Brooklyn: An Economic Review

Brooklyn’s economy has undergone considerable changes in the last several decades, and remains a borough in transition. With the shift to a service economy, Brooklyn has yet to develop a significant presence in services that find their customer base outside the region. Such export-oriented businesses tend to pay higher wages and help spur economic growth. Consequently, Brooklyn’s employment base is now concentrated in industries that serve the local market, and pay relatively low wages.

Half of Brooklyn’s working residents travel to jobs within the borough. Jobs in the borough have traditionally been concentrated in manufacturing, but manufacturing employment has declined by 60 percent since 1977. The remaining manufacturing sector is concentrated in apparel and niche manufacturing concerns such as furniture, fabricated metals, and food products.

On the other hand, service employment has risen from 23 percent to over 40 percent of Brooklyn’s jobs. Within the services sector, public and private health services account for nearly one out of every five jobs in Brooklyn.

In 1997, private employment finally surpassed its level in 1989, the beginning of the last Citywide recession. But unemployment and income data show that Brooklyn has felt only a slight echo of New York City’s recent economic boom. Brooklyn’s unemployment rate of 9.4 percent ranked second highest of the five boroughs, although slowed labor force growth has led to further declines in unemployment in early 1999.

Slow employment growth and a large share of low-wage industries are reflected in slow total wage growth and low average salaries. The $27,870 average wage paid by Brooklyn employers in 1997 ranked the lowest in the City. After adjusting for inflation, there has been no growth in wages in Brooklyn since 1992.

Nearly 30 percent of Brooklyn residents lived in poverty in 1995, the most recent year for which data are available, and nearly half of the borough’s poor were under age 18. Brooklyn accounted for 41 percent of all children living in poverty in the City in 1995.

Although the City’s economic expansion has not significantly bolstered incomes in Brooklyn, the real estate market is improving. The market value of real property in Brooklyn has increased in each of the last four fiscal years, largely on the strength of the market for one, two, and three family homes.

As in the rest of New York City, reported crime has dropped dramatically in the 1990s, with the number of incidents falling by 50 percent between 1990 and 1997. Public assistance rolls have also declined significantly, showing a 33 percent reduction between FY 1994 and FY 1998 that equals the City’s average decline.

In recent years, there has been a renewed recognition of Brooklyn’s economic resources including its waterfront properties, changing demographics, and sizable workforce. Niche manufacturing, such as food processing and design-related manufacturing, is achieving some success in local, national, and international markets, with the help of numerous assistance programs. These include initiatives such as the Food Venture Center, the proposed Brooklyn Mills incubator, and "Brooklyn Goes Global," marketing assistance sponsored by the Brooklyn Chamber of Commerce.

Brooklyn has added several Class A office buildings to its commercial inventory, centered around Metrotech Center downtown. The Renaissance Plaza office tower opened in 1998, and includes the Marriott Hotel, the first large-scale hotel to open in Brooklyn in half a century.

In addition, the development of large retail projects, numerous multi-screen cinemas, luxury residential apartments, and proposals for significant infrastructure investment, such as a Cross-Harbor Tunnel, all signal renewed investment in the City’s largest borough. However, Brooklyn’s lagging incomes and high poverty rates signal the need for a more comprehensive economic development strategy.

The Village of Breuckelen became the first municipality in what is now New York State when it was authorized by the Dutch West India Company in 1646, one hundred and twenty two years after Giovanni da Verrazano first explored the New York Bay. In 1683, now under English rather than Dutch rule, Breuckelen joined with Bushwick, Flatbush, Flatlands, Gravesend and New Utrecht to form King’s County.

Through a series of secessions and consolidations, the City of Brooklyn and King’s County became coterminous in 1896, just two years prior to the consolidation of what are now the five boroughs into New York City. By this point, Brooklyn had established itself as one of the largest cities in United States, with an 1890 population of 1,166,582, and also as one of the country’s largest centers for the production of manufactured goods.

Brooklyn was ethnically diverse, with the descendants of European and African-American residents joined by waves of immigration from northern and western Europe in the 1840s and 1850s, followed by a second great wave of eastern and southern Europeans at the end of the 19^th century. Brooklyn’s African-American population also increased with the "Great Migration" from the rural South to northern cities, starting in 1915 and stretching into the 1950s, while, beginning in the mid-1960s, immigrants hailed from the Caribbean, Latin America and Asia.

By the turn of the century, Brooklyn had become rich in cultural assets, among them the Brooklyn Academy of Arts and Sciences (now the Brooklyn Museum of Art), the Brooklyn Academy of Music, Pratt Institute, and Prospect Park, the masterpiece of landscape architects Calvert Vaux and Frederick Law Olmstead. More prosaically, Coney Island had become a popular entertainment center, serving up "frankfurters" and featuring roller coaster rides.

Brooklyn is the home of many "firsts." Eastern Parkway, the world’s first six-lane highway was completed in 1868; Erasmus Hall Academy was established in 1787 as the first public school in the country. The Brooklyn Children’s Museum opened in 1899, the first museum designed for children. And, the first children’s library in the U.S., the Brownsville Children’s Library, was established in 1914 by the Brooklyn Public Library.

