http://www.hudsonreporter.com/site/n...d=523586&rfi=6
If they get it, will they build?
Goldman Sachs wants special tax agreement for new $560M tower
MAKING A CASE FOR 50 HUDSON – Dino Fusco, director of global real estate operations for Goldman Sachs, speaks at the June 25 City Council caucus on the financial firm’s proposed office tower at 50 Hudson St. The company estimates that they will be expanding greatly over the next few years. Some are concerned that they may take too long to start building.
Ricardo Kaulessar
07/13/2007
When the City Council convenes its meeting this Wednesday, it will consider approving a 20-year tax abatement deal for a major investment firm.
Goldman Sachs, the owner of the tallest building in the state at 30 Hudson St. - and a sponsor of various community events - would like the tax agreement for an office tower to be built at 50 Hudson St., next to their existing headquarters.
They say their company will be expanding over the next few years, and they need the extra space.
However, tax abatements have become controversial. They allow developers to make a deal with the city to pay a pre-determined annual tax fee rather than being subject to the quixotic rise and fall of regular property taxes. Some believe that the deals are too generous to the developers, and should be used only to encourage developers to build in blighted areas.
But even
major developers sometimes claim they need the deals in order to make a big project financially viable, or to make it more prudent than locating elsewhere (like in New York City).
At the City Council's previous meeting on June 27, the council voted 8-0 to introduce the abatement, with an abstention by City Councilman Steven Fulop, a former Goldman Sachs employee himself.
The $560 million, 918,956 square-foot office tower will be 30 stories high with 573 parking spaces - if it is built.
Some officials believe that it's a big if, as an original construction plan for that property has been on hold since June 2000.
That year, Goldman Sachs got approval for tax abatement for a hotel/conference center at the site.
At the last council meeting,
several officials tried to press Goldman Sachs on when they will build their new project, if they get the new abatement. They noted that the existing 30 Hudson St. headquarters is not fully occupied and that Goldman Sachs is currently building its new world headquarters near New York City's Battery Park.
But Goldman officials say that their company is expanding rapidly, and they will build when the market makes it feasible.
Went from 50 to 30
The plan for the new tower went into motion last year when the City Council at its Aug. 16 meeting approved changes to the Colgate Redevelopment Plan, allowing for the construction of a 50-foot office tower by Goldman Sachs at 50 Hudson St.
The redevelopment plan also allowed for an open-air plaza with the 21,000 square feet of retail space. Previously under the plan, an atrium would have been built.
But even
at that time, there were questions about Goldman Sachs seeking to build a new, taller building at a time when their 30 Hudson St. location was then filled at half-capacity.
At that meeting, Goldman Sachs executive Timor Galen said the new tower for 50 Hudson St. was necessary to redistribute the workforce between New York and New Jersey.
The Jersey City Planning Board, at its meeting on Sept. 19 of last year, approved a shorter 30-story office tower for 50 Hudson St. They also approved a public plaza between that new building and Goldman Sachs' existing 30 Hudson St. building.
Goldman will need more space
Peter Rose, spokesperson for Goldman Sachs, said last week that their proposed office tower is advance planning on the part of Goldman Sachs to prepare for future expansion.
Goldman Sachs operates offices in 46 cities in the United States and in other parts of the world.
Rose pointed out that
since 1999, when shares in the company were first offered on the stock market, the firm has grown from 9,000 to 28,000 employees.
"We're very serious about preparing ahead of time," Rose said. "Over the past years, we always believe we end up needing more space sooner than later."
He also said they intend to be the sole tenants of the buildings they occupy, which is why they have reached only 65 percent occupancy at their 30 Hudson St. location.
Rose said if Goldman Sachs gets the abatement,
they will do a study to find out when it will be economically feasible for them to start building. They may look six to 10 years into the future in that study.
"We do the economic analysis and we find it's very difficult to start building immediately," Rose said. But Rose noted that they are already paying taxes on the property, regardless of when they build.
According to the current abatement agreement, they pay a current tax of $165,000 annually on the undeveloped land. The new agreement calls for $2.2 million to be paid each year to the city from time of completion to the year six of the abatement. After that, the payment will increase every few years until the abatement ends.
Putting on the charm
Goldman Sachs advocated for the abatement at the council caucus last month.
Dino Fusco, director of global real estate operations for Goldman Sachs, noted that the firm has been a "good neighbor" in Jersey City with their support of various community events.
They said they established a strong presence in the city with their 30 Hudson St. building, and a new building will be necessary once 30 Hudson St. is fully occupied by - by his estimate - 2009, and the new world headquarters in New York City is completed in 2010.
"With the completion of our world headquarters building in Battery Park across the river, Jersey City is going to be more strategic for Goldman Sachs," Fusco said.
Fusco may have revealed why Goldman Sachs will probably receive the abatement, as he complimented the city's "tax enhancement" program for keeping Jersey City "competitive" with lower Manhattan.
Not everyone is convinced
City Councilman Bill Gaughan got to the point during the caucus when he asked: "How long will it take to build this building?"
An architect for Goldman Sachs said that after construction begins, it could take three years to build the tower.
Gaughan also wanted to know how many construction jobs and jobs after construction will be available for Jersey City residents.
In fact, a recently passed ordinance forces certain projects to agree to use a percentage of Jersey City residents in their construction. The Goldman Sachs project falls under this agreement.
A consultant for Goldman Sachs, Rutgers University professor Joseph Seneca, saidd the project will produce 274 construction jobs for Jersey City residents. There will be 3,811 jobs during construction.
He said that when the building is finished, 413 of Goldman Sachs' 3,496 permanent jobs at 50 Hudson St. will be local residents.
Last week, City Councilman Steven Fulop, who represents the Downtown area of the city where the 50 Hudson St. site is located, said the abatement should have had a stipulation that requires Goldman Sachs and other developers to build once they receive the abatement.
Fulop said that some developers get an abatement for a project, then stall on development for years or sell the property for a higher price than purchased originally.
"The reality is, the developers should be building," Fulop said. "Instead, the city is in the business of giving abatements that increases value of the property, but [do] not actually see the development taking place."