A company named Infosys helped build India’s booming tech industry. Although few Americans have heard of Infosys, this large company in Bangalore employs 200,000 people and codes for companies as diverse as Nordstrom and Harley-Davidson. But trouble has struck.
In April of last year, Puneet Manuja, the co-founder of YourDost, a Bangalore-based online mental-health platform that offers counseling via live chat, noticed a spike in messages from IT workers who’d lost their jobs, or worried they would soon. In response, YourDost opened a temporary hotline to field employment concerns. Over three days, they were contacted by 1,100 workers. “A lot of these people did not have a plan B,” Manuja said. “More than 60 percent of people who reached out to us had less than three months of savings left.” Many who’d lost jobs, he said, were hiding it from their parents and friends. “When we asked why people do not tell their parents, they said you are considered weak. If you’ve been fired or laid off, it’s very difficult to convince people that it’s because of some structural changes.” They heard from one young woman, he said, who lived with her parents and who, for a week or two after getting fired from her IT job, got dressed and left every day as if she were going to work.
The leading IT companies all denied that they were laying off anyone. Some IT workers told me that, to avoid admitting to layoffs, the companies had increasingly been setting impossible performance targets to push out workers. One evening I met a longtime Infosys employee in his apartment in east Bangalore. The courtyard of his housing complex was a dazzling display of lights and fountains and overwhelming scale; it was the kind of residence that would have been unimaginable in the old Bangalore, before IT took over. Early last year, he said, he took two months’ leave following the death of his father, and when he returned he felt he’d come back to a different company. His new manager, he said, removed him from his projects, gave him a poor performance review, and incessantly pressured him to resign, threatening him with termination if he didn’t. After two months of this, he surrendered. He still seemed stunned and mortified by this turn of events; he said his work had always been highly commended by managers and clients alike and showed me emails to prove it. He didn’t want me to name him because he still hoped the company would take him back.
The Bangalore-based tech company called Infosys employs more people than Facebook and Google combined. It builds and maintains software for large American companies, and it helped build India’s IT industry. Now that industry is bracing for not only massive layoffs, but what the author calls the end of “India’s dominance of IT services”.
In Rising: Dispatches from the New American Shore(Milkweed Editions), Elizabeth Rush visits people and communities made immediately vulnerable by the rising sea levels that are brought on by climate change. She interviews people who have lost their homes, their loved ones, and the world they once knew to flooding and other disasters. Some just want to be able to afford to leave, while others are willing to withstand everything to stay.
Rush pushes through the rhetoric around climate change to look closely at the consequences. Not the ones that will happen at some point down the road, but the ones that are happening now. She travels from Louisiana to Florida to California and elsewhere to see and try her best to understand what it is like to lose the ground beneath your feet.
We talked by phone about what led her to this book, what carried her through this book, and what comes next for her and her subjects. Read more…
The ’90s Are Oldis a Longreads series by Rebecca Schuman, wherein she unpacks the cultural legacy of a decade that refuses to age gracefully.
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The most appropriate single epithet for MTV’s unscripted housemate drama The Real World is pioneering. Granted, given what the show and the oeuvre it birthed have since become — an indistinguishable procession of aggressively vapid ab models who take turns getting alcohol poisoning in a hot tub, no matter the show’s setting or purpose — the positive connotations of that word make it painful to use.
But alas, pioneering is accurate. Before producers Mary-Ellis Bunim and Jonathan Murray had the idea in 1992 to choose seven strangers at random, deposit them in a New York City loft, have their lives “taped” at a totally grungified 42-degree angle, and find out what happens, the very thought of someone going on television for no other reason than to live in an apartment with a bunch of randos was extremely novel.
What we so easily forget now, in an age where the country’s only housewives are Housewives, is that The Real World‘s early seasons were beloved by young adults precisely because they showed the largely-unremarkable exploits of largely-unremarkable (if mildly telegenic) young people. By “early seasons” I mean 1992-1996 — the 1997 season, shot in Boston, would mark the show’s transition from unscripted soap opera to unapologetic grotesque, a.k.a. what we now consider the reality-television standard. This transformation is one of the most notable — possibly most ignominious? — legacies of the ’90s, perhaps even more so than the mushroom cuts, black chokers, and off-kilter camera work.