In 1990, the U.S. decennial census counted Brooklyn’s population at 2,300,660, the most populous New York City borough. If considered an independent city, the borough would rank as the fourth largest in the United States after the rest of New York City, Los Angeles, and Chicago. It has been estimated that one out of every seven people in the nation was either born in Brooklyn, lived there at some time in their lives, or had relatives who had lived there.

Brooklyn is the most populous of the downstate counties, and along with Queens, is the location of choice for new immigrants. However, Brooklyn’s economy has undergone considerable changes in the last several decades, and remains a borough in transition. With the shift to a service economy, Brooklyn has yet to develop a significant presence in services that find their customer base outside the region. Such export-oriented businesses tend to pay higher wages and help spur economic growth. Consequently, Brooklyn’s employment base is now concentrated in industries that serve the local market, such as health care and personal services, which pay relatively low wages. Brooklyn still retains some of its manufacturing base, and many Brooklynites commute to jobs outside the borough, often in export-oriented industries that provide higher salaries. Citywide economic growth in the past few years has also helped to bolster the borough’s real estate market.

After losing population for most of the 1990s, Brooklyn grew by more than 2,000 people between mid-1997 and mid-1998 to total almost 2.3 million people (see Appendix A). About 30 percent of all New Yorkers now live in Brooklyn, making it the most populous of the five boroughs. In 1998, the large domestic out-migration of over 52,000 people was tempered by a significant international in-migration of almost 34,000. Taken together with the number of births, 40,000, double the number of deaths, Brooklyn’s population rose.

Brooklyn’s domestic out-migration, which has been the largest of the five boroughs throughout the 1990s, has slowed as the decade progressed. Its international in-migration was also larger than in the other boroughs until 1998, when international in-migration to Queens was slightly higher. Even so, Brooklyn population has declined by 49,000 people since 1989. Of the other four boroughs, only the Bronx has also experienced a population decrease (18,000), while the rest of the City has grown.

Brooklyn is within the top 15 counties of all United States counties in terms of its population concentration of many minority groups. In fact, as of 1997, Brooklyn had the third largest African-American population, almost 925,000 people, of all the counties in the United States, and had increased by 2,000 people between 1990 and 1997. The Hispanic population in Brooklyn numbered almost 520,000 people and is the second largest concentration in New York City. More than 56,000 people of Hispanic origin migrated to Brooklyn between 1990 and 1997. The Asian population in Brooklyn has also grown, rising by 30,000 to total 145,000 people, the third largest concentration of Asians in New York City.

Brooklyn’s population is relatively young. Overall, Brooklyn has the most people age 44 and under of any borough in the City – nearly 21 percent of the City’s total population (see Figure 1). This reflects both Brooklyn’s larger population and the relatively high share that the younger age groups make up within the borough. Both Brooklyn and Queens have equivalent shares of people age 45 to 64, but Queens has the largest concentration of residents over age 65.

Since 1990, Brooklyn’s population has grown only among residents below age 17 and in the 45-to-64 age group (see Appendix B).

Census data show that at the beginning of the 1990s, nearly half, or about 451,000, of Brooklyn’s employed residents worked in their home borough. Another 38 percent worked in Manhattan, with the rest working in surrounding counties, most notably Queens. However, Brooklyn also attracted workers from the surrounding region, mostly from Queens, Manhattan, Nassau, and Staten Island.

The movement of this large number of workers involves both private cars and public transportation. Over the last few years, public transportation has enjoyed a resurgence in the City, and this trend is evident in Brooklyn. Bus ridership had been declining steadily in the early 1990s, for both weekday and weekend travel, but average ridership has soared in 1997 and 1998. Subway ridership has also risen, although at a slower rate. In 1997, the most recent period for which data are available, Brooklyn weekday ridership increased 2.2 percent, while weekend ridership grew 4.5 percent. Weekday ridership grew by nearly 7 percent at the Atlantic Avenue/Pacific Street station, while at Court Street/Borough Hall, the busiest station in Brooklyn, it rose by 1.5 percent.

Many of Brooklyn’s bridges and highways are old or have been neglected. The City is currently engaging in a number of major reconstruction projects, such as the rebuilding of the Gowanus Expressway, to improve road conditions. Other projects, such as reconstruction along the Belt Parkway and the Brooklyn-Queens Expressway, are being planned. Trucks are a major source of vehicular congestion in Brooklyn, and there are many competing proposals for addressing this problem.

However, there is a lack of comprehensive planning for transportation and other infrastructure needs, both in Brooklyn and across the entire region. Given the many pressing needs and the high cost of addressing them, we urge that infrastructure issues be coordinated so that the entire area can benefit economically from these investments.

Brooklyn has traditionally had a heavy concentration in manufacturing, having the largest number of manufacturing jobs outside of Manhattan. In 1977, manufacturing accounted for over 30 percent, or almost 120,000, of the borough’s jobs. Since then, manufacturing employment has been cut in half in the City, but has declined by 60 percent in Brooklyn. Although it now accounts for less than one-eighth of the borough’s employment base, manufacturing is still relatively larger here than in the other boroughs (see Figure 2).

