The efforts of state and county agencies in the past two years to keep Starwood Hotels’ global headquarters on this side of the border could not match Connecticut’s offer.This is what happens when you have states with a poor business climate continue doing business as usual, and don't take a step back to realize that high taxes and competing states putting together favorable tax packages are luring away jobs and businesses, which affects New York's tax base.
"We have tried for two years to make this happen and fill the gap," said Salvatore J. Carrera, Westchester County’s director of real estate and economic development. "And the gap was $40 million."
Wednesday’s announcement that Starwood Hotels & Resorts Worldwide Inc. would move from White Plains to Stamford, Conn., reinforced the view of many real estate and development experts that New York stood little chance in an incentives fight with Connecticut.
"New York state and Westchester don’t have the programs and incentives to compete with the state of Connecticut, plain and simple," said William V. Cuddy Jr., an executive vice president at CB Richard Ellis Inc. "No one should be shocked if this is the first of subsequent relocations."
Connecticut, which of late has offered several aggressive incentives packages to lure businesses, will provide the company with a $9.5 million loan, $75 million in tax credits and up to $5 million in tax exemptions on building materials. The package will translate into a 20 percent reduction in the company’s annual rent, Starwood President and Chief Executive Officer Frits van Paasschen said in a statement.
The loss of Starwoods doesn't just affect corporate income taxes in New York, but sales and use tax, and other tax revenue streams in upcoming years following the company's headquarters move. It also affects other businesses that helped service Starwood's headquarters, including restaurants and catering that benefited from the company's presence. That, in turn, will result in loss of sales and income to those businesses.
Multiply this by multitudes of other companies that have or will be relocating elsewhere, and the problems facing the state will only deepen.
The single best way to turn around this mess is to reconsider onerous tax and spend schemes in the state and lure businesses back to the state to do business. Moreover, building up the tax base helps reduce the individual tax burden since more people share in the tax load and create jobs in the process.