Barry Sullivan has his work cut out for him. As New York City's deputy mayor for finance and economic development, Sullivan's primary task is to help reverse five years of economic decline, which began with the stock market crash of 1987 and continues with a recession that has yet to hit bottom.
But according to the city's business elite, no one is better suited for the job. Sullivan was appointed to the post in March by Mayor David N. Dinkins, who acted on the advice of the New York City Partnership and David Rockefeller, former chairman of Chase Manhattan Bank.
In moving to City Hall, Sullivan ended a 35-year career in banking and finance, retiring as chairman and chief executive officer of the First National Bank of Chicago. His contacts in finance have already paid dividends, supporters say.
Sullivan, in his first six months on the job, has worked out tax-incentive packages to stop Prudential Securities Inc. and the Morgan Stanley Group from moving to neighboring states.
Still, others warn that it is far too early to pass judgment on Sullivan's record. Recently, for example, First Chicago Capital Markets announced it would move 1,000 jobs out of the city. New York City officials say the bank demanded too large of a tax rebate.
Sullivan was not involved in the First Chicago negotiations because he is still a paid consultant for the firm's parent company. But some analysts say the move is symptomatic of the city's business-retention problems.
The mayor is expected in the next few months to make a major policy statement that will likely discuss many of Sullivan's suggestions on how the city can promote economic growth.
In an interview with Bond Buyer reporter Charles Gasparino, Sullivan describes how the city will address its near-term problems and how it can survive and thrive in a global economy.
Q: What is the responsibility of your office in the context of city government?
A: The primary role is economic development, although the office also plays an important role in the financing of the city as the title would indicate.
On the economic development side, its mission is to retain and attract business and help the businesses we have now grow. The office is attempting to reverse the decline of jobs that has occurred over the last couple of years outside the normal force of the marketplace, which is the principal generator and destroyer of jobs and something the city has no control over.
Q. Can you describe what this office does on the finance side?
A: This role concerns financing of the city's new debt and rolling over of present debt, thinking about new debt instruments, such as how we tap new markets for funds and how we lower the cost of the city's financings.
Q. In June, you and Mayor Dinkins went to Europe as guests of the New York City Partnership and New York Chamber of Commerce and Industry. Could you explain what you did there?
A: The primary reason for the trip was to put the flag of the city in Europe and to tell Europe's business leaders that we are interested in being the headquarters for European and all other international companies.
When we were there, we also wanted to talk to companies and their key executives to determine if they wanted to participate in New York City financing and whether they wanted to make letters of credit or other kinds of credit available to us.
Q: Did you accomplish your mission?
A: The purpose of the European trip was to talk to as many of the head offices of [European banks] as we could. We couldn't talk to everybody, but on at least two occasions the leaders of the meetings we attended said basically their minds were changed about New York City and that they were impressed with the mayor's commitment to fiscal stability.
Q: Your office says poor market conditions led the city to put on hold a transaction to sell taxable New York City Yen-denominated bonds to Japanese investors. When conditions improve, will you try a similar transaction for European investors?
A: We are working on that now. It takes time to put the right package together. And, to some extent, when we were in Europe, we weren't in a major rush because we had already arranged the kind of financing we were going to do last month [October's $1 billion city general obligation bond deal].
So, we are hoping to do one of these financings at the end of this year or next year.
Q: What is the benefit of selling New York City bonds to Japanese investors?
A: As a general principle, we would like to take advantage of the Japanese market because it represents a new purchaser and diversifies the source of our paper.
That is desirable for any large financing activity like ourselves. But we want to do it when we can get an advantage out of it for the city.
So, it's a question of waiting. It was advantageous for a while. We were thinking of the fall to do the deal, but we had the changes in the currencies and interest rates, and the positive differential went the other way. So the deal is on hold until the market conditions change.
Q: What is the largest fiscal problem facing the city? Would you say it's the departure of major businesses or the projected $1.3 billion budget gap in fiscal 1994?
A: What businesses are leaving? The real issue is having people look at the public information that's available.
We put out a quarterly plan. And the August quarterly plan lays out the fiscal issues of New York. In fiscal 1994, we have a $1.6 billion deficit [New York City budget officials now say the gap is $1.3 billion], and that's assuming any labor settlement will be fully offset by productivity gains.
That's a significant financial issue for the city. We are working at solving this as we speak.
Q: How do you think you will eliminate that large of a budget gap?
A: We have to do a variety of things.
First, we have to continue to do what we have been doing, such as completing some financings at a better rate than the assumptions in the financial plan.
On the other hand, we have a soft real estate market, so the assessed values of real estate will be lower than what appears in the plan. That will have a negative impact on the budget.
We've been talking with the city agencies to determine how we can make other savings. And then there are other areas where the federal government can help and the state government can help. Obviously, any approach to the federal government will not come until Nov. 4, when we know who is the next President and the makeup of Congress.
Q: Do you think the city will fare better under the Clinton administration?
A: Obviously.
Clinton is a Democrat and the mayor's a Democrat. If there's a brotherhood among Democrats, it's probably easier to get in the door to make a proposal under a Clinton administration.
Q: How much aid would you ask the Clinton administration to provide?
A: I'm not the guy to decide that -- the mayor's the one.
I'd ask them for a lot. But our attitude is that the primary source in dealing with the prospective deficit is ourselves.
Q: How is your office dealing with the city's soured economy, and what businesses are you trying to attract?
A: Much of the city's job growth is going to come out of expanding the headquarters' business, and that's an international focus.
We have a large number of domestic companies, which we're trying to hold on to. It's unlikely that we will have a large movement of headquarters from other cities to New York.
But with greater and greater local competition, and with greater and greater global competition, more companies will be coming from overseas to locate here. We're the major city in the United States for this.
Q: How about in the area of small business?
A: We want to keep growing as the center of regional economy. One way is to support small business, which is a big employer in the United States and in New York City.
In some respects New York City has not been an easy place for small businesses, such as in dealing with city government. We've got an inter-agency task force in the city that will be coming up in the next couple of months to determine what are the problems of small business and how we can solve them and help [the businesses] grow.
Q: Do you expect the city to continue providing tax incentives to other large Wall Street firms that threaten to leave, even though some critics call the practice unfair?
A: Our policy is to use our resources to persuade every major employer to remain in the city, and to help small- and medium-sized firms grow. But it is not true, as some may suggest, that we are in the midst of some sort of careless give-away. The reason the deals get so much attention is that they are so rare.