Apparel accounts for most of the manufacturing jobs in Brooklyn, as it has for the last several decades, and the borough has the second highest concentration of that type of manufacturing in the City. In addition, there are several industries that, while not employing large numbers, are centered primarily in Brooklyn. These niche manufacturers produce furniture, fabricated metals, food products, textile mill products, and rubber and plastic products. Many of these firms are the last survivors of Brooklyn’s once large and thriving durable goods manufacturing sector. Employment in durable goods industries has fallen much faster than in nondurable goods, so that by 1997 only 14,000 durable goods manufacturing jobs remained in Brooklyn, down from over 37,000 two decades earlier. Heavy industries such as shipbuilding left Brooklyn a long time ago. The borough’s port facilities, a source of well-paying jobs in the transportation rather than manufacturing sector, have also diminished substantially over the last few decades.

Brooklyn’s industrial makeup also favors the local market sector, which services the needs of residents and businesses in the City. The local market sector includes industries such as trade, construction, transportation, and personal, medical, and social services. Although over half the City’s trade sector jobs are located in Manhattan, trade makes up a larger share of jobs in the other boroughs. The type of trade stores that are concentrated in Brooklyn, and Queens and Staten Island as well, are building materials and auto dealers. Manhattan, by comparison, has at least half of the City’s general merchandise, apparel, and furniture stores. Almost two-thirds of the City’s restaurants are in Manhattan.

As manufacturing has declined, the service sector has risen to replace it (see Figure 3). This trend has occurred throughout the City, but is more noticeable in several boroughs, including Brooklyn. Today, the service sector accounts for over 41 percent, or 170,000, of the jobs in Brooklyn. In 1977, its share was about 23 percent.

However, the service sector is very large, and salaries for jobs within this sector vary greatly. The broadest distinction within the service sector is between local market and export-oriented businesses. In general, the export sector consists of industries that provide goods and services outside the region. The service component of the export sector is comprised of hotels, business services, professional services, and engineering, accounting and management consulting. Jobs in these industries tend to be higher-paying than other service sector jobs. Unfortunately, these jobs account for a very small share of Brooklyn’s employment base, since most of these jobs are located in Manhattan. Although Brooklyn has the greatest concentration of service jobs outside of Manhattan, the service sector jobs located in Brooklyn are primarily local market oriented, comprising personal services, social services, and most importantly, health services.

Private health services provide almost 16 percent of Brooklyn’s jobs, and are the second largest concentration of health service jobs outside of Manhattan. Most of these jobs are in hospitals.

Government health services account for almost half the government employment reported for Brooklyn, as several large City-owned hospitals such as Woodhull, Coney Island, and Kings County hospitals are located in the borough. Kings County Hospital, which originally opened in 1831, is currently undergoing a major $223 million rebuilding project, which includes a new 340-bed facility. Although the overall number of beds in the hospital is being reduced, other patient care facilities more tailored to the neighborhood’s health care needs are being expanded. In addition, another $345 million in facility improvements, equipment, and technology are planned.

Together, private and government health care represent nearly one out of every five jobs in Brooklyn, and are a vital component of the local economy. As such, health care restructuring has potentially large impacts on the borough.

Finally, social services account for over 11 percent of the borough’s jobs, a greater concentration than in the rest of the City. Most of these jobs are in individual and family services, which encompasses such activities as community centers, counseling and crisis centers, meal delivery programs, self-help organizations, settlement houses, and more. These organizations have expanded as government cut back its direct involvement and instead entered into contracts with private providers of these services. As such, they are extremely dependent on government funding.

Not surprisingly, most establishments in Brooklyn are small. Of the approximately 36,500 establishments in Brooklyn, over 91 percent had fewer than 20 employees. Nearly one-third of the jobs in Brooklyn are in establishments of this size, most of which are in the trade and service sectors (see Figure 4). There are over 2,700 establishments in the 20-to-99 employee range, primarily in trade, services and manufacturing, which provide over 100,000 jobs.

Establishments employing 100 people or more provide another two-fifths of the jobs. These establishments are primarily in the service sector. Of the approximately 70 establishments employing 500 or more people, nearly all are in services, primarily health care.

After declining slightly in 1996, private employment in Brooklyn grew by almost one percent, or about 2,900 jobs in 1997, the most recent year for which data are available, to total 380,000 (see Appendix C). Continued losses of government positions lowered the rate of increase in total employment. Because of its concentration in local trade and services, which depend mainly on population, Brooklyn employment gains lag the City as a whole, where private employment grew by 2.1 percent in 1997.

Even so, by the end of 1997, the number of Brooklyn private sector jobs had surpassed that of 1989, the beginning of the last Citywide recession. Between 1989 and 1992, almost 16,000 jobs, or 4.2 percent, were lost. Since 1992, over 18,000 jobs have been added in the borough.

The trade sector added the largest number of jobs in Brooklyn in 1997 (see Figure 5). Retail trade added 1,100 jobs, its biggest increase of the 1990s, with jobs at restaurants accounting for almost 40 percent of the growth. Employment at food and apparel stores also improved. Increases in local and suburban transportation and motor freight jobs helped the transportation sector. Within the service sector, social services added over 1,000 jobs, while health care services declined by 600, reflecting consolidations at hospitals that more than offset growth in areas such as home health care services.

