New York Stock Exchange
In 1998 New York City entered into negotiations with the New York Stock Exchange to subsidize the development of a new trading floor across from its current location. At its peak, the subsidy hovered close to $1 billion in various forms of public financing. In exchange for the benefits, NYSE was to commit to remain in its new facility for at least 50 years. On August 1, 2002, almost four years after the first version of this deal was announced, it was pronounced dead by the NYSE Chairman Richard Grasso. Yet, taxpayers are still responsible for approximately $100 million in expenses associated with the plan.
Good Jobs New York followed the unfolding of this historic tax subsidy deal, as seen in the reverse timeline, below.
The project would have required the demolition of the buildings (except for one historically protected facade) on the entire square block bounded by Wall, Broad, and William Streets and Exchange Place. In late December, 2000 the state announced it would initiate eminent domain procedures to allow the taking of the land by condemnation in case the city was unable to negotiate a purchase. In early February, Rockrose Development Corp. agreed to sell 45 Wall St. to the city for about $160 million, and in mid-March J.P. Morgan Chase & Company agreed to sell its office building at 15 Broad and 23 Wall St for $220 million to make way for the new trading floor. The remaining property, a building owned by the Wilf family, will be seized through condemnation.
Rockrose converted 45 Wall St. to residential use in 1997 and since then has received real estate tax exemptions and abatements worth $9.8 million under the Lower Manhattan Revitalization Plan, which provides incentives for conversion of office space to residential use. The $160 million price tag paid by taxpayers for this building is undoubtedly much higher than it would have been without the $9.8 million in incentives for conversion to residential use. The city had also agreed to reimburse the tenants for relocation costs of up to $15,000. There are 435 apartments at 45 Wall St.
Mindful of the empty office towers in the 1980s, developers have been reluctant to break ground in Manhattan without at least half of the prospective building pre-leased. In the wake of September 11th, chair of the Stock Exchange, Richard Grasso, declared the tower "unsaleable" and forced the city to re-negotiate a less extravagant deal.
Even at the time some questioned NYSE's need for expanded facilities in the first place, with the increased prevalence of on-line trading and automation. On July 26, 2001 the NYSE announced it would be laying off 150 employees (clerks that record trading data) and replacing them with automated technology. The NYSE is a last hold-out in an industry-wide trend towards electronic trading boards rather than personnel. Electronic trading requires significantly less space. Critics noted the extravagance of the proposal:
"The stock exchange is like a baseball stadium in that it may be somewhat good for civic pride and the economy, but it's not worth paying an exorbitant price," said Charles Brecher, director of research at the Citizens Budget Commission. "We may have proveded a deeper subsidy than the underlying economic judgment could justify" (New York Times, 12/21/00).
"The mayor is playing Santa Claus with the city's treasury. The fact is, the city is paying an inordinate amount on the dubious proposition that the stock exchange would have moved to Jersey City. And all this has been done without any public debate," State Sen. Franz Leichter (New York Times, 12/23/98).
3/11/03 -- Epilogue: IDA board approves $110 million bond issue for NYSE expenses.
The defunct deal will cost the city at least $110 million plus interest payments on an IDA-issued bond that will be paid back through annual appropriations in the city budget.
8/2/02 -- The End of an Era?
NYSE Chair Richard Grasso announced yesterday that the Big Board was walking away from three and a half years of negotiating a deal with the city to build a subsidized new trading floor across the street from its current Wall Street location, according to a Bloomberg News report. The deal unraveled after September 11th as a result of the NYSE's security concerns about a proposed private office tower on top of the new floor. Rent paid by tenants in this office tower were going to be paid to the city to help offset its investment. Without the tower and the rents it represented, there would be no chance for the city to make back any of the money it had proposed to invest.
Prior to September 11th, the cost to NYC taxpayers of the NYSE subsidy was estimated at over $1.1 billion. However, with no tower and with the city facing an enormous budget crisis, Mayor Bloomberg said the city could not afford such a subsidy. This shifted one third of the cost of the project from taxpayers to the NYSE and reduced the city's contribution to $400 million. Mayor Bloomberg's refusal to increase the city's contribution above $400 million apparently contributed to the NYSE pulling out of the deal.
