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00:00This is a story about balancing the books.
00:02Faced with putting together his first budget,
00:05New York City's Mayor Memdani managed to pick a nasty and very public fight
00:09with one of the biggest names on Wall Street, Ken Griffin.
00:19New York City has long been known as the City of Opportunity,
00:23home of the Statue of Liberty, Broadway, and Wall Street.
00:28It's also home to the highest number of billionaires anywhere in the world.
00:32The city's new mayor thinks they might be able to help him with his budget problem.
00:37When I ran for mayor, I said I was going to tax the rich.
00:42Well, today, we're taxing the rich.
00:45In April, New York City Mayor Zoran Memdani stood in front of a penthouse on Billionaire's Row,
00:50a penthouse owned by Citadel CEO Ken Griffin,
00:54and made him the poster child for a proposed so-called pied-a-terre tax
00:59on second homes in the city with an assessed value of $5 million or more.
01:04This tax will raise at least $500 million directly for the city.
01:08The move triggered some of the other Wall Street leaders to come to Griffin's defense.
01:13If your goal is to make New York City kind of financially solvent,
01:18what you don't want to do is drive out the Ken Griffins of the world.
01:22Wall Street and the tax revenues from Wall Street are what enable New York City,
01:26all the people in New York City, to have a better life.
01:29Memdani originally proposed increasing real estate taxes overall,
01:33but thought better of the idea after Governor Hochul came up with some help from the state budget.
01:37So far, however, he's sticking with trying to tax the most valuable second homes in the city.
01:43I think Memdani made a mistake, you know, going after Ken Griffin by name
01:47as he trumpeted his success in raising taxes, even though he only got a tiny morsel.
01:53Wall Street veteran Whitney Tilson ran for mayor of New York City against Mr. Memdani last year.
01:59What we're talking about is, you know, those pencil towers overlooking Central Park
02:03that are dark at night because nobody actually lives there.
02:07I do think tone matters, and just out there painting billionaires as evil is really dumb,
02:16given that 1% of New York City taxpayers account for 47% of the personal income tax paid in
02:22New York City.
02:23A bunch of billionaires went down to Florida during COVID, and that has real budgetary impacts on New York.
02:32We should be rolling out a welcome mat for every rich person who wants to live, invest here,
02:37and we're already a very high-tax city, depending on how you measure it,
02:42probably the highest tax burden of any city in the country.
02:44But there's something unique about New York.
02:47I tell my rich friends who are thinking of moving,
02:49the whole point of being rich is you can live where you want to live.
02:53Imposing new taxes on their property may not be the best way to attract wealthy residents,
02:57But Steve Fulop, the head of Partnership for New York City and the former mayor of Jersey City,
03:03has even deeper concerns.
03:05I think that there is a bigger message with regards to the Ken Griffin conversation, okay?
03:12Yeah, it's not great that he was highlighted in that way.
03:16And in this environment where you have people being the targets of political violence,
03:21CEOs being assassinated, it's inappropriate.
03:24And that's been covered fairly extensively.
03:27Whether it was smart to target a specific Wall Street CEO like Ken Griffin or not,
03:32the fact remains that New York City has struggled with years of budget shortfalls.
03:37Mamdani's new proposal promises to balance the city's budget, at least in the short term,
03:43despite inheriting a $12 billion deficit, but only with that pied-Ă -terre tax included.
03:49It's about the size of the budget.
03:51New York, if it were a state, it would be the 13th largest state by population.
03:55It would be the third largest state by budget.
03:58So he's looking at some real budget cuts, and that, of course, affects the unions that were among his biggest
04:04supporters.
04:05He wants to spend more money as a democratic socialist, so he's sort of caught between a rock and a
04:09hard place.
04:10The challenge facing Mamdani is made more complicated by the structure of the tax system.
04:16Property taxes are the single biggest source of revenue for New York City, accounting for more than 30 percent of
04:22its budget.
04:23But those taxes hit residents in very different ways.
04:26As an example, even though single-family homes have the highest nominal tax rate,
04:31caps on assessment mean they pay the lowest effective rate, putting most of the burden on apartment buildings, condos, and
04:38commercial property owners.
04:39There are weird anomalies in which someone who is grandfathered into an older building but very expensive apartment on Park
04:49Avenue
04:50is paying a much lower tax rate than a blue-collar person out in one of the outer boroughs, right?
04:56It's a very different burden on those owners, the middle-class family in Queens versus the billionaire on Central Park
05:03South.
05:04So you have to come up with some type of other structure.
05:08I think the pied-Ă -terre tax is a fair idea.
05:12Ruth Kulp-Haber is a partner at commercial real estate firm Wharton Property Advisors.
05:17For her, the issue isn't so much the idea of a new real estate tax.
05:22It's more a matter of how Mayor Mamdani is going about it.
05:25To take for granted an owner such as Ken Griffin, who has contributed in the form of his company,
05:35it's going to be 25,000 jobs before he's done, and hundreds of millions to hospitals and museums.
05:45I mean, this is a guy we want here, you know, and we don't want to antagonize him in any
05:50way.
