New York City Council Testimony on the Impact of the Federal Tax Law on New York City

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On February 26, 2018, Kathryn Wylde, President and CEO of the Partnership for New York City, testified to the New York City Council on the impact of the federal tax law on New York City. Below is a summary of her comments.

“As the nation’s business and real estate capital, New York City can expect to benefit from federal tax reform, particularly the reduction of corporate tax rates and of taxes on repatriation of profits from overseas operations. Many corporations have already announced plans to dedicate a portion of tax savings to salary increases for lower wage employees, additional employee bonuses and expanded investment in the U.S. But not all businesses are realizing equal benefits.  For example, partnerships like legal and accounting firms and boutique investment banks and venture capital firms—all major employers in the city—are not getting the tax advantages of so-called pass-through entities under the new law. And many implications of the law are still not fully understood.

The biggest negative impact for the city is the loss of state and local tax deductibility for individual taxpayers, specifically capping those deductions at $10,000.  As a result, residents of New York and nine other states with high property and personal income taxes will not see the same tax reductions as tax filers in lower tax states. On the contrary, some highly compensated New York employees — think Wall Street, corporate executives, tech entrepreneurs, entertainers, hospital administrators and doctors—will see a tax increase.

Contrary to some political rhetoric, the Trump tax reform is probably going to lower the taxes of most low- and middle-income households, although not as much here in New York as in other states. Our Partnership analysis shows that the typical New York single taxpayer earning more than $500,000 and married taxpayer earning more than $750,000 will have a bigger tax obligation because of the inability to deduct state and local income and property taxes.

There are about 60,000 tax filers who earn over $1 million in the state, most of whom will be paying between 52 and 57 percent of their marginal income to the government, with the highest tax burden falling on residents of New York City and its suburbs.

The taxpayers our city and state rely on for most of their revenues are severely impacted. The top one percent of tax filers—city residents who earn more than $700,000—account for 49 percent of all city income tax revenues and also generate significant economic activity through their spending power. These are 37,200 households out of 3.7 million total income tax filers.

There is also a competitiveness issue. New York residents whose taxes are not actually increasing under the new law—due to lower rates, the child tax credit, and higher standard deduction—will still fare worse than residents of most other states.  An average family of four earning $175,000 will pay 25 percent of their income in taxes in New York, but only 14 percent if they reside in Florida. For the family earning $750,000, 40 percent of their income will be spent on taxes in New York versus 30 percent in Florida.

So the federal tax law will help our businesses compete in global markets, but it will make it more difficult and more expensive for them to recruit and retain top talent. Employers in key industries are calculating how to respond to this challenge— should they increase compensation to offset the tax burden, or should they relocate jobs to London, Asia, or lower-taxed American cities? In short, New York will be the global commercial center with the highest income tax rates in the world on its top earners. This will make it more expensive for employers to attract talent to the city and for entrepreneurs to build businesses here.

It is important that leaders in city and state government demonstrate their understanding of these issues. Governor Cuomo has included measures in his executive budget that attempt to offer some relief to those who will be most impacted by personal income tax increases. This is the right message to send to employers and taxpayers.  On the other hand, proposals coming out of some quarters for another millionaire’s tax or other tax increases on high earners put the city and state in jeopardy of significant revenue and job losses. Anyone who thinks migration of jobs and high earners out of the city isn’t happening should speak to the realtors in Florida.

Elected officials around the country and world have quickly understood the competitive opportunity for poaching jobs and talent from New York. We urge the City Council and other elected officials to help fend off these efforts, first by acknowledging that we have a problem and second by looking at the current structure of the UBT and other tax laws and regulations to ensure that the city is taking whatever measures it can to mitigate the negative impact of the federal law on individuals and certain pass-through entities. We do not project that this tax law is a net negative for New York’s economy, unless we fail to deal honestly with its implications. We appreciate this Council hearing as an illustration of the kind of fact-finding and policy review that is necessary to keep New York competitive.”

