Losing Business–The Deals and the Downfalls

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Since the city does not release employment information about firms that have received retention deals, there’s no way to determine accurately whether the companies have fulfilled their pledges to keep jobs. To fill in the blanks, the Center for an Urban Future examined news reports and company press releases to learn if a recipient laid off a large number of employees, entered into a mega-merger, or sold off some of its assets–all of which cast doubt about its ability to deliver on promises to bring jobs to the city. Forty raised those red flags. Here are the top 20:

Alexander & Alexander
Subsidy: 3.4 million in tax incentives
Date: November 1996
Pledge: Retain 400 jobs, create 400 more
What happened: Just one month later, the company was acquired by Chicago-based Aon Corporation. Five months after that, Aon said it would lay off 2,600 people as a result of the acquisition.
In November 2000, Aon announced it was cutting another 3,000 jobs nationally, 6 percent of its workforce.

StarMedia Networks
Subsidy: $2.5 million in tax incentives. Also received a $1 million state grant.
Date: August 1999
Pledge: Increase its New York City workforce from 190 to 1,300
What happened: In September 2000, this internet media firm reported it was dismissing 125 employees, 15 percent of its workforce. And though the city had provided incentives to help the firm offset the costs of moving into a new 100,000-square-foot office in lower Manhattan, StarMedia was recently forced to sublease 60,000 square feet of that office space–an acknowledgement that it wouldn’t need to house as many employees as it once planned.

Scient Corporation
Subsidy: $2.8 million in tax incentives
Date: April 2000
Pledge: Retain 213 jobs in New York and create another 1,367 over the next 17 years
What happened: In December 2000–less than nine months after the tax deal was announced–e-business consultant Scient said it planned to lay off 460 employees, 25 percent of its work force.

ING Barings; Furman Selz
Subsidy: $5 million in tax incentives for ING Baring, $2.4 million for Furman Selz
Date: April and July 1997
Pledge: ING Barings would retain 841 New York City jobs and create an additional 870. Furman Selz promised to keep 580 employees in the city and bring on 400 more.
What happened: A month later, ING agreed to buy Furman Selz. The following year, ING Barings announced it would eliminate 1,200 of its 10,000 jobs worldwide. This past November, Netherlands-based ING said that it plans to sell its U.S. investment banking business, which will likely result in job reductions in New York.

DLJ; CS First Boston
Subsidy: DLJ got a $29.5 million package of incentives. Credit Suisse First Boston won $50.5 million in city benefits.
Date: DLJ August 1994; CS First Boston January 1995
Pledge: DLJ promised to keep 1,950 jobs in New York and create 1,162 new jobs. Credit Suisse First Boston said it would retain 3,704 jobs in New York City and create 5,550 more.
What happened: Less than three months after the CS First Boston deal was announced, the firm said that it would eliminate as many as 900 jobs. Meanwhile, six months after the DLJ incentive package was reported, the company closed its municipal bond unit, which employed 125 people.
Even greater cutbacks were in store. On August 30, 2000, CS First Boston announced it was acquiring DLJ. The president of CS First Boston has said that the merger will result in a loss of 2,000 jobs, though Wall Street analysts predict the number could be closer to 5,000. The new entity will reportedly keep most of its European investment bankers, meaning that the majority of layoffs will be in Manhattan, where both firms’ investment banks are based.

Subsidy: $3 million incentive package
Date: October 1999
Pledge: Establish northeastern regional headquarters in Manhattan and add 1,357 employees over 15 years to 586 workers already employed in the city
What happened: Less than two months after the tax deal was announced, the internet service provider merged with the tech consulting firm Whittman-Hart. Not long after the merger, it became clear that the new company (now known as MarchFirst Inc.) would not meet the ambitious job growth projections made by USWeb and the Giuliani administration. Between January and the middle of May, the company laid off 260 people.
In November 2000, the company announced it would eliminate another 1,000 jobs, or 10 percent of its work force. According to news reports, at least 20 percent of the company’s New York employees were let go. Later that month, the company’s CEO told a meeting of investors that he might eventually end up selling the company. Last month, the firm terminated its 15 year lease for 280,000 square feet on Park Avenue South, where it had planned to build an office.

Merrill Lynch
Subsidy: $28.5 million in tax incentives
Date: June 1997
Pledge: Keep 9,000 jobs in New York and add another 2,000
What happened: In October 1998, the firm reported plans to eliminate 3,400 jobs, more than 5 percent of its workforce. At the time, company officials said the job cuts would affect 700 of its New York City employees. The retention deal failed to inspire Merrill Lynch to make the city the site of future expansion. In 1998, the firm began negotiations to build an office tower on the Jersey City waterfront. Though it didn’t move forward with that plan, last year it decided to move 1,200 jobs to Jersey City, netting the firm $41 million in tax incentives from New Jersey. (In 1998, Merrill Lynch received another $20 million in subsidies to build an office building in Hopewell, New Jersey).

Dillon Read; Paine Webber
Subsidy: $5.8 million in tax incentives for Dillon Read; $14.47 million for Paine Webber
Date: October 1996 for Dillon Read; Paine Webber in May 1996
Pledge: Paine Webber committed to retaining 2,781 jobs and creating 474 more. Dillon Read promised to keep 620 jobs in the city and create 664 positions.
What happened: Less than a year after the Dillon Read tax deal, the company was acquired by Swiss Bank, resulting in 1,500 layoffs at the new company, SBC Warburg Dillon Read. In 1997, it moved its North American headquarters from New York City to Stamford, Connecticut, after receiving a generous incentive package from state officials there. In March 2000, Connecticut offered SBC Warburg Dillon Read a $46 million, interest-free loan to create 555 jobs in Stamford. In July 2000, Swiss Bank (now known as UBS) announced that it was acquiring Paine Webber. In January 2001, PaineWebber said it was close to finalizing a deal to rent a 1.1 million-square-foot office building in Jersey City. Though the firm says it does not intend to move personnel there from Manhattan, the city’s incentive package did not compel Paine Webber to undertake its expansion in the city.