GJNY estimates that the city may have already spent nearly $100 million in preparing this now defunct deal. View GJNY's breakdown of costs.
The news of Grasso's decision to end negotiations came shortly after the NYSE announced plans to locate a site for a second active trading floor, possibly in Westchester.
Read coverage in: The New York Times
7/26/02 -- Mayor Bloomberg Says Proposed Move for Back-up Trading Floor Out of NYC Would "let the terrorists win" by Scaring Important Business Out of the City.
Read coverage in: The New York Times
7/24/02 -- NYSE "Eyes" Westchester for Second Trading Floor
According to a Bloomberg News report, the NYSE is considering establishing a facility in the suburbs that would both ease crowding on Wall Street and provide a way to keep trading from being interrupted as it was on September 11th. Westchester was listed as a possible candidate for the back-up location, although Queens and Brooklyn were also mentioned as possibilities. A spokesman for the City stated that the Exchange had not approached the administration about the move. "If we find more money for the exchange, the backup facility goes away," one city official told The New York Post.
Read coverage in The New York Times
5/24/02 -- The Bloomberg Administration asks NYSE to double its contribution to new trading floor project
At a meeting on May 16th, the city proposed to the NYSE that it contribute as much as $900 million rather than the original $450 million to the building and outfitting of a new trading floor across the street from its current location, according to a report from The New York Times. The city recommended making use of Federal funds in the form of tax-exempt Liberty bonds, accelerated depreciation and cash grants available to businesses in Lower Manhattan. Chair Richard Grasso has not yet commented on the new proposal. Doubling the NYSE contribution would reduce the city's commitment from approximately $800 million to under $400 million. However, the exact terms of the deal and the consequent cost to taxpayers remains unclear. As of now, the project might or might not include a tower with rents that would help offset the trading floor's price tag. However, the cost is certainly rising, since J. P. Morgan Chase and Rockrose Development are still collecting a combined $3 million per month in penalty fees from the city for failure to close on the purchase of property on the proposed site.
4/30/02 -- City faces ultimatum from J. P. Morgan Chase
According to a recent news report, J. P. Morgan Chase, which owns one of the three properties the City plans to acquire to build the NYSE a new trading floor, now demands that the City close on the $220 million purchase by mid-May or lose the sale. The Bank of New York (BONY) had been leasing part of the building after being displaced by the terrorist attacks. But by summer BONY intends to return to its own buildings, leaving the property empty. The City is currently paying $2 million a month to J. P. Morgan Chase and $1 million a month to Rockrose in penalty fees due to the delay. City officials and NYSE spokespersons affirm that they plan to go ahead with some version of the deal, possibly even retaining the tower that NYSE CEO Richard Grasso declared "not a salable transaction" last November.
3/25/02 -- NYSE members and staff unenthusiastic about possible AMEX merger.
According to a report from Crain's New York Business, the prospective merger between AMEX and the NYSE is meeting stiff resistance from floor brokers and seat owners.
3/7/02 -- Now seriously, folks, who really believed they'd go to Jersey? NYSE and the American Stock Exchange (AMEX) hold preliminary talks on merging.
The NYSE is thinking about buying the AMEX from the National Association of Securities Dealers (NASD) according to news reports today. If the deal goes through, the NYSE would gain access to AMEX's already equipped trading floor space, which is in close proximity to the proposed tax-payer financed site for a new NYSE trading floor. The AMEX floor was built with the help of $200 million in tax breaks and grants in 1998. (Click here for details from our database.) The AMEX has been valued at between $500 million and $700 million, roughly the amount of money the NYSE is contemplating contributing to constructing and equipping the subsidized trading floor. However, no formal dollar amount has yet been offered by the NYSE.
The proposed acquisition, if it goes through, raises important questions for NYC taxpayers: 1) Because the merger discredits NYSE's threat to move to New Jersey, how can the city justify continuing negotiations to give the NYSE a nearly $1 billion subsidy to build a new trading floor, especially if new trading space will be acquired under this merger? 2) How will the merger impact jobs? The AMEX and former fellow-NASD subsidiary the NASDAQ have both received city subsidies in the past in the name of job retention.
3/5/02 -- City is doling out an extra $2 million per month in taxpayer dollars to maintain proposed NYSE trading floor site while the deal languishes.