In 1969, my father traveled alone from India to Boston so that he could enroll in the master’s program in geophysics at MIT.
I don’t know whether he flew or came by boat, so when I try to picture him setting foot in America for the first time, I don’t know what to imagine. I’ve tried to find the photographic evidence, but there aren’t any pictures of the fifteen years he spent in this country before he married my mother. Maybe he just threw out the tattered albums when we were moving between houses, but it’s more likely that he never took any photos at all. He’s never been a sentimental man.
I also don’t know why he chose to come in the first place. He has never had any great fascination with money; despite his making a good living, we lived in shabby rentals for most of my childhood, and my mother shopped for us from department store discount racks. I never felt that professional success was what he was after either. He never advanced past middle management, and except for one late-night discussion in which he made clear that he felt there was a glass ceiling for people with our skin color, I never heard one word of frustration from him about work. Maybe it was to help his family – along with his brother who came to Kansas State University earlier in the 1960s, he supported his parents in India for years with the money he earned. When trying to make us feel guilty about our second-generation lassitude, which is often, he tells us of how at MIT he had to work all hours of the night in the cafeteria and library while keeping up a full courseload, so maybe we need to be a little more appreciative that he helped with the room and board during our own time in college. Read more…
Garrett M. Graff | Longreads | June 2018 | 20 minutes (5,086 words)
Razhden Shulaya maintained a diverse business empire, like a Warren Buffet of crime. By age 40, from his base in Brighton Beach, Brooklyn, he had a cigarette smuggling operation, a drug ring, a counterfeit credit card scheme, an extortion racket, an illegal gambling establishment, and teams devoted to hacking slot machines. According to prosecutors who have been building a case against him, Shulaya’s associates provided gun-running, kidnap-for-hire, and the fencing of stolen jewelry. Plans were in place for what authorities came to call the “romance scam”: use an attractive woman to lure a target down to Atlantic City, knock him out with chloroform, and steal his money. They’d take his Rolex, too.
Blood spatter expert Duane Deaver testifies during a trial in Durham, N.C. in 2003. (AP Photo/Sarah Davis, Pool, File)
Part two of Pamela Colloff’s ProPublica/New York Times “Blood Will Tell” investigation into the faulty forensic “science” of blood spatter analysis came out today. It’s a sobering look at the reliability — or lack there of — of what has become an important crime scene investigation technique, and anyone who cares about criminal justice or understands forensics only via Dexter should read it. If you haven’t yet read part one, which details the unlikely arrest and conviction of Joe Bryan for the murder of his wife, Mickey, now’s the time:
When Robert Thorman settled into the witness box on the fifth and final day of the state’s case, it marked a turn in the prosecution’s fortunes. Thorman was the bloodstain-pattern analyst who was called to the Bryan home when investigators were still working the scene. As an interpreter of bloodstains, Thorman possessed a singular expertise, and the prosecution would use this to bring its hazy narrative into focus, lending a sense of scientific certainty to an otherwise equivocal set of facts…
The district attorney began by leading Thorman through a recitation of his credentials. The detective explained that he had served as a military police officer for 20 years before working his way up through the ranks of several small law-enforcement agencies and that he had been trained in bloodstain interpretation. The jury did not know that Thorman’s training was limited to a 40-hour class he took four months before Mickey was killed.
Bryan was convicted despite a complete lack of other forensic evidence (in fact, there was evidence that pointed away from him), an extremely improbable timeline, and no motive; there is zero evidence that he was anything other a supportive husband who was deeply in love with his wife. Then he got a re-trial, and was convicted a second time on the same shoddy evidence.
Thorman told the jury not only that the flashlight was in the bedroom at the time of the shooting but also that the killer, before fleeing the scene, had changed into clothes that were already in the Bryan home. He delivered his findings with the authority of an expert, stripping away the ambiguities of the state’s case. As he spoke to the jury, he grounded his findings in the certainty of science. “Based on my knowledge and experience in bloodstain interpretation,” he said, “the flashlight itself was right next to or near the source of energy, that being the gun.” By the time the guilty verdict came down on the last day of the trial, it seemed like a foregone conclusion. Joe was again sentenced to 99 years.
