NY B15 Private Sector Evacuations Fdr- Entire Contents- 3-2-04 Draft- Private Sector Response 064

8/14/2019 NY B15 Private Sector Evacuations Fdr- Entire Contents- 3-2-04 Draft- Private Sector Response 064

http://slidepdf.com/reader/full/ny-b15-private-sector-evacuations-fdr-entire-contents-3-2-04-draft-private 1/17

DRAFT 3/2/04

The Private Sector Response and the Evacuation Story on 9-11National Commission on Terrorist Attacks Upon the United States

Introduction

The events of September 11 appear in all accounts to be an act against the G overnm ent ofthe United States. Clearly, the message that the terrorists appare ntly intended to send inacting out their plot was directed to the United S tates Governm ent. One can only assumethat it was a message of protest against the country's values, beliefs, policies, and history.And while this message was received by the U.S. G overnment and the A merican people,the actual events of this day hit home most closely to the people who were tragicallywounded or killed. M any of these people worked for small businesses or largecompanies located in the World Trade C enter or environs. The story of the impact of theevents of September 11 includes both the accounts of those people located in the Towers,some who evacuated and others who were less fortunate as well as the story of the

companies who were affected in those attacks. This section will discuss the corporateresponse to the events of 9-11. It is based on num erous interviews with corporations

located in the World Trade C enter towers and those located in its perimeter. It will alsoinclude the stories of those who survived the attacks by evacuating.

This section will discuss some of the key issues related to the Emergency Preparednesson 9-11 by the private sector. These will include preparedness, comm unications, andcontinuity of business. The section will discuss some of the changes and improvementsthat have been made post-9-11 to improve corporate preparedness, particularly in NewYork city with companies who were involved and/or affected by 9-11, as well asenhance the security of people, buildings and businesses (although not specificallyairlines). It will cover the public/private sector partnership that is growing to facilitatethese efforts. And it will discuss the relationship between preparedness and good

corporate governance. And it will lead to recom men dations in this area.

Overview of the Impact on the Private Sector of th e Events of September 11, 2001

85 % of the United States' infrastructure is owned and/or run by the private sector, so anyevent of 9-11 s scale drastically affects the private sector. The challeng e before both theprivate sector after the towers fell was enormous. People were lost, buildings destroyed,and businesses significantly disrupted. This included both the companies in the towersand the privately owned utilities such as Con Edison and Verizon whose facilities and

infrastructure was destroyed. Financial services indus try emp loyees accounted for 74%of the victims.

This loss cannot be measured to anyone's satisfaction. It cannot be measured statistically;

it cannot be measured financially; it cannot be measured emotionally. And it is difficultto measure econom ically.

Over 400 structures across a 16-acre area were damaged. The Securities IndustryAssociation estimates the cost of this property damage ranges from $24 to $28 billion.



DRAFT 3/2/04

Dust and debris destroyed data processing centers. Telecommunications and powerinfrastructure serving lower Manhattan was devastated. The majority of this damageoccurred when 7 World Trade Centercollapsed into Verizon's 140 West Street building.Water from broken mains an d fire hoses flooded Verizon's cable vaults, an dapproximately 34,000 businesses and residences in the area lost services. A T&T lostservices. Con Edison lost three power substations and more than 33 miles of cabling

estimated at damages of $410 million. 13,000 Con Edison customers lost power. TheStock Market was closed from September 11 through September 17, the longest closurein the history of the U.S. since the depression.

The full extent of the damage is staggering. It required an unprecedented response to getthe businesses of lower Manhattan running following the event. And an unprecedentednecessity was exposed for businesses to take preparedness and continuity of businessplanning seriously.

The areas that will be covered in this report include:

1. Key Issues faced: Evacuation, commu nication, CO B2. Steps taken by Private Sector since 9-11 and Role of DHS

3. Devastation on 9-114. Economic Impact on NYC5. Recommendations for the Future

Key Issues On the Response of the Entities at the W orld Trade Center on 9-11

Based on a reasonable sampling of companies and Government agencies located at

Ground Zero on September 11, 2001, the key issues related to their response that daywere the following:

1. Limited evacuation and life safety preparedness at the Corporate and personallevel

2. Difficulties in Communication3. Ineffective or non-existent Continuity of Business plans

Evacuation

One September 11, one of the poignant issues related to private sector emergency

preparedness was a combination of the lack of communication of , knowledge of andpractice of evacuation and general life safety procedures by the building owners,

companies and their employees.

The fire and safety code for New York city states that the building owner is responsiblefor having a full-building evacuation plan.1 In addition, OSH A regulations state that

1 Get the code citation



DRAFT 3/2/04

companies must have an evacuation plan.2 The Port Authority evacuation plan (insert

here section on PA).

Having a plan based on the laws mentioned above and actually comm unicating andpracticing the plan are two different issues. While clearly plans existed, there is some

question as to the level of communication that had gone on with the tenants of the

buldings and their employees both from the Port Authority to the employees as well asfrom the Corpo rate Leaders/security or other to their employees directly. Practice of the

fire drills had occurred. They are required by New York law to happen twice a year.Many companies said that they had practiced these plans. Others did not clarify whether

or not they had practiced the plans. W TC 7 building security people said that they didconduct the drills. M any employees did not recall participating which could have been

for a variety of reasons. Generally speaking, most interviewees adm itted that they rarely

paid attention to fire drills.