According to news reports, the City is paying fines and compensatory fees of $1 million a month to Rockrose Development Corp. for their residential building at 45 Wall Street and $2 million a month to J. P. Morgan Chase as a result of the delays in finalizing the purchase of their properties. The Bank of New York is renting space in the J. P. Morgan Chase building to house employees displaced by the attacks on the World Trade Center and is paying the City $1 million a month in rent. This leaves the city with a net loss of $2 million a month.
1/1/02 -- City to scale back amount of subsidy by approximately $240 million to compensate for lack of revenues from tower.
Although they failed to conclude a new agreement before Giuliani left office, the NYSE and the former mayor did sign an “Agreement in Principle” to go ahead with the subsidized trading floor at the originally planned site across from the current Stock Exchange building. The new agreement calls for the city to pay $500 million for the site itself -- the city has already signed contracts to purchase most of the buildings on the site -- but passes off around $240 million in construction costs to the NYSE. The exact amount of the city’s contribution is still up in the air, but Kevin Corbett, chief operating officer for the Empire State Development Corporation, estimated in a Bloomberg News article that the taxpayer would now pay only $740 million. The final cost will depend on the amount of private office space built, if any, above the trading floor. The State is still committed to paying $225 million and has not entered negotiations with the Exchange for a reduction.
According to Bloomberg News, the new agreement will give title of the building itself to the NYSE. (The city has thus far failed to secure a developer for the site.) But the land under the building would be leased from NYC to the Exchange for approximately $10 million a year for 50 years.
12/7/01 -- NYSE Board of Directors approves "post September 11th" plan for a new Wall Street trading floor. Negotiations with City to resume.
On December 7th, the NYSE Board of Directors announced that it would seek a revised deal with New York City to build a 600,000 square foot trading floor across the street from the Exchange's current site on Wall Street. This deal would retain the size of the trading floor proposed in the original model, but would greatly reduce or eliminate the proposed 900 foot privately financed office tower above the floor for reasons of security. Rents from this tower were to have off-set the cost of the City's investment in the project. The NYSE chair, Richard Grasso, stated that if no private tower is built the City's contribution would be capped at $450. It is unclear whether the $160 million negotiated tax breaks would be reduced as well.
11/9/01 -- Vote Postponed Indefinitely
New York City Industrial Development Agency cancels Tuesday's vote on NYSE subsidy deal.
Decision apparently follows NYSE Chairman Richard Grasso expressing doubts about the viability of the currently proposed location.
On November 8th, while the Economic Development Corporation's Public Relations staff assured GJNY that the vote was going forward as scheduled next Tuesday, Mr. Grasso publicly backed away from the current plan, saying the tall tower to be built over the trading floor was "not a salable transaction." Read GJNY's message about this latest twist. Late Friday afternoon, information reached GJNY that the vote, originally scheduled for 9:00 am Tuesday, November 13th, would be canceled.
New York City Industrial Development Agency is expected to vote on the NYSE subsidy deal at the November 13th board meeting.
On October 26th, 2001 Good Jobs New York provided testimony at the NYC Industrial Development Agency's public hearing, along with several other nonprofit groups and individuals concerning the city and state's financing of a new trading floor for the New York Stock Exchange. It is estimated that this subsidy deal, the largest taxpayer subsidy in New York State history would cost at least $1.1 billion. The mandated hearing has been and most likely will be, the only opportunity the city has established for New Yorkers to provide testimony concerning this deal.
Excerpts from a October 27th, 2001 Newsday article brings to light an appalling fact - hearing attendees and staffers at the EDC [Economic Development Corporation] which runs the city Industrial Development Agency, said they didn't have a process for public testimony because they never had anyone who spoke in opposition at a public hearing. Considering the IDA has announced $2 billion dollars in economic development subsidies since 1994, it's a sad fact that New Yorkers have yet to be an active participant in the decision making process in which tax dollars are used to funds projects such as the NYSE.
Some people question whether this subsidy is still viable following the September 11th terrorists attacks. In fact, while recent news reports in the Daily News and New York Newsday point that while the construction of the project may be delayed (in order to provide office space to Bank of New York which was displaced), it seems the city is proceeding with the financing of the new NYSE trading facility.
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