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A Tug-of-War of Tax Breaks Tightens Across the Hudson
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A Tug-of-War of Tax Breaks Tightens Across the Hudson
With Tax Incentives, New York and New Jersey Fight for Jobs

The New York Times
JUNE 11, 2014

Late last fall, bankers from BNY Mellon went to state officials in New York and New Jersey with a proposition: The bank was planning to sell its headquarters on Wall Street and was looking for office space on either side of the Hudson River for more than 1,100 employees.

The bankers wanted to know who would cut the best deal.

In New Jersey, Gov. Chris Christie?s administration responded quickly with a hefty offer ? nearly $100 million worth of tax credits ? if the bank would move one mile west to Jersey City.

New York countered with its own incentive package that real estate executives say is worth millions of dollars if the bank remains in Lower Manhattan.

The bank is leaning toward New York, real estate executives say, but no victor has been announced and officials on both sides of the Hudson refused to discuss the high-stakes negotiations.

The tug-of-war is the latest skirmish in what is becoming a fierce competition between New York and New Jersey to heap subsidies on some of the country?s wealthiest corporations as enticements. With a struggling labor market, jobs are precious to both states, but in New Jersey there is also a political factor: Mr. Christie is widely presumed to be a contender for the Republican presidential nomination and has promoted himself nationally as a prudent financial steward.

So while offering incentives to businesses is a common practice across the country, New Jersey has been extraordinarily generous under Mr. Christie, awarding over $4 billion in subsidies ? tax breaks and credits ? since 2010 to JPMorgan Chase, Forbes, American Dream Meadowlands, RBC Capital and other corporations. But that also raises questions about how well Mr. Christie is managing the state?s economy, since many critics argue subsidies are an ill-advised use of taxpayer money that fail to yield significant economic benefits.

The $4 billion is also far higher than the $1.2 billion in incentives the state granted in the previous 10 years. The figures are included in a report published on Wednesday by New Jersey Policy Perspective, a liberal policy organization whose analysis was based on data from the New Jersey Economic Development Authority.

Some of the subsidies went to companies already in New Jersey ? Panasonic got $102.4 million to move its headquarters nine miles within the state. New York State, by comparison, has provided more modest incentives.

Mr. Christie has used every deal to trumpet his success at job creation. ?JPMorgan Chase Bank?s decision to choose New Jersey exemplifies our enhanced ability to compete in the regional, national and global economy,? the Economic Development Authority said in a news release issued last month after the state?s decision to provide the bank with $224.8 million in tax credits over 10 years.

?We will always compete for every job,? said Timothy J. Lizura, president of the development authority. ?We?ll put our most compelling proposal forward. But there?s no upfront money. It?s only after the companies have created jobs, retained them and made the promised investments.?
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The average cost of the subsidy package has soared to $75.9 million from $10.1 million and the amount of tax forgiveness per promised job has jumped to $47,916, from $16,430, according to New Jersey Policy Perspective. Just this week, the state announced $82 million in tax breaks to the Philadelphia 76ers basketball team to move its training facility from Pennsylvania to Camden.

?We?ve never seen anything like this,? said Gordon MacInnes, the president of Policy Perspective, ?where such large chunks were granted to a handful of corporations.?

Critics contend that incentives are nothing more than corporate welfare, giveaways to companies that hardly need them and whose motivation for relocating ? which can be expensive and disruptive if employees do not want to move ? is usually dictated by market demand, not by subsidies.

?You?re talking about a huge waste of resources,? said Jon Whiten of Policy Perspective, ?when it?s pretty clear that these sorts of tax breaks are not essential to location decisions.?

The resources could be better spent, critics say, on transportation and education, which benefit all businesses and citizens. Instead, tax breaks deprive the state of revenues and shift more of the tax burden onto small and medium-size businesses, whose threats to relocate do not get the same attention.

Since the 1980s, New Jersey has lured Goldman Sachs, Depository Trust and Clearing Corporations, U.S. Trust, Merrill Lynch and JPMorgan Trust into moving parts of their operations to Jersey City from Manhattan. In general, the companies moved lower-level or back-office employees to less expensive locations.

A few years ago, the Christie administration also provided Prudential Insurance $250.8 million in incentives to move a few blocks within Newark.

But with the state?s economy still staggering, New Jersey has been busy striking a string of cross-border deals.

RBC Capital Markets, a division of the Royal Bank of Canada, recently got up to $78.75 million to transfer about 900 employees from Lower Manhattan to Jersey City, instead of Minnesota, according to the Economic Development Authority.

RBC, which will maintain its American headquarters in Lower Manhattan, is moving to New Jersey?s tallest building, which Goldman Sachs built in 2004 with $164.3 million in state tax credits. The tower, which was built to accommodate over 6,000 employees, was never fully occupied, after equity traders for Goldman balked at being transferred from Manhattan.

The Christie administration also struck a $224.8 million deal with JPMorgan Chase after the bank threatened to move its New Jersey operations to Delaware and Ohio. The bank agreed to retain 2,612 employees and promised to add 1,000 new jobs in Jersey City.

Chase had gotten about $100 million in tax breaks in 2000 from New Jersey to move about 5,000 technical jobs from Manhattan to a new building in Jersey City. State officials say that those jobs are not included in the latest deal.

The administration of Gov. Andrew M. Cuomo of New York has brokered its own subsidy deals, albeit on a smaller scale, with major corporations.
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Continue reading the main story

This year, Time Inc., which publishes Time magazine and 20 other brands, threatened to move to New Jersey from its longtime home in Midtown. New York agreed in May to provide the company with $10 million ? a $3 million tax credit and $7 million in cash ? to move instead to Lower Manhattan.

Several other companies received incentives without even threatening to leave New York. The state agreed to provide GroupM, a large media company, $15 million in cash if it moved downtown from Midtown. Two companies that are part of New York?s fast-growing technology sector, Etsy and Square, each got $5 million in tax credits.

Kenneth Adams, commissioner of the New York State Department of Economic Development, played down the notion of a border war. ?We don?t focus on states,? he said. ?We focus on companies, primarily on strategic industries that are poised for growth.?

Kathryn S. Wylde, president of the Partnership for New York City, a coalition of business leaders, said competing with New Jersey was foolhardy. ?If you look at the history of corporate tax subsidies,? she said, ?it?s not a pretty picture. What?s silly about these border wars is that we?re really, in many respects, one economy.?

But that does not seem to be the case when it comes to BNY Mellon. The bank reportedly has a handshake deal to move to Brookfield Place, a downtown office complex in Battery Park City. According to real estate executives who have been briefed on the matter, the state plans to provide a form of rent aid through the Battery Park City Authority that could be worth $2 million a year.

?After a decade in which these kinds of deals were under the radar or discredited, it?s troubling to see them return,? said Jonathan Bowles, director of the nonprofit Center for an Urban Future, a research group. ?I?m worried that we?re going to enter an era where companies expect tax breaks from the state, just because their competitors are getting similar incentives.? ... bs.html?ref=nyregion&_r=0

Posted on: 2014/6/12 16:54

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