New York City: The Jewel In The U.S. Crown

Wednesday, October 1, 2008 - 01:00

The Editor interviews Diana Torres, Vice President of Global Competitiveness at the Partnership for New York City (www.pfnyc.org).

Editor: Why would a global business with headquarters outside the U.S. want to consider New York City as a site for its Western Hemisphere headquarters?

Torres: The critical aspect is the wealth and depth of talent that can be found in the City. The Partnership is an organization of business leaders, and when we speak to our Partners, talent is usually the first thing they cite in terms of where they make business location decisions. Many of them are already located here, and that is also what we hear from companies that are considering New York.

Editor: Why is the Partnership interested in seeing more companies come to New York?

Torres: The Partnership was founded about 30 years ago by David Rockefeller with a mission to maintain New York as the world's business and financial capital. At the time it was founded, New York was facing severe fiscal crises, and since then, the City has re-energized itself. The Partnership has always worked closely with City government to promote what is best for the City in terms of business that creates a kind of virtuous circle - we call it enlightened self-interest - because when you create an environment that is conducive to business, more business comes.

Editor: How long has the Partnership been in existence?

Torres: Although it was constituted in its current form by David Rockefeller in the late 1970s, it took over the charter and mandate of the original New York Chamber of Commerce, so our pedigree and our history go back much further to the 18th century.

Editor: Looking at the various aspects of the environment that attracts business to New York City, tell us about its concentration of professional resources.

Torres: There are two things: the concentration of multinational Fortune 500 companies is important to New York's success, and with that concentration comes a very deep bench of professional services firms, including lawyers and accountants and consulting firms, which means that companies have the resources available to do more here, having world-class quality professional services firms to assist them.

Editor: How would you characterize the legal and regulatory climate?

Torres: Here I think we could do better. New York by no means has the worst legal climate in the nation; we come about halfway down in the annual ranking of states in how litigious we are (according to the U.S. Chamber's ranking), but that's not a position of power, and obviously we'd like to see that improved. From a regulatory environment standpoint, we are encouraged by recent activity, particularly the Governor's Commission to modernize financial services, which we hope will have a positive effect in that arena.

Editor: Is that related to the McKinsey Report and the two other reports issued about the same time that addressed the relative competitiveness of the New York and London financial markets?

Torres: It is. I think that the Governor's initiative, which was actually begun under Governor Spitzer, and is being continued under the current governor, Governor Paterson, was in part a response to the McKinsey report that Senator Schumer and Mayor Bloomberg had commissioned. It has become even more timely, given the difficult situation we've been experiencing with the credit markets. There's only a certain amount that can be achieved at the state level because some regulatory oversight is federal, but it is a step in the right direction that State government recognizes the need to modernize its regulatory environment to remain competitive, not just in terms of benchmarking against other states but benchmarking internationally.

Editor: The big point that was made in the three reports was that the U.S. was losing ground to London in terms of attracting IPOs. Has that now reversed?

Torres: It hasn't completely reversed. IPO volume has declined dramatically this year across all markets, but I think the extreme gap you saw a few years ago has closed. The other important point to make is that New York is particularly strong in raising money privately, so IPOs should not be the only measure by which our financial competitiveness is judged. If you look at hedge funds and private equity, New York leads the world in both of those areas. Editor: What about the presence of world-class universities and teaching hospitals? Do you find that attracts business to the City?

Torres: Absolutely. In some ways that is a quality of life issue. Where hospitals are concerned, world-class pharma is located in or close to New York City, and similarly the research issuing from our universities makes them a magnet for exactly the kind of talented students and teachers who then make the City itself attractive to business.

Editor: How important are the think tanks and the trade associations to creating an intellectual mix that makes New York interesting?

Torres: They are important. I wouldn't put them at the top of the list, but I think they definitely assist in creating a broader mix through the City that makes the whole package appealing to business.

Editor: What tax and other incentives are available to attract businesses to the City?Torres: I'm not expert enough on the specific incentives to be able to give you a detailed breakdown of what's being offered, but what I can talk about is New York's tax environment, which is important in terms of the future in that New York City does have a relatively high tax burden. To some extent we're fortunate that we benefit from the presence of business despite that.

What's key for the immediate future in what is acknowledged to be a very difficult environment is that we don't increase that burden. Interestingly, one of our major international competitors, London, has just spent a year conducting a review of its taxation policy, which has created so much uncertainty that major business are beginning to leave that city. It is key for New York to focus on cutting spending as opposed to raising taxes.

Editor: Hasn't London enacted a tax that is discouraging to foreigners living in London?

Torres: They have proposed such a tax, which has not yet been enacted - it's that kind of uncertainty that is causing businesses to leave. There was another proposal to increase the tax on foreign profits for multinationals headquartered in London, which has not yet become law, but in anticipation of what could be a very detrimental effect, several multinationals have left ahead of the legislation being enacted.

Editor: New York City is home to more Fortune 500 companies than any other U.S. city, and the Partnership consists of some of the leading businesses in New York. Does the mix of business people with major companies in New York and the presence of leading law and accounting firms and other consultants make New York particularly attractive?

Torres: Definitely. This goes back to my earlier point about a virtuous circle. The Fortune 500 companies are here both because New York City offers them an access to the entire U.S. market and even the entire North American market. Once you have the strong presence of high-quality businesses, there is a strong incentive for smaller and medium-sized businesses to locate where they will be able to learn and benefit from that richness of experience.

Editor: J.C. Penney and Exxon migrated to Texas some years ago. Do you see that process being reversed?

Torres: We do pay attention to companies leaving the City. We also pay attention to the companies coming in. I don't think that we have looked at relocations to another state specifically. We have noticed that Dallas, Houston and Texas generally have been doing extremely well, which is partly a function of the affordability of those locations, but we've been pleased to see that many businesses still consider New York first. An example of that would be the recent relocation of AOL's headquarters from Virginia to New York.

Editor: How important are the activities of organizations like the New York City Economic Development Corporation to attracting business to the City?

Torres: Part of any location decision is having available information at your fingertips, and the availability of the City and the State economic development corporations to provide timely and relevant information that can make the difference between a company coming here or going elsewhere. There's no question, however, that for some companies tax and other incentives will always be the bottom line, so it's a combination of correct and timely information, and also the entire package the City has to offer.

Editor: Are there websites or publications that are particularly helpful?

Torres: I'd recommend that your readers have a look at the City's economic development website - www.nycedc. com.

Editor: Law, accounting and consulting firms in a city play significant roles for a business seeking to relocate. Does the availability of such firms in the City provide an important resource for the seriously interested organization that is seeking to relocate?

Torres: That's right. Obviously, such firms can provide you with more detailed advice tailored to the needs of your business.

Editor: Talking about the City's multicultural environment, do you find that the cosmopolitan nature of New York City, with 37 percent of the population foreign born and more than 200 languages spoken, to be helpful in attracting business to the City?

Torres: Diversity is key in a globalized world. Businesses are looking for diversity and multilingual ability, both to connect with markets and because it's more satisfying for their employees to work in a diverse environment. Many of our Partners are now looking to increase the diversity of their workforce, partly because it tends to increase employee satisfaction.

Editor: Are you finding more of your Partners are businesses that are headquartered abroad?

Torres: We have a very good mix at the Partnership, but a majority of the Partners' businesses are still headquartered here. We include foreign companies in the Partnership because we think it's critical for New York as one of the two global business capitals to have strong representation from foreign companies.

Please email the interviewee at dtorres@pfnyc.org with questions about this interview.