There are differences in evacuation procedures for company owned buildings, multi-

tenant buildings not owned by the tenants, and single tenant buildings not owned by the

tenant. In the case of a single tenant that ow ns the building, the tenant is responsible for

their ow n plan, inclu ding training and practice. Companies such as Am erican Express

that own their own building are master of their own evacuation plan and training. They

also do not have to coordinate w ith other residents of the building and can time theirpractices to their ow n suitability. They should, however, coordinate with neighboring

buildings.

Multi-tenant buildings w ith multiple tenants who do not ow n the building face theprocedures given them by the building owner. Building owners of mu lti-tenant buildings

no t owned by the tenants are responsible for the evacuation plans. The Port Authority

was responsible for the plans for the WTC Towers. Single tenant building s not owned

by the tenant are still the responsibility o f the building ow ner, but the tenant can havemore involvement in the evacuation plans as they are the sole group involved.

Prior to 9-1, no building in the Wo rld Trade Center had conducted a full evacuationtraining exercise. Individual companies had practiced drills isolated to their floors, but in

no case that we have determined, did any company in the WTC practice a drill where theemployees had walked down all flights of stairs from their relevant floor to the ground

floor and exited the building. This proved to be important during the event.

Companies located in the WTC generally did not have their own evacuation plan

independent of the Port Authority. There were exceptions. Morgan S tanley, for examp le,

led by their Chief Security Office Rick Risquelme, did have a plan.4 It was derived fromthe 1993 bom bing experience where Rick had participated. It was a detailed plan thathad been practiced. Emp loyees had copies of the plan both at their office and at home.5

2 OSHA regulations3 Inerview with American Express4 Book on Rick Risquelme

5 Interview w ith Morgan Stanley



DRAFT 3/2/04

Other companies6 stated that they had practiced fire drills, but had not gone down the

stairs. The y had gone to the hallw ay to practice. Other interviews with evacueessugg est... (insert quotes from people we interview who evacuated).

In cases where the stairwells were well known, employees were able to get to thosestairwells, even in cases where the y had not practiced the exiting. There we re cases,

however, shown on the 9-11 calls, where employees were looking for stairwells andclearly did not know where to exit.7

The Port A uthority plan .... Relative to the escape on the roof.... Through our interviews,we learned that there were people w ho believed they could escape from the roof.

It is clear that most corporations did have evacuation plans of some sort that is requiredby law. It is not clear, howe ver, that they were effective plans for situations that calledfor the total building ev acuation. Nor is it clear that they would have been effective for

several floors. Most of the plans had not been rehearsed or not been fully rehearsed to

the point of people actually w alking outside and reporting to a designated rende zvous

point. There were m any issues related to practicing the plans, most notably the need for

liability releases in order to step on the ground outsid e a buildin g. As you are all aware,if you have worked in a high-rise building, very few practiced th e fire drill.

The helicopter landing on the roof issue.

The issue of the locked doors to the roof.

The issue of the use of elevators, the locking of the elevators, and those trapped in theelevators.

Coordination within multi-tenant buildings related to evacuation w as rare, both in the

Port Autho rity buildings and within buildings in the surrounding area. Som etimes, evendifferent business sectors w ithin a company had individual plans and they were notcoordinated within the company. Many companies had security officers who were in

charge, but others did not have an individual appointed who could make decisions on

evacuation. Many had assigned people, but no back-ups and the assigned people were

out of town that day. Obv iously in those cases where the building housed a single tenant

and was owned by the tenant, the process was easier. One tenant equaled one responsible

security team and one plan. M ultiple tenants equaled multiple people w ith multiple

security teams and multiple plans - all that, implemented at one time, ends up equalingone big mess.

In the case of the World Financial Center, located across the street from the World TradeCenter, if everyone in American Express and Merrill Lynch had followed their normal

evacuation plan to the W inter Garden, the space in the Garden w ould have not have beenadequate. In the case of 9-11, the center was totally destroyed. But since there had not

been the assumption that more than one comp any would need to e vacuate at one time, the

6 Interview with CEO Fiduciary Trust International7 9-11 calls transcripts



DRAFT 3/2/04

discussion about sharing the evacuation location space was not considered. And once the

plan could not allow this space to be used, the companies were forced to move to Plan B.

an d head in a different direction. This plan had not been rehearsed.

Regarding World Trade Center Building 7, a multi-tenant building, the evacuation

procedure had not been practiced simultaneously by the entire building. Add in the part

from Engineer in Building 7 about this evacuation story.

The decision whether or not to evacuate was the responsibility of the Incident

Commander located at the Command and Control desk in each of the towers. In the case

of th e private sector companies located in surrounding buildings, it was the building

owner who made the decision. It varied as to the building whether or not the companies

residing in the building felt that they could place their own call fo r evacuation or they felt

forced to rely on and obey the decision of the building owner. In some cases, the

building owner took a decision and companies followed, hi other cases, some companies

followed the decision, others took their own decision and decided to evacuate or others

did not take a decision and employees took the responsibility into their own hands.