Although it continued to lose jobs, the manufacturing sector saw its losses slow in 1997. Apparel manufacturing, particularly women’s clothing, gained almost 1,500 jobs, while the printing and publishing industry lost 1,200 jobs. However, given sharp Citywide declines in apparel manufacturing during 1998 because of increased import competition from Asia, apparel manufacturing in Brooklyn likely recorded a similar downturn. Manufacturing of durable goods also declined in 1997.

Because of the continued consolidation among banks, the FIRE (finance, insurance and real estate) sector lost jobs. The 800 jobs lost in the banking industry were somewhat offset by gains in securities, insurance and real estate. Government employment fell, with almost half of the loss attributable to declines in local government. (For more detail on recent employment changes, see Appendix D).

Unemployment rates in the City have remained high despite record employment growth in 1997 and 1998. Across all five boroughs, rates rose during 1997, but then eased somewhat in 1998 (see Figure 6). Nonetheless, Brooklyn has the second highest unemployment rate in the City, averaging 9.4 percent in 1998. Going into 1999, monthly data show the unemployment rate has continued to decline in the boroughs.

Unemployment rates fell in 1998 because the number of people getting jobs grew faster than the increase occurring in the labor force. This growth in the labor force reflects immigration, students entering the workforce, homemakers reentering the job market, welfare reform, and any other changes that cause people to begin looking for work. At play in recent years have been both the pull of economic growth bringing people into the labor market, and the push of welfare reform initiatives that have lead to an emphasis on work and a sharp reduction in the welfare rolls.

Indeed, the City’s labor force expanded rapidly in 1996 and 1997, increasing much faster than jobs were created and people employed. As a result, unemployment rates increased. When labor force growth slowed, and employment growth increased in 1998, the unemployment rate fell. These trends affected all the boroughs. In Brooklyn, labor force growth fell from 3.2 percent in 1997 to 1.3 percent in 1998 (see Appendix E), and during the first three months of 1999, it has declined by 1.6 percent compared to the same period last year.

Total wages paid by firms located in Brooklyn show considerably slower wage growth than in the rest of the City, reflecting an industrial mix that leans toward a greater concentration of lower-paying local market jobs. Manhattan, with its concentration of rapidly growing and higher-paying financial, professional, and business service jobs, enjoys the best rate of wage growth in the City. However, as Figure 7 shows, wage growth slowed in Brooklyn during 1996 and 1997 (the most recent years for which data is available), to the smallest rates of increase in the City.

While these growth rates reflect slower employment growth in Brooklyn, the mix of industries is also weighted toward lower paying jobs. This is reflected in average salaries, with Brooklyn’s $27,870 average in 1997 ranking as the lowest in the City. While it could be expected to be less than Manhattan’s $59,160 average, it was much less than in either Queens ($31,430) or the Bronx ($30,160). The average salary in Staten Island ($28,360) was closer.

In addition, in many industries, average salaries are lower in Brooklyn than in the other boroughs (see Figure 8 and Appendix F). For example, manufacturing wages are highest in Manhattan because of the headquarters functions located there. Similarly, the securities industry boosts the financial industry’s salaries in Manhattan where it is centered. However, Brooklyn has a large concentration of health care jobs, and average salaries here are lower than the other boroughs -- $33,530 compared with a range of $36,140 in Staten Island rising to $43,100 in Manhattan. This primarily reflects lower hospital salaries in Brooklyn, which does not have a major hospital research center. Hospitals in Brooklyn are directed more toward providing local services.

After adjusting for inflation, there has been no growth in wages paid by firms located in Brooklyn since the recession ended in 1992, and in both 1996 and 1997, real wages actually declined. While wages have not grown in the Bronx since 1992, there have been small gains in Queens and larger increases in Manhattan and Staten Island. Thus, wages paid in Brooklyn have made no contribution to overall real wage growth in the City over this period (see Figure 9).

Since there have been employment gains after 1992, the lack of growth in real total wages means inflation-adjusted average salaries have actually declined in Brooklyn, by an average annual rate of 0.7 percent. This primarily reflects the mix of jobs being created, most of which are in low-paying areas such as retail trade and social services.

Growth in overall personal income, which includes not just wages but also income from partnerships and proprietorships, dividends, interest, rent, and transfer payments, is also lower in Brooklyn than in other parts of the City. During 1996, the most recent year for which data are available, personal income increased 4.4 percent in Brooklyn, about the same rate of growth as in Queens and the Bronx, but substantially less than growth in Staten Island (5.3 percent) or Manhattan (6.7 percent). The differential is due to faster growth in these boroughs for wages and earnings and, to a lesser extent, dividends, interest, and rent. However, in Brooklyn and the Bronx, the slower growth in these categories is somewhat offset by greater gains in transfer payments (see Appendix G).