I took a deep breath and listened to the old brag of my heart. I am, I am, I am. — Sylvia Plath, The Bell Jar
The landscape of theaters must be terrifying for patients, but it’s becoming normal for me. It’s amazing what you can get used to. Life wasn’t always like this.
The first operation that I watch is a heart-lung transplant. I am nineteen years old and still a student nurse. The operation takes so long: over twelve hours. It requires a team of surgeons to behave like a relay team; but instead of a baton, they pass between them a human heart and lungs. I’ve been looking after the patient waiting for the new set of lungs that day: a fourteen-year-old boy named Aaron suffering from cystic fibrosis, who is confined to bed, oxygen tubes inserted into his nose, with a tired, wet cough and sallow gray skin. I help him get ready for the operation. I rub cocoa butter onto his dry knees, take away his Game Boy and swear to guard it with my life. I wet his lips with a small salmon-pink sponge that I dip in sterile water, not wanting to risk the tiniest possibility of him being exposed to any germs.
Aaron’s room glows with lights in the shape of stars and moons surrounding his hospital bed and a journal is hidden under his pillow. There is a small corkboard next to his bed that his stepdad has Blu-tacked to the wall, covered in a mosaic of photographs of him with his friends, every single one of them smiling. It is a common thing for a child’s hospital room to be personalized. Aside from the oxygen piped through the wall and the suction canister with its thick transparent tubing, it could be a typical teenage bedroom. Read more…
May his head burn! Your words are rocks thrown at my forehead! I will peel her skin off! Threats and insults like these do not sound that bad in their native Punjabi. Even when they are directed at loved ones. Even when they come from your own mother. The pronouns are catalysts for combustion, a quick, irreversible reaction, with only ashes for proof. However, an English word like partition can sit in an Indian’s mouth for hours, or even for a lifetime, in motion toward something shapeless, and then melted, gone. Sometimes partition represents a noun (a broken door), sometimes it is a verb (to divide into parts), but it is never clear who is at fault. An Urdu poet once called partition a birthday party for anonymous and a funeral for unanimity. A mathematician saw it in his mind as a fractal, a Koch snowflake, a continuous curve without tangents. A political scientist speaks only of before-and-after maps, the thick red Radcliffe Line. Nobody ever truly understands one another. Translation is never simple.
***
Mother makes chapattis. They are perfectly round, a circumference entirely calculable by first measuring a tangent, thanks to the discovery of constants. The first one she makes is reserved for the Brahmin, who will come later in the day to pick it up. The last one she makes is for a crow or a dog, whoever comes first. The rest are for us, but there must always be one left over at the end of the day, reserved for nobody, for nothing. That is how Mother would define abundance if she knew the word in English. How she achieves it, on the other hand, is a mystery. I am already bathed, dressed in my salwar kameez, and outside, content to throw five nameless stones onto the cement floor. I grasp them in my fist in groups of one, two, three, and then four while tossing another straight up. That one will fall either where I want it to or where it will. I hope for intersection but do not worry too much about the outcome. The five of us are here now. Mother, father, sister, brother, and me. There will come a time when I will be the only one left of us. Still up in the air. Read more…
On September 17, 2014, the art world’s upper crust convened in Luxembourg City to fête Le Freeport, a warehouse where the ultra-rich hoard paintings, cars, jewelry, wine, and other luxuries in duty-free comfort. Waiters in red uniforms dodged oversize bouquets of white lilies to pass around trays of champagne, and an orchestra played an overture written especially for the occasion before an audience that included the Grand Duke of Luxembourg and top executives at Deloitte.
That evening, two American businessmen mingled among the government ministers, gallerists, and local bigwigs. Kenneth Cayre, a wealthy real estate developer, and Tom Sapienza, an accountant who’d worked for years in art shipping and handling, were planning their own entrée into the fine art storage business. But instead of operating in the luxury tax haven of Luxembourg, they would open their storage facility in a place not known for its low taxes: New York City.
This story is published in collaboration with Artsy Editorial. Artsy is a global platform for readers to learn about, discover, and purchase art.
