Testimony

Good afternoon. I’m Alice Meaker, and I direct Good Jobs New York, a good government project that promotes accountability to taxpayers in the use of economic development subsidies. Good Jobs New York is a joint project of the Fiscal Policy Institute and Good Jobs First. The Fiscal Policy Institute is a New York-based research and education organization that focuses on state and local tax, budget, economic and related public policy issues. Good Jobs First is a national clearinghouse tracking best practices in economic development. Good Jobs New York seeks to ensure that New York’s economic development practices are carried out effectively, responsibly, and with accountability to taxpayers. Toward this end we have documented the largest subsidies offered to New York City corporations in the name of economic development. Information on these subsidies is available on our website, at www.goodjobsny.org.

The proposed subsidy to the NYSE could cost taxpayers $1.1 billion. It would be the largest subsidy in state history, and it is a bad deal for New Yorkers. We take issue with the extent to which public resources and government authority are being used to facilitate the proposed development.

The State’s power of eminent domain is limited to cases involving public use, benefit or purpose. We do not think that a new trading floor for the NYSE fulfills this requirement. This proposed project will primarily benefit private interests. While New York State has used its power of eminent domain very liberally, other states have defined what constitutes a "public purpose" and some have precluded takings for private commercial development. The New York State Bar Association has called for reform of the State’s eminent domain procedures law, and two of the law’s co-authors have called for a review of what constitutes a "public purpose," since the current definition is too broad and allows virtually any use.

The state and city say that the economic benefits of retaining the NYSE justify the massive public investment. But that justification rests on the assertion, which has never been demonstrated to the public, that the NYSE had made credible threats to move from Wall Street to a site outside New York. Unfortunately, there is a precedent in this city for retention deals to be made with companies whose executives later announce they never considered relocating. The governor and mayor owe it to taxpayers to demonstrate that we are not, yet again, being taken for a ride.

Why isn’t there more private sector investment in this new project? If keeping the NYSE in lower Manhattan is so critical to the strength of the city’s financial industry, shouldn’t its member firms be expected to invest in keeping it here? They can certainly afford it. The securities industry in New York City, which is dominated by NYSE member firms, paid out bonuses of nearly $12 billion in 1999. With a fraction of those bonuses, these firms could easily finance the new facility themselves.

NYSE executives claim they need larger, consolidated space with room to expand in order to compete globally. But the rapidly-evolving computerization of brokerage functions, and the much greater efficiency of electronic trading means the old-fashioned trading method that involves a "specialist" on a trading floor is quickly becoming obsolete. It is likely that NYSE, keeping up with these trends, will actually need less space, not more.

The use of subsidies for this project runs counter to the public benefit in several respects.

The opportunity costs of this subsidy are enormous. The $1.1 billion offered to the NYSE means that much less for investments in public education, transportation, affordable housing, and job training – investments that would benefit many more New York businesses and residents. Subsidies to NYSE and other large companies also mean more of the tax burden shifts onto smaller businesses.

This project is much too risky for the amount of public money at stake. The city has agreed to develop a trading floor for the NYSE with or without a developer and a major tenant for the office tower. No professional developer has been willing to take on this project without an anchor tenant. And with several large parcels of real estate coming onto the market in lower Manhattan, it may become increasingly difficult to identify an anchor tenant willing to take space above the NYSE. Without an anchor tenant, and with the economy continuing to slow, the Mayor has agreed to engage in a very risky speculative development project with hundreds of millions of taxpayer dollars at stake.

The lack of accountability to taxpayers reinforces public cynicism that government serves the powerful and connected, while ordinary people have no meaningful say, even when enormous public expenditures are at stake. Today’s hearing is one of very few opportunities for the public to have input into this proposed project. In fact, this hearing would not have happened at all but for the possibility that the land will be taken by condemnation. The closed-door process of distributing corporate subsidies fuels a growing sense of disenfranchisement, further mutes civic engagement and ultimately erodes our democratic institutions. Let’s honor Alexander Hamilton, after whom this building is named, and his commitment to democracy, fiscal prudence and good government. It’s time to open the doors on corporate subsidies and offer better accountability to the New Yorkers who pay for them.