Transfer payments consist primarily of government payments to individuals for such things as pensions, disability benefits, medicare, welfare, veterans’ benefits, and unemployment insurance benefits. In both Brooklyn and the Bronx, transfer payments constitute over 30 percent of personal income, compared to a range of 10 percent to 25 percent in the other boroughs. However, because of Brooklyn’s size, this borough accounts for over 30 percent of all transfer payments received in the City. This share has been rather consistent over the last thirty years. Medical payments, not just for Medicare but also the larger Medicaid payments for welfare recipients and other qualifying individuals, comprise over half the transfer payments received in Brooklyn. Medical payments are one of the fastest growing components of transfer payments, not just in Brooklyn but throughout the City.

On a per capita basis, personal income for Brooklyn residents totaled $22,460. Income was lower in the Bronx, but slightly higher in Queens and Staten Island. Manhattan residents had the highest per capita income in the City – $64,410 – reflecting the higher wages and greater dividends, income and rental income they received. By comparison, per capita personal income for New York State in 1996 was $29,055.

Within Brooklyn, the areas with the highest household incomes included Flatlands/Canarsie, Brooklyn Heights/Fort Greene, and Park Slope/Carroll Gardens. The lowest incomes were in Bushwick, followed by Bedford Stuyvesant and Brownsville/Ocean Hill.

The high levels of transfer payments that Brooklyn receives as part of its personal income flows reflect the high level of poverty in the borough. In 1995, the latest period for which county data are available, 665,700 people, or nearly 30 percent of Brooklyn residents, lived in poverty. Brooklyn accounted for about 38 percent of all people living in poverty in New York City, much greater than its share of the general population. Among the boroughs, only the Bronx has a higher concentration of people in poverty.

Poverty rates rose across the City between 1989 and 1993, in response to the severe recession at that time. Although poverty rates fell somewhat between 1993 and 1995, Brooklyn’s share of the City’s population living in poverty has been relatively consistent. However, in 1989, only about 23 percent of the borough’s residents lived in poverty.

Although data are not yet available for the counties, poverty levels across New York State had not improved between 1995 and 1997, indicating there may not have been much improvement in Brooklyn in the more recent period.

Nearly half of the people living in poverty in Brooklyn are under age 18. Given the high concentration of youth in Brooklyn, the borough accounted for 41 percent of all children living in poverty in the City in 1995.

The market value of real property in Brooklyn, as estimated by the New York City Department of Finance, has increased in each of the last four fiscal years, although the total value of $65.8 billion in FY 1999 (July 1998 to June 1999) is still slightly lower than the total value in FY 1993. Market values declined by nearly 7 percent between fiscal years 1993 and 1994, but have risen since then. More than 80 percent of the market value for Brooklyn is attributable to residential property (see Figure 10), and most of this is in Class 1 properties, which is comprised of one, two, and three family homes.

Market values for all real property in the other four boroughs declined by more than 4 percent between fiscal years 1993 and 1999, compared with a decline of only 0.8 percent in Brooklyn. Brooklyn has done relatively better because its Class 1 properties, which make up such a large portion of the total market values of Brooklyn properties, experienced a 0.6 percent increase in total market value since FY 1993. By comparison, the rest of the boroughs suffered because Class 1 properties in the Bronx and Queens declined slightly, while commercial properties in Manhattan lost almost 13 percent of their market value during this period.

Because some of the increase in total Class 1 market value is attributable to additions of new properties, the average market value across all of Brooklyn for a Class 1 home in FY 1999 is still below the level in FY 1993 (see Figure 11). Nonetheless, the gains in recent years have been significant, with an increase of more than 4 percent between fiscal years 1998 and 1999.

For the different neighborhoods in Brooklyn, it is possible to track changes in the median (rather than the average) value of homes. These changes in home values varied, with some neighborhoods experiencing increases and others decreases (see Appendix H). Increases in values were not confined to those neighborhoods with home values above the borough median, nor were decreases only in neighborhoods below the median. For example, values in the neighborhood of Brownsville/Ocean Hill, with the lowest median home value in 1991, increased by 50 percent during this period and Bay Ridge, among the higher valued neighborhoods had a decrease in the median home value of 9 percent.

This apparent discrepancy can be attributed to brownstone properties, which exist throughout Brooklyn and are both popular and valuable. In certain areas of the poorer neighborhoods, the values of these properties have increased significantly, driving up overall values for the surrounding area. These trends signal a turn-around for some of Brooklyn’s more troubled neighborhoods.

Overall, there are a greater number of Brooklyn households that rent rather than own property. About 73 percent of the households in the borough rent, and renters represent a majority in each neighborhood except Flatlands/Canarsie (see Appendix I). In some instances, the percentage of renter households is overwhelming, such as in Bushwick, where renters make up 90 percent of the households. The median income for all renters in Brooklyn is one-half that of homeowners (see Appendix I). (Appendix J provides data on types of rental properties in Brooklyn, while Appendix K details poverty and rental burden by Brooklyn neighborhood).

Among commercial and retail properties, those with the highest values include the Metrotech complex, Kings Plaza, Pierrepont Plaza, and Macy’s.

Although market values for residential and commercial property in Brooklyn are improving, not all properties are fully taxable. The City’s FY 1999 property tax roll shows that although there was $11.4 billion in taxable assessed value (the value of properties as determined by the City for purposes of taxation) in Brooklyn, there was a similar amount that was exempt from taxation.

