Bloomberg News

Wall Street Cool to Lhota With Republicans Outnumbered in NYC

September 12, 2013

New York’s financiers have yet to throw their support behind Joseph Lhota, the Republican Party’s mayoral candidate, even as his leading Democratic opponent pledges to seek higher taxes on the rich.

Lhota, who was a top aide to former Mayor Rudolph Giuliani, won the primary Sept. 10 by beating supermarket billionaire John Catsimatidis and George McDonald, founder of the nonprofit Doe Fund. He will face either Public Advocate Bill de Blasio, who won the most votes in the Democratic primary, or former city Comptroller William Thompson. De Blasio is hovering above the 40 percent mark, which would allow him to avoid a runoff with Thompson. Votes are still being counted.

“I haven’t heard any real talk about Lhota at all,” said Timothy Selby, president of the New York Hedge Fund Roundtable, a trade group with 500 members. “There just doesn’t seem to be excitement or interest in this election.”

Lhota, 58, has raised about $2 million, less than half of the $4.4 million taken in by de Blasio, though he has does have wealthy backers such as Home Depot Inc. (HD:US) co-founder Kenneth Langone and David Koch, the billionaire executive vice president of Koch Industries Inc.

Demographics, not fundraising, may be Lhota’s biggest challenge in the competition to succeed Mayor Michael Bloomberg, the founder and owner of Bloomberg LP, the parent of Bloomberg News. Democrats outnumber Republicans by more than 6 to 1 in the most populous U.S. city. Lhota received 29,919 votes, less than former Representative Anthony Weiner got in the Democratic primary, where he finished fifth. By contrast, de Blasio received more than 258,000 votes in a seven-way race.

Phone Ringing

De Blasio, 52, campaigned on what he calls a “Tale of Two Cities,” promising to help the almost half of New Yorkers that he says have been left behind as crime plummeted and luxury condos and boutiques rose during 20 years of Republican and independent mayoral rule. Opposition to his policies may push more bankers and businessmen to support Lhota, said Jim Tisch, chief executive officer of Loews Corp. (L:US)

“I’ve spoken to a lot of businesspeople of all stripes, virtually all of whom, unanimously, are concerned about a de Blasio mayoralty,” said Tisch, a finance chairman for Lhota.

Even so, the heads of the biggest banks may “lay low” because contributions by people who do business with the city are restricted, Tisch said.

Lhota worked as an investment banker for more than a decade and was widely praised as head of the Metropolitan Transportation Authority when he reopened New York’s subways after Hurricane Sandy. Still, some in the financial industry said they need more information about the candidate.

‘Stark Contrast’

“I’m a staunch Republican, so right off the bat, I should say Lhota, but I need to do a little bit more research,” said Sean Gambino, a trader who’s worked on Wall Street for about 20 years. “I don’t think many New Yorkers know who Joe Lhota is or what he stands for.”

The Lhota campaign has been reaching out to all industries, including finance, Jessica Proud, a spokeswoman, said in an interview yesterday.

“The people of this city will have a very stark contrast between a candidate who wants to grow the size of the budget and someone who is a fiscal expert who knows how to create jobs,” Proud said.

Koch and his wife, Julia, each gave $145,050 last week to a political-action committee supporting Lhota, Campaign Finance Board data show. Langone hosted a fundraiser for Lhota this week with Giuliani, according to Politico.

Langone, Koch

Lhota “may not need much more money” because of backing from Langone and Koch alone, said Ken Sherrill, a professor emeritus of political science for Hunter College of the City University of New York.

“A candidate with the support of David Koch and the Giuliani people obviously should be taken seriously,” said Orin Kramer, general partner at Boston Provident Partners LP and a top fundraiser for President Barack Obama, a Democrat.

De Blasio first proposed his tax on the wealthy to pay for pre-kindergarten and after-school programs in an Oct. 4 speech to the Association for a Better New York, a group of business executives. The plan would add about $532 million in revenue -- about 3.5 percent of the city’s $70 billion a year budget.

In a March interview, de Blasio described it as the defining moment of his campaign, saying the experience was akin to the biblical figure Daniel “going into the lion’s den.”

‘Lion’s Den’

“I always reference that moment because I want to show I say the same thing in front of wealthy, powerful folks as I’ll tell parents in the South Bronx,” he said in an interview. “I wanted to show decency and courage to go before a group who wouldn’t like it and tell them, ‘This is what I think we need for the good of the city.’”

De Blasio’s plan would raise the marginal tax rate on incomes above $500,000 to 4.4 percent from almost 3.9 percent. For the 27,300 city taxpayers earning $500,000 to $1 million, the average increase would be $973 a year, according to the Independent Budget Office, a municipal agency.

For those making $1 million to $5 million, the average extra bite would rise to $7,793, the budget office said. At incomes of $5 million to $10 million, it would climb to $33,518, and for those earning more than $10 million, it would mean paying $182,893 more.

Richard Schmeelk, 89, a founding partner of CAI Private Equity LLC, said the city’s schools should “do a better job with the money they have” rather than spending more.

“The idea of taxing the rich more, heavy regulations, it doesn’t help,” Schmeelk said. “I pray that the mayor will come out and back the former MTA guy.”

Critical Mass

De Blasio told the Nation magazine in an August interview that the mayor should have found a place for the Occupy Wall Street movement to continue its protests rather than ousting it from Zuccotti Park. As public advocate, a watchdog post, he lobbied companies including Goldman Sachs Group Inc. to stay out of politics. That won’t keep business leaders from supporting him, Kramer said.

“There will be a critical mass of people from the financial and business community who will be with de Blasio, without reservations, by the way,” said Kramer, who’s raised money for the candidate.

Lhota has said he supports charter schools, a favorite cause of many financiers, while de Blasio says he opposes Bloomberg’s closing of underperforming schools. Democrats for Education Reform, a group whose directors include hedge-fund managers Whitney Tilson and Boykin Curry, has yet to endorse a candidate.

“None of the candidates got our base fired up,” said Joe Williams, the group’s executive director. “We’re not going to be supporting Joe Lhota, and I’m not sure if we would support de Blasio.”

To contact the reporters on this story: Zeke Faux at zfaux@bloomberg.net; Henry Goldman in New York at hgoldman@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net; David Scheer at dscheer@bloomberg.net.


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Companies Mentioned

  • HD
    (Home Depot Inc/The)
    • $92.23 USD
    • -0.11
    • -0.12%
  • L
    (Loews Corp)
    • $42.58 USD
    • -0.32
    • -0.74%
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