Governor George Pataki
Albany, NY 12224
Mayor Rudolph Giuliani
New York, NY 10007
Dear Governor Pataki and Mayor Giuliani:
The New York State and City decision to grant a series of subsidies, now expected to total more than $1 billion, to the New York Stock Exchange (NYSE) ranks as one of the most foolish and cruelly ironic urban public policy decisions in recent memory.
Tragi-comedy may play well on Broadway, but it doesn’t belong on Wall
Street, at least not with City Hall and Albany as the underwriters.
I am writing to urge you to pull the plug on the deal before the City
invests hundreds of millions of dollars in property acquisition and the
City and State’s commitment to the outrageous subsidy becomes truly
In December, the City entered into a Letter of Intent to assist the NYSE
in constructing a new trading floor — or, more precisely, the NYSE agreed
to accept a gift of a new building and other benefits from the City and
State. The arrangement commits the City to acquire a plot of land for the
new exchange, and for the City and State to construct a new luxurious
trading floor for the NYSE, grant substantial tax benefits to the NYSE and
make discount energy available to the NYSE.
This boondoggle is likely to cost taxpayers nearly $1.1 billion or more
($450 million for land acquisition, $480 million for construction of the
trading floor, $160 million in tax and utility cost breaks).
By any definition, this package is, pure and simple, corporate welfare.
You are making a more than $1 billion gift to a private entity. You are
not paying the NYSE for any services rendered or to be rendered. You are
not investing in or making a loan to the NYSE, with an expectation of
repayment or recoupment of the investment from the exchange (but for $10
million annual rent which will never come close to reimbursing the City
and State for their costs). What you are doing is conferring staggering
taxpayer benefits on a private entity without any conceivable public
benefit. No one can possibly believe that the NYSE, if in fact it needs a
new trading floor, could not raise sufficient funds, including from its
The sole purported rationale for the corporate welfare bonanza, of course,
is to retain the New York Stock Exchange in New York City. If one were to
credit this rationale, the gift of more than a billion dollars for the
purpose of retaining fewer than 5,000 jobs — while not even ostensibly
creating new ones — would, even by the corrupt standards of job-retention
blackmail deals, set a highwater mark for ransom payments among
arrangements of this scale.
However, the City and State are in fact receiving nothing in return for
the billion-dollar-plus windfall they are bestowing on the NYSE. Although
it is true that NYSE Chairman Richard Grasso has blustered a threat to
move to New Jersey, there is no chance — none, zero — that the stock
exchange would leave New York City.
It is hard to believe that you don’t know this. The Jersey City Stock
Exchange? Be serious. When I went on the NYSE floor last year and asked
veteran traders about the possibility of the NYSE moving to New Jersey,
they literally laughed as they dismissed the possibility out of hand. In
addition to the institutional identity and reputation of the NYSE, the
exchange’s connections to the Wall Street firms — committed to New York
City by history, the Manhattan residences of many of their principals and
employees and long-term office rental commitments, increasingly sealed by
yet other city subsidies — preclude the possibility of a move across the
river. The New Jersey ploy is nothing more than a NYSE ruse to provide a
pretext for covering public officials using what Justice Louis Brandeis
once called “other people’s money.”
Almost every aspect of the deal looks worse the closer it is scrutinized.
The Empire State Development Corporation has initiated condemnation
proceedings to take property by eminent domain for conveyance to the NYSE.
You may recall that the U.S. Constitution specifies that eminent domain
can only be exercised for “public use.” Although that provision has been
interpreted as meaning “public purpose,” there is no plausibly legitimate
public purpose in the gift to the stock exchange. Even if the judiciary
has at times seen fit to render the public use requirement practically
meaningless by deferring to legislative and executive determination of
what constitutes a public purpose — and this case certainly will test the
outer limits of what the judiciary is willing to countenance — elected
officials should recognize why the public use provision is included in the
Constitution and honor its wise directive of restraint. Eminent domain
authority is one of the government’s most far-reaching powers and one
that, though necessary, is prone to abuse. It is a misuse of government
power to take the property of one private party simply for the purpose of
conveying it to another private party, made worse where taxpayers foot the
bill for the taking and then convey the property without obtaining
reciprocal benefits from the beneficiary. That is exactly what is proposed
in the NYSE deal, a stunning abuse of government power and grant of
corporate welfare enabled by a supposedly free-market-oriented governor
and a mayor who once famously explained his plans to sell community
gardens to private developers with the remark, “This is a free-market
economy. Welcome to the era after Communism.”
Not surprisingly, pushing through such a grotesque deal has required you
to circumvent democratic norms. The City refuses to make available to us
or to the public generally a copy of the Letter of Intent it signed with
the NYSE to proceed with the deal. The Governor asked the state
legislature to consider legislation authorizing the deal to go forward on
a super-expedited basis, invoking an emergency provision to waive the
state constitutional requirement that legislators be given three days to
consider legislation before voting on it. That the Governor waited more
than a year after the deal was first announced to introduce the bill, and
another five months to sign the bill after passage, mocks the claim of
emergency and makes clear that the overriding concern was to inhibit
informed legislative debate.
Finally, it is important to apply some perspective to the proposed deal
and assess the opportunity costs of a $1.1 billion donation to the NYSE.
The flagrant giveaway of tax dollars to the NYSE is exacerbated
by the glaring unmet needs in New York. Nearly one in four children in New
York live in poverty, well over the disgracefully high national rate.
Fifteen percent of children in the state go without health insurance,
according to the Children’s Defense Fund. Genuine community development
projects report that they have lost government funding. Major
infrastructural investments are needed in transportation, schools, sewers,
community health clinics, drinking water systems and more.
Surely some residual sense of shame must persist in New York politics. In
a state with one of the nation’s worst child poverty rates, and one of the
largest gaps between rich and poor, is a billion dollar subsidy for the
emblematic bastion of global capitalism not beyond the pale?
P.S. Enclosed is a copy of Cutting Corporate Welfare and Time magazine’s
award-winning issue on corporate welfare to further inform you.