Tuesday, April 16, 2013

"Night of the living tax break": Forest City Ratner among big beneficiaries of canceled but still operating ICIP

The watchdog site New York World yesterday published Night of the living tax break:
Five years after state lawmakers killed a corporate property tax exemption that had outlived its original purpose, it’s still stalking New York City’s finances, to the tune of more than $650 million this year.
...Other windfalls went to the headquarters of News Corporation — the owner of the New York Post — whose tax bill is cut by some $2.2 million this year, and Manhattan’s East River Plaza mall, a project co-owned by real estate giant Forest City Ratner, which got two breaks totaling $8.1 million.
...These are among the more than 7,000 properties that continue to receive abatements on property taxes under the city’s Industrial and Commercial Incentive Program, or ICIP, first launched in the 1980s to encourage businesses to locate or remain in New York City.
That program was open to a wide array of business that built or made improvements to their properties. It expired in 2008, amid widespread criticism that it was too generous. But any company that had successfully applied for the break before then would continue to get it — for as long as 25 years.
In fact, the cost of the tax break to the city has swelled since it supposedly died, rising from $512 million in 2008 to a peak of $682 million in 2012. That’s because the properties, as a condition of the tax break, have undergone improvements that increase their value over time.
Forest City's totals

Forest City Ratner has three properties on the top 20 list: Forest City Myrtle Associates at 115 Myrtle Avenue (MetroTech), with a $5.9 million tax abatement; Tiago Holdings (a co-venture with Blumenfeld Development Group), with $8.1 million granted; and FC Queens Place, with $2.6 million from the Queens Place mall, of which Forest City sold 49% in 2011.

But that's not all. According to the database provided The New York World by Good Jobs New York, there are numerous Forest City properties (mostly retail properties, with that 49% share sold in 2011) on the list.

Note that the first column below is the tax abatement, the second the taxes paid, and that the abatement does not precisely match the number in the chart above. That's because the chart shows the 2013 abatements, while the downloaded info covers 2012.

What it means

As the New York World's Nathaniel Herz reported, the program "effectively reallocates the commercial property tax burden to other property tax payers,” said James Parrott of the Fiscal Policy Institute.

Former city official Alair Townsend described the tax incentive as a tactic launched by the struggling city to keep businesses in the late 1970s and early 1980s from moving to New Jersey or other suburbs:
The idea was to encourage job-producing construction — either new buildings, or renovations — by not immediately taxing owners on improvements to their property. Projects qualified on an “as-of-right basis,” not based on need — meaning that as long as they met a certain set of criteria based on location, use, and size of investment, they’d get the subsidy.
Following scathing audits of the program, the Bloomberg administration took a hard look at what all the tax breaks were paying for. A 2007 study by the city’s Economic Development Corporation revealed that more than 75 percent of participating projects — which cost some $2.8 billion in subsidies — would have gone ahead even without the ICIP exemption.
As with the 421-a tax relief program for market-rate construction, the program was not tinkered with until the city had clearly recovered. The NY World reports:
“This is an example of an as-of-right program run amok,” said Bettina Damiani, project director for the advocacy group Good Jobs New York, which supplied the New York World with ICIP data acquired from the Department of Finance through a public records request. (Download the data in CSV format.) “When you start subsidizing midtown retail and midtown office buildings, things have clearly gone awry.”
The exemptions also extend to several large Queens malls, where visitors and workers were surprised to hear about the value of the tax breaks being extended to corporate owners.
...After ICIP’s demise in 2008, the city replaced it with the Industrial and Commercial Abatement Program, which is more discerning in handing out property tax breaks — just over $5 million this year.
But Parrott said that lawmakers should be watching the new program closely, given the lingering cost of ICIP — which he noted was more than enough to cover the city Parks Department’s annual budget.
The East River Plaza announcement

A 7/26/2010 Forest City Ratner press release headlined East River Plaza grand opening:
New York City Mayor Michael Bloomberg and Bruce C. Ratner, chairman and CEO, Forest City Ratner Companies, were joined by public officials and business partners on Tuesday, July 20, for the official grand opening of East River Plaza.
Bringing Manhattan its first Costco and Target, East River Plaza represents a groundbreaking investment in the East Harlem Community and will contribute to the neighborhood’s continued revitalization. To date, the project has created over 1,100 construction jobs and over 1,000 permanent retail jobs. The development team and retailers have worked closely with New York City Council member Melissa Mark-Viverito, Manhattan Borough President Scott Stringer, the Upper Manhattan Empowerment Zone, the New York City Department of Small Business Services/Workforce 1 and the STRIVE non-profit organization to implement a local hiring program to maximize employment opportunities for local residents. Approximately 70 percent of the new jobs created have gone to residents of Upper Manhattan.
“The opening of East River Plaza culminates the historic transformation of a long vacant and polluted site into a vibrant retail center that is bringing a thousand permanent jobs, tens of millions of dollars in private investment and new shopping opportunities to East Harlem,” said Mayor Bloomberg. “With East River Plaza complete and construction of the nearby East Harlem Media, Entertainment and Cultural Center underway, East Harlem is undergoing a renaissance that will provide new housing, office and retail space and job opportunities for the local community.”
Bruce C. Ratner, chairman and CEO of Forest City Ratner Companies said, “East River Plaza represents the best of public-private partnerships in action. Given the tough economic times we are facing, East River Plaza offers a much needed boost to the economy of New York City, bringing new jobs and generating tax revenues for the City and State. The center also provides new shopping opportunities for East Harlem residents.”
East River Plaza, developed through a joint venture between subsidiaries of Blumenfeld Development Group and Forest City Ratner Companies, is a five-level, 527,000-square-foot retail center in East Harlem. Located on the FDR Drive between 116th Street and 119th Street with direct access to the 1,248-car attached parking facility. In addition to Costco and Target, East River Plaza tenants include national retailers Best Buy, Marshalls, Bob’s Discount Furniture, PetSmart, Kidstown, Old Navy, Verizon and GameStop.
Blumenfeld Development Group and Forest City Ratner Companies, working closely with the leadership of public agencies including the Upper Manhattan Empowerment Zone, Empire State Development Corporation and the New York City Economic Development Corporation, were able to turn this former Brownfield site, once occupied by the Washburn Wire Factory, into a great new shopping destination for all New Yorkers. East River Plaza again shows what is possible when all parties are committed to a successful outcome.

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