The terms “free port,” “free trade zone,” and “foreign trade zone” are used interchangeably in the art world. They generally denote a place that’s free of customs duties and other taxes— but the extent of that freedom depends largely on the jurisdiction of the facility. That’s why most of these warehouses tend to be in existing tax havens, like Luxembourg or Switzerland.
In the United States, these areas are called Foreign Trade Zones, and they’ve existed under the protection of Customs and Border Patrol since the first opened on Staten Island in 1937. Today, they’re located in airports, in seaports, and on waterfronts, but also in warehouses and urban centers. They’re a big part of the U.S. business landscape: There were 263 of these zones in 2016, employing 420,000 people across the country, with hundreds of billions of dollars worth of merchandise, from car parts to pharmaceuticals, moving into and out of them. The zones typically take advantage of what’s known as an inverted tariff. When there are federal duties on the imports of raw materials, like steel, but not on the import of a finished product, like a tractor, it makes sense to bring the steel into the duty-free zone, manufacture the vehicle there, then formally import it without incurring the taxes.
None of this applies to artwork, though, because there are no federal import duties on art. Nor are FTZs home to any art studios engaged in manufacturing. Until recently, there was only one American FTZ dedicated to art, and it was in Delaware, which from a tax perspective is as close to a Luxembourgish freeport as you can get in the continental United States, so the facility was not only free of customs duties, but also most local and state taxes.
A few inside the Arcis art storage facility in Harlem. (Zoe Wetherall for Artsy)
What Delaware lacks is prestige and proximity to auction houses, museums, and galleries, so Cayre and Sapienza recognized potential in a New York competitor. “We saw the attention at the opening,” Sapienza recalled at a 2017 art business conference, “and we decided we’re coming to market with a 21st-century storage facility. Why not, as the icing on the cake, add a Foreign Trade Zone?”
Their facility, which opened in April 2018 on a proletarian Harlem block on West 146th Street, is called Arcis Art Storage. “Arcis” is Latin for “fortress” — a fitting name for what’s essentially a museum-quality bunker, currently insured to store up to $3 billion worth of goods. Like Luxembourg’s Le Freeport, which is armed to the teeth and admits next to no one, security is tight: Guests at Arcis must have their retinas scanned to go through the first door, then present their bare forearms for a vascular scan at a second door.
Instead of operating in the luxury tax haven of Luxembourg, Arcis would open their storage facility in a place not known for its low taxes: New York City.
Once inside, visitors to the building will be wedged — geographically, at least — between a historic black church and a daycare center. But as far as the U.S customs agents are concerned, once goods are imported into Arcis — whether they’re coming from Shanghai or the Upper East Side — they are no longer within U.S customs territory.
This was going to be Cayre and Sapienza’s edge over a crowded New York art storage market. But there was a reason no one else had done it yet: Even though customs duties don’t apply, New York State taxes do. This means a painting bought at Christie’s and stored uptown would not get preferential treatment when it came to sales and use tax over a painting going anywhere else. Arcis got the competitive, insular art storage world wondering exactly what its executives were selling.
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Kenneth Cayre, 74, has had a varied and eccentric career. His associates at Arcis, as well as friends and former colleagues, describe him as a sharp, family-oriented hustler. (He declined to be interviewed for this article.) Cayre began his import-export career in 1959 as a teenager, operating a floating duty-free store with his two brothers, sailing back and forth from Miami to the Bahamas with cigarettes, alcohol, perfume, and watches to sell to passengers who wanted to avoid high import duties. Over the years, he helped a cousin run a textile factory in Puerto Rico; operated a pantyhose manufacturer called Kandy Mills, in Hialeah, Florida; and, inspired by the rhythms of the Miami Beach club scene, started a record label with his brothers called Salsoul.
In the early 1980s, the Cayre brothers started Good Times Entertainment, which distributed VHS copies of Jane Fonda exercise tapes, knockoff Disney movies, and other videos whose copyrights were in the public domain. An early encounter with Walmart founder Sam Walton led to a long-standing distribution deal, but the company was eventually sold to a private equity firm in 2003. The company filed for bankruptcy in 2005.
