Earlier this month, New York City mayor Michael Bloomberg tried to blunt criticism of his giant property tax increase by telling a group of business executives that the citys high costs dont deter companies from doing business in Gotham. Contradicting his own declarations during the 2001 mayoral elections that high taxes hurt an economy, the mayor flatly declared that although New York may not be the lowest cost place to do business, it is the most efficient.” And he ought to know, youd think. After all, didnt he run a successful Manhattan-headquartered business?
But hold on a second. Look at tiny Montgomery Township, New Jersey, where local leaders have called together the areas major employers to help fashion a master plan for future growth. What especially concerns officials is that Mayor Bloombergs company, Bloomberg LP, holds an option on farmland on which it may build up to 800,000 square feet of office space to house thousands of employees. So rapidly has Bloomberg LP grown already in Southern Jersey that it has helped cause congestion in and around Montgomery Township.
Clearly, while Bloomberg the mayor now asserts that New Yorks high costs dont matter, Bloomberg the executive seemed to operate on a very different philosophy. True, Bloomberg expanded his company rapidly in New York City: it now employs nearly 4,000 people here, about half of its worldwide workforce of 8,000. But Bloomberg LP also has been one of the fastest growing employers in New Jersey. Starting with only a few dozen employees situated in a small office near Princeton in 1987, the company now employs 1,600 people in New Jersey, according to NJBiz magazine. And it is not merely low-wage clerical or back-office jobs that Bloomberg took to New Jersey. At its corporate campus in Princeton, it houses financial-analyst jobs, magazine- and book-publishing positions, editorial and reporting staffersexactly the kinds of high-paid, knowledge-intensive jobs that have been crucial to New Yorks economy for decades.
Most of Bloombergs New Jersey expansion took place while the mayor was running the company. The entrepreneur got his feet wet in New Jersey when he began an alliance with a 35-person Princeton firm that provided electronic government-bond information to traders. Bloomberg expanded the firm rapidlyin Princeton rather than in Manhattan, or even Brooklyn or Queens, which city officials often present as a lower-cost New York City alternative. By the end of 1990, the once tiny Garden State operation had grown to 185 employees. Then, between 1991 and 1993, a period when New York City was bleeding hundreds of thousands of jobs and Manhattan office space was going begging, Bloomberg LPs Princeton offices grew to nearly 600 people, many of them in operations unconnected to the original bond-information company.
By the mid-1990s, Bloomberg LP had moved well beyond its focus on Wall Street services. It started a publishing operation that included a book division and several magazines, one of them a personal-finance publication. It also rapidly began expanding its news service. And much of that growth took place in Jerseyeven though New York is the center of book publishing, the home of several personal-finance magazines, and the headquarters of major news services. Bloomberg had apparently discovered what other businesses were also learningthat you dont have to be in New York City with all of your employees, even if you are running a classic” New York business.
In expanding into southern New Jersey, Bloomberg was merely doing what other big New York employers were doing. One of Bloombergs neighbors in the Princeton area was a division of Goldman Sachs. And when Bloomberg needed new space in 1995, the company moved into a Princeton building previously occupied by Merrill Lynch, another anchor of the New York financial-services industry.
From a business perspective, one could hardly blame Bloomberg. Commercial rents on the East Side of Manhattan, the home of Bloombergs New York operations, are about two and a half times that of rents in New Jersey. More pointedly, real-estate taxes make up about $10 per square foot of rents in Manhattan office towers, compared to between $2 and $3 a square foot in Jersey. Given that Bloombergs 1,600 Jersey workers would probably fill half of a mid-sized office tower in New York, Bloomberg LP is probably saving about $3 million a year just in property taxes by having those workers in the Garden State. And the savings will be greater now that the mayor has hiked property taxes in the city.
But if even a company like Bloomberg LP, a high-margin business focusing on financial services, would choose to grow so rapidly outside of New York, where does that leave the rest of New York businesses? New York is not just the home of high-tech, high-margin, high-finance firms like Bloomberg. Many of the citys remaining manufacturers operate on thin profit margins. Small businesses, which are acutely sensitive to high costs, account for half of all jobs in the city.
Even the high-margin financial-services industry is struggling to get back on its feet in New York after having lost about 15,000 jobs. Most firms are still shrinkingor at least not hiring. One exception is Bloomberg. Theyve got positions open for mutual-fund analysts focusing on Japanese and German mutual funds as well as Latin American fixed-income securities. Those are the kinds of jobs that might boost the citys finance industry.
Too bad theyre in Princeton.