Almost three-quarters of the exempt value, about $8.4 billion, belong to the City, State or Federal governments or to public authorities, which includes such agencies as the Metropolitan Transportation Authority and the New York City Housing Authority. Among private property, the largest exemptions, worth $1.7 billion, are for religious, medical, educational, cultural, or charitable organizations. Another $1 billion in residential exemptions were granted, the largest being for Mitchell Lama housing. Surprisingly, industrial and commercial incentives in the form of property tax exemptions total only about $190 million. By comparison, the Bronx receives a similar level of exemptions, while in Queens, $455 million in exemptions have been granted.

Cushman & Wakefield estimates that the Downtown Brooklyn market contains about 9.1 million square feet of office space, compared to about 107.8 million square feet in the Downtown Manhattan office market. Vacancy rates are somewhat higher in Downtown Brooklyn, averaging 11 percent for all classes at the end of 1998, compared to 9.5 percent in Lower Manhattan. However, vacancy rates were drifting slightly upward in Brooklyn during 1998, while they were falling in Manhattan. Rental rates are considerably lower in Brooklyn, with the price for prime buildings averaging $27.52 per square foot in the fourth quarter of 1998. In Downtown Manhattan, average rents for prime office buildings during the same period were $38.70.

Brooklyn’s office space market is also smaller than other areas in the region. Long Island contains about 27.1 million square feet of office space, with an average rental rate of $25.19 at the end of 1998. The overall vacancy rate was 8 percent, with the rate in Nassau much lower than the rate in Suffolk. Northern and Central New Jersey are a major office market, containing 143.6 million square feet of space. Vacancy rates, which averaged 10.1 percent here at the end of 1998, were higher than on Long Island, but were still lower than in Brooklyn. Rents in Northern and Central New Jersey averaged $26.57 during this period.

Between 1990 and 1997, the most recently available data, reported crimes dropped by 50 percent, or 100,500, in Brooklyn, to total 101,500 incidents (see Figure 12). The declines ranged from a high of 67.5 percent for motor vehicle theft to a low of 32.3 percent for larceny (see Appendix L). The greatest reduction in crime occurred in Manhattan, where crime declined by 54 percent, to 99,700 incidents in 1997.

Per capita crime has also declined in Brooklyn by 49 percent between 1990 and 1997, to 4.5 crimes for every 100 people. Both Manhattan and the Bronx have higher rates of 6.5 and 4.8 crimes per 100 people, respectively.

After rising in the early 1990s in response to the recession that gripped both the nation and the region, the number of people receiving public assistance has fallen sharply in the last few years. This has been in response to both an improving economy and welfare program reforms at all levels of government. New York City has moved aggressively with its reforms, and has seen the number of people receiving assistance fall by one-third since FY 1994.

Across the five boroughs, the reductions in public assistance recipients over the last few years have varied, from over 43 percent in Manhattan to about 24 percent in the Bronx. In Brooklyn, the number of recipients has fallen from over 408,000 in FY 1994 to 273,800 in FY 1998 (see Figure 13), a 33 percent reduction that equals the Citywide average decline. Thus, Brooklyn’s share of all public assistance recipients in the City has remained relatively constant at about 36 percent. Shares in Queens and Staten Island have not changed much either, while the share accounted for by the Bronx has risen and Manhattan’s share has fallen.

As a once-independent city, Brooklyn had developed its own cultural resources in the last century. Chief among these are the Brooklyn Museum of Art and the Brooklyn Academy of Music. The Brooklyn Academy of Music has thrived by not competing directly with Manhattan’s cultural icons, but rather offering material that reaches to a different niche, such as the annual Next Wave music festivals. Although ticket sales dipped slightly in FY 1998, the Brooklyn Academy of Music has sold about 150,000 tickets in each of the last two years, with performances playing to houses that averaged three-quarters full.

The Brooklyn Museum of Art had seen its attendance dip somewhat at the start of the 1990s, with visitor counts running about 250,000 annually in the last few years. However, in FY 1998 attendance more than doubled, to almost 590,000, on the strength of a major exhibit of impressionist art. The Museum is continuing to mount several high profile shows to maintain this momentum.

Brooklyn also offers popular family-oriented attractions, such as the New York Aquarium, which draws visitors from throughout the region. Attendance over the last ten years has averaged about 760,000 visitors annually. The Brooklyn Botanical Garden, in addition to offering a natural preserve in the City, also offers classes for home gardeners, while the Brooklyn Children’s Museum, the first such facility of its type in the nation, is now celebrating its one hundredth anniversary.

The borough’s cultural diversity promotes many festivals and parades. For example, the West Indian Day Parade is one of the largest such events in the City, attracting more than a million spectators and participants.

In recent years, there has been a renewed recognition of Brooklyn’s economic resources including its waterfront properties, changing demographics, and sizable workforce. This section of the report will look at some of the current initiatives for economic development in Brooklyn, and identify some of the institutions that are working to strengthen and diversify Brooklyn’s economy. However, given lagging incomes and high unemployment for Brooklyn residents, there is a need for more comprehensive economic development efforts.