Partnership Fund portfolio company TARA Biosystems appoints pharmaceutical industry innovation leader, John M. Baldoni, Ph.D., to its Board of Directors

Resource Type: Fund News, News, Partnership Fund

NEW YORKFeb. 20, 2018 /PRNewswire/ — TARA Biosystems, Inc., a company offering physiologically relevant “heart-on-a-chip” tissue models for drug discovery and development applications, announced today that it has appointed pharmaceutical industry innovation leader, John M. Baldoni, Ph.D. to its Board of Directors.

TARA Biosystems offers bioanalytical testing services on its human stem cell-derived cardiac tissue platform. The company’s Biowire™ II platform enables early cardiac risk assessment of drug discovery candidates and accelerates discovery efforts for novel heart medicines via its disease modeling and phenotypic screening capabilities. TARA continues to develop a proprietary analytics platform, leveraging data from internal development programs on its Biowire™ II tissue production platform.

“TARA Biosystems uniquely enables the production of large amounts of high fidelity human-relevant data,” said Dr. Baldoni. “This provides foundational information for machine learning and next-generation computational approaches that are fundamentally shifting the way drug development is done today.”

Read the full Press Release

Partnership Fund portfolio company Lodo Therapeutics “unearths hope for new antibiotics”

Resource Type: Fund News, Partnership Fund

“In a bag of backyard dirt, scientists have discovered a powerful new group of antibiotics they say can wipe out many infections in lab and animal tests. including some microbes that are resistant to most traditional antibiotics.

Researches at Rockefeller University in New York reported the discovery of the new antibiotics, called malacidins, on Monday in the journal Nature Microbiology.

It is the latest in a series of promising antibiotics found through innovative genetic sequencing techniques that allow researchers to screen thousands of soil bacteria that previously could not be grown or studied in the laboratory. To identify the new compounds, the Rockefeller researchers sifted through genetic material culled from 1,500 soil samples.

Read more at the Wall Street Journal

Traffic Congestion Will Cost Metro Area $100 Billion by 2022

Resource Type: News, Press Releases

Downstate Commuters Lose Over 100 Million Hours Annually

An analysis released today by the Partnership for New York City calculates the cost of traffic congestion in the New York metropolitan area as $20 billion a year. Unless something is done to reduce traffic, the New York economy can expect to lose more than $100 billion over the next five years, enough to fund the modernization and maintenance of the MTA mass transit system for the next two decades.

The study was conducted by global engineering firm HDR for the Partnership, which is the city’s leading business organization. The findings represent a substantial increase in congestion since the Partnership and HDR conducted a similar analysis in 2006 [1], at which time the cost of congestion was $13 billion a year. The current study indicates a 53 percent increase in damaging traffic conditions in just over a decade.

A certain level of traffic congestion is evidence of a healthy local economy, but there is a tipping point where “excess congestion” creates real damage to the economic health and productivity of a region. In downstate New York, the study found that 44 percent congestion is considered excess congestion and is borne by business and individual commuters, local residents and visitors.

The biggest factors in the growing cost of congestion are commuting time and work-related travel time. The money-value of this time totaled $9.17 billion last year for the New York City metro area. Commuters working in downstate New York counties lost 113.3 million hours to congestion at an average cost of $767 per person [2]. Lost business revenue totaled $5.85 billion across the New York City metro area, increased business operating costs totaled $2.42 billion, and excess fuel and vehicle operating expenses amounted to $2.54 billion.

“Regional population growth contributes to traffic congestion, but also accelerates the strain on transit and road infrastructure. Solutions require an integrated strategy for infrastructure investment and traffic mitigation,” stated Kathryn Wylde, President & CEO of the Partnership. “London, Stockholm and other world cities are far ahead of us in managing congestion and raising new revenues for roads, bridges and mass transit projects through congestion pricing. It is time for New York to cut its congestion losses by adopting a pricing program.”

“The primary source of traffic congestion across the region are the Manhattan central business districts, where a quarter of regional economic activity is concentrated. The congestion generated by traffic going to and from Manhattan, however, spreads the traffic problems to surrounding communities, with workers in Queens suffering the highest number of car commuting hours lost due to excess congestion.  Reducing gridlock in Manhattan is the only way to trigger relief on congested roadways throughout the region,” Wylde continued.

