New York City to promote Connecticut economy

In its continuing effort to promote the Connecticut economy at the expense of its own, the New York City Council decided to pass a $1.2 billion property tax increase. Clearly, someone has to pay for the 40,000+ new city employees added during Mayor Bloomberg's term, and it might as well be city's the property owners. 

Property is already so cheap in New York City - why not make it even less affordable?

And if there's one thing we've learned, it's that Wall Street will always be there for the soaking, if city leaders wish to do so for the sake of financing an ever-growing city government. 

How much does the city rely on the financial industry? Finance accounts for at least 20 percent of the city's income; "in the 1990s, it was responsible for 21 percent of new jobs and for 56 percent of income growth."  It's a good thing that the city can count on that continuing indefinitely into the future.

Especially because the pro-business climate is so good at creating jobs in the rest of the city's economy:

• banking today employs only 39,000 people, down from a peak of 120,000, while the insurance sector, which once employed more than 100,000 people in Gotham, now has only 56,000 jobs                
• From the start of the last recession just before 9/11 until the end of 2004, the city actually lost a total of 170,000 jobs—a decline of 5 percent. Of course, tens of thousands of those jobs evaporated immediately after 9/11. But the losses nevertheless continued over the next two and a half years, despite Wall Street’s record profits in 2003                                                                                                              
• A big chunk of what has passed for private-sector job growth in New York has also occurred in industries that are nominally private but are actually supported by tax revenues and therefore don’t create wealth but at best merely redistribute it. These industries—health care and social services—have accounted for nearly half the city’s job growth in the past 12 months and now represent 18 percent of all “private”-sector jobs in the city.                                                                                        
• Today, Gotham taxes residents and businesses at about 75 percent more than the average of the next ten largest American cities—and that startling percentage is growing                                                  
• [and this was back in 2005] real-estate taxes now account for on average $12 per square foot of a lease in a Manhattan office building, while in new buildings the tax averages $19 per square foot, and in “trophy” buildings like the Time Warner Center or the Condé Nast tower, real-estate taxes eat up an amazing $26 per square foot, according to the Real Estate Board of New York. By contrast, the average total price of a lease in a New Jersey office building is about $28 per square foot, including only about $3 per square foot in property taxes.              

  

Perhaps unsurprisingly, those who would otherwise help build the economy tend to flee as fast as they can:

• From 1995 through 2000, a period of economic growth, 1.37 million New Yorkers left the city, while only 825,904 residents came here from somewhere else in the U.S.: a net loss of 545,269 people. Brooklyn had the biggest drain, down a net 233,555 residents. Yet even Manhattan, the place that New York mythology likes to describe as irresistibly attractive to all the right people, suffered a net loss of more than 57,000 U.S. residents                                                                                            
• New York State suffered the greatest net loss of U.S. residents of any state from 1995 through 2000—down 874,248 people. That outdid the second-biggest loser, California, by more than 100,000 residents. New York and California alone accounted for 55 percent of the net loss of all states that experienced out-migration.   

  At least the city government is trying to get the most for its money?

• More than half of the city’s projected $6 billion deficit for the next fiscal year comes from hiked spending, much of it needed to pay for rising employee benefit costs—including more than $730 million in new pension costs and $343 million in additional medical benefits                                           
• These ballooning outlays don’t just fall out of the sky. They result from specific policy choices, such as the Bloomberg administration’s decision to give a plummy $275 million raise to teachers and its refusal to demand that city employees pay part of their health-care insurance premiums, a common practice in the private sector. Thanks to this extravagance, the city’s cost in wages and benefits for fiscal 2004 will be nearly $7,000 higher per employee than previous estimates, the CBC says.

And trying to attract businesses to the city?

• The average commercial lease in Manhattan contains about $9.91 per square foot in annual property taxes, while in cities like Los Angeles, Atlanta, and Dallas, commercial property taxes average between $2.50 and $4 per square foot. And on top of this, New York adds a commercial occupancy tax—a tax on rent—that doesn’t exist in most cities. This produces staggering differences in costs.                                                                                                                                                                                                         
• Even before the Bloomberg tax increases, a company employing 2,000 people and renting 500,000 square feet of space, or about 15 floors in a large modern midtown Manhattan skyscraper, might pay up to $7 million a year in property taxes through its lease, including the commercial rent tax. With the Bloomberg increases, the business will now pay more than $8 million. By comparison, that same company, located in downtown Los Angeles or Atlanta or across the river in a New Jersey office park, would pay from $1.3 million to $2 million a year in property taxes—or at least $6 million a year less than in New York.                                                                                       
•   A recent listing by Entrepreneur magazine of the 100 fastest-growing, most entrepreneurial companies in America includes just one New York City company.                                                                 
•  A city that employs about 300,000 full-time and full-time-equivalent workers, about 50 percent more than it did in the early 1980s, though the city’s population has grown by just 12 percent since then. The city’s workforce is one-seventh the size of the federal government’s yet serves a population that is less than 3 percent of the U.S. population.                                                                           

Today, I give thanks that I don't have the misfortune of trying to start or run a company in New York City.