The normal operating procedure fo r fire evacuation practiced by the FDNY an d

mainstream fire fighting on 9-11 was to evacuate the two floors below the fi re . . . (State

the normal procedure). In the case following the first tower being struck, there was a

great deal of falling debris, including humans who were jumping from the top floors.

The general outside area around Tower 1 was extremely dangerous. It is clear that many

felt that leaving the building would have been more dangerous at that point than staying

in the building which was not on fire or attacked at that point.8 In hindsight, those who

left building tw o before it was struck were fortunate to get out o f the Tower prior to

impact. For those who were stationed above the point of impact of the plane, they were

extremely fortunate to have escaped prior to the plane hitting Tower 2. For those below

the point of impact, even after the plane struck, they were still able to escape assuming

they moved quickly as the time between the plane striking the building and the collapse

of the building was .... Minutes.

The amount of time it would take a healthy, physically fit person to walk from Floor . . .

to th e ground floor without traffic in the corridors would be approximately Minutes.

With traffic going in both directions, e.g. fire fighters going up and others coming down,

with some of the stairwells not in use, with the elevators frozen, with panic, with smoke,

with alarms ringing, with water pouring an d with fire blocking exits, th e time it would

take a person to go down those same steps would have tripled???? ADD IN STUFF

THAT PEOPLE ON 9-11 TAPES SAID THEY FACED

The issue of who said what to whom in the South Tower prior to the second plane hitting.

ADD IN HERE

The responsibility of the individual for their own decisions on when and if to evacuate

were also important. Some individuals remained at their desks working for longer than

!Numerous interviews too many to cite individually



DRAFT 3/2/04

may have seemed w arranted in hindsight in spite of repeated calls for evacuation by thePort Authority, colleagues, or people who called them. They may or may not have felt

the danger. In addition, the work ing culture of the traders, among others, who workedclosely with the m arkets, was not to leave the market unless it was m andatory. Others

left imm ediately when they sensed danger, including some in the South Tower who left

on their own volition prior the second plane hitting this tower. Other people were told to

stay in their seats and they followed the instructions. Some were lucky an d others werenot. Evidence does point, however, to the fact that many people had not practiced orbeen well-trained in the area of evacuation in these buildings. This But it was very clear,

that people were no t

It does no t appear that anyone took their own personal decision to evacuate based on the

thought that the building or buildings could collapse. We did not interview a singleperson who suspected before the first tower collapsed that this was a possibility. This

includes employees of the WTC, Con Edison employees, Verizon employees, fire, police,EMS etc etc etc. (List these peop le and the interviews) People who left the Secondtower after the first tower collapsed either received word to do so from their respective

company, felt the danger an d ran, or were encouraged to leave by friends or family in thebuilding or calling on the phone. Some did not even recognize the towers werecollapsing when it was occurring (Verizon employees, Amex employees, Nasdaq senior

officials, etc).

PUT IN HERE WHO GOT OUT FROM WHICH FLOORS with the diagram etc.Add in any other evacuee stories when we get them into the sections ab ove.

The key point to this story is that in spite of the lack of evacuation preparedness and

training, there are estimates that over 25,000 people were evacuated on September 11

from the World Trade C enter successfully. Key factors in the successful evacuation

(GET STUFF FROM THE COLUMBIA STUDY)

Comm unication

Com mun ications problems on 9-11 were large and multi-faceted . Fire, police and EM Sissues are discussed in Section Com m unication problems within the companies

located at the W TC complex were clearly a key hindrance to getting the word out on

what people should have done that day, how to find out whether or not they were safe

following the incident, speaking with family members, and to getting businesses back upand running following the event.

The phone system in the W TC towers continued to work after the planes had struck thebuildings. Em ployees w ere able to place calls to the 9/11 system as well as to familiesand friends. Many of these calls were reviewed from the 9/11 tapes and some voicemails

were saved by families of the victims which were played at the First Public hearing of the9-11 Com mission in April 2003.



DRAFT 3/2/04

(Put the Verizon story here). The main switching station for the phone system in theWTC w as the Verizon station on 140 Broad Street (located adjacent to the WTC Building7 which collapsed at 5:10 pm on September 11, 2001). There are num erous reported

phone calls from al l floors no t directly impacted by the planes from 8:56 when the first

plane struck until when the first tower collapsed. Cell phones were also work ing at

this time as well as blackberries.

Du ring the day, the situation of comm unicating through the cell phones an d regular landlines in NY C became increasingly intermittent an d difficult. The cell phones wirelessconnections on top of the W orld Trade Center had been lost when the bu ildings weredestroyed an d cell phone wireless traffic was diverted to near-by towers. This traffic,

however, was routed to a main switching station once the wireless connection was madeto the tower. Given the events in the city, the switching stations were experiencing

significant overload. According to Verizon, the switching station was not set up to dealwith overload. Callers were given an "all circuits busy" signal and if the caller remainedon line, they wou ld have been placed in a queu e to receive a clear line. Mos t callers,however, hung up when they received the "all circuits busy" signal and thus they were

repeatedly jamm ing the lines by continuously trying to get a dial tone.

