Some 2,000 miles away from the hustle and bustle of Wall Street, Goldman Sachs Group Inc. has found an unlikely second home: Mormon country.
Low taxes, tax breaks and a cheap but well-educated workforce persuaded Goldman to go on a hiring binge in Salt Lake City. The bank now employs 1,300 people here — putting Utah's capital city on a path to become Goldman's fourth-largest global operation, behind only New York, New Jersey and London.
At a time when the Wall Street firm has cut thousands of jobs elsewhere, Goldman plans to grow in Salt Lake City. Already, Salt Lake City accounts for just under 4 percent of the global investment bank's total headcount, double the staff it had in Salt Lake City only two years ago, and that figure continues to climb.
During a Feb. 28 visit to Goldman's office on Main Street, just a few blocks from the headquarters of the Mormon Church, Chief Executive Lloyd Blankfein told employees of plans to hire an additional 300 workers by year's end.
Goldman's image as a Wall Street powerhouse dominated by hard-charging traders and swaggering bankers might seem at odds with Salt Lake City's reputation as a family-oriented town where the bars close early and the Church of Jesus Christ of Latter-day Saints is the most powerful local institution.
But by bulking up in Utah, which boasts one of the lowest corporate tax rates in the United States, the bank is taking advantage of a series of lucrative tax breaks offered by the state to woo its business.
Several former and current employees say that dozens of technicians, developers, accountants and research analysts on the East Coast have been replaced by less expensive staff in Utah.
A Goldman spokesman would not comment on that, or on how Utah affects the bank's overall tax bill. He and others at Goldman acknowledge that cost-cutting was initially the driving force behind its Utah expansion, but they say the local talent pool has been more impressive than the money saved.
"The cost savings have become less interesting than the quality of people we can retain," says David Lang, a managing director who heads Goldman's Salt Lake City operation. "We would expect that one day we can export the talent from here. We have groups and teams here who interact with our global operations abroad every day."
Goldman's move out West underscores how for major investment banks, proximity to Wall Street means less and less when it comes to support staff, trade processing and even research.Taxing times
Many of those functions "can be performed just about anywhere with a computer connection," says Charles Geisst, a Wall Street historian and professor at Manhattan College. "They just simply go where the costs are cheapest."
The tax advantage is nonetheless important. State taxes have become a big concern for corporate America, as some cash-strapped states have leaned heavily on higher corporate taxes to plug widening budget gaps.
Goldman set aside $392 million for U.S. state and local taxes last year, 21 percent more than in 2010, even as the bank's profit plunged 67 percent. By comparison, its federal tax provision fell 77 percent to $405 million, and its foreign tax bill shrank by 81 percent to $204 million over the same period.
Utah Gov. Gary Herbert has pledged not to raise taxes, and has made corporate tax breaks a focal point of his economic development plan.
Goldman Sachs ranks as the second-biggest beneficiary behind Procter & Gamble Co of Utah's tax-break program, having inked a deal in 2009 to receive an estimated $47.3 million worth of rebates over 20 years. In exchange, the bank committed to investing $51 million in Utah, maintaining at least 1,065 employees and paying them at least 50 percent above the average Salt Lake County wage.
The deal built upon a previous $20 million tax break deal Goldman received two years earlier under Herbert's predecessor, Jon Huntsman.
Goldman agreed to the sweetened package after an entourage of Utah public officials — including Gov. Herbert, Salt Lake City Mayor Ralph Becker and local business leaders — came to the bank's headquarters in lower Manhattan to make a personal sales pitch to senior executives.
The Utah officials came bearing not only the tax break, but also a promise that Goldman Sachs would like the state's much lower cost-of-living and friendly regulatory environment. They also touted the state's reputation for having a highly educated workforce that speaks multiple languages.
Utah officials continue to give Goldman the star treatment. When Goldman Chief Financial Officer David Viniar, a former college basketball player, visited the Salt Lake office in October, he was invited to shoot hoops with players from the local NBA team, the Utah Jazz.
"Goldman Sachs being here is a big deal," said Gov. Herbert, a Republican and former real-estate agent who makes no secret of his contempt for high taxes and what he calls "nonsensical" regulation.
Utah's tax breaks are rebates spread out over a number of years and are only granted as long as companies meet agreed-upon targets for investing, hiring and wages, says Jerold Oldroyd, a partner at law firm Ballard Spahr who structures the tax incentive deals for the state.
Even without the rebate, Utah's corporate tax rate of 5 percent is among the lowest in the nation, according to data from the Tax Foundation, a nonpartisan policy group. State tax rates range from zero to 12 percent, with a median rate of 7 percent.
And just as wages and office space are less expensive in Salt Lake than in metropolises like New York, payroll and property taxes tend to be lower as well.
"Utah is sort of like a U.S. tax haven," says Robert Willens, a tax expert who teaches at Columbia University. "Utah may be offering incentives, but the corporate tax rate is incredibly low and an even bigger element of the tax savings is that Goldman can attribute more of its taxable income to the state. I'm sure that $47.3 million is just the tip of the iceberg." Goldman wouldn't comment on that.