Tuesday, June 25, 2013

Shades of 2007? Another 421-a carve-out to developers generates outrage

Thanks to some investigation by the Metropolitan Council on Housing, which prompted coverage in the New York Daily News and by New York Times columnist Michael Powell, we now know more about a January giveaway to developers worth some $50 million to the largest project.

Note that this 421-a "carve-out" is worth far less than the "carve-out" in 2007 legislators gave developer Forest City Ratner regarding the Atlantic Yards project, wroth $150-$200 million.

The Daily News article, NY lawmakers mandate massive tax breaks for millionaires’ Manhattan apartments, was published 6/18/13:
The millionaires buying apartments in a soaring tower rising on 57th St. will get more than sweeping views of Central Park: They’ll also be eligible for massive city tax breaks.
So will the homeowners and builders of four other luxury Manhattan condo and rental developments.
Language quietly inserted into a bill that sailed through the state Legislature singled out the five developments to make them eligible for tax breaks — which could cost the city tens of millions of dollars in property taxes, the Daily News has learned.
The sponsor of the bill, Sen. Martin Golden (R-Brooklyn), defended the tax breaks, saying the projects would create jobs and boost the economy.
“These projects were ready to go,” he said.
But Golden could not say who selected the five projects for special treatment. “I’m not sure where they came from,” he said.
And the Assembly sponsor, Keith Wright (D-Manhattan), said he knew little about the tax breaks.
“These five properties — it was important that they benefit from the piece of legislation probably, and I don’t know why, because some of the folks in the Senate wanted them to be included.”
The developers of four of the projects, their relatives and affiliated companies gave $1.5 million to various state campaign committees during 2008-12 — including $440,962 last year, records show.
So it all seems to hinge on Golden, who's "not sure where they came from. He's known for his ties to Forest City, which is not one of the five developers in this case. The leading one is Extell, Forest City's belated rival for the Vanderbilt Yard bid in 2005, and in that case the relative white knight.

Taking on Extell

Today, Gotham columnist Powell writes the more pungent Luxe Builders Chase Dreams of Property Tax Exemptions:
The latest evidence that our developers scour sidewalks for pennies might be found at the 90-story ziggurat known as One57, with his-and-her bathrooms, super deep freeze, titanium-reinforced views that reach to the Arctic, or at least Putnam County.
...Seven years ago, the New York State Legislature ruled out tax breaks for Midtown Manhattan developments unless they included affordable units; reformers noted reasonably that there was no shortage of construction cranes and fortunes to be had in that neighborhood. In all, 150,000 units in New York City receive the 421-a property tax abatements, for $1.1 billion in lost revenue for the city.
...Mr. Barnett and four princeling developers joined the Real Estate Board of New York last year, spreading a thick green carpet of cash for politicians, at least $1.5 million. (To peruse their donation lists is to glory in nonpartisan giving: the governor, the attorney general, the state party organizations that have proved so corrupt of late, and any politician, Republican or Democrat, who possessed the simple wit to create a “Friends of ... ” committee — all are awash in the developers’ cash.)
...In January, State Senator Martin J. Golden, Republican of Brooklyn, and Assemblyman Keith Wright, Democrat of Manhattan, attached a gilded little 421-a “carve-out” to the underside of a much-needed housing bill for New York City. Everyone voted for it. Just like that, Mr. Barnett’s development earned a property tax exemption worth at least $50 million, maybe much more, over the next 10 years.
Powell adds to the story by querying Brooklyn Assemblyman Joe Lentol, who unsuccessfully tried to retroactively extend tax breaks for converted lofts.

“Was this proposed tax break for these properties a good thing or not? I can’t say,” Lentol responded. “I don’t have enough knowledge to say it’s a good thing or bad thing.”

That's our legislature, folks.

The Met Council report

The Met Council press release, REPORT: 421-a A PRODUCT OF DEVELOPER CASH
According to a report released today by the Met Council on Housing, the 421-a tax giveaway was the product of Albany’s dysfunctional culture, which allows virtually unlimited cash from wealthy real estate developers.
Key Findings:
Combined, developers of four of the five luxury buildings gave at least $440,962 to PACs, state offices, and political par­ties in 2012 alone. (After an exhaustive search, we were not able to obtain data for the developer of the fifth building.)
Governor Cuomo, who had to sign the 421-a legislation, re­ceived $150,000 from the four developers in 2012. He was the biggest recipient of cash from these developers last year.
Contributions from Extell Development Company and its princi­pals, owners of One57, accounted for $229,262 of the 2012 total. Extell has given a whopping $771,436 to state committees and campaigns since 2005, spent $74,500 lobbying New York City on One57 alone and spent tens of thousands of dollars more lobbying the city and state to get new permits for its crane, among other issues.
Contributions to party committees, which benefit the most powerful legislators who control the movement of legislation, were also sizable: Republican Party committees received $53,000 and Democratic Party committees received $34,000 from the four developers in 2012.
Overall, these four companies gave more than $1.5 million ($1,531,531) to state elected officials, political parties and real-estate PACs between 2008 and 2012.
From the report:
That a handful of real-estate developers were able to win such a huge giveaway is a reflection of their outsized influence and just how broken the current campaign finance system is. Even legislators who have a long history of favoring the expansion of affordable housing voted for the bill, since it contained items they favored. But the 421-a tax breaks went beyond the typical horse-trading in the legislature.
..These tax breaks represent millions of dollars that the city has lost. The money could have been used for real housing needs, like rent subsidies for the more than 50,000 people sleeping in homeless shelters or for the repair of dilapidated apartment buildings. The 421-a program cost the City $755 million in 2010 in lost real property tax revenue, according to the Pratt Center for Community Development.5

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