A client viewing room at Arcis. (Zoe Wetherall for Artsy)
Today, Cayre owns and manages property with his sons, Jack and Nathan, including a million-square-foot chain of self-storage warehouses in the New York tri-state area called Treasure Island. In 2014, real estate heavy Steven Guttman made a splashy transition from cheap self-storage to high-end warehousing with Uovo, which now has branches in Rockland County and Long Island City, Queens — home to a burgeoning gallery scene and the contemporary art museum MoMA PS1. During this time, the art market was growing fast: Between 2005 and 2015, annual sales doubled to reach $63.8 billion, and more contemporary art is being produced and sold every day. Nearly 80 percent of all artwork is in storage,according to one storage executive, and since new art is made every day, demand for storage facilities — at least in theory — will grow continuously.
In an application for property tax breaks from the city of New York, Cayre describes himself as “an artist at heart” and claims that after Superstorm Sandy ravaged the downtown gallery scene, he felt compelled to enter the art storage business. “Ken witnessed more and more galleries and Fine Art storage facilities vacating Manhattan for locations in New Jersey like Newark and Jersey City,” the application reads. A desire to clean up his image may have also provided motivation: In 2006, Cayre was accused by New Jersey con man-turned-FBI informant Solomon Dwek of having received stolen assets worth $2.2 million. Although he was never charged, Cayre was kicked off the board of a New Jersey medical marijuana foundation in the aftermath.
Guests at Arcis must have their retinas scanned to go through the first door, then present their bare forearms for a vascular scan at a second door.
In mid-2013, less than a year after the storm, Cayre spent $4.5 million on the Harlem parking lot where Arcis now stands and an adjacent property housing a childcare and eldercare center. Six months later, one of his sons ran into a real estate developer friend at a Super Bowl party, who offered to introduce the family to someone in the art storage business.
That someone turned out to be Tom Sapienza, now a 48-year-old dad of three from Long Island with dusty blond hair and the wholesome, slightly stiff demeanor of a Little League coach. An accountant by training, he’s a khakis-and-blazer kind of guy, which makes it hard to imagine him at a glitzy art opening in Luxembourg. But Sapienza had a Rolodex of potential clients at museums, galleries, and family offices — fruits of a decade working as a consultant and CFO at Crozier Fine Arts, one of the world’s biggest art storage firms. Sapienza’s tenure there ended on a sour note: According to legal documents, he was fired in 2012 and subsequently sued the company for allegedly denying him his share of equity. His ex-colleague, Simon Hornby, declined to comment on the termination and the lawsuit; Sapienza also declined to comment on the suit, which was settled in 2017.
Cayre and Sapienza hit it off, and before long, were en route to a castle in Maastricht for a business seminar designed to educate art world professionals about finance and to educate financiers about the art world. “It was to expose Ken to the new global art world,” Sapienza says. In the class, they heard a presentation by a business professor about Le Freeport and the business of Free Trade Zones for art. “We left with binders and binders of information,” says Sapienza. “He loved it.”
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The first free ports were established in early modern Europe as way stations for goods like grain, coffee, or spices. Their extraterritorial status saved traders time and money, but since the contents of these warehouses were perishable, the facilities weren’t intended for long-term storage, let alone keeping valuables like paintings and sculptures. But as globalization made more and more types of business transnational, these facilities evolved too. Today, free ports are a crucial cog in the global art trade. Their contents are fiercely guarded, top secret, and largely tax-free. But which exact taxes they incur depends on their location.
“The term ‘free port’ really does mean something phenomenal in Europe and Asia,” says Jason Kleinman, a partner and art-tax-law expert at Herrick Feinstein LLP. Those free ports exempt buyers and sellers from VAT and income taxes, and because of their clear perks, they have courted art collectors for decades. “These locations confer great tax advantages to the people who use them to store or conduct business,” Kleinman says, adding that when sales take place within a foreign free port, sellers also save on shipping and handling costs. For speculators flipping Picassos, free ports specializing in art and luxury items offer an attractive deal.
