Company

New York Stock Exchange (terminated)

Date Announced

12/22/1998

Site

Wall and Broad Street

Total Subsidy

Ranged from $1.3 billion (approx. $1.1 billion from city) to $785 million (approx. $500 million from city)

Promised Job Creation

0

Promised Job Retention

0

Length of Contract

50 years

Competing Sites

New Jersey

Conditions

In exchange for a heavily subsidized new trading floor across from its current location, the NYSE would commit to remain in its new facility for the 50 year term of the lease with an option to extend to 99 years.

Notes

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. For details on the deal's unraveling, go to GJNY's New York Stock Exchange news page.

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Due to security concerns post September 11th, the NYSE withdrew its support for the original plan (outlined below) that involved a tall office tower to be built over the new trading floor. Without the revenues to the city expected from private companies' rent and taxes, the city negotiators pushed for a reduction in the city's subsidy amount. The public commitment now stands at an estimated $740 million. The city has agreed to pay $500 million for the site. The state is still slated to contribute $225 million. A final deal has yet to be reached and the total cost is still uncertain. Including tax breaks and payment due on interest for city-issued bonds, the public is likely to be charged closer to $940 million.

Prior to the re-opening of negotiations, the city and state had agreed to:

1. Buy land -- a whole city block -- at a cost of about $400 million (this figure was originally announced as $200 million and then upped to $350 million before the latest increase);

2. Provide $480 million to build a new 600,000 square-foot trading complex;

3. Throw in $160 million in tax breaks and low-cost electricity.

4. Bear any additional costs associated with acquisition and construction of the new site (unknown, uncapped amount).

Additional long-term costs associated with this project include:

5. Approximately $490 million in interest payments on the bonds needed to finance the project.

6. An estimated $120 million (not including possible increases in property value) in forgone real estate taxes now paid by current occupants of buildings on the block in question. The new facility would be exempt from real estate as well as sales, mortgage recording, and other taxes, instead making payments in lieu of taxes of $10 million a year for the first twenty years, and amount which would gradually increase over the course of the 50 year lease.

7. Around $6 million in relocation costs for existing tenants of the one residential building.

Taking all these costs into account, the final bill for the project is close to $1.3 billion over the first 20 years of the agreement.  The city's portion of that cost amounts to around $1.1 billion.  Much of this cost will be paid through annual allocations from the city budget. The entire deal will cost around $140 from the pocket of every New York City taxpayer. Looked at as a job retention package, the subsidy offers over $750,000 for each of the NYSE's approximately 1450 employees.

Close to three years have passed since the package was first announced in December 1998.  A vote by the IDA is anticipated sometime this year (2002).

The project would require 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 will also reimburse the tenants for relocation costs of up to $15,000. There are 435 apartments at 45 Wall St.

City officials originally intended to defray the costs of the subsidy with rent and taxes from a 50-story office tower above the trading floor, and from the sale of the development rights for the office tower. As it turns out, no developer has been willing to take on this project in the absence of an anchor tenant. In December, 2000 the Mayor signed a letter of intent with the NYSE, indicating his commitment to proceed with the project with or without an office tower on top. If the city builds the trading floor without the tower, it will mean the city doesn't defray the costs of the subsidy. If the city builds the tower without an anchor tenant, it will be engaging in speculative real estate development, and underwriting the kind of project that banks have been loath to finance. 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 11^th, chair of the Stock Exchange, Richard Grasso, declared the tower "unsaleable" and forced the city to re-negotiate a less extravagant deal.

Some question NYSE's need for expanded facilities 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.

Corporate Notes

The New York Stock Exchange currently operates as a not-for-profit corporation. Its quasi-governmental regulatory authority over stock trading shielded the exchange from a recent lawsuit. However, the exchange has announced plans to convert itself to a for-profit company and raise capital by selling shares of stock in itself. Critics argue that the NYSE will have to choose between immunity from lawsuits as a quasi-governmental entity and the major infusion of cash that an offering of stock would raise.

Critics

"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," noted State Sen. Franz Leichter (New York Times, 12/23/98).

Because the public deserves easy access to information about how taxpayer dollars are being spent, Good Jobs New York will update these profiles as we uncover more information.

Good Jobs New York  - August 05, 2002