Archive for the ‘Site Location Consultants’ Category

Right questions, wrong decisions on subsidies for big firms in NYC

August 5, 2010

Deloitte has an office in the city's municipal building on the same floor as the City Comptroller

At the New York City Industrial Development Agency’s public hearing last week, two proposals generated notable controversy: one to bestow millions in tax breaks on Big Four accounting firm Deloitte LLP, and another to revive a subsidy agreement from 1998, still worth millions in unused credits, for information services giant Thomson Reuters. This past Tuesday, the IDA board approved both projects, but not before a handful of board members engaged in a robust dialogue with IDA staffers, especially on the Thomson Reuters proposal.

The Deloitte proposal could have benefited from an even more vigorous discussion. For one thing, it smells like the same old game in which companies pit states and regions against each other in bidding wars for investment. As an IDA staffer explained, the agency “took seriously” a “threat” that Deloitte would leave the city for “other opportunities,” namely New Jersey. (Deloitte LLP plans to use the subsidy to help pay for moving its headquarters from one highly prized Manhattan office location—midtown—to another—Lower Manhattan.) And yet IDA staff also reassured the board that the proposal wasn’t about retention, but about growth. As EDC President Seth Pinsky stated, Deloitte will get no benefits until it increases its employment numbers within NYC. (more…)

Smoke and Mirrors on the Hudson (updated)

October 16, 2009

HudsonRiver_Small_021708051148This week, real estate pundits anointed New Jersey the winner when Depository Trust and Clearing Corp (DTCC) rejected a benefits package from New York City and took New Jersey up on its $80 million  nearly $90  million offer of tax breaks to move 1,600 jobs across the Hudson River. The firm, a major clearing house for securities, will keep 700 front office jobs at its Lower Manhattan headquarters.

But did New Jersey really have to fork over all those subsidies? As reported, DTCC claims it didn’t make the decision to move based solely on tax breaks. It’s well known that the business basics of transportation, appropriate space, workforce and access to customers are key in a location decision; without them tax breaks won’t make a difference.

Sadly, when two locations have what a firm needs, site consultants and firms send cities into a competitive frenzy of tax breaks and subsidy offers. But because bidding wars happen behind closed doors, no one knows what the proposals entailed.

New York officials responded, “We’d like all of its operations to be here, but we’d rather use scarce taxpayer dollars to invest in our future than engage in a reckless bidding war with New Jersey.” New York City did engage in negotiations for over a year but DTCC went where many back-office jobs have gone over the years – Jersey City where commercial rents are cheaper.

A startling fact revealed by New Jersey Policy Perspective is that almost $12 million of the $80 million of tax breaks are expected to come from a program not yet fully created much less approved by officials. The bulk of the incentives would come from New Jersey’s Business Employment Incentive Program, (BEIP) which mandate certain job standards. Disturbingly, New York City’s discretionary subsidies are void of any job standards. This should be a wake up call to the Bloomberg Administration that job standards aren’t job killers and start including them in its economic development subsidy deals.

These negotiations are reminiscent of the battles waged between New York City and New Jersey in the 1990’s. You’d think successful businessmen like New York City Mayor Michael Bloomberg and New Jersey Governor Jon Corzine would recognize that playing the bidding game doesn’t benefit anyone but the real estate industry.