The Partnership worked with HDR to complete this study, which updates a similar report from 2006. For the purposes of this analysis, the New York City metro area is defined as New York City, Nassau, Suffolk, Putnam, Rockland and Westchester counties and Northern New Jersey.

[1] Includes the effect of inflation on the cost of excess congestion.

[2] Excludes Northern New Jersey.

Maria Gotsch Ranked No. 13 in Institutional Investor’s “The Fintech Finance 40”

Resource Type: Fund News, Partnership Fund

“When KKR & Co. co-founder Henry Kravis started the Partnership Fund for New York City in 1996, the effort to support local business ventures was bound to make waves. But it wasn’t until 2010 that a picture of how big its impact would be began to emerge.

That was the year the Partnership Fund’s president and chief executive officer, Maria Gotsch, co-founded the FinTech Innovation Lab with Robert Gach, a senior capital markets consultant with Accenture. The lab connected venture capitalists and start-ups, creating an ecosystem for mentoring and financing that has been replicated internationally.

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Partnership for New York City Highlights Opportunities to Contain Title Insurance Costs

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Today, Kathryn Wylde, President & CEO of the Partnership for New York City, delivered the following testimony on recent title insurance regulations  before the  New York State Assembly Standing Committee on Insurance:

“The Partnership for New York City represents the city’s business leaders and largest private sector employers. We work together with government, labor and the nonprofit sector to maintain the city’s position as the pre-eminent global center of commerce, innovation and economic opportunity.

New York State is well established as the national leader when it comes to state regulation, enforcement and oversight of the financial services and insurance industries. The policies we establish here are models for other states and the agencies that carry out this work on our behalf are highly respected as best in class among state regulators. We should consider the efforts of the Department of Financial Services to ensure appropriate oversight of the title insurance industry in that context.

Real estate is a key industry for New York City and title insurers have long provided a service that the industry values. They deliver timely evidence of clear title as a condition of virtually every purchase and loan closing.

At the same time, title insurance is only as good as the public records of ownership, easements and liens that may encumber a property. In New York, the title industry has less than a 5 percent rate of losses, far lower than any other so-called “insurance” sector. One must conclude that our public agencies do a good job of record keeping — for which they receive very modest fees.  Title insurance companies, on the other hand, are compensated at significantly higher rates than may be justified by either the risks they incur or their legitimate expenses, as demonstrated by the results of the DFS investigation.

In 2008, when New York State faced a significant budget deficit, the Partnership for New York City released a proposal that the state should consider self-insuring title records as a way to generate new revenues and reduce costs for affordable housing. Frankly, members of the real estate and banking industries did not support this position out of concern that government agencies would be less responsive than the private sector to the demands of showing up promptly at closings with a completed record. We did not pursue the issue.

But we did advocate for the state to take a close look at industry rates. In New York, a handful of politically connected companies collected revenues of about $1.1 billion in 2016. Last October, after an extended investigation, DFS issued regulations designed to curb lavish marketing expenses that are promotional and protectionist, rather than a necessary cost of doing business. We support the position of DFS and would also suggest a careful and complete review of the appropriateness of other expenditures allowed under the current rate structure, such as lobbying and political contributions that add unnecessarily to costs passed along to consumers and businesses.

Though technology has made title searches simpler and cheaper, premiums have continued to rise, with New York state having some of the highest insurance rates in the country. In New York, the industry has input into the rate-setting process through the recommendations of the Title Insurance Rate Service Association, Inc. but the public relies on DFS to ensure that the costs passed along to customers are reasonable and necessary. Nationally, only four underwriters own 90 percent of the title insurance market. Given the fact that their premiums are essentially mandated impositions on every transaction, the concentration of power is troubling and requires more strenuous oversight than has historically been the case.

We commend the Assembly Insurance Committee for taking a hard look at the industry and its regulatory environment today. We are not calling for socialization of the industry. But we are suggesting that investigations and tightening of controls by the DFS are necessary and appropriate to contain costs and to ensure that the best interests of residents and businesses in the state are protected.”