At 5:15 pm, when Building 7 collapsed, it fell into the Verizon main sw itching station at120 Broad Street. ADD IN THE REST OF THE STORY HER E. The last billed phonecall the switching station took was at 10:30 pm on September 11, 2001. The switchingstation was effectively shut off from use. The calls that were scheduled to come throughthat station were diverted to the West Street Station which was experiencing significant

overload. The switching station that handled the WTC complex was destroyed, but so

were the phones in those buildings so there was no net lost capacity due to the destruction

of that switching station w hich only served the towers.

Blackberries apparently worked quite well during the day of September 11 when othermeans of commu nication w ere failing. While we are not certain why this was the case, a

general viewpoint is that there were less blackberries in use at this time than cell phonesand thus the wireless comm unication was not overloaded. Many companies have givenblackberries to their senior management and/or has plans to use blackberries for

communication during crises that affect communications in the future. It remains to beseen whe ther or not this will prove effective. (WE NEED TO SPEAK TO SOMEONEAT BLACKBERRY)

Most of the companies that survived the WTC destruction, bu t lost comm unications du eto the difficulties in the area, had back-u p comm unications suppliers. The problem was

the suppliers, while being different companies, either used the same switching station orthe same underground cables.9 In fact, many companies had not examined the underlyingconnections of the provider to determine whether or not in an emergency theircommunications would actually be going through alternate switches an d therefore remainworking. This was particularly significant regarding the operations of the Bank of New

York and the market participants for the stock exchange who remained in the area of the

9 Interview with BONY and Verizon



DRAFT 3/2/04

WTC and were not forced to evac uate or relocate.10 There were some cases wherecompanies had alternative communication facilities in another state which was not

affected by the disruption. Much w ork has been done to change this factor since 9-11.

Getting word out on what to do in terms of evacuating was difficult on 9-11. Once thefirst plane had hit, the tower was severed, along with electricity and communication. The

Com mand Station controlled the system to make em ployee announcem ents. PUT INWHAT TH EY SAID AND HOW WELL IT WAS HEARD HERE. What issues wererelated to com mun icating to employees in their desks that day.

Once evacuated, com panies had to locate their employees. In many companies, seniorofficers called as man y employees as numbers were available. In man y cases, a currentand com plete listing of employees with home an d/or cell num bers was not available. Inother cases where access to buildings was largely denied, and since ma ny companies keptpersonnel records in those building, there was no easy way to locate employees. One

company turned a credit card facility into a call center (should w e put nam es here?).Others, however, lost all records and had no back-up. There were very few examples of

cases where em ployees had been given a place to con gregate follow ing an evacuation aplace to congregate nor had they been given a location to call or told to call anyone in

their firm. Finding people who had survived or not became a full-time mission for

several days (and in the case of those deceased was on-going). Procedures to address

this problem have been put into place since 9-11 by most com panies in the New Yorkarea.

Efforts were made by most companies to communicate with employees through theinternet. W eb-sites were imm ediately put into place with inform ation about the situationrelated to that compan y. Fam ily mem bers who reached som eone in the compan y weretold to remain glued to the corporate web-site fo r on-going up-dates. These web-sites

continued to be used fo r corporate disaster updates an d comm unication with families fo rsome time to come post 9-11. DO WE NEED MORE ON WHAT WAS IN THESE

WEBSITES. I HA VE LOTS OF EXAMPLES

Communications from the companies involved to families and to the media ranged indegree of efficacy, intensity, and coordination that day and for the week after 9-11. For

the mo st part, evidence w ould suggest that few com panies had a crisis com municationsplan in place. Mo st developed plans in the "comm and centers" that were set up from

which the senior management of the company (who had not been located in the WTCwhen the disaster occ urred) were following events. Many of the senior officials of thelarger companies at the W TC were not in NYC and some of them operated from

"command centers" that were located outside of the area. They often had groups whowere stationed in NYC as well. The contacts with the media were generally kept quite

low and most of the comm unication appeared to be directed at families and locatingemployees. In the weeks following 9-11, some key co mpanies involved in the attackreceived more press attention, some favorable and some not. Since 9-11 companies havetaken a wide variety of positions on pub licizing their involvem ent in 9-11. Most notably,

10 Interview BONY, GAO report



DRAFT 3/2/04

in the cases of those companies where the casualties were greatest, the least amount ofexternal press was encouraged. Some companies did write articles for newspapers and/or

journals11 that outlined their stories. M any CEO s had letters to the staff an d families that

were posted on web-sites an d often circulated to the press. Almo st every firm involved in

9-11 created a v ideo of September 11 remembrances, either including highlights ofheroes an d tributes to those fallen.12

Most of the companies interviewed by the 9-11 Comm ission wrote after-action reports

outlining the experiences of the day and corrections that needed to be made. The reportscontained varying levels of detail on the accounts of what happened that day and details

of what went wrong. It is highly likely that given the nature of liability issues that more

was discussed than was printed. . The reports the Comm ission examined pointed largely

to commun ication issues, back-up issues but very few to evacuation procedures. M any

did highlight the need for additional steps to make the stairwells more user-friendly.