05:51Citadel alone has paid tens of millions in taxes.
05:56Yes, their employees make a lot of money, and I can understand how some people have a problem with that.
06:03Citadel has about 1,300 employees in the city, and Griffin is now saying he'll move at least some of
06:09them to Miami
06:09and take another look at a huge new office tower on Park Avenue.
06:13Not only has he committed to a 60 percent ownership of this development, but he's committed to being the anchor
06:21tenant,
06:21meaning he's going to take, like, half the space in the building.
06:24This is a major commitment.
06:27If he pulls out from that, the message that is going to go out literally to the world is,
06:34New York is not a good place to do business.
06:37It would be a disaster.
06:39This wouldn't be the first time Griffin made good on a promise like that.
06:43Citadel once employed more than 1,000 employees in its 50,000-square-foot office building in Chicago.
06:49We need to look to history.
06:50And what happened in 2022 with Ken Griffin in Chicago, with Governor Pritzker,
06:57and Ken Griffin was building his business in Chicago.
07:01There was politics got involved.
07:04Ken Griffin wasn't happy about the crime situation in Chicago, and he left.
07:11Thus far, most of what we've heard about to address the budget gap has been about raising more revenue.
07:17But Fulop thinks it's not fundamentally a question of how much the city is taking in.
07:22I think at the core of the problem is that you have a spending problem and less of a revenue
07:28problem.
07:29And that's what we try to kind of hammer home repeatedly.
07:31Where did New York City go in the wrong direction of their budget?
07:35There was a time not too long ago that they had balanced budgets.
07:38They were doing okay.
07:39Is it because the spending just grew too much, or did the growth of the overall economy slow down?
07:45I mean, look, it's complicated because you have a lot of things simultaneously happening.
07:51So you had costs, COVID, go through the roof.
07:55You had tariffs.
07:56You have wages and union contracts that have increased fairly significantly.
08:01You've had very progressive mayors that have layered on additional social service.
08:05So all those things kind of come together.
08:06But a pragmatic person would look at it and say, the city budget has grown significantly faster than the rate
08:13of inflation.
08:13And that is a question mark on why.
08:15But putting that aside for a second, what we've tried to say is we should be thoughtful about the program
08:22overall and whether it achieves the outcome that you want to achieve.
08:25If the Pina Tera tax goes forward, and if it's $500 million, that's still way short of where we need
08:32to be.
08:33I mean, the estimates are over $5 billion.
08:35So if you'd won, if you got to be mayor, where would you look for the other $4.5 plus
08:40billion?
08:41I found it very difficult, and I tried to really get down into the weeds.
08:47I mean, you can see $5 million to build a public restroom in a park is 10 times too much.
08:53We pay six times as much as any city in the world to construct one mile of subway.
08:59So you can see those examples, just the school budgets, 37% of our $118 billion budget.
09:05I have been very involved in charter schools and educational reform over the years, and I know there's a lot
09:10of fat in there, you know, dead people on the payroll and that kind of thing.
09:13So I think I might start with just sort of a 1 or 2% across the board cut, and
09:19that sort of gets you in a $118 billion budget.
09:22That gets you a bunch of the way there, and then negotiate from there.
09:27Balancing the books on a New York City budget is never easy, and it's not surprising that there's a range
09:33of ideas about how to come up with a few billion dollars to make it work,
09:37with or without calling out specific CEOs and their penthouse apartments.
09:43But the one thing most everyone agrees on is that we need to get the balance right to ensure that
09:49New York City remains a magnet for talented young workers and the companies that employ them.
09:55The best asset here, which is very hard to replicate, is the New York City brand is very, very special.
10:01And two, it is the most desirable place for young people to want to be.
10:06That is a very, very special thing.
10:08Now, you have AI, that uncertainty around jobs, and the affordability on housing.
10:13So those are two things that go directly at that young person who wants to live here.
10:17So that is a challenge.
10:18And then you also have places like, use Texas as an example.
10:22So J.P. Morgan today has more jobs in Texas than they do in New York.
10:27It's a crazy thing to think about.
10:29Ten years ago, that wasn't the case.
10:30So the trend is moving in a bad direction.
10:32Goldman Sachs trend in the bad direction.
10:35Why?
10:35It's bigger than taxes.
10:37It's Texas has been very deliberate with their strategy on how they're going to attract jobs.
10:42So they changed their court systems entirely to replicate Delaware, to make it more corporate friendly.
10:47They're starting a Texas Stock Exchange to have better access to the capital markets.
10:53Then they have incentives and they have leadership that talks about embracing their big corporate communities.
11:00We need to build a lot more housing, not just low-income or affordable housing, but it all trickles through.
11:07We need to build more housing for young professionals who can afford to pay more.
11:11You know, look, when Amazon came and wanted to put their headquarters here, you know, you want a mayor who
11:16invites Jeff Bezos and the Amazon executives to Gracie Mansion,
11:21sits down with all the key people from the city and rolls out the welcome mat.
11:26So some of it's just sort of messaging and signaling and being a champion for business in the city.
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