While New York City is still widely regarded as the “Financial Capital of the World,” global uncertainty, job losses and shrinking office footprints from Wall Street have all taken a significant toll on the city’s municipal tax base.
But despite these declines in the securities industry, retail, hospitality and tourism have played a bigger role in the recent recovery, according to new research.
Eastern Consolidated’s hot-off-the-press white paper, “New York City’s Changed Economy: Less Dependent on Wall Street,” authored by Eastern chief economist Barbara Byrne Denham, tells a compelling story about how other industries are compensating for the declines in tax revenues from the financial services sector.
The report provides a thorough analysis of tax revenue data that shows while some taxes still fluctuate wildly in-line with Wall Street and other fortunes, a number of taxes have grown steadily and have garnered a larger share of the total tax base.
Most notably, real property tax collections have climbed 25% since 2009, contributing $3.6 billion in additional revenues to the city.
Also, sales taxes and hotel taxes have climbed 27% and 39%, respectively, since 2009, generating an additional $1.38 billion in total taxes, specifically due to a surge in tourism, new hotel construction and the addition of more than six million square feet of retail space throughout the five boroughs.
“Wall Street still contributes significant if erratic revenues to the City’s tax coffers, but considerably less than five years ago,” said Eastern Consolidated’s chairman and CEO, Peter Hauspurg, in the report.
“It’s been crazy over the years watching the real estate market escalate in-line with Wall Street only to see it plummet with every Wall Street correction. The fact that the commercial real estate market has rebounded so significantly in spite of a tepid Wall Street recovery is a welcome development.”
Significant findings include:
• Total tax revenues collected by the City government climbed from $33.9 billion in fiscal year 2009 to $41.4 billion in fiscal year 2012, without any added revenues from the securities industry.
• Tax revenues generated by the securities industry was $5 billion in 2007, but Eastern Consolidated’s estimates show that taxes generated by securities firms fell to $3.3 billion in 2009. After climbing to $4 billion in 2011, the estimates indicate that taxes from securities fell back to $3.4 billion in fiscal year 2012.
• Sales tax revenues increased by $1.24 billion (27%) from 2009 to 2012 and hotel tax revenues grew by $134 million (39%) during those three years.
• The boost in hotel tax revenue increases were due to the surge in tourism. The city has added more than 24,800 hotel rooms since 2006, including many in Long Island City and Brooklyn.
• From the budget-conscious to the well-heeled travelers, all have spent significantly at restaurants and retail stores, generating added sales taxes.
Moreover, the added 12 new retail complexes in all five boroughs totaling more than six million square feet of space have retained sales taxes that had previously been spent outside of the city. The retail industry has added close to 40,000 jobs and restaurants have added another 42,000 jobs since the end of 2009.
• Real property taxes along with commercial rent taxes climbed steadily from 2004 through 2012 even though real property transfer taxes and mortgage recording taxes swung wildly over those years. Total property taxes collected by the City grew from $14.3 billion in FY 2009 to $17.9 billion in FY 2012, accounting for 61% of the total increase in tax revenues during these years.
• All three corporate taxes collected by the City have swung wildly over the last ten years as have personal income taxes.
• Even after adjusting for inflation, New York City’s total tax revenues have increased steadily over the last five years. This contrasts with the federal tax collections which have not kept pace with inflation.