They also called for the development of plans to locate employees after a disaster. NEED

TO REVIEW THE PLANS AND SEE IF THERE ARE M ORE THINGS PEOPLE DID.According to most of the companies the Commission interviewed, many of their Boardswere also interested in seeing the reports and many security officers were called to makeformal presentations to the Boards of their companies. The Commission did not ask for

and did not receive any copies of the reports that were given to the Corporate Boards in

those cases. Mo st security officers reported that they felt their status was elevated after

9-11, if not only briefly. Many felt that they could get the attention of the CEO or

President when they needed it and that they had been taken more seriously. It is clear

from the Comm ission's interviews that the Boards were concerned about the impact this

event had on the safety and emotion of employees and financial health of the compan y.There was no case in any interviews conducted by the Commission where the CE O,

Chairman and/or President was not personally an d significantly involved.

Continuity of Business

Changes S ince 9-11

Since 9-11 it is fair to say that many companies in NYC and many in the US and the

world have re-evaluated their Emergen cy Preparedness and adopted new policies thatwould address some of the key issues they faced on 9-11. The point of the exercise wasNOT simply to prepare fo r another terrorist attack but to be more prepared for all events.

It is called the "all-hazards" approach to Emergen cy Preparedness.

Evacuation procedures have been adopted to new scenarios. Practices are being held.Coordination is occurring within multi-tenant buildings an d with neighbors. The black-

1' Marsh M ac, Fiduciary Trust, NYSE among others

12 Merrill Lynch, UB S Paine Webber, Citigroup Asset Management, Con Edison, NYSE, American StockExchange among others



DRAFT 3/2/04

out in NYC w as the first full scale practice session of these plan s and they w orkedreasonably well . Employees are taking the exercises more seriously an d senior

management is taking more leadership roles in ensuring that Emergency P reparedness is

on the top-burner.

Communications policies have been vastly improved. Ma ny companies have gone to

full-scale use of blackbe rries for their senior executives or NEXTEL walkie-talkies.Most companies have ado pted a dual sw itch phone system and the y have secured that the

companies are actually using different equipment.

Many com panies have put in place new entrance security systems that allow for

recognition of the employees as they enter the building and tracking of employees and

visitors to the floors in which they are located. The records are backed-up off-site to

insure that in the event of a disaster, someone has a list of who is in the building. Some

companies have put 1-800 num bers on the back of all emplo yees ID's to ensure that

people call and announ ce their location in the event of an evacuation.

The public/private sector partnership has contributed to this evo lution in EmergencyPreparedness. There are num erous examples. The Office of Emergency Management inNYC has a program to reach out to private companies with intelligence information,

emergency plans an d procedures. Dialogues have begun within industries where Security

Officers meet regularly to discuss issues and best practices. The banker-broker group isone such group. The New York Safety Council is holding Emergency Preparedness

Seminars for Security officers that provide three days of training on how to w rite andexecute an Emergency Preparedness plan. O ver 2000 private sector companies with

offices overseas belon g to OSAC, a State Department group which provides data onevent risk in other countries. The New Y ork Police Department Cou nter T errorismBureau is supplying terrorist-related updates to APPLE, an association of New York City

Corporate and Institutional Security Directors. The FBI works with the private sector.And there is a new H ead of Private Sector Liaison at the Department of Ho mel andSecurity with programs and initiatives underway.

All these efforts are indicators of the awareness that 9/11 cast on preparedness, and it is

an extremely po sitive sign that these initiatives are springing up .

Continuity of Business Issues

Obviously the events of 9-11 brought to light fo r many companies the need fo r enhanced

continuity of business plans. After all, the financial district was hit hard, and the markets

were closed for four long, uncertain days. My exam ple is one of many. I was d irectlyinvolved in the reconstruction of Citigroup Asset Managem ent follow ing our losses in

Building 7. We had a back-up site in Rutherford, New Jersey which was operational withsome additional equipment and personnel. So that site was used to coordinate. The

offices for our sales force were completely wiped out along with their computers an d

other necessary business telecomm unications. So we had to get the backup sales site,located in Stamford, Connecticut, ready to handle $400 billion, and our displaced

10



DRAFT 3/2/04

workers over there. Like I said, task one: locate the people. Blackberries, palm pilots, cellphones - nothing worked at first. Even if they did, there's no guarantee the outdated, stale

numbers we had w ere accurate. Our hum an resources database didn 't contain multiple

back up numbers, and the numbers it had were n't routinely updated. But once we couldlocate our employees, we had task two: get them to work. Many people did not live near

our back-up sales site, and therefore co uld not get to work easily, if at all. So we had tofigure out how to g et them there. Finally, task three: we lost all of the physical contracts

with our customers. W hile the computers were backed up and relatively easilyrecoverable, we had to ask our clients for copies of our contracts as well as the money

management guidelines.

The bottom line of this experience for Citigroup Asset Management was mirrored inother places. Obviously those companies who totally lost their buildings and lives were

most deeply affected. And others escaped only through luck. In one case, the back-up

computer sat next to the main comp uter which wou ld have been a real disaster for the

business if the building had gone down. Con tinuity of business includ ing back-up sites,personnel relocation, communications, contracts and the like took on a new meaning.

