Smoke and Mirrors on the Hudson (updated)
This 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.