Duracell), toothbrushes (OralB, Braun) and has had a 75% market rise. The old-timer P&G, with $51B in sales (Tide, Always, Iams, Charmin, Bounty, Actionel, Crest, Ariel, Downy, Pampers, Folgers, Wella, Olay, Head&Shoulders) wants to consolidate and expand, particularly in China, the fastest growing consumer market. It is ironic that the Chinese are now the industrial giants, and we have dropped to contending for their consumer goods market; but, anything to cure the US trade deficit... The P&G people, who have established a solid brand name in China, continue liquidating their losers, so far eliminating Sunny Delight, Jif Peanuts, Crisco and four detergents, including the well-respected Oxydol.

A strong reason for P&G’s need for partners is self-protection against Wal-Mart’s overwhelming ability to dictate their supplier prices, with the threat of cutting out the producer by creating a store brand. It is a major threat, when Wal-Mart consumes 25% of P&G’s production while P&G constitutes only 10% of their total sales. The producers’ response is to shed the weaklings and promote the strongest brand-name products that the predator cannot successfully imitate. It is war, make no mistake, and P&G has become the world’s largest advertiser.

A current example of Wal-Mart’s power is the oncoming collapse of Winn-Dixie supermarkets, squeezed between Publix markets and the Bentonville behemoth. It may not be apparent how much of the US trade deficit, 6% of its GDP, is due to Wal-Mart’s buying the bulk of their goods offshore. Wal-Mart destroys the livelihood of American factory workers, and our children will have to pay off the debts of this cheap-goods-drunk non-saver generation. And if the Chinese and Japanese stop investing their trade surpluses in US Treasuries, there emerges the threat of a collapsing US investment market. Meanwhile the Wal-Mart behemoth is closing a store in Canada that is near to getting unionized, as a warning shot that such activities will not be tolerated – although the company insists its action is prompted by lack of profitability, not union busting.

So, while a few companies are trying to recapture US markets overseas, Wal-Mart’s outsourcing will countermand much of such effort. Anti-trust action may not be suitable against them, there are imitators who mirror the market actions, Target, and the new confederation of the weak, Kmart and Sears. Anyway, anti-trust does not work in the long run. The breakup of the AT&T monopoly into a parent and seven Baby-Bells in 1984 and the Deregulation Act of 1996 have resulted in the B-Bs recombining into four major companies, and one of them, SBC, will now kindly absorb the moribund former long-distance giant, for $16B. For some more great deregulation effects we can look at the current airlines’ bankruptcies and the California electric power/Enron story, all essential industries going into that good night. Less government, yeah, that’s what we need, for sure.

Wally Dobelis thanks the NY Times and Economist for facts.

LOOKING AHEAD by Wally Dobelis

On the last day of February the Parks Committee of Community Board 5 preliminarily approved the redesign of the federally landmarked Union Square Park’s North End. The process, if not the result, has been a good example of community and government interaction, still moving forward.

Change has been a permanent feature of New York’s real estate, ever since we found out that an island cannot expand indefinitely, sideways and upward. Currently Mayor Bloomberg’s proposed changes for the West Midtown Rail Yards, also a CB5 topic, are getting some major press (he is striving for the 2012 Summer Olympics, enhanced revenue, rehabilitation of the dilapidated area with a stadium for the Jets, and new business and residential construction). Meanwhile, in our neighborhood, the Department of Parks and Recreation is doing its bit, to replenish the scant funding of maintenance of our essential green spaces through rent-paying restaurant concessions, park by park. In Union Square Park we have had the first such tenant for a few years, on a modest scale, the Luna Park restaurant, at the foot of the North End pavilion. In Stuyvesant Square Park, several attempts to convert the little convenience building into a food kiosk have failed, due to community resistance and the proposed concessionaires’ lack of interest. Further west, the food kiosk in Madison Square Park has been implemented.

Which brings us to the latest redesign of the North End of Union Square Park, nearly 20 years after the rehabilitation of 1985, one that converted a neglected haven for derelicts and drug dealers into a thriving community resource, with most of the credit due to the Greenmarket. The latest design, sponsored by Parks and the Union Square/14th Street LDC/BID, now renamed the Union Square Coalition, to be paid for by $8M of city and $6M of unnamed private funds, has run into major opposition.

Union Square Community Coalition, the major neighborhood group, after protracted discussions has voted to reject the project in its entirety. Over a dozen quasi-regulatory, community and consumer organizations and elected public officials have expressed their disapproval of substantial parts of the effort, if not of the whole: the Fine Arts Federation of New York, The Municipal Art Society of New York and its preservationist arm, Place Matters, Historic Districts Council, Flatiron Alliance, Greenwich Village Block Associations (an aggregation of 45 block associations) and Fifteenth Street Block Association. The sentiments are shared by Assemblymembers Steven Sanders (74th AD) and Deborah J. Glick (66th AD), State Senator Thomas K. Duane (29th SSD), and former City Councilmember Carol Greitzer (2nd CCD), as well as the Samuel J. Tilden Democratic Club, Gramercy Stuyvesant Independent Democrats and the Village Independent Democrats.