Through perseverance, cooperation and a good dose of ingenuity we got up and running;

most financial market participants got up and running; the markets reopened. But thefinancial district of Manhattan, one of the critical financial centers of the global market

place, was left forever scarred, and forever wary.

Since 9-11, many companies have revamped their COB plans and re-evaluated risks.

While it is impossible to identify or prepare for all events, it was clear from 9-11 thatmore needed to be done. A w ell-run company m ust protect its business and people in a

way that makes sense financially for the business and is "doable".

Extent of Damage to WTC and New York City from 9-11

A summary of the extent of the damage on 9-11 at the WTC site and surrounding areas(including the Con Ed and Verizon stories) and the economic impact of this event in New

York city are the following

Impact on New York C ity

Overview

Various estimates are available for the total losses to New York City.

• NY City Com ptroller's officer estimated $82.8-$94.13

• NY City Partnership estimated $83 billion in losses14

13 Thompson, William C., Jr. Com ptroller, City of New York, "One Year Later, the Fiscal Impact of 9/11on New York City", September 4, 2002, page 1.

14 New York City Partnership and Chamber of Comm erce, "Update of the NYC Partnership's EconomicImpact Analysis of the Sept. 11th Attack on New York City", February 11, 2001 page 1

11



DRAFT 3/2/04

• NY State Senate Finance Co mm ittee estimated $15.145 billion in loss of income15

Employment

The New York Federal Reserve did a follow-up report on the New York economy beforeand after September 11. As one of its' m ain tenants, this report said that "an analysis ofemployment and income trends suggests that the economic impact of the September 11attack on New York city was som ewhat less severe than originally thought. The attackcreated sizeable job and income losses, but the cities current dow ntown appears to stemlargely from other, cyclical factors, namely the U.S. economy and the financialmarkets".16 The Federal Reserve research indicates that the city's economy was "inworse shape prior to the attack than was indicated by preliminary em ployment data".17

The Fed believes NY City sustained a "boom" period from late 1990 - 2000 which drewto a close in January 2001, just tw o months before th e national economy. Nine monthslater, the city faced the September 11 attacks. Private sector unemployment, however,

ha d fallen already 2 percent an d while it fell again post 9-11, it was relatively stable afterthat. The Fed also believes there was a weakness in wage and salary earnings prior toSept. 11, down 6.2 percent in the second quarter 2001 compared to fourth quarter 2000.18

These were m ost pronounced in the securities sector. To separate the attacks from thebusiness cycle, the Federal Reserve B ank of New York conducted a statistical simulationof how N ew York city wo uld have faired without the attacks using private sectoremployment as a benchm ark. This results in a view that "the downw ard trajectory inemployment in the months leading up to the attack was steeper than originally thought, "and "more of the post-attack job loss" wo uld be a ttributable to "pre-existing trends in thelocal economy and less of it to the attack itself'.19

The New York State Senate Finance Committee in January 200220 estimated the Job lossto be 17,000 in 2001, 70,000 in 2002 and 57,100 in 2003. This report estimated tha t

retail trade sector em ployment had been particularly robust, up 5.3% year over year in thesecond quarter 2001, following a 4.5% rise in the first quarter. Non agriculturalemployment was up 2.0 in April. But they admit that mixed in this were weaknesses intourism and general consum er spending w hich caused a deceleration in services grow th.Also the year on year employment com parisons in the private service-producing sectors(3/4 of the city's employment), had been steadily declining through the year.

15 New York State Senate Finance Committee, "Financial Imp act of the W orld Trade Center Attack",Prepared by D RI-WEFA, January 2002, page 2.16 Bram, Jason, "New York City's Economy before and After September 11", Current Issues in Economicsand Finance, Federal Reserve NY, Volume 9, Number 2, Feb. 2003, page 1.17 IBID, page 218 IBID, page 319 IBID, page 420 New York State Senate Finance Comm ittee, "Financial Impact of the Wo rld Trade Center Attack",January 2002 prepared by DRI-WEFA

12



DRAFT 3/2/04

The New York City Partnership in its report in February 200221 stated that from

December 2000 to March 2002, New York City lost 147,000 private sector jobs. Two

thirds were losses occurred between Septem ber 2001 and March 2002, w ith a record51,000 jobs lost in October alone. From March 2002 to June 2002, the city gained10,000 private sector jobs (source Federal Reserve Bank of New York).

The FDIC National Regional Outlook22 in the fourth quarter 2001, estimated that joblosses em anating from the attack exceeded 100,000 or 3 percent of the city's w orkforce.It related this largely to airlines and tourism -related jobs . Securities firms, which hadbeen cutting jobs prior to 9-11, had announced further cuts. Industries supporting the

securities industry can were also expected to decline. This data, howeve r, is quite out ofdate.

