At a time when the federal government is promising to make its bank bailout more transparent by requiring financial institutions receiving funds from the Troubled Asset Relief Program (TARP) to report what they are doing with the money, New York City should shed more light on the subsidies it has provided to many of these same firms over the past two decades. Before the Bailout of 2008: New York City’s Experience with Tax Giveaways to Financial Giants, a new report by Good Jobs New York, documents the lack of transparency and accountability in New York City’s corporate subsidy deals.
Before the Bailout focuses on six financial firms that have received some of the largest federal payouts under TARP and earlier received subsidy deals worth hundreds of millions of dollars from New York City: American International Group (AIG), Bank of America, Bear Stearns, Citigroup, JPMorgan Chase, and Merrill Lynch.
Good Jobs New York released the report last week at a press conference with New York City Council Members Eric Gioia, David Yassky and Letitia James, and advocacy groups Common Cause/New York and New York Jobs with Justice.
The report documents problems with New York City’s reporting system that make it difficult to discern whether these companies have lived up to the job promises they made in exchange for tax breaks. One of the biggest roadblocks is that the New York City Industrial Development Agency’s Annual Projects Report excludes companies that were initially granted subsidies eight or more years prior, even though many of the companies are still receiving city subsidies. While reporting requirements expire after seven years, most deals last more than twice as long – Bear Stearns’ deal is for fifty years.
From the documentation we have been able to obtain we found that the city’s return on these deals is disappointing: some firms failed to live up to their job-creation promises, others laid people off despite supposedly agreeing to retain or create jobs, and others only reached promised job levels thanks to mergers.
The report details a number of recommendations for making the city’s subsidy deals more transparent and accountable to taxpayers. Among them:
Improve web-based transparency – The current reporting system provides information only for the first eight years of a deal, leaving the public in the dark for the remaining duration of the projects.
Provide full advance disclosure of proposed subsidy contracts – The IDA should post the full text of proposed subsidy contracts online 30 days in advance of the public hearing. Details should include job creation and retention requirements and clawback (money back guarantee) provisions.
Implement job quality standards – Subsidized firms should guarantee all employees earn a living wage and have health benefits. This requirement – that companies receiving subsidies adhere to job quality standards – already exists in numerous states and municipalities across the country.
Strictly enforce job-creation requirements – Any new subsidy contracts must eliminate the possibility of a firm laying off workers while still claiming tax breaks.
Whether federal or local funds are involved, the public deserves to know how banks are using taxpayer dollars.