New York State will give a $25 million tax break to a company with over $5 trillion in assets so it can move into a shiny new taxpayer-funded office building on the far west side, the New York Times reported this morning.
BlackRock, a global finance company, has promised that in return for the tax break, it will create 700 jobs. The building it will be moving into is owned by Related Companies, which has received almost half a billion in tax breaks from the city for building several properties over the Hudson Yards.
Back in January of this year, BlackRock signaled that it was looking for some new digs in New York City, having grown weary of its Midtown offices. “A firm like BlackRock, looking for a million square feet at once, should have the brokerage community as well as the development community salivating,” an analyst told Bloomberg at the time.
And salivate they did! Both Tishman Speyer and Related Companies began to woo BlackRock over to the Hudson Yards, each offering low rents and other incentives in the hope that once BlackRock called Hudson Yards home, other financial services firms would follow. For some reason however, New York State decided to sweeten the deal, even though the company was being actively courted.
“How many layers of subsidization can be justified?” asks Greg LeRoy, executive director of Good Jobs First, a group that tracks government subsidies nationwide.
“You’ve already got the property tax being given to Related, you’ve got the huge investment for the new subway line extension, which is a giant public investment and greatly enhances the value of the land,” LeRoy told the Voice. “And then you’ve got two landlords competing for BlackRock — giving them rent discounts or build-out allowances, and what’s BlackRock going to do? Move to Greenwich? I don’t think so.”
For decades, New York City and state have been trying to fend off the threat of companies moving to New Jersey or Connecticut by offering tax deals that keep companies in the city, but devastate tax revenues. Now, with landlords competing for tenants at various new commercial towers at the World Trade Center site and Hudson Yards, the city is mostly competing against itself. And yet public money is still getting thrown into the deal.
“It would be very difficult for the state to argue that they moved the needle here,” LeRoy said. “And if they can’t prove that they moved the needle, that they caused something to happen that wasn’t going to happen anyway, it’s a waste of money.”
In an email to the Voice, the Empire State Development, the state’s public-benefit corporation, said that the tax breaks would be given in the form of Excelsior Tax Credits tied to job creation. According to ESD, BlackRock had threatened to move 400 jobs out of the state instead of moving to Hudson Yards.
“The company is already in New York City, they’re simply not going to go someplace else,” said James Parrott, an economist with the Fiscal Policy Institute. “BlackRock is a huge investment company that manages several of New York state’s major pension funds. I think their customers would have a lot to say about it if the company ever tried to move out of the state.”
The only reasoning for the tax break that Parrott could see was that the state would be able to tout the job creation that it made possible. Even without the tax breaks however, the Times reported that BlackRock was looking to expand its workforce anyway.
This afternoon, Governor Cuomo presided over the Regional Economic Development Council Awards, a prize he created to award public-private partnerships across the state. There, Cuomo announced, “Our tax structure is as competitive as anyone’s.”