In seeking subsidies as they build new office space, some of the city's biggest financial firms could face a newfound stiff resistance from the Spitzer and Bloomberg administrations.
The downstate chairman for New York's Empire State Development Corporation, Patrick Foye, said in an exclusive interview yesterday that the state intends to lower the amount of subsidies offered and decrease the amount of tax breaks offered for development projects statewide.
"We're going to maximize the value of every dollar we have and we're going to be passionate advocates for the advantages of doing business in the city and state," Mr. Foye said.
His statement comes on top of a pledge yesterday from Mayor Bloomberg not to give any special subsidies to developers downtown.
"If anybody builds downtown now, they will get normal, as-of-right tax breaks," Mr. Bloomberg said at a news conference, "and nothing more."
The pledges about subsidies come as banking giants are scouting out new office space on which to expand, including a plan by JPMorgan Chase to build a tower near ground zero, first reported in yesterday's New York Times.
The firms would presumably desire large tax breaks and other incentives, analysts say, given the hundreds of millions in subsidies awarded to rival Goldman Sachs in a deal involving its plans for a new headquarters downtown.
"They're always looking at the other firms," an analyst with Real Capital Analytics, Daniel Fasulo, said. "They can make very solid economic arguments to justify some incentives to steer their location decision."
Both the mayor and the governor's office have made clear that the Goldman Sachs deal, which included federally backed tax-free bonds, was a unique response to the need to spur investment in lower Manhattan after the attacks of September 11, 2001, and would not be duplicated.
"Deals that were done in the past by a prior administration soon after 9/11 ó those were done in a particular set up circumstances, and we've got to operate in the world as it exists today," Mr. Foye said.
While the Empire State Development Corporation has been directed by Governor Spitzer to be more aggressive in negotiating with developers, the strength of the pledge has largely been unmeasured, as no major projects have been approved since the new administration took office in January.
A deal over a new building with JPMorgan Chase or another large financial firm could serve as a strong early test of the state's claims of being more vigilant financial stewards, as the firms often carry strong political weight given their influential role in the city and state economy. Both the Bloomberg and Spitzer administrations have frequently highlighted the important role of Wall Street and a need to ensure that the city maintains its dominant global financial position.
In negotiating deals over the new development projects, the financial firms are sure to bring up the competitive advantage afforded to Goldman Sachs with its subsidies, the president of the Partnership for New York City, Kathryn Wylde, said.
"It set a new floor and obviously all their competitor institutions believe that they should get a package at least as attractive as Goldman," Ms. Wylde said.
A supporter of the Goldman Sachs agreement, Ms. Wylde did not call for the state and city to match such a deal, pointing to the federal government to take a larger role in supporting the city's major financial firms.
"The state is struggling to meet its obligations ó the city is in good shape this year but has a huge agenda," she said. "This shouldn't just be a local problem, because our competitor cities like London have the full support of their federal governments."
JPMorgan Chase and other large banking firms and associations declined to comment.
The subsidies offered to development projects traditionally include tax-free bonds or other forms of tax breaks, and can cost the local, state and federal governments hundreds of millions of dollars.
State and city tax breaks for banking giants frequently hit a nerve with critics of large subsidies, given the billions of dollars in profit that the firms can earn in a single quarter.
The director of the anti-subsidy watchdog group Good Jobs New York, Bettina Damiani, said that Mr. Bloomberg has been far more parsimonious with subsidies than his predecessors, though she has criticized numerous deals under his tenure including the Goldman Sachs building and an agreement for the Bank of America tower at Bryant Park.
"We shouldn't be utilizing taxpayer money to exacerbate the economic war between the states," Ms. Damiani said, referring to a common claim firms make that they will build new offices in New Jersey or Connecticut to save on costs.
While she said she plans to watch development deals closely, Ms. Damiani added that numerous tax-break deals unrelated to development projects were brokered under previous administrations with the intention of saving jobs. As those agreements expire in coming years, she has concerns that the firms will want the agreements renewed and the city could oblige.
The city and state are currently brokering numerous large-scale development projects around the city that could include subsidies. The plans to redo the Farley Post Office, across from Pennsylvania Station, are currently being negotiated, and could include an enormous deal including mixed-use development, a train station and possibly a new Madison Square Garden.