To understand the problems, the proposed redesign should be subdivided and evaluated in detail, element by element. The most objectionable appears to be the perceived enclosing of the North End, with a row of 15 trees facing 17th Street, from Broadway to PAS, and bleacher-like rows of “shaded public seating.” The designers have compromised and reduced the trees to seven, and eliminated the obnoxious seats, as well as a central water fountain that would disappear underground on the four Greenmarket days. How the seats would have been hidden on market days was never clear.

The North end of the park has traditionally been the site of public protest, from the first Labor Day parade in 1882 through the years of May Day observances, demonstrations and sharing of grief after 9/11. Keeping this space open appears to be the disapprovers' main objective.

An equally controversial item is the consolidation of the two playgrounds into one, with more space, for which City Councilmember Margarita Lopez (2nd CCD) had provided $1.9M of CC funds. This issue is tied in with the rebuilding of the upper part of the 1930 Pavilion as an upscale restaurant, with a bridged extension (“terrace”) above, while the “pit” below, currently used by Luna, would serve as a connection of the unified playgrounds. The design of this area is murky, particularly the addition of a “takeout window” for people with slimmer pocketbooks.

Councilmember Lopez, who a few days ago expressed regrets that her early support for the enlarged playground has been misinterpreted as sponsorship of the entire project, indicates grave reservations about the principle of privatization of this and other park facilities. There is possibility that Congressmember Carolyn Mahoney (27th CD) will also comment, soon.

While there is not much doubt that CB5 in its monthly meeting of February 10 will approve the report of its Parks Committee, the project faces a further rocky ride, through the Art Commission, and, subsequently the NYS Dept of Parks, Recreation and Historic Preservation, administrators of the National Historic Landmarks, of which Union Square Park is one. From the point of view of this old-time project manager, the plans are too patchy, and someone soon should call a halt until the definitions are completed. Approval of multi-part projects with undefined details is full of pitfalls. The battle against privatization in parks was forfeited long ago, but we can still strive to define limits, case by case.

LOOKING AHEAD by Wally Dobelis

Rush hour passengers on the Lexington Avenue line are the regular prey ofself-declared homeless entrepreneurs, who arrive with a bag of sandwiches,offer them to the needy and make a quick pitch for donations, departing tothe next car in a hurry. Time is money. It was therefore a surprise thatthe most recently encountered solicitor, a big bald bullet-headed man oncrutches, took his time to make an impassioned speech against addiction (hewas a disabled Viet war vet, who threw away his post-disability youth ondrugs), Wall Street bigtimers who snort cocaine, and politicians who do notsupport the veterans and want to close health care facilities, such as theVA hospital on East 23rd Street. He ended with good words about the copsand firemen and 9/11 volunteers. The speech was sincere, painfully made,the people, mostly the young and immigrant types, responded with bothdollar bills and and change, as the man, worn out by his effort, slowlyhobbled out of the car at Brooklyn Bridge, collapsing on the platformbench. This man could get elected, think of Gov. Ventura.

His speech also reminded me that I had not made my year-end visit to GroundZero, and I promptly got off, at Fulton Street.The WTC site is still a huge hole in the ground, the bottom can be seenfrom the Southern exposure. Tourist buses surround it, and little smilingKorean maids mix with the crowd, speechlessly offering a souvenir pamphletfor sale. A row of licensed souvenir t-shirt, cap and food wagons is keptoff the site at the South-East corner, on Liberty Plaza. The faded darkhistory boards attached high on the heavy wire fence, surrounded byreaders, are showing their age, with the plastic film peeling off here andthere. People still place fresh flower sprays in the niches of the cyclonewire.

The atmosphere is dignified, and a story-teller receives respectful attention, as he roams around, handing out free maps, reciting the storiesof the buildings and explaining how he was saved by having to take hisdaughter to school that fateful morning. The black-covered damaged DeutscheBank skyscraper at the South end is still coming down, slowly, floor byfloor, to protect the subway tunnels below it, while at the North edge,the replacement of #7WTC, the last building to collapse, is growingpractically as we speak.

Something positive, while the redevelopment of the entire WTC site is slumbering, overtaken in newsworthiness by the currentstrife between Mayor Bloomberg and the Madison Square Garden worthies, over whether the 59 blocks west of T&V Country should be rezoned for a $1.4billon stadium, to serve the Jets and the dreamed-of 2012 Olympic Games.The City Planning Commission has given the plan its blessing, with onedissent from the Public Advocate Betsy Gottbaum's representative. The rezoning has been the subject of lengthy discussions and messages fromCommunity Board 5, barely mentioned in the dispatches from the battlefront.

As you have read here in the CB5 reports, the effort involves us a lot, with an expansion of the Jacob Javits Convention Center, extension ofthe #7 subway line, huge new office construction (26 million square feet),20 acres of parks and 13,600 new housing units, sort of like a newStuyvesant Town and then some. The Jets will pay $800 million of theStadium costs, with the city picking up the balance of $600 million. Whatoptimists! The CPC chair Amanda Burden projects a revenue flow from theproject of 1.6 billion, and 200,000 private sector jobs, apart from thethousands of construction jobs over a decade and more.

