History of New York City (1946–1977)

John Lindsay, a liberal Republican, was a highly visible and charismatic mayor from 1966 to 1973. The city was a national center of protest movements regarding civil rights for black citizens, opposition to the Vietnam War, and the newly emerging feminist and gay movements. There were jolting economic shocks as the postwar prosperity came to an end with many factories and entire industries shutting down. There was a population transition with hundreds of thousands of African-Americans and Puerto Ricans moving in, and an exodus of European-Americans to the suburbs. Labor unions, especially in teaching, transit, sanitation and construction, fractured over major strikes and internal racial tensions.[1]

The Transport Workers Union of America (TWU) led by Mike Quill shut down the city with a complete halt of subway and bus service on mayor John Lindsay's first day of office. As New Yorkers endured the transit strike, Lindsay remarked, "I still think it's a fun city," and walked four miles (6 km) from his hotel room to City Hall in a gesture to show it.[2] Dick Schaap, then a columnist for the New York Herald Tribune, coined and popularized the sarcastic term in an article titled Fun City.[2][3] In the article, Schaap sardonically pointed out that it was not.[2][3]

Anderson Avenue garbage strike. A common scene throughout New York City in 1968 during a sanitation workers strike

The transit strike was the first of many labor struggles. In 1968 the teachers' union (the United Federation of Teachers, or the UFT) went on strike over the firings of several teachers in a school in Ocean Hill and Brownsville.[4]

That same year, 1968, also saw a nine-day sanitation strike.[5][6] Quality of life in New York reached a nadir during this strike, as mounds of garbage caught fire, and strong winds whirled the filth through the streets.[7] With the schools shut down, the police engaged in a slowdown, firefighters threatening job actions, the city awash in garbage, and racial and religious tensions breaking to the surface, Lindsay later called the last six months of 1968 "the worst of my public life."[8]

The Stonewall riots were a series of spontaneous, violent demonstrations against a police raid that took place in the early morning hours of June 28, 1969, at the Stonewall Inn, in the Greenwich Village neighborhood of New York City. They are frequently cited as the first instance in American history when people in the homosexual community fought back against a government-sponsored system that persecuted sexual minorities, and they have become the defining event that marked the start of the gay rights movement in the United States and around the world.

US economic stagnation in the 1970s hit New York City particularly hard, amplified by a large movement of middle-class residents to the suburbs, which drained the city of tax revenue.[11] In February 1975, New York City entered a serious fiscal crisis. Under mayor Abraham Beame, the city had run out of money to pay for normal operating expenses, was unable to borrow more, and faced the prospect of defaulting on its obligations and declaring bankruptcy. The city admitted an operating deficit of at least $600 million, though the actual total city debt was more than $11 billion[12] and the city was unable to borrow money from the credit markets.[13] There were numerous reasons for the crisis, including overly optimistic forecasts of revenues, underfunding of pensions, use of capital allocations and reserves for operating costs, and poor budgetary and accounting practices. Another perspective given on this matter is that as the most capitalised city of the United States at that time, New York hosted an array of welfare and benefits for its people, including nineteen public hospitals, mass transit facilities and most importantly, New York City provided higher education for free with the Municipal University system.[14] The city government was reluctant to confront municipal labor unions; an announced "hiring freeze" was followed by an increase in city payrolls of 13,000 people in one quarter, and an announced layoff of eight thousand workers resulted in only 436 employees leaving the city government.[15]

The World Trade Center, completed in 1973

The first solution proposed was the Municipal Assistance Corporation, which tried to pool the city's money and refinance its heavy debts. It was established on June 10, 1975, with Felix Rohatyn as chairman, and a board of nine prominent citizens, eight of whom were bankers. In the meanwhile, the crisis continued to worsen, with the admitted city deficit reaching $750 million; municipal bonds could be sold only at a significant loss to the underwriters.[15]

The MAC insisted that the city make major reforms, including a wage freeze, a major layoff, a subway fare hike, and charging tuition at the City University of New York. The New York State Legislature supported the MAC by passing a law converting the city sales tax and stock transfer tax into state taxes, which when collected were then used as security for the MAC bonds. The State of New York also passed a state law that created an Emergency Financial Control Board to monitor the city's finances, required the city to balance its budget within three years, and required the city to follow accepted accounting practices. But even with all of these measures, the value of the MAC bonds dropped in price, and the city struggled to find the money to pay its employees and stay in operation. The MAC sold off $10 billion in bonds.[16]

It failed to achieve results quickly and the state came up with a much more drastic solution: the Emergency Financial Control Board (EFCB). It was a state agency, and city officials had only two votes on the seven-member board. The EFCB took full control of the city's budget. It made drastic cuts in municipal services and spending, cut city employment, froze salaries and raised bus and subway fares. The level of welfare spending was cut. Some hospitals were closed as were some branch libraries and fire stations. The labor unions helped out, by allocating much of their pension funds to the purchase of city bonds—putting the pensions at risk if bankruptcy took place.

A statement by Mayor Beame was drafted and ready to be released on October 17, 1975, if the teachers' union did not invest $150 million from its pension funds in city securities. "I have been advised by the comptroller that the City of New York has insufficient cash on hand to meet debt obligations due today," the statement said. "This constitutes the default that we have struggled to avoid."[17] The Beame statement was never distributed because Albert Shanker, the teachers' union president, finally furnished $150 million from the union's pension fund to buy Municipal Assistance Corporation bonds. Two weeks later, President Gerald R. Ford angered New Yorkers by refusing to grant the city a bailout. [18]

Ford later signed the New York City Seasonal Financing Act of 1975,[19] a congressional bill that extended $2.3 billion worth of federal loans to the city for three years. In return, Congress ordered the city to increase charges for city services, to cancel a wage increase for city employees and to drastically reduce the number of people in its workforce.

Rohatyn and the MAC directors persuaded the banks to defer the maturity of the bonds they held and to accept less interest. They also persuaded the city and state employee pension funds to buy MAC bonds to pay off the city's debts. The city government cut the number of its employees by 40,000, deferred the wage increases already agreed to in contracts and kept them below the level of inflation.[20][21][22][23] The loans were repaid with interest.[24][25]

Manhattan skyline around 1970

A fiscal conservative, Democrat Ed Koch, was elected as mayor in 1977. By 1977–78, New York City had eliminated its short-term debt. By 1985, the City no longer needed the support of the Municipal Assistance Corporation, and it voted itself out of existence.[15]

The New York City blackout of 1977 struck on July 13 of that year and lasted for 25 hours, during which black and Hispanic neighborhoods fell prey to destruction and looting. Over 3,000 people were arrested, and the city's already crowded prisons were so overburdened that some suggested reopening the recently condemned Manhattan Detention Complex.[26]

The financial crisis, high crime rates, and damage from the blackouts led to a widespread belief that New York City was in irreversible decline and beyond redemption. By the end of the 1970s, nearly a million people had left, a population loss that would not be recouped for another twenty years. To Jonathan Mahler, the chronicler of The Bronx is Burning, "The clinical term for it, fiscal crisis, didn't approach the raw reality. Spiritual crisis was more like it."[27]