Speaker Corey Johnson and Finance Committee Chair Daniel Dromm Welcome IBO’s “Worth The Cost?” Analysis and Call for the Phase-Out of the Commercial Revitalization and the Commercial Expansion Programs

This call follows Council oversight and recommendations on the programs and the Independent Budget Office’s newly released report examining the necessity of the programs granting tax breaks to commercial properties

City Hall, NY – New York City Council Speaker Corey Johnson and the Council’s Finance Committee Chair Daniel Dromm called for the phase-out of the City’s Commercial Revitalization Program (CRP) and Commercial Expansions Program (CEP). This call follows the release by the Independent Budget Office (IBO) of a new report titled “Worth the Cost? An Examination of the Commercial Revitalization & Commercial Expansion Programs.” The study calls into question the effectiveness and continuing relevance of these tax expenditure programs.

“Worth the Cost?” is the first result of Local Law 18 of 2017. This law created a process whereby the IBO does independent professional reviews of the City’s economic development tax breaks in cooperation with the City Council.  These reviews aid the Council in its oversight of these tax breaks.  A December 2017 Finance Committee hearing heard testimony on a draft version of this study.

As a result of the IBO’s findings, Speaker Johnson and Finance Committee Chair Dromm propose phasing out the Commercial Revitalization Program and Commercial Expansion Program since they are not achieving their purposes and not a good use of taxpayer money. These programs were intended to increase employment rates in Lower Manhattan ‒ and in areas outside of core Manhattan ‒ decrease vacancy rates, and encourage property renovations. However, IBO could not find any effect on vacancy or unemployment rates attributable to the programs. According to ‘Worth the Cost,’ the two programs cost the city $27 million in tax expenditures in 2017.

“Businesses lay the foundation of our City, and the Council will always support commercial tenants who provide jobs and revenue to New Yorkers. However, it is important that tax incentives are relevant to today’s economy and meet their goals.  If not we should modify or sunset those tax breaks.  I thank the Independent Budget Office for their report and efforts, and I thank Finance Committee Chair Daniel Dromm for his partnership,” said Speaker Corey Johnson. 

“This new IBO report presents a strong case for why the city should begin to phase out the Commercial Revitalization and Commercial Expansion Programs. ‘Worth the Cost?’ demonstrates that the two programs are not actually aiding NYC businesses or boosting employment.  As custodians of our constituents’ tax dollars, we have a responsibility to ensure that economic development tax breaks like these make sense.  When they are not achieving their intended purposes, we need to act accordingly.  I thank the IBO for issuing this informative report and will continue to work with Speaker Johnson to strengthen our businesses in ways that are effective and fiscally sound,” said Council Member Daniel Dromm, Chair of the Committee on Finance.

Findings from IBO’s report include:

  • Both before and after the Commercial Revitalization Program started, commercial vacancy rates and employment in Lower Manhattan followed similar trends as the rest of the city. IBO’s analysis suggests that the program did not decrease vacancy rates and had little, if any, effect on employment.
  • Over 60 percent of participants in the Commercial Revitalization Program spent more on upgrades to their office or commercial space than they received in tax abatements. This suggests that many of these participants would have spent at least their required $5 per square foot absent the program. This is less pronounced among Commercial Expansion Program participants, about 40 percent of whom spent close to their required $2.50 per square foot on upgrades for firms with fewer than 125 employees.

Locations where leases were subsidized with the tax breaks since 2010 include:

Commercial Revitalization Program (CRP):

1 New York Plaza New York
125 Broad Street New York
195 Broadway New York
One Water Street New York
1 Liberty Plaza New York
222 Broadway New York
28 Liberty Street New York
100 William Street New York
120 Wall Street New York
165 Broadway New York
One New York Plaza New York
30 Broad Street New York
One Liberty Plaza New York
233 Broadway New York
120 Broadway New York

 Commercial Expansions Program (CEP):

30-30 47th Avenue Long Island City
131-11 Atlantic Avenue Richmond Hill
125 Lake Avenue Staten Island
60-01 31st Avenue Woodside
5700 Avenue D New York
32-00 Skillman Avenue Long Island City
63-15 Traffic Avenue Ridgewood
300 Liberty Avenue Brooklyn
45-13 33rd Street Long Island City
3611 14th Avenue Brooklyn
110 Beard Street Brooklyn
170-01 Douglas Avenue Jamaica

About the Programs:

The Commercial Revitalization Program (CRP) provides a property tax abatement and a commercial rent tax reduction to certain commercial properties south of Canal Street in Manhattan. The Commercial Expansions Program (CEP) provides the same property tax abatement to eligible properties north of 96th Street in Manhattan. The abatements are given for new, renewed or expanded commercial leases.  Leases must be for at least 3 years for small firms and at least 10 years for larger firms (over 125 employees). There are minimum required investments in building improvements to go with the leases.

 

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