American FTZs, by contrast, have more limited benefits and have historically served the automotive, electronics, and oil industries. The art world got one of its own in 2015, when Austrian art shipper Fritz Dietl opened the 36,000-square-foot Delaware Freeport. His art-centric outpost allows clients who buy pieces in New York or Miami to avoid state sales taxes if they ship their pieces directly there — but the saving is due to the tax breaks offered by the state, not because it’s a FTZ.
For speculators flipping Picassos, free ports specializing in art and luxury items offer an attractive deal.
That’s because while American FTZ rules do waive federal customs duties when they are applicable, they don’t eliminate state or city sales and use taxes; in that respect, FTZs are part of the state they’re in, but not part of the country. Federal law further stipulates that goods can’t be bought and sold within the zones, so under-the-radar handoffs aren’t possible either. And New York’s sales and use taxes on art are levied based on the location where the buyer gains possession of the item, whether it’s acquired at a domestic sale or at an auction abroad — so the most an FTZ could possibly do is defer that cost while the item is in storage.
In other words, if a $10 million painting ends up hanging on a billionaire’s wall in New York after passing through an FTZ, the FTZ alone will not save its owner from the state’s 8.875 percent tax on sales and use. It might be more convenient or indeed more prudent to store a painting bought in Manhattan just a few miles uptown from the auction house than in Delaware or Long Island, because moving art is risky, but an FTZ won’t save money. And in the event that a painting was bought in London and brought to New York, the most the FTZ would do is defer tax until the piece leaves the zone. Since artwork isn’t dutiable, there’s nothing to gain from avoiding customs. “I spent hours researching it,” Kleinman says, “and I concluded that Arcis is a tax-free zone in search of a tax.”
Nevertheless, a tax-free anything sounds good to a certain clientele, even if the actual benefits are limited (or, as Kleinman suggests, virtually nonexistent). “People toss the term around all the time,” Kleinman says. “It’s P.R.”
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After the Maastricht seminar, Sapienza called a former Crozier colleague, Kevin Lay, who joined Arcis as director of operations in 2016. For Lay, a rakish former punk rocker who is more visibly artsy than Sapienza, art preservation is a matter of philosophical import. “Art storage is time travel,” he says. “When you look at a painting you’re standing where the painter stood, and as custodians of culture it’s up to us to return this in the same condition it came in.”
Now complete, the warehouse looks a bit like a steely blue iceberg: monolithic, windowless, and blank. There’s no obvious signage save for a large purple A, for Arcis, on the north face of the building, about 10 feet above a 16-feet-high and 40-feet-wide loading dock that opens onto 146th Street. “If your art doesn’t fit here, it won’t fit anywhere in the city,” says Sapienza. (The largest dock at Uovo’s New York City facility is 13 feet 7 inches high and 11 feet 10 inches wide.) A discreet black car entrance leading into the loading area and visible only from one-way mirror windows in the executives’ offices will accommodate the rich and wary.
Detail of the Arcis storage facility. (Zoe Wetherall for Artsy)
Inside, the newly painted facility smells disconcertingly like an Ikea stockroom and looks, at first glance, like an ordinary industrial warehouse: exposed beams, large metal columns, huge mechanical doors, and stark white walls. The ground floor is divided into viewing rooms with $1,000-a-bulb lighting, per the company, and ceiling rigs for moving heavy sculptures. There’s also a loft-like space where artwork will be inventoried, and, on the higher levels, private storage units in different sizes, along with larger shared spaces.
Lay and Sapienza can — and do — talk for hours about the building’s technical specs. If a storm surge were to occur, a protective envelope of panels made of insulated metal panels between its inner and outer walls would help protect it from the elements. Its power supply is uninterruptible, with every function intentionally redundant in case a power source goes out. The generators have backups located on the roof, which run on natural gas; in theory, they will keep the building going until any emergency is over. The faint whir of the air-conditioning system, which filters the air three to six times an hour, is a constant presence; otherwise, it’s completely quiet. “They’re not taking any chances,” says Lawrence Bovich, a partner at Mechanical Technologies, LLC, one of the firms that installed part of Arcis’ HVAC system. “These guys are many folds more risk-averse than any museum might be.” Arcis would be a great place to hide during a natural disaster, or allergy season.
Cayre applied for and received $13 million in tax breaks on construction by promising the warehouse would bring six full-time and 10 part-time jobs to East Harlem.