Loss Income

The New York C ity Partnership claim s that wage and salary losses through J une 2002 areestimated to be from $3.6 billion to $6.4 billion. This include s earning declines due to

both the reduction in hours worked and attack-related job losses.23 They estimated theloss of prospective lifetime earnings from individuals who died at $7.8 billion (similarperhaps to the $8.7 billion in the next para).

The NewYork State Finance Committee - DRI/WEFA report24 of January 2002 statesthat the loss of personal incom e is $8.7 billion. Wages an d salaries w ill also lost $4.9billion. It said that the differences between the tw o num bers are largely drops inproprietor's income and in property incom e, which were sh arply affected by the attack.

The Com ptroller's report estim ates the loss in jobs and wages from 9/11 betweenSeptember 2001 and July 2002 at $8.4 billion with 6.6 billion in the private sector and 1.6

billion in the public sector.25 It also suggests that $8.7 billion is an estimate of thepresent value of the future earnings of those who died. This report also suggests thatdisabilities and traum a costs $943 m illion. This includes produ ctivity losses, respitoary

illnesses, inju ries and all of that contributing to a shorter work ing life of the averageworker and therefore a reduction in the lifetime NYC wages. Although this is offset byother workers being hired to replace people.

The Com ptroller of the C ity of New York estimates there is a connection between jobs,income and lost Gross city Product after 9-11. With the New York Stock E xchange andairports closed and theaters dark, NYC lost $11.5 billion in gross city product to the endof 2001.26

21 NY City Partnership, "Update of the NYC Partnership's Economic Impact Analysis of the September11th Attack on New York City", Feb ruary 11, 2002, page 10.22 FDIC, N ational Edition Reg ional Outlook, Fourth Quarter 200123 NY C Partnership, page. 102 New York State Senate Finance Com m ittee, page 6"Thompson, William C, Jr. "One Ye ar Later, The Fiscal Impact of 9/11 on New York City", page 1826 Com ptroller report, page 14

13



DRAFT 3/2/04

Business Bankruptcies

The New York C ity Partnership said that in 2001, business bankruptcies increased by82.2% in New Y ork City and 114% in Manhattan over the previous year, where thenational increase was 13%. In the first half of 2002, business bankruptcies climbed 5%in New York City and 9.7% in Manhattan, compared to the first half of 2001. In thenation, business bankruptcies fell by 4.4% in the first half of 2002 compared with a yearearlier.27

Local Tourism

The New York City Partnership said that despite a rise in overall dom estic tourists toNYC in 2001, the group 's spending was down $ 1 billion. International visitors increasedfrom 2001 to 2001. There was an 11% drop in international visitors in 2001. Hoteloccupancy as of Feb. 2002 was significantly below 2000's high levels, despite lowerroom rates.28

The Comptroller of NY City estimates that the percentage loss of spending by domestictourism was 9.2% 2001 Q 4, 23% for international with a total of 15.5%. It was down6.5% in 2001 and 10.9% in 2001 with an estimate of a decrease of 10.9% in 2002. The

total impact of domestic visitor spending was $1.7 billion and $2.5 Billion fo rinternational vistors. Occupancy rates at New York hotels have consistently risen sinceSept. 11. The rate hit a low point in September with 45% of rooms occupied and the firstweek of November registered 78%. These rates, however, are based on a reduced supplyof rooms since some hotels were damaged. In addition, hotels have significantly slashedroom rates (down 21% in September and 30% in October year over year). Restaurantsalso experienced a large drop-off in sales, approaching 50% in the second half ofSeptember. 12% of the workforce was laid off. Over 30 restaurants were permanently

closed and forty closed temporarily. Broadway and the theatre industry lost $15 millionfrom Sept. 11 - Nov. 4 in ticket sales. Museums fell 40% down in attendance from a

year earlier.29

Cleanup

The New York City Partnership sated that the cleanup of the W TC site took nine mo nthsand cost $750 m illion (not the proposed $2.5 billion).30

It appears that the City of New York C omptroller estimated the Dem olition and debrisremoval was $659 m illion in FY 2002 taking 8 months and 19 days, overtime was $462

Million and Disaster relief Medicaid $120 plus other of $609. The other is not definedbu t the total is $1.85 billion minus $1370 FEMA reimbursement w hich makes the netbudget impact of the clean-up (not including loss tax revenue) of positive money. After

27 NYC partnership, page 328 NYC partnership, page 429 NY State Senate Finance Committee report pages 28-3230 New York City Partnership report, page 8

14



DRAFT 3/2/04

tax revenue loss of $2.015 billion, the net impact to the bud get was $2.495 billion inFY2002 with an additional amount in FY 2003 (unrelated to cleanup).31 It is not clear

why the loss tax revenue is compiled with the clean-up numbers so the bottom line onclean up is that it wa s covered by the Federal Governm ent.

The Senate Finance Com mittee states that the cleanup will cost $5billion. This was an

estimate at the end of 2001 so it probably is less valid than the two mentioned above.