Statement from Kathryn Wylde, President & CEO of the Partnership for New York City, On Governor Cuomo’s State of the State Address

Resource Type: News, Statements

“Governor Cuomo made it clear today that he understands that New York faces new challenges in competing to attract talent and business investment to the state as a result of federal tax reform. The business community is prepared to offer its cooperation and expertise to help explore how any negative impact on the state and its resident taxpayers might be offset, through such measures as a payroll tax or a public charitable fund. We applaud the Governor’s commitment to take thoughtful action to cushion the loss of state and local deductibility, which comes down hardest on the top 1% of New York State taxpayers, who account for 42% of total state income tax revenue.

Another important announcement today involves the state’s workforce development efforts, focusing on better alignment with the job opportunities in growing sectors of the economy. Adequate education and skills training are the most productive way to increase upward mobility. There are more than 110,000 jobs waiting for qualified applicants to fill them in New York City alone.”

Downstate Business Leaders Endorse Governor’s Regional Economic Development Council Initiative

Resource Type: News, Press Releases

This week, New York State awarded over $64 million dollars to fund local projects that were recommended by Governor Cuomo’s NYC Regional Economic Development Council (REDC). This is the seventh round of funding awarded through a process where a council comprised of local business, labor, academic and civic leaders establishes regional priorities and helps evaluate applications for state funding. This round will support over 120 companies and nonprofit organizations to carry out economic and workforce development projects across the five boroughs.

The industry priority of the NYC REDC this year was life sciences. Two growing companies in this field that will receive capital and tax credits through the REDC process are Celmatix, a health company using genomics and big data to empower women’s fertility decisions, and Cresilon, which manufactures a plant-based gel to stop bleeding.

Awards will also support a number of workforce training programs that feature collaborative partnerships between employers, nonprofits and educational institutions. For example, City University of New York will receive funding for an IT Support Program that will prepare unemployed workers with training and industry credentials that qualify them for jobs in the rapidly growing tech sector. Historic Greenwood Cemetery will train youth for careers in stone masonry and construction.

B.Amsterdam, which operates one of Europe’s largest tech incubators, was granted nearly $2 million to support its plan to open a U.S. operation in the Brooklyn Navy Yard. B.NYC will be a tech accelerator for international entrepreneurs. A recent study by the Partnership for New York City found that tech is the most promising area to increase foreign direct investment in the city, creating new jobs and economic activity.

REDC funding for New York City’s priority projects will help close the skills gap, provide affordable space for the emerging tech companies, support neighborhood development and improve the region’s infrastructure, all of which are critical to ensuring that the city’s continued growth and prosperity are widely shared,” said Winston Fisher, Partner at Fisher Brothers and co-chair of the NYC Regional Economic Development Council.

“Life sciences investments from the REDC help strengthen an important and well-paying sector that plays an increasingly dominant role in the innovation economy. This additional state funding reinforces our efforts to effectively compete with other life science centers,” said Cheryl A. Moore, President & COO of the New York Genome Center and co-chair of the NYC Regional Economic Development Council.

“The REDC process offers a great opportunity to reflect local priorities in the state’s economic development program,”  said Kathryn Wylde, President & CEO of the Partnership for New York City and a member of the NYC REDC. “Outreach by the REDC members has brought a greater diversity of funding applications, many from small businesses and NGOs that would never have otherwise gotten through the traditional funding process. The regional and more transparent approach to economic development through the REDC process has brought benefits well beyond the dollars awarded.”

Total REDC awards to New York City since 2010 total $465.2 million. Funded projects will result in more than $3.3 billion in private and other public investment.

Watch the video for more on projects that are transforming New York City. All of this year’s winners are listed here.

Partnership Fund portfolio company Kasisto raises $17M Series B

Resource Type: Fund News, Partnership Fund

NEW YORK — December 13, 2017 — Kasisto, creators of KAI, the leading conversational AI platform for finance, today announced a $17 million Series B funding round led by Oak HC/FT with participation from existing investors Propel Venture Partners, Two Sigma Ventures, Commerce Ventures, Mastercard and Partnership Fund for New York City. KAI enables financial institutions to acquire new customers as well as engage, support, and generate additional revenue from existing customers via human-like, intelligent conversations with smart-bots and virtual assistants, anytime, anywhere.

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