Goldman Sachs exploits 9-11 redevelopment chaos —and public bonds

Aug. 24 commentary in MarketWatch takes Goldman Sachs to task for exploiting the chaos—as well as government largesse—over the Ground Zero redevelopment effort in New York City:

For a Wall Street bank, Goldman Sachs plays the Main Street game of government extortion like a veteran.

You know the routine: A company threatens to leave or take a fancy new plant — and its jobs — elsewhere unless the local yokels dish out huge tax breaks and incentives that allow them to basically locate for free in a town or state.

Witness, then, the Goldman Sachs tower planned for Ground Zero, the final details of which were unveiled Tuesday night. Last year, the investment bank cut a sweetheart deal to build a $2 billion, 40-story, 1,800-foot-high tower financed by $1 billion in tax-exempt Liberty Bonds. Alone, the financing represented nearly 13% of all the bonds Congress had earmarked to rebuild Lower Manhattan.

But then Goldman started getting edgy. It worried about security. It worried about crowds. Traffic would be terrible. It’s dangerous, Goldman said; let’s move to Midtown.

Somehow, the thinking at [85] Broad St. [Goldman Sachs’ current headquarters] suddenly became: If we build it, taxpayers will come — and pay for it. And come they did, with Mayor Michael Bloomberg and state officials agreeing to dish out an additional $600 million in bonds and sweetening the deal with $150 million in tax breaks. Goldman will save $9 million with the special financing, according to government estimates.

You can’t blame them. Nothing makes people feel more secure than free money.

As someone who has lived and worked before and after 9/11 in the area now known as Ground Zero, I’m not against the idea of giving companies willing to invest in the area some incentives. The neighborhood needs a lot of work, and the more corporate citizens that have to deal with its hardships the better.

Goldman’s presence means there will be someone who can help take care of their own backyard.

It’s quite a different story, however, to voice fears about safety only to have them allayed by a taller stack of cash on the table.

Goldman’s paybacks

Bloomberg says Goldman will have to add 4,000 jobs, but those jobs won’t be required until 2019. Goldman is committing to keeping at least 9,000 jobs and a “significant” portion of its trading operations downtown through 2028.

The mayor also said Goldman will funnel $8 billion of tax revenue into state and city coffers over the life of the deal, or about $333 million annually through 2028.

Estimates also suggest that construction of the 43-story tower — the plans have changed since last year — will create more than 18,000 construction jobs and pump $350 million into the economy. That’s a big plus.

If security really is an issue for Goldman, it should explain right now how tax breaks are going to make staying in Lower Manhattan safer.

Also to Goldman’s credit, at a meeting of the Battery Park City Authority this week, it was disclosed that the firm would make a $900,000 civic facilities payment — which is to be used to maintain the surrounding neighborhood — and spend $3.5 million to create a public library. It will pay $1 million for a community center.

Goldman also has committed to build a state-of-the-art environmentally friendly building and to provide public space at the location.

‘A failure’

But Good Jobs New York, a local watchdog group, rightly points out that such public giveaways should require more in return. For instance, last year the group suggested that Goldman be charged a 3% fee for its use of the bonds. That would amount to $55 million that Good Jobs suggests could be put to use in creating affordable housing in the area.

It also wants commitments from Goldman that it will use New York contractors and suppliers in construction of the tower.

Downtown also suffers from a broken transportation system that requires many commuters from New Jersey to walk blocks to connect to uptown trains.

And if security really is an issue for Goldman, it should explain right now how tax breaks are going to make staying in Lower Manhattan safer.

Bettina Damiani, project director at Good Jobs, said she believes Goldman is serious when it talks about security issues. But she wants more details. She said if the company is concerned about weaknesses then the problems should be made public so that all downtown businesses and residents can be aware of them.

She’s also skeptical that a company as profitable as Goldman should be getting financing on the backs of taxpayers.

“There’s a failure in the Liberty Bond program that serves wealthy financial firms,” Damiani said. “They lobbied government for them.”

‘Shot in the arm’

Government officials, including Bloomberg and Governor George Pataki, heralded the agreement as a “shot in the arm” for downtown development efforts. Whether will it be enough to silence the critics is open to question.

I called Goldman twice this week to see if anyone could explain to me how it came about that the bank complained about security and ended up with sweeter terms from the state and city. Each time I was told someone would call me back. No one did. I got the same from the mayor’s office.

Nothing invites suspicion like silence. And Goldman’s reticence on the project, combined with what we do know…well, let’s just say even a yokel could easily figure out what’s going on here.

See our last post on the ongoing battle for Ground Zero, and on Bush’s obvious exploitation of 9-11.