Serious protection costs serious money. The price of storing a painting at Arcis can range from just a bit more than at your average self-storage facility to thousands of additional dollars a month depending on the size of the unit, whether there’s custom shelving, and where in the building it’s located, says Lay — but he won’t say by how much.
Cayre applied for and received $13 million in tax breaks on construction by promising the warehouse would bring six full-time and 10 part-time jobs to East Harlem and calculating that its benefit to the city, mainly in other taxes, would total $20 million. But employment at art storage facilities typically goes to aspiring artists who know how to handle, crate, and transport the art; even Arcis’s own filings note that the business will require “employees with specialized skills sets similar to those of a museum registrar.”
That could explain why an administrator at a community organization on the south side of the block called Street Corner Resources, which does job placement for young people as part of its larger mission of reducing gun violence, said on a recent afternoon that he’d heard nothing about Arcis, let alone the possibility of jobs there. Staff at neighboring bodegas, a barbershop, and a local diner were aware of the facility because they’d served chatty construction workers from the job site; none of them knew they would soon share a block with million-dollar paintings. At the senior center next door to Arcis, whose building Cayre’s company acquired, a coordinator said they’d received assurances from the newcomers that they would not be displaced.
Because FTZs are regulated by the federal customs agency, local elected officials don’t participate in the approval process. When asked how Arcis might affect this part of his district, City Councilman Bill Perkins grew aggressive, demanded more information, and directed questions to his predecessor, current State Assemblywoman Inez Dickens, who didn’t respond to requests for comment.
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In April 2017, Arcis was a sponsor of the Art Business Conference, a glitzy annual networking event for the fine art world, at the Time Warner Center in Manhattan. “Kevin and I both keep getting calls from people pushed from locations in Manhattan,” Sapienza told the crowd during a panel about freeports. “People wanted us to commit space. We have a warehouse reservation binder, with clients signing up for the space.”
In the audience were Delaware Freeport founder Fritz Dietl and Crozier president Simon Hornby. Hornby says Crozier also consulted with advisors on the utility of an FTZ, and the benefits came up short. “Art is not a dutiable good. There are no duties on art in the U.S.,” he says. “So what’s the point of a FTZ for art if there’s no duty in the first place and it’s designed to suspend duty?”
Even Dietl says the free port part of the Delaware Freeport saves little money. But branding something as a free zone or free port sends a powerful — if empty — message to potential clients. “It absolutely works because it’s a term that’s so widespread in the art world,” he says.
A freight elevator at Arcis. (Zoe Wetherall for Artsy)
Self-storage king–turned–fine art protector Steven Guttman says his team studied the possibility hard before they opened Uovo and found no significant benefits. “We did not take this lightly,” Guttman says. “We knew about this a long time ago and kept saying this makes no sense. I’ve been in the business for three years, and never heard a tenant request an FTZ.” He adds of Arcis, “They may be onto something just by confusing people.”
Sapienza declined to comment on tax hypotheticals, insisting that it’s the client’s responsibility to obtain appropriate counsel and follow the law. Kevin Lay insists there’s some tax value to the FTZ — though that depends on how you define “art.” “Antique furniture that’s a hundred years old can be imported duty-free, but if you have a lamp from 1921 that you bought in Paris at auction for $1 million, if you were to bring it here, you would avoid those duties,” he says. The idea is that the lamp could hang out in storage until duties weren’t due. Other valuables, like some jewelry, also carry duties. In those scenarios, an FTZ can also be useful to avoid or defer them.
Herrick’s Jason Kleinman, whose job it is to help collectors manage (or as he puts it, “control”) their U.S. tax bill, says Arcis “doesn’t change anything for me or present me with any tax-planning opportunities.” Some of his clients were curious about Arcis, he says, but none had serious plans to relocate their assets. “I’d suggest anyone look at Arcis and apply to it criteria you’d demand of any other facility,” he says.
In the end, the biggest draw might be to collectors looking to keep their art close to home, and eventually sell at a New York auction. If there’s one thing everyone can agree on, it’s that the less you move art, the better. And the tax-averse, art-collecting global elite? They’ll always have Luxembourg.
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