"Emergency Cancellation" of Tax Abatements?

David Goldsmith

All Powerful Moderator
Staff member
As a result of the current crisis New York City has a multi-billion dollar budget shortfall. This could result in 22,000 municipal employees being played off, large Real Estate Tax increases, income tax increases, combinations of all the above - and more. But what if the City decided that due to the emergency it would cancel all existing Real Estate Tax Abatements to raise money? What are the owners going to do - rip down the buildings out of spite?

If you raise income taxes people could leave for greener pastures so you might not collect them anyway. So there is probably going to be some large increase in Real Estate Taxes any way you slice it. An emergency cancellation of abatements will likely concentrate the increases on those most likely to be able to afford it. Why do I say that? These owners knew they had these increases coming eventually anyway. All this would do is accelerate the process, and at a time where the city is in dire need of the revenue.
 

David Goldsmith

All Powerful Moderator
Staff member
Should The Rangers' Playoff Game In Toronto Have Triggered The End of MSG's $555 Million Tax Break?
When the Carolina Hurricanes bounced the New York Rangers from the Stanley Cup bubble with a 4-1 win on August 4th, it seemed like a mere footnote in a sports season turned upside down by the coronavirus pandemic. The Rangers players packed up and went home from Toronto, one of the two Canadian cities where the Stanley Cup playoffs are being held under quarantine rules, and everyone hoped that they could return in the fall to their usual home at Madison Square Garden.
Except that, according to a provision of New York state tax law, that final game in Toronto should have had lasting consequences for the team and the city treasury. That’s because it was designated by the NHL as a “home” game for the Rangers, not only allowing players to wear their home blue jerseys, but also giving the team the in-game advantage of making line changes after seeing what moves their opponent has made.

And the state tax law passed in 1982 that granted the Rangers’ owners their $555-million-and-counting tax exemption for Madison Square Garden explicitly states that any home games played outside the Garden cause the tax break to immediately expire:
If one or both of said teams shall cease to play their home games in said property at any time, the tax exemption provided herein shall cease immediately and such property shall immediately be restored to the tax rolls and thereupon become subject to taxation and shall be taxed pro rata for the unexpired portion of the taxable year.
Rangers/Knicks/MSG owner and blues-rock cosplayer James Dolan has been well aware of the home-game provision in Section 429 of the tax law: In 2014 and again in 2018, when Rangers players took the ice in special-occasion outdoor games at Yankee Stadium and Citi Field, team execs made sure to have the NHL designate them as road games, for tax purposes.
So what changed this time, other than a global pandemic?
While Governor Andrew Cuomo has issued a slew of executive orders waiving various provisions of the law for the duration of the pandemic, from suspending vehicle registration renewals to allowing unlicensed individuals to conduct COVID-19 swabs, he doesn’t appear to have touched Section 429. Some sports and tax experts have suggested that the playoff game could be forgiven thanks to the national emergency—Stanford University sports economist Roger Noll noted that there’s some case law that laws can be overturned if they’re impossible to comply with. But neither the state nor city seems to have proactively made that determination in this case.
The explanation from New York state is that “cease to play their home games in said property at any time” doesn’t mean what you think it means. State tax department spokesperson James Gazzale tells Gothamist, “The law is clear that the exemption continues until either team ceases to play home games at MSG—meaning a permanent stoppage, not a temporary relocation due to a global pandemic.” Asked why the Rangers then chose to play Winter Classic games as the road team, Gazzale declined to comment further.
Madison Square Garden officials, meanwhile, had a different explanation for why the Toronto trip was okay: Ed Koch said it would be. Garden officials confirmed a brief note in this New York Post article from July that an “original agreement” between the city and MSG excluded relocations due to Acts of God from triggering the tax renewal clause, but did not provide further details.
That’s not what the language of the tax law says, though, and it’s unclear whether a contractual agreement between the city and the Garden can trump state law. Ultimately, enforcement of the MSG tax-restoration provision is up to the city Finance Department, which had not provided a comment by press time. (In 2014, the Times reported that city Finance “could not definitively say” whether Madison Square Garden would have lost its exemption if the Rangers had played a single home game at Yankee Stadium.) Which means Mayor Bill de Blasio could theoretically move to strip MSG of its tax break—something he’s called for doing in the past.
So far, no local elected officials seem to want to blow the whistle on MSG solely on the basis of the home-game clause. City Councilmember Costa Constantinides, who along with eight other councilmembers last month penned an open letter to the mayor and governor calling for New York’s sports teams to pay their full property taxes, declined to comment on the home-game clause. Assemblymember Sandy Galef, chair of the assembly committee on taxation, said her committee would not be investigating, directing all questions to New York City.
State Senator Brian Kavanagh, who has introduced bills to repeal MSG’s tax break, told Gothamist that while “I'm not really interested in penalizing MSG on a technicality, especially one in which public health is the primary concern,” he maintains that “the City is in crisis and it's time for James Dolan to step up” and start paying taxes. (Kavanagh’s bill to force Dolan to do so is currently resting comfortably in committee, where his previous bills have ended their days.)
For now, the Garden’s get-out-of-taxes-free card lives on, nearly three decades after its drafters initially meant it to expire, and is set to cost the city treasury another $43 million in 2021, according to Independent Budget Office projections. And while it might seem petty to try to make a multi-million-dollar decision based on a technicality, it’s worth remembering that’s how the MSG tax break got enshrined—permanently—in state law in the first place.
 

