Editor: Please tell our readers about your background and professional experience.
Bernier: I currently serve as a tax partner leading the Tax Consulting Practice of RSM McGladrey in New York. Over the past 20 years, I have concentrated in the area of State and Local Taxes ("SALT"). Prior to joining McGladrey, I led the SALT Metro-New York Area Business Incentives practice at a Big 4 accounting firm. I began my career as a corporate tax litigator for the New York City Department of Finance.
Editor: Why would a global business with headquarters outside the U.S. want to consider New York City as a site for its U.S. or western hemisphere offices?
Bernier: New York City is an attractive and dynamic international city with a compelling business proposition - unlimited accessibility. It is the global crossroads for so many diverse industries. First, the City offers accessibility to intellectual capital, in part, due to its renowned universities and its research centers. This helps attract and sustain the City's educated and talented workforce. Second, it also boasts a diverse workforce with a wide range of skills as well as an environment of cultural understanding and language capabilities.Third, the City provides access to a marketplace with business partners, suppliers and customer bases. Lastly, a global business can have easy accessibility to all parts of the world, as New York has tremendous transportation, including three major airports in the tri-state area and a rail system.
Editor: What incentives are available to attract businesses to New York City?
Bernier: New York City includes Manhattan as well as the other boroughs - the Bronx, Queens, Brooklyn and Staten Island. In Manhattan, there is a concentration of financial services, media and entertainment, professional service firms and corporate headquarters for many manufacturing and retail businesses. North of 96th street or anywhere in the boroughs, businesses thrive, too. There, one will find light industrial businesses, food service industry and retail, among other businesses. There is plenty of opportunity to secure tax credits and incentives in all five boroughs to help attract, retain or grow a business.
The Empire State Development Corporation (ESDC) and the New York City Economic Development Corporation (EDC) do an outstanding job of working with law firms, accounting firms and businesses. They have tailored the available tax credits and incentives to attract specific high-growth industries as well as to foster targeted economic development in specific locations.
For example, in order to help New York build its base in emerging technology and biotech - including research and development - there are very specific tax credits available such as the Qualified Emerging Technology Credit and the Empire State Technology Employment Incentives Program. Often refundable tax credits are available to business, and, in some instances, even investors in technology can take advantage of tax credits.
Another example of targeted incentives would be the New York State's Empire Zone Program, which provides significant wage tax credits, investment tax credits and sales tax refunds and may include sales tax exemptions, real property tax credits among other benefits for qualified empire zone enterprises (QEZE) business operating in a designated area.
New York State and City also have traditional tax incentives programs focused on assisting with cost and tax reductions for real estate construction, renovations and capital expenditures, either through loans or financing through the Industrial Development Authority, which can offer benefits including lower-cost financing and tax exemptions. The State can provide training grants or reimbursement to help employees in the workforce to acquire new skills and to learn new business processes and technology. There are a myriad of other programs available such as the Relocated Employee Assistance Program (REAP). It is a matter of knowing what assistance will enable the business to commit to come and grow in the City.
Editor: Manhattan has certainly seen a lot of turmoil in its financial sector this month. How will New York respond?
Bernier: It is absolutely unfortunate, as the financial sector has been a mainstay of the City's economy for nearly two centuries. The acquisition of two of the "Titans of Wall Street" - Bear Stearns and Merrill Lynch - by large banks, coupled with the demise of Lehman and the bailout of AIG, may result in significant workforce reductions in the City or workforce relocations to other international or domestic cities. This has a trickle down effect on real estate, retail, tourism and the like. I believe that the State and City economic agencies will react by being proactive.
I anticipate the State and City will become very aggressive in their efforts to keep our economy strong and our workforce employed. As part of a multifaceted plan, I would expect to see an increased focus on the efforts to attract international businesses both from Europe and Asia. Note that they do currently have international outreach efforts. Next, I would like to see the State and City create highly attractive incentives for diverse industries or businesses to come along to replace some of the financial services jobs here in the City. Additionally, they will need to address potential job loss and redeployment of the financial sector workforce, as well as businesses dependent thereon, over the next few years.
I think that New York City has done an excellent job, particularly with respect to the revitalization of lower Manhattan in terms of retaining businesses, increasing residential buildings, attracting retail and maintaining the waterfront parks. I believe that the multi-agency approach to the catastrophic events enabled the economic development agencies to be successful in lower Manhattan. I hope to see the same success in the wake of the sliding financial services industries in the City.
Editor: Do you see them increasing tax incentives?
Bernier: Not necessarily. I believe that tax credits and incentives are a very important consideration in the site selection process or a decision of where to reinvest for growth or expansion, but I never want to see tax incentives as "the tail wagging the dog." Corporate tax reductions, availability of workforce, regulatory stability, real estate costs and the ease of doing business will drive decisions to do business in the City.
However, the State and City will have to react and help galvanize the workforce to remain in New York by keeping employment high, perhaps further reducing real property and excise tax burdens in order to make operating expenses in New York City equivalent or balanced in comparison to other cities or locales. But again, it is New York City's cache and accessibility that enable it to remain a very competitive international city.
Editor: What does your firm offer?
Bernier :At RSM McGladrey we focus on middle-market companies and understanding their businesses. This enables us to provide comprehensive tax consulting services that meet the business needs of growing companies. Specifically, we help businesses identify and secure tax credits and incentives available either by statute or negotiation when they are considering relocating or expanding, including investments in construction, significant capital expenditures, increased employment or workforce training from Federal, state and local governments.
After working with a company to assess its specific needs and cost analysis, we facilitate presentations to the appropriate economic development authorities, many of whom RSM McGladrey has longstanding relationships with, to request consideration for statutory and negotiated benefits. It is our goal to extend these relationship to the businesses. We provide capital expenditure, operating costs and tax liability analysis models as well as tax credit and incentive application assistance. Once tax credits and incentives are awarded, we assist in the process to provide the appropriate annual documentation and applications or tax returns to secure these tax and financial benefits.
Often, business decisions are not solely dependent upon tax incentives or even real estate costs, but rather on how well a company can do business and thrive in a particular location. To that end, I have often seen New York's economic development authorities strive to understand a company's business operations and needs, and they will assist with very specific issues where they can.
Many economic development organizations do a wonderful job with outreach both domestically and internationally; when it comes to working with a business, they put together a kind of "swat team" - a multi-disciplinary team including people from different departments and sometimes different agencies - to address a company's needs. If you have an accounting firm or law firm helping you navigate the tax and business incentives, you can get some very good results.
Editor: Can you give me an example?
Bernier: Several examples are from outside the City. One of our clients in a western state planned to close down its hotel for a 12-month renovation. The government responded by bringing in a workforce group to help outsource all of the employees. This accomplished several business objectives. First, it eliminated potential ill will in the community. Second, it preserved the unemployment rating because many of these people were moving to new jobs before the hotel closed. Third, this protected the hotel's brand. It takes years to build a reputation, but it can be lost in a day. The transition period was itself exciting: the government actually came onto the property and conducted interviews, helped write resumes, and placed about 600 employees in new businesses, in other hotels and restaurants, and in a new call center.
Another "outside-the-box" incentive was provided by an East Coast city's economic development agency. They involved their transportation authority to help a new warehouse locate in a targeted economic area not convenient to potential employees. The government proposed creating a new bus route that had a timetable similar to the work shifts. This would enable employees to have convenient access to and from their work at the warehouse and the site was selected. What a wonderful creative result!