The transformation of Brooklyn’s economy from manufacturing to one more oriented toward local markets has left tracts of vacant space and opportunities for a variety of types of development. First, as manufacturing has diminished, it has shifted in composition toward smaller businesses operating in "niche" areas such as food production and design-related manufacturing, which have different space requirements than the larger concerns that have left the City. Second, the saturation of the Manhattan office market and the resulting escalation in commercial rents make Brooklyn a potentially attractive alternative location for some office-based operations. Third, although population has recently been increasing, retail employment is still far below the level in the 1980s. While this partly reflects changes in retailing practices, Brooklyn is considered "under-stored" and is attracting large "big box" retailers. Finally, residential developers are beginning to see the possibilities for creating luxury housing along Brooklyn’s waterfront.

Despite the considerable decline in manufacturing employment, a substantial manufacturing base remains in Brooklyn, and there are a range of efforts aimed at retaining or expanding existing businesses and assisting growth. Many of these are based on a public-private partnership model.

New York State designates certain areas as "economic development zones," within which businesses can qualify for generous tax incentives, reduced utility rates, technical training, assistance with business plans, and access to low-cost financing. While these benefits are not confined to manufacturing, or even to export-oriented businesses, the zones are located in areas with a considerable industrial presence: East New York, Southwest Brooklyn, and the Brooklyn Navy Yard (see Appendix M for a description of these zones). In addition to its industrial facilities, the Navy Yard is now expected to be the site of a 700,000 square foot film, television, and post-production facility under an agreement between a group of investors, including Robert de Niro and Miramax Films, and City and State development agencies. This facility will be competitive with those on the West Coast.

Providing similar services, but more specifically targeted to manufacturing and industrial firms, "In Place Industrial Parks" (IPIP) are administered by the City’s Economic Development Corporation. The three facilities are in East New York, Sunset Park, and East Williamsburg. The Brooklyn Army Terminal within the Sunset Park IPIP covers 97 acres and is home to a host of manufacturers engaging in printing, jewelry, apparel, and electronic component manufacturing.

Other facilities have been developed to target specific manufacturing sectors. The Food Venture Center, on the border of Red Hook and Carroll Gardens, is a commercial kitchen facility that is rented to small food service and food processing companies owned by women, minorities, or individuals located in economically distressed areas. In addition to providing access to kitchen equipment, the incubator also provides strategic planning and financial services. The Greenpoint Manufacturing and Design Center was started as an incubator by a group of artisans and craftspeople in the late 1980s. It is now home to nearly 70 businesses specializing in woodwork, metal crafting, and design, who can take advantage of services including shared facilities, technical assistance, marketing services, and apprenticeship programs.

Soon to be completed, Brooklyn Mills will be an incubator for garment manufacturers. Initially funded by a grant from the Borough President’s Office, and developed by the Brooklyn Alliance, this 27,000 sq. ft. facility will be located within the Bush Terminal complex in Sunset Park. It is expected that six manufacturers will rent space and take advantage of the wide range of technical services offered. In addition, state-of-the-art machinery will be provided, on a fee basis, to be shared by the resident manufacturers.

Citywide technical assistance to manufacturers is also provided by such organizations as the Industrial Technology Assistance Corporation (ITAC) and the New York Industrial Retention Network (NYIRN). ITAC helps firms to become more competitive, while the NYIRN identifies and assists firms at risk of closing or relocating. Brooklyn Union Gas has also been active in providing assistance through low-cost energy and loans to manufacturing and other firms.

Several programs have also been successfully implemented to address the marketing and promotion of products. These promotional programs have given local manufacturers the opportunity to present their product lines before national and international consumers. "Brooklyn Goes Global" was developed by the Brooklyn Chamber of Commerce to facilitate the promotion and sales of locally manufactured products on a global scale. They provide a wide array of advisory services including marketing, technical export advice, market research and certificates of origin. Similarly, the Chamber developed "Brooklyn Coast to Coast" to assist local manufacturers in promoting their products for domestic markets.

The Brooklyn Export Network is an effort by Brooklyn Goes Global to provide specific, one-on-one consulting by trade specialists and marketing consultants to evaluate a manufacturer’s ability to successfully export its products. They also provide customized marketing plans, as well as evaluations of potential markets.

One proposal to promote industrial activity in Brooklyn involves the construction of a freight rail tunnel linking Brooklyn with New Jersey. This project has received the Mayor’s endorsement and is currently under study. In addition to helping spur economic development along the Brooklyn waterfront, it is expected to help reduce truck traffic and congestion in the borough. In addition, New York City’s Economic Development Corporation is conducting a feasibility study of developing a container port for "fast ships" on the Sunset Park waterfront. These are major infrastructure investments, and we urge that the projects be reviewed carefully in light of overall regional infrastructure needs, and that, if approved, they be coordinated with other transportation projects in order to maximize the benefits.

Unfortunately, Brooklyn lost the chance to be designated as a Federal Empowerment Zone during the most recent competition for Zone designation in 1998. Empowerment Zone designation would have entitled the Zone to significant economic resources that would have funded such projects as a financing facility, technical assistance, brownfield redevelopment, mixed-use waterfront development, and skills training, among other initiatives. This would have been the type of comprehensive economic development effort necessary to help Brooklyn realize its economic potential.