David Goldsmith

All Powerful Moderator
Staff member
19 years after 9/11, does Lower Manhattan still need subsidies?
Several tax breaks were renewed in the state budget

Substantial tax incentives put in place to help Lower Manhattan recover from the 9/11 terrorist attacks are still active 19 years later. (Getty Images)
In the nearly 20 years since the tragic Sept. 11 attacks, much has changed in Lower Manhattan. One constant, though, is a series of multimillion-dollar tax incentives designed to aid its recovery by attracting office tenants and encouraging the rehabilitation of older buildings in the area.
As part of this year’s state budget, Gov. Andrew Cuomo and the legislature renewed three Lower Manhattan tax breaks. One exempts tenants who are paying an annual rent of more than $200,000 from commercial rent tax for five years.

Another incentive, the Lower Manhattan Energy Program, allows commercial building owners and tenants to reduce energy costs by up to 45 percent for 12 years. That program expires in June 2023 and costs $10 million annually, according to the Department of Finance.

The third tax break extended this year exempts local businesses from sales taxes. It includes one zone for the World Trade Center and Battery Park City and one for non-WTC blocks.
The state also renewed the Relocation Employment Assistance Program (REAP), which provides a $3,000 tax credit per employee per year for tenants that move from outside the city to Lower Manhattan, Upper Manhattan or the outer boroughs. It is one of the tax breaks that Amazon would have received had it opened a campus in Long Island City.

The commercial rent and REAP programs, respectively, expire in June 2023 and June 2025 and cost the city $8 million and $33 million, according to the Department of Finance’s 2020 report on tax expenditures.
The coronavirus pandemic adds urgency to these programs, their supporters say, as office vacancies in the city rise and the anchor tenant of One World Trade Center, Condé Nast reportedly considers leaving the tower for Midtown.

“Big picture, we’ve made incredible progress, and this [pandemic] is clearly going to stall some of that,” said Jessica Lappin, president of the Alliance for Downtown New York, a business improvement district that has advocated for the tax breaks.

She noted that the World Trade Center redevelopment is incomplete: construction on 5 and 2 World Trade Center remains stalled. Silverstein Properties hasn’t found an anchor tenant for the latter tower since 21st Century Fox and News Corp. abandoned its agreement to anchor the tower.

That could be seen as evidence that the tax incentives are not working, as companies’ location decisions are based on other factors. Critics of subsidies often argue that they spend taxpayer money on things that would have happened anyway, and pit localities against each other in a race that ultimately costs them all money.

But champions of the tax breaks see them as important.
“Having a vibrant and central business district was, is and will be critical to our recovery,” Lappin said. “If anything, this has been an example of how targeted incentives work.”
In fact, in April, the BID announced that it would allocate $250,000 from its annual budget to provide $10,000 grants to help essential business cover rent payments, the New York Daily News reported.

Nicole Gelinas, a senior fellow at the Manhattan Institute, a free-market think tank, said if not for the pandemic, the city should reconsider some of the tax breaks in Lower Manhattan. But given the current crisis, she said the city should avoid any abrupt increases in taxes that could drive businesses to other states.

“I think [the incentives] work in that they served their purpose in getting people to take a chance Downtown,” she said. “It did take a long time for Downtown to come back.”
 
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