New York State an d City Tax Revenue and Expenditures

The New Y ork C ity Comptroller said tha t the result of the attacks cost the city nearly $3billion in tax revenues largely from economically-sensitive non-property taxes in FY2002 and 2003. Real estate values outside of lower Manhattan gave support to propertytax collections. FY 2002 real estate taxes were not affected by 9-11. In FY 2003 lowerManhattan taxes dropped $113 million, but were offset by other areas with an overallincrease in real estate tax es of four percent for FY20 03. In terms of tax revenues, onemust separate the slowdown im pact from the 9-11 impact. The Com ptroller report

believes that the economy of NYC would have recovered in FY 2002 in the absence of 9-

11. They project that the tax losses from 9-11 were $2.015 billion and loss fromeconomic slowdown $519 million. They estimated the impact of 9-11 on FY2003 taxrevenues as $928 million with an additional loss of $184 from property tax revenues.32

The Comptroller report estimates that additional expenditures were needed for security,the cleanup (which w e see above was covered by FEM A), personnel cost from lost livesin the NYC government, Medicaid disaster relief (mentioned above), pension costs,capital costs (which are covered by FEMA), an increase in cost of borrowing by $2.7billion. 33

The Partnership for New York City report states that the estimated revenue loss for NewYork city was $1.4 billion in FY 2003 and $1.6 billion in FY 20 02. This is comprised of$915 m illion in personal income taxes, $901 million in business taxes, and $700 millionin sales taxes.34

Infrastructure an d Real Estate

The Senate Finance Committee report sates that 37.2 million square feet of office spacewas destroyed or damaged. 10.1 million square feet of office space was damaged andsupposedly could have been reoccupied in one year. Another 3.5 million square feet

would require a least one year's worth of repairs. Total repair costs were estimated at$2.2 billion. Utility infrastructure was destroyed as well. 33 miles of high voltage cablewas laid by Con E d. It wa s estimated to cost the city $900 million to repair.

31 Comptroller of NYC Report, page 5232 Comptroller of NYC report, pages 27-2933 Comptroller of NYC report, pages 42-4434 New York City Partnership report page 5

15



DRAFT 3/2/04

The New Y ork City Partnership said that 34.5 million square feet were destroyed ordamaged. Six properties were destroyed for 13.4 millions square feet. 35

The Com ptroller of NYC stated that 30 million square feet were lost or damaged 36 . Thedestroyed and damaged office space is 11 percent of six to seven percent of M anhattanspace. 7

Charitable Giving to NYC and residents

The New York C ity Partnership said that individuals, foun dations and corporations havecontributed $1.88 billion to 9-11 related causes (Source Research Alert, August 2002).38

Federal Payme nts to NYC and local Businesses

The New York City Partnership said that Federal Aid Earmarked for New York City isover $20 billion (as of Jan. 2002). This is divided between D irect approp riations, and tax

credits, bond refinancing and other provisions.39

The Com ptroller of the New Y ork City said that the total appropriated to New York C ityas of the time of their report was $21.358 billion. FEM A was $9.1 billion for emergenc yand recovery work an d transit projects. Liberty Zone Package, which provided economicsubsidies to businesses in lower Manhattan and allows the State and C ity to issue tax-exempt bonds to fund the construction costs of office an d residential units in lowerManhattan, $5.029 billion. The Lower Manhattan Development Corporation and EmpireState Development Corporation will oversee $3.45 billion appropriated by the FederalGovernment targeted to compensate businesses for economic losses, to encourage jobretention, job creation, to provide financial assistance to residents, and to help rebuild

infrastructure in lower Manhattan. All other funds are $3.779 billion fo r transit an dtransportation projects, individual assistance and security.

Recommendations for the Future

Obviously from an y experience, you take the lessons learned and make recommendationsfor the future. The Com mission will do the same. Many of the recommendations will liein the policy an d organization of the Government, bu t there certainly is room for more

preparedness in the private sector. Mem ories are short and mu ch has gone back tonorm al. 9-11 seems a long time ago. Corporate budg ets are tight. And wh ile some easymeasures that are important have been taken by m any, including at the least better

identification of employees an d their location, there are still ma ny issues to tackle. Eachcompany has a different view but trends are emerging. One is to have a Director of

35 New York City Partnership report page 636 Comptroller Report, page 437 IBID38 New York C ity Partnership report page 1039 New York City Partnership report page 6

16



DRAFT 3/2/04

Security reporting to the CEO. This is a welcomed trend, particularly as it providesevidence that the CEO is involved andthat the concept of Crisis Management -

Emergency Preparedness and Continuity of Business receives Senior ManagementSupport.

I believe that market based approaches for encouraging Emergency Preparedness are

important to the future security of the corporate economy. While the U.S . and otherGovernments are working hard to prevent terrorism, it is up to the private sector to do its

part. In my opinion, good corporate governance should reflect a sound Emergency

Preparedness and Continuity of Business plan. It makes sense.

In Conclusion

While the financial district of NYC could not prevent 9-11, nor did it have any direct

influence in the US approach to the varying factors that led to 9-11, they were the

recipients o f the attacks, and they are today forced to confront the very real poss ibility

that despite the best cooperative and determined efforts of our government, of othergovernments, their may still be other large scale attacks against the private sector.

That need fo r preparation is the center of my work for the Commission.

17

Documents

NY B15 Private Sector Evacuations Fdr- Entire Contents- 3-2-04 Draft- Private Sector Response 064