Citicorp May Leave Big Apple
Chairman complains of static atmosphere, costs
CITICORP - one of New York's most important and visible institutions - may be leaving the city.
For years, John Reed, the chairman of the nation's largest bank, has wanted to move the company headquarters out of Manhattan. Now, he says, he has become ''considerably more serious'' in the last year and a half.
With 20,000 employees in New York, Citicorp is one of the Big Apple's largest private employers. If the bank left the city, the move would be a major blow to New York's efforts to grow and might encourage other large companies to leave as well.
And there is no shortage of eager suitors. Just the prospect of attracting a large employer such as Citicorp could spark a financial bidding war among states across the country.
Although New York is an expensive city, Mr. Reed, in an informal interview, says his main reason for wanting to leave Manhattan isn't economic. It's the ''psychology of the place,'' he says.
Reed says his top executives don't get out enough, that they are too insular, that the atmosphere is too static. As a sign of his own bankers' myopia, he says he doubts most of his New York-based bankers could name five of the most important consumer products.
Reed also points out that Citicorp, the parent of Citibank, was historically known as a big New York money-center bank that made large corporate loans. ''But that is an inaccurate description of the company today,'' he told employees in a newsletter this past March. Instead, Reed is trying to position the bank as a global financial-services company on the leading edge of technology. As such, it is joining the ranks of borderless corporations who choose to operate anywhere.
With his interest in technology, Reed says that the bank's headquarters might be better suited to Palo Alto, Calif., near Stanford University and such high-technology companies as Hewlett-Packard Company and Varian Associates.
Reed, a graduate of The Massachusetts Institute of Technology, also likes Boston. ''Boston would be ideal but it's high cost,'' he says, since the bank would pay additional taxes there. He says Citibank vice chairman Paul Collins estimates the bank would pay an extra $40 million to$50 million a year in taxes in the Bay State.
David Keto, undersecretary of economic affairs for Massachusetts, says he is not aware that Citicorp has contacted the state. ''Do they know that major bank tax reform passed this latest session of the legislature?'' asks Mr. Keto. On July 27, Gov. William Weld signed into law a 2 percentage point reduction of bank taxes. Keto says the state would be eager to discuss the issue with the bank.
Charles Millard, head of New York's Economic Development Corporation, says the city knows the bank is considering moving. ''Whether it is quality of life or economic issues, we're prepared to expend all the energy we can to keep them here,'' he says.
Other cities have been mentioned as possible candidates for Citibank's headquarters, including Tampa, Fla., and Omaha, Neb. Reed says he has also ''heard'' rumors the bank might move to Austin, Texas, or Reston, Va. Reed says he likes Reston, but is concerned the bank might be considered just a Washington, D.C., bank.
After discussing the pros and cons of various cities, Reed asks, ''Will we actually do it?'' He answers with a big, ''who-knows?'' shrug.
JACK MORRIS, a spokesman for the bank, says there are no immediate plans to make any announcement about corporate relocation. He says the bank is ''constantly'' looking at alternative sites. It has a full-time relocation consultant to help with the process. ''That does not mean that plans are afoot,'' he adds.
Such corporate site-gazing is not unusual, says Regina Connell, a principal at PHH Fantus, a Chicago-based corporate relocation specialist. ''It is common for people to study various options without anything specific in mind,'' she says. ''Companies in New York and Los Angeles are always looking for ways to carve up their operations to move to a lower-cost area.''
It is a battle that New York officials have fought for some time. According to Fortune magazine, the number of industrial companies with headquarters in New York State (mostly in New York City) has shrunk from 84 a decade ago to 30 in 1994.
To entice companies to stay, New York provides sales-tax exemptions and other benefits linked to job growth. This year, the city has announced job-retention packages for such companies as Avon Products, NYLCare Health Plans Inc., and the Equitable Life Assurance Society.
Sometimes, however, the city decides it is too expensive to try to keep a company in town. Last year, Swiss Bank Corp. announced plans to move as many as 2,000 employees to Stamford, Conn. by 2000.
Citicorp, the parent of Citibank, has a long history in New York. In 1812, the bank was started as City Bank of New York by a group of merchants. It became National City Bank of New York in 1865, adding the First in 1955 after a merger. In 1974, it became Citicorp.
Under Reed, Citicorp has steadily reduced its New York operations. Recently, the bank shifted some of its securities operations to Tampa, where it already has a large operation. It has moved its credit- card division to Sioux Falls, S.D., and Hagerstown, Md.
Reed recently moved the top 25 officers of the bank from its main offices at 399 Park Avenue to Citicorp Center, a distinctive silver-sided building across the street. Reed, who has an iconoclastic management style, says this minor move has been an improvement. ''The top 25 people are really determining the future of the bank,'' he says, ''and they have to make good decisions or the bank won't be around.''
In 1988, the bank made the prospect of moving easier when it sold parts of its two office buildings to Daichi Life Insurance Company. The giant Japanese company now owns one-third of the Park Avenue tower and two-thirds of Citicorp Center.