| Company | Ernst & Young (deal not closed yet) |
| Date Announced | 7/22/1999 |
| Project Site | 42nd St and 7th Avenue |
| Competing Sites | Jersey City |
| Maximum City Subsidy |
No
benefits have been received to date.
Original proposal: $16.2 million Current proposal would reduce benefits to approximately $14.5 million |
|
$6.2 million, possibly reduced to $4.5 million in discounted energy |
|
$10 million in sales tax credits |
| Type(s) of City benefits | Energy discounts, sales tax growth credits |
| Benefits from New York State | The deal with Ernst & Young amounts to a second subsidy for the building. The site itself has property tax breaks worth $236.4 million over 20 years under the 42nd Street redevelopment project. |
| Total Benefits Allowed | ? |
| Benefits Distributed to Date (according to LL69 Report FY 2002) | NA |
| Promised Job Retention | 4,409 (new base: 3,503) |
| Job recruitment | |
| Projected job growth | 6,054 (new growth: 3,052) |
| Total Jobs | ? |
| Jobs Reported in LL69 Report FY 2002 | NA |
| Layoffs | As a result of accounting scandals on Wall Street, Ernst & Young recently divested itself of its consultancy division, Cap Gemini. This reduced its employment numbers significantly, and caused the subsidy deal with the city, which had never closed, to be renegotiated based on lower employment numbers. |
| Length of Contract | 20 years |
| Project Purpose |
This deal was to induce a new building in Times Square and to retain the jobs. New benefits will be tied to incremental growth. |
| Clawbacks? | If the firm moves a certain number of jobs outside the city, it will be subject to penalties. |
| Since then . . . |
The announcement of this deal marked only the
second time the city has offered tax subsidies to keep an accounting firm
from leaving the city, and this package was much bigger than the $3.1
million offered Price Waterhouse (now PriceWaterhouseCoopers) in 1997. Formerly, the
conventional wisdom held that subsidy money to retain professional
services firms such as accountants and lawyers is wasted; such firms
cannot easily leave the city since their clients are located here.
In the wake of this deal, PriceWaterhouseCoopers is reportedly
seeking another round of subsidies from the city. The building the deal was meant to induce has been built and is functioning, even though no city benefits have been distributed. This raises the question of how important the subsidy was to E&Y's decision to build and occupy the space. |
| Corporate Notes |
Ernst & Young provides consulting services to a variety of businesses. In Fiscal Year 2003, Ernst & Young employed 103,000 people in 670 locations in over 140 countries and had revenues of approximately $13.1 billion. |
| Comments |
"This
is totally unnecessary given the strength of the economy. Unfortunately,
it opens the door for yet another industry dominated by large profitable
corporations to start lining up for these subsidies," said James
Parrott, an economist with the Fiscal Policy Institute, which is a sponsor
of Good Jobs New York (New York Times, 7/23/99).
"It would be a lot better to devote those tax revenues to improving the overall business climate for economic development and jobs," said Diana Fortuna, president of the Citizens Budget Commission. (New York Times, 7/23/99). Executives at the city's and state's economic development have also criticized the deal. As one told the Times anonymously: "The economy gets better and better and we give out more and more money. How does that make sense?" (New York Times, 7/23/99) |
| A note on sources -- Information in this deal comes from GJNY's examination of project agreements obtained through Freedom of Information Law requests, as well as news reports, minutes and notes taken at board meetings, and communication with our allies. The entries are a work in progress. For more information about the documentation behind GJNY's database, or to let us know about any developments that are not yet reflected here, please contact us at gjny@ctj.org or (212) 414-9394. | |
| Date last updated: 10/15/03 | |