Kidder Peabody; Paine Webber
Subsidy: $31.2 million incentive package
Date: 1993
Pledge: Brokerage firm Kidder Peabody agreed to retain 3,000 jobs in the city
What happened: Kidder Peabody, most of whose employees were located in New York, was acquired by Paine Webber in October 1994. Even before the merger, Kidder Peabody slashed more than a thousand jobs. After the firms combined, the cuts continued. Paine Webber eliminated roughly 150 jobs in September 1995 and slashed another 500 a few months later.
Ziff Davis
Subsidy: $4.3 million in incentives
Date: November 1997
Pledge: Keep 738 jobs in the city and add another 1,332 over the following 22 years
What happened: The following October, the company said it planned to eliminate 350 jobs, 10 percent of its U.S. workforce.
Over the next year and a half, Ziff Davis sold off much of its publishing empire, including the magazines PC Week, PC Magazine, Interactive Week and Smart Business, as well as its ZDTV cable television network and its Comdex trade show business. Last July, San Francisco-based Internet company CNET announced that it was buying Ziff Davis and the publishing company’s ZDNet Internet subsidiary, a deal likely to lead to more layoffs.

Tullett & Tokyo Forex; Cantor Fitzgerald
Subsidy: $2.25 million in tax breaks for Tullett & Tokyo; $1.4 million in incentives for Cantor Fitzgerald
Date: 1995
Pledge: Tullett & Tokyo promised to keep 555 jobs in New York and add another 166 over 16 years. Cantor Fitzgerald agreed to keep 958 jobs in the city and add 473 more.
What happened: In June 1999, Tullett & Tokyo announced that it was selling its futures business to a Chicago-based company–a move that most likely led to job cuts in New York. In September 2000, Tullett was reportedly in negotiations to be acquired by securities dealer Cantor Fitzgerald. Though that deal has yet to go through, in November the company (currently known as Tullett & Tokyo Liberty) reportedly laid off more than four dozen New York-based employees.

Chase Manhattan Bank
Subsidy: $234 million in tax incentives
Date: 1988
Pledge: Construct an office building at Metrotech in downtown Brooklyn and keep 5,000 jobs there
What happened: In the years following the deal, Chase cut thousands of city jobs as a result of mergers with Manufacturers Hanover Trust (in 1991) and Chemical Bank (1996). Then, in October 1999, the company announced it was moving 3,500 jobs from New York City to Florida and Texas. In June 2000, Chase said it would move 2,500 employees from its New York City offices to two new towers in Jersey City. And in September 2000, Chase agreed to another megamerger, this time with J.P. Morgan. The merger is expected to result in the elimination of 5,000 jobs, many of them in New York.

Citicorp/The Travelers
Subsidy: $90 million tax incentive package for Citicorp; $22.1 million to Travelers
Date: Citcorp 1989; Travelers 1994
Pledge: Citibank built an office tower in Long Island City. Travelers promised to retain 8,970 jobs in the city and create 2,100 new jobs over the next 15 years.
What happened: In April 1998, Travelers joined Citicorp in one of the business world’s largest mergers. A few months later, executives of the new entity, now called Citigroup, confirmed that they would eliminate 10,400 jobs, or about 6 percent of the combined firm’s work force. While about 65 percent of the cuts were expected to occur overseas, more than 1,000 layoffs were planned in New York City because there was considerable overlap between the bond traders, investment bankers, and derivative experts at Citicorp and Travelers’ Salomon Smith Barney subsidiary. In January 2000, Citigroup agreed to buy the investment banking operations of London-based Schroder Plc. As a result of the deal, Citigroup’s Salomon Smith Barney unit decided to relocate its global fixed-income sales and research division from New York to London. And because there was significant overlap between the two firms, the acquisition was expected to result in hundreds of layoffs among Schroder’s 1,000 U.S. employees, most of whom were based in New York.

CBS; Viacom
Subsidy: $59.5 million in tax breaks and subsidized electricity for CBS; $15 million tax incentive deal for Viacom
Date: CBS 1993 & 1999; Viacom 1994
Pledge: CBS promised to stay in Manhattan through 2008. Viacom vowed to keep 4,450 jobs in the city and add another 2,500 jobs over the next 15 years.
What happened: In November 1995, CBS was bought by Westinghouse (which retained the CBS name). Four years later, Viacom announced that it was buying CBS. News reports indicated that the merger would result in hundreds of layoffs at the two companies’ New York headquarters.
In June 2000, the CBS Internet Group let go of 24 of the approximately 100 employees in its New York-based office. In September, MTVi, the online division of Viacom’s MTV Networks, said it was cutting about a quarter of its staff, or 105 workers, from its offices in New York and San Francisco.

Subsidy: $26 million in tax incentives
Date: June 1994
Pledge: Retain 3,700 jobs and create 185 new positions
What happened: In February 1996, ABC was bought by Walt Disney Co. In February 1997, ABC notified the state Labor Department that it planned to lay off 60 city employees as a result of the merger. Later the same year, the company said it was eliminating 200 jobs to cut costs, of which 98 would come from its New York City offices.
In early 1999, ABC decided to relocate 240 employees from New York to the Burbank, California, offices of Disney. At least 200 were senior employees in areas from business and legal affairs to marketing and daytime programming. In January 2001, ABC decided to lay off 15 network news reporters.

Visit www.nycfuture.org for the full report, including recommendations for policy changes.

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