Commodities Exchanges to Stay in N.Y. : Wall Street: The city and state grant the four big exchanges $145 million in incentives to stay rather than move to New Jersey.
Wall Street’s big commodities markets decided Tuesday to stay in the nation’s financial center rather than flee to New Jersey, giving a major boost to the city’s sagging economic fortunes.
The decision by the four exchanges, which trade products from orange juice to crude oil, comes during a devastating financial industry recession that has cost New York thousands of jobs since the 1987 stock market crash.
The city and state gave the Commodity Exchange; the Coffee, Sugar and Cocoa Exchange; the New York Mercantile Exchange, and the New York Cotton Exchange $145 million in tax breaks, land and other incentives to stay on Wall Street.
“This vote of confidence in the future of our city is so very important,” New York Mayor David Dinkins told a news conference.
The city, which also is the home of the New York Stock Exchange, American Stock Exchange and the nation’s leading brokerage houses, faced losing nearly 12,000 jobs and $1.3 billion a year in goods, services and salaries generated by the commodities industry.
New York lost 30,000 jobs this summer and is mired in a budget crisis reminiscent of its fiscal collapse in the mid-1970s, and analysts said the city couldn’t afford to lose one of its few growing industries.
In addition, the decision by the commodities exchanges, the oldest of which was founded 120 years ago, is a favorable signal as several other major Wall Street institutions consider leaving the city.
“Had they lost this case it would have made holding on to some others much more difficult,” said Hyman Grossman, a managing director of Standard & Poor’s Corp., which is reviewing the city’s credit rating. “These things seem to go in waves, and they feed on each other.”
The commodity exchanges have been straining to expand to compete with rival exchanges in Chicago and elsewhere. They project that employment will soar to up to 23,500 by 2000.
After an all-night negotiating session, exchange officials voted unanimously to accept New York’s bid over one by Jersey City, N.J., across the Hudson River.
Under the deal, New York state and city will provide $145 million in incentives for the four exchanges to relocate from cramped quarters at the World Trade Center to a new building to be constructed on an empty lot nearby, to be completed by mid-1994.
The total cost of the project was not determined, officials said, but the new trading floor alone is expected to cost $225 million. The new site will triple the size of the exchanges’ total space to 1.2 million square feet.
The exchanges will receive $82 million in capital from the city and state, while the city will own the land and building. The exchanges will also get $32 million in real estate tax abatements spread over 25 years, low-cost power, and some sales and mortgage tax abatements.
By keeping the exchanges, though, the city and state retain $165 million a year in tax revenue. Sally Hernandez-Pinero, deputy mayor for finance and economics, said the city expects to recoup the cost of the incentives within 3 1/2 years.
She said the package would add about $4.5 million to the city budget for the next three years, which analysts called a minimal expense.
The deal must still be approved by the membership of the four exchanges at a December vote. If they reject the plan, the exchanges will stay at the World Trade Center.
The site at the Harborside Financial Center in Jersey City was just one subway stop from New York’s financial district and offered a bigger trading floor--100,000 square feet compared with 75,000 at the Manhattan site.