This plan is a huge remake of our city, per Ms Burden, the most ambitious since the grid of 1811 which laid out the future map of Manhattan. Itshould have a huge resident and public interest organization input, andexposure. The NYTimes,who had been treating the project in its litefashion, as a personal bumping match between the Mayor and James Dolan,head of Cablevision, the MSG owner, has now come out with an editorial,damning the Stadium as financially unsound, following the lead of theRegional Plan Association. The latter offers a futuristic alternative ofroofing over the rail yards, and building on top of the roof.

But the Stadium juggernaut rolls on. So much for the value of neighborhoodopinion and respect for the wishes of the people directly affected by therehabilitation. Neighborhood objection to projects is an automatic, butthis protest has merit. An underused an ugly Stadium (eight home games ayear) engine drives a monster rehabilitation project that has some good andcost-effective parts, and should be considered piece by piece, slowly anddeliberately. Maybe the three rulers of Albany, Messrs. Pataki, Bruno andSilver, will slow down the process, but I would not count on it

LOOKING AHEAD by Wally Dobelis

An East Midtown family tells this story:

Since 9/11/2001 we feel that our capacity to withstand winter colds and bronchitis has deteriorated, and the only way to survive is to go south for the colder weeks. When the snow is down and the only exercise available is slogging around Gramercy and Union Square, and to and from the IRT, and the weather keeps one landlocked a sweltering apartment, a leave of absence from the beloved city becomes an almost overwhelming obsession.

We had planned to leave mid-January, but an event intervened, and our flight was postponed to Saturday, January 22, the expected day of the blizzard. We kept checking with American Airlines, our carrier, about their expectations. No postponement was AA’s steadfast answer, and on the morning of the 1 PM flight we set out for the airport three hours early, for whatever good it would do.

The day was bitter cold. The departures entrance at LaGuardia was windswept, too cold for an outdoors check-in, and a passing redcap, seeing our plight, packed our trunks on his cart and rolled us inside; then, after asking for our flight number and our picture IDs, ran of with the latter. We were puzzled, then worried, until he reappeared, holding the streaming luggage tags for our three checked trunks in his mouth, and our tickets, boarding passes and drivers’ licenses in his hands. He attached the tags and told us to go to Gate D; he’d take care of the security check. That was good for a $10 tip for the enterprising redcap, and only afterwards did I begin to think about the personal security aspects of the transaction.

Once inside, we had a breakfast and bought takeout food in the Concourse next to the lines in ticketing area. A cell-phone armed couple next to us was calling family members, ruefully explaining that they expected to be snowed in until Monday. This was too much pessimism, and we picked up our coffees and hied to the security gate. The indignities at the security entrance were not demeaning, although a few grumbled about removing belts and shoes (as it turned out, our digital camera card was wiped out, but that’s another matter).

Once in the waiting area for AA flight to Fort Lauderdale, we managed to take seats facing the runways. Aircraft were rolling in and out at a steady pace, although the skies were leaden there was no precipitation – but then, we had arrived at 11 AM, way ahead of the 1 PM departure time. The passengers around us were quiet, sitting with their arms crossed and eyes glued on the runways, almost prayerful, reminding me of the Yankee fans at the crucial game of the Boston – New York playoffs. The next two hours were a torture.

At 12:05 the first snowflakes appeared, in a steady fall, within 15 minutes covering the blue utility vehicles outside the picture window with a film of white. This was the real thing, right on time. At 12:30 an official announced the first boarding, of Zone A, the rearmost seats (the boarding passes now carry the zone information), stressing urgency, and the boarding proceeded in a steady stream. The crowd had come out of its prayerful vigil, and a wiseacre ahead of us announced: “The faster we board the sooner we leave,” to some oh yeas from the line.

Despite announcements from the cabin attendants to stow carryons under the seat and save overhead space for the rollaways, at flight time there were still late arriving passengers, probably some of the standbys, standing in the gangway, forlornly looking for stowage space. An impatient passenger actually got up and started opening the overheads, and some others moved their bags to tighten the space until the standbys' gear was stowed. But the volunteer effort did not hasten departure, the captain came on the horn to announce that de-icing was needed, and that it would take some time. A groan ensued, but sudsy water started flowing across the portholes almost instantly, as a huge water truck with a cherry picker and a man in the bucket started spraying us, turning the wings of the aircraft a promising pink.

Pulling out of the gate, the plane performed some intricate dance maneuvers in the snow, which seemed a couple of inches deep, although one could still see the orange runway markings under the cover. There were tire tracks ahead, and we seemed to follow them, to the satisfaction of any winter driver, who knows the perils of venturing a car into fresh snow. Then the plane got on the actual runway and started revving up, and there was no need to worry about torque and traction, as jet power took over the job.

The plane took off at 1:30 PM, lifting easily, to the applause of the passengers, and cutting through the mist until it reached full sunshine, 35,000 feet above. Two and a half hours of airtime later, as the Airbus 80 landed at Fort Lauderdale, we found out that we had been among the last to leave LaGuardia Airport before the snowfall closed off all air traffic. The blizzard stranded some 200 flights that day and 500 the next.