Tuesday, May 25, 2010

The Bloomberg business subsidy scheme

From the NY Times:

For all the giddy wealth that ran through the city before the economic crash, prized commercial real estate was often subsidized through state and city tax benefits, sometimes in special deals made behind closed doors.

And now, Condé Nast, which was granted $10.8 million in rent and tax breaks to move into a Times Square tower that was already heavily subsidized, is said to be having discussions with government officials about relocating downtown, into the tower planned as 1 World Trade Center. The Port Authority of New York and New Jersey has agreed to provide $1 billion in financing for the building.

The city has not decided if it will pitch in with taxpayer money to move companies from other parts of the city into the tower, but it has “a policy goal to help Lower Manhattan rebuild, and the new World Trade Center is a critical part of that,” said David Lombino, a vice president at the city’s Economic Development Corporation.

We all know that the bill has come due for lavish spending by the city and state: swelling public pensions, huge borrowing by the Metropolitan Transportation Authority that bought next to nothing, government salaries that grew faster than inflation. There is another, off-the-book cost that is also being paid: billions in public incentives given to some of the richest companies in the world.

For more than 25 years, they have been distributed by mayors, with little oversight or control, as an exercise of their discretion when faced with threats by companies to leave town.

They were criticized as forms of corporate welfare — often by the mayors themselves — that simply shifted the burden to other, smaller taxpayers, most of them not as well-connected.

Many of the threats to leave were barely disguised feints, and sometimes not even that. Condé Nast, for instance, publishes some of the most exalted titles in the magazine business, and the chances that the company would move out of Manhattan are slim to none. Other businesses equally unlikely to leave the media capital — The New York Times Company, CBS, Reuters, NBC, News America, ABC, McGraw Hill, Viacom, Hearst — were also given public money.

Mr. Giuliani also awarded subsidies for new baseball stadiums, but those deals were canceled by Michael R. Bloomberg almost as soon as he took office in January 2002. The city had a major deficit. There wasn’t enough housing or space for schools. “It is just not practical this year to go and build stadiums,” Mr. Bloomberg said.

A few years later, Mr. Bloomberg used hundreds of millions in public money to help the Yankees and Mets build stadiums.

In 2004, Mr. Bloomberg declared that he had “ended corporate welfare as we know it, by no longer paying companies — who wouldn’t have left anyway — to stay in our great city.”

He has not. But he has cut down on the number of deals, and in some cases, has put in provisions that require the companies to pay back their subsidies if they don’t keep their promises to keep jobs in the city.

Will the taxpayers now pay to move companies from one part of the city to another?

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