Perhaps to honor the imminent passage of the Democrats' $1.9 trillion stimulus package, which will effectively bail out blue states and cities that emptied their coffers during the pandemic as spending soared and taxable income shriveled, Bloomberg has published a story claiming that the COVID-era trend of New York financial firms trading the Empire State for Florida is about to reverse.
So far, Appaloosa founder and North Carolina Panthers owner David Tepper, who recently returned to New Jersey from Florida for family reasons, is one of only a handful of examples of this trend. But Bloomberg has found at least a couple of hedge fund guys who claim to be "on the fence" about keeping Florida as their primary residence.
Dan Sundheim, founder of New York-based hedge fund D1 Capital Partners, will very likely leave Palm Beach and return to his Park Avenue home, according to a person familiar with his plans. David Tepper, who moved back to New Jersey from Miami last year, is staying in his home state for now, even though he and wife just bought a $73 million Palm Beach mansion.
The story's most compelling quotes were unilaterally attributed to Jason Mudrick, founder and head of Mudrick Capital Management, which has $3BN AUM. Oddly, Mudrick was featured heavily in the piece, despite the fact that he has lived in New York for the last 20 years, and never moved to Florida. But Mudrick seized the opportunity to
talk his book defend NYC.
He claimed to know plenty of wealthy people who are having second thoughts, though he offered no real examples - just some spicy New York snark.
The big problem with Florida, according to Mudrick, is that you then need to live in Florida, a comment which makes us wonder whether Mudrick has ever been to south Florida. He went on to assert that NYC is home to "the smartest, most driven people", another self-serving misconception shared by many New Yorkers.
"The main problem with moving to Florida is that you have to live in Florida,” said Jason Mudrick, who oversees $3 billion at Mudrick Capital Management and has resided in Manhattan for more than two decades.
"New York has the smartest, most driven people, the best culture, the best restaurants and the best theaters,” he said. “Anyone moving to Florida to save a little money loses out on all of that.”
In what was perhaps Bloomberg's most transparent attempt to play down the trend, the reporter cites US Postal Service data showing that 9% of people filing to change their address from Manhattan were moving to Miami Dade and Palm Beach (just two of 67 counties in the state of Florida). This figure is up from 6% the prior year, but Bloomberg tried to frame this as evidence that the Florida narrative is overblown...
Yet, US Postal Service data paints a different picture: Last year, 2,246 people filed a permanent address change from Manhattan to Miami-Dade County and 1,741 went to Palm Beach County. Together they account for 9% of the out-of-state moves from the borough, up from 6% in 2019.
Much of the narrative around these relocations centered on taxes and business-friendly climate. Florida has no state income tax, while New York City’s is among the nation’s highest.
...before acknowledging that wealthy residents can have an "outsize impact" on the tax base when they decide to leave a state.
Still, even a small number of departures by the ultra-wealthy can have an outsize impact. The top 1% of New Yorkers earned a combined $133.3 billion in 2018 and accounted for 42.5% of local income taxes collected, according to the city’s Independent Budget Office.
Bloomberg's team of reporters (we're frankly amazed this was a four byline story) managed to track down an anonymous hedge fund manager who claimed he was "on the fence" about whether to remain in the Sunshine State. Though BBG offered no explanation for why it decided to conceal this source's identity, the individual reportedly cited access to good schools and his social network as factors that might prompt him to reconsider the move.
Apparently, so many financiers have moved to south Florida over the past year, that private schools in the area have run out of spaces for their kids.
One hedge fund founder who spent the past six months in Miami is still deciding whether he’ll stay. The forces pulling him back are New York’s dynamism and his children’s school, which he likes better than the one they’re attending now. Either way, he’ll keep his New York office - because many of his employees with kids don’t want to leave - as well as his place in the Hamptons, because no one wants to be in South Florida in the summer.
Parents leaning toward staying in Florida are finding that many of the private schools are at or near capacity. Fanning Hearon, the head of Palm Beach Day Academy, said enrollment rose 22% to 480 students in the past 18 months, and some classes already have waiting lists. Other schools in the area report that they, too, have little room for more. Meanwhile, New York’s elite private schools said they’ve seen enrollment jump and few students leaving for Florida.
The piece ended on a bit of commentary from Mudrick and a Cornell sociology professor. In his final quote, the hedge fund manager and veteran New Yorker prognosticated that the COVID-19 pandemic would spawn another "Roaring 20s".
Cristobal Young, a sociology professor at Cornell University and author of “The Myth of Millionaire Tax Flight: How Place Still Matters for the Rich,” predicts that relocation will remain minimal because wealthy people generally stay put.
"They live where they became successful, where they have industry connections, employees and customers, and where they sit on nonprofit boards,” he said. Young, who has studied the effects of tax increases in California and New Jersey, said they barely caused an uptick in interstate migration, which stands at about 2.4% a year among U.S.-based millionaires.
Then there is the lure of New York as everything starts to reopen.
"It will be like the Roaring Twenties - you’ll see a resurgence here like never before," said Mudrick, who predicts some of his friends who moved to Miami will soon be back. "You want to be buying New York and selling Florida - that’s the contrarian in me."
And who would want to miss out on that? And what's so great about Florida, anyway? Well, aside from the beautiful weather and absence of a state income tax.
Of course, the key point that Bloomberg misses in its story is that the exodus to Florida started years before the COVID-19 pandemic hit. At this point, so many firms have moved to Miami and Palm Beach, how much longer until Bloomberg News decides to move more reporters down to Florida to
cut costs help expand coverage?