In recent years, Brooklyn has added several Class A office buildings to its commercial inventory after decades of no activity in this area. Much of the driving force behind Brooklyn’s downtown development has been One Pierrepont Plaza and Metrotech Center, which were initially conceived to rival downtown Manhattan office locations. While attracting tenants to Brooklyn has at times been challenging, Metrotech houses operations of companies such as Chase Bank, Bear Stearns, Brooklyn Union Gas, the Securities Industry Automation Corp., and Goldman Sachs, while Pierrepont Plaza houses Morgan Stanley. Since its original opening in 1987, the Metrotech complex has grown with the addition of Metrotech 9 North and Metrotech 11.

Adding to the growing office capacity in downtown Brooklyn, and to help satisfy the current strong demand for hotel space in New York City, developer Joshua Muss opened Renaissance Plaza in 1998. This office tower includes the Marriott Hotel, the first large-scale hotel to open in Brooklyn in half a century. In addition to the hotel’s guest, meeting and convention facilities, the Plaza offers 820,000 square feet of office space and has attracted such tenants as Leucadia Insurance Co., the Brooklyn District Attorney’s office and the New York City Law Department.

Retail development in Brooklyn has taken on a large-scale flavor, with completed and proposed projects anchored by major national retailing operations.

In 1996, development company Forest City Ratner completed a 350,000 square foot retail complex called the Atlantic Center. It is located at the intersection of Flatbush and Atlantic avenues, and has attracted such chains as Old Navy, Kids "R" Us, Marshall’s, and Pathmark to anchor this area’s development. The developer has plans to open an even larger mall nearby by 2001, called Atlantic Center Plaza. It will contain over 400,000 sq. ft. of retail space, an office tower and an open plaza on the site above the Long Island Railroad terminal near the Atlantic Center. Meanwhile, two major "big box" retailers, Home Depot and Costco, have located stores in the Sunset Park EDZ. Their success in the borough has led them to seek additional locations.

In many locations around Brooklyn, smaller retailers have joined Business Improvement Districts (BIDs), which focus on cosmetic improvements in commercial strips, including providing greenery, lighting, security, sanitation and special event marketing. For fledgling commercial strips located outside of BIDs, the City’s Department of Business Services administers the Commercial Strip Revitalization Program via numerous local sponsors, including the Brooklyn Economic Development Corporation, many local development corporations, the Brooklyn Chamber of Commerce, and the Brooklyn Borough President’s Office. The program identifies the areas and organizes local merchants into functional groups, while providing institutional guidance until they can operate independently.

Among the many sports-related projects around the City, Coney Island is the prospective site for a minor league stadium, which would house a team affiliated with the New York Mets, and a multi-use sports complex. The sports complex would serve as a 260,000 sq. ft. amateur sports facility on the site of the historic Steeplechase Park.

Along with investment in retail and sports facilities, developers are turning to address the limited number of cinema venues in Brooklyn. In 1997, International Amusements Inc. completed a cinema house in East New York. Forest City Ratner is currently planning two movie complexes, including the Court Street Complex, already under construction and planned to house a condominium tower containing a 12-screen cinema and a Barnes and Noble bookstore. The other cinema is being planned for Bensonhurst, near Gravesend. In the downtown area, the Brooklyn Academy of Music recently transformed its Carey Playhouse into the four-screen BAM Rose Cinemas. Just to the south, Millenium Partners, in conjunction with Loews Cineplex Entertainment, has broken ground for Brooklyn Commons. This will be a $63 million, 500,000 sq. ft. entertainment and movie complex on the site of the Gowanus Post Office, and will feature a 22 screen theater, a recreational center, restaurants, a bowling alley, as well as a 1,500 car garage and esplanade. And recently, Magic Johnson announced the development of a multi-screen theater in Flatbush.

In addition, a piece of Brooklyn’s waterfront, centered on Piers 1 through 5 in Brooklyn Heights, is likely to be transformed into a park and recreation area that will include related commercial development.

In recent decades, much of the housing constructed in Brooklyn has been for low- to moderate-income families, and much of it has been subsidized and developed by public-private partnerships. More recently, moderate- to upper-income residences are being planned and constructed. This can be attributed in part to the sustained bull market on Wall Street, as well as the skyrocketing prices of Manhattan real estate.

One significant development project, which is also controversial, is a mixed-use residential and commercial complex in the area between the Brooklyn and Manhattan bridges, known as "DUMBO" (Down Under the Manhattan Bridge Overpass). One building, the Clock Tower, has already been converted into luxury condominiums. A second project calls for the conversion of two vacant buildings into a 53 unit complex. The developer is awaiting final approval by the state before he begins to further develop the area.

However, as is the case in other projects to convert industrial space into commercial or residential use, the project poses potential problems for neighboring manufacturers and others who find that increased rents are creating additional cost pressures for their businesses. In addition, in anticipation of potential redevelopment of vacant industrial space, landlords often warehouse industrial properties speculatively, exacerbating space problems for some of Brooklyn’s remaining industrial employers.

Additional residential projects include the development of 850 market-rate units on the site of the former Brighton Beach Baths, which will begin construction in April 1999. And in December 1998, construction began on a 33-story apartment building on Montague Street.

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