Archive for the ‘Property Taxes’ Category

JPMorgan Chase Abandons $1 billion NYC Subsidy Effort

October 29, 2014

When The New York Times reported that JPMorgan Chase was seeking close to a billion dollars in incentives to build a new trophy headquarters on Manhattan’s Far West Side, the idea seemed too audacious to be true. As it turns out, it was. The New York Times reports that JPMorgan has abandoned its plan to develop two towers in Hudson Yards and will keep its headquarters in two buildings located at 270 Park Avenue and 383 Madison Avenue.

The de Blasio administration has cause to celebrate the apparent success of its decision not to provide huge economic development subsidies to wealthy corporations for uncertain job promises. New York City Deputy Mayor Alicia Glen responded to JPMorgan’s decision by stating: “This is an outcome that validates our approach, and our belief that these deals often come down to factors that have nothing to do with taxpayer subsidies.” This is a truth that Good Jobs First has been documenting for years.

Just prior to the collapse of the deal with JPMorgan Chase, a group of labor unions and government accountability advocates organized under the banner of the Committee for Better Banks and was about to issue a report detailing the history of abuse of taxpayer subsidies by JPMorgan Chase in New York City.

JPMorgan Chase (previously Chase Manhattan) is a poster child in New York City for the waste of lavish subsidies in return for failed job creation promises. In 1988, after threatening to leave New York City for offices in New Jersey, Chase Manhattan was offered an unprecedented package of city tax subsidies, worth over $200 million in property and sales tax breaks as well as infrastructure payments, to relocate 5,000 of its employees to 4 Metrotech Center in Brooklyn. JPMorgan has not paid any property taxes for 4 Metrotech for the past 25 years, a savings of over $170 million. Additionally, it has benefitted from over $37 million in sales and other tax benefits.

Despite the generous subsidy, the firm never achieved its promise to retain 5,000 employees at Metrotech and create 1,450 jobs. In 1999, Chase Manhattan cut 10% of its New York City workforce when it fired 800 employees and relocated thousands of other workers to Florida, Texas, and Massachusetts. Current full-time permanent jobs at 4 Metrotech Center in Brooklyn are approximately 2,500, less than half of what was originally promised. Since the financial crisis of 2008, JPMorgan has cut about 12% of its citywide workforce.  The New York City Industrial Development Agency recaptured about $100,000 in subsidies from the bank, and its agreement with the city for its Brooklyn location is set to expire in 2015.

What has been less clear to the public is the enormous benefit JPMorgan receives for one of the buildings it currently owns located at 270 Park Avenue. Although it was originally intended to provide incentives to industrial firms seeking to expand in New York City, the Industrial and Commercial Incentive Program (ICIP) is widely criticized for providing excessive subsidies to non-industrial firms. JPMorgan Chase is currently at the midpoint of a 12-year property tax exemption through ICIP for its property at 270 Park Avenue, valued at about $100 million.

Clearly, JPMorgan understands well how to shake the tree for government subsidies. In May 2014, the New Jersey Economic Development Authority offered JPMorgan Chase approximately $225 million in tax credits to retain 2,600 employees in Jersey City. Advocates have called this deal “mind-boggling.” Similarly, Good Jobs First has documented in Subsidy Tracker subsidies received by JP Morgan in 13 states. JPMorgan Chase received $25 billion in bailout assistance (later repaid) from the federal government through the Troubled Assets Relief Program (TARP).

It is too early to know whether the collapse of this particular subsidy deal signals a truly new approach to economic development policy in New York City. However, it is certainly worth commending the de Blasio administration for not bowing to JPMorgan’s original demand. And perhaps it can be a lesson to economic development officials nationwide that taxpayer subsidies are not required to maintain a rich business environment.

GASB Finally Prepares to Step Up! And Who is GASB, You Ask?

October 7, 2014

For many years, we at Good Jobs First have criticized GASB—the Governmental Accounting Standards Board, or “GAZ-bee”— for failing to require state and local governments to disclose economic development subsidy spending in a uniform way.

It appears that’s finally about to change, and if it does, it will be hard to overstate the significance of the news.

As the group that has been successfully shaming states and cities to disclose on subsidies all these years, with our 50-state and 50-locality “report card” studies, and as the group that has been collecting all the public data—and also lots of previously unpublished data—in our Subsidy Tracker database, we are intimately familiar with the irregularities and gaps that exist in these vital public records. And we have long shown how to fix them in our model legislation.

First, a quick primer on GASB: it is the public-sector counterpart to the Financial Accounting Standards Board, or FASB, which issues private-sector accounting rules. Each body oversees its respective set of rules, which are constantly under review and improvement, known as Generally Accepted Accounting Principles, or GAAP.

Adhering to GASB, cities, counties, states (and other government bodies such as school boards and sewer districts) must account for their finances in conformity to GAAP if they want to receive ratings from the major credit ratings agencies (Moody’s, Standard & Poors, Fitch), which they must earn if they wish to sell bonds.

The same is true for corporations of all kinds if they wish to satisfy shareholders, sell debt, or even get foundation grants. Indeed, Good Jobs First’s auditors have to certify us as GAAP compliant in our annual financial statement. All of which is to say: the influence of GASB and FASB is enormous and ubiquitous; they are the arbiters of sound United States bookkeeping standards that protect investors, taxpayers, and consumers every day. (Both are part of the non-profit Financial Accounting Foundation.)

Now, GASB is preparing rules that say: to meet GAAP, governments will have to publish an annual accounting of the revenue lost to economic development subsidies. The proposed wording of these rules has not been issued; all we have are board-meeting minutes of a low-profile process spanning more than two years, as GASB gathers information and debates how best to achieve this new standard.

GASB is using the term “tax abatement” as an umbrella term (not just specific to local property tax exemptions) but “a reduction in taxes… in which (a) one or more governmental entities forgo tax revenues that [an individual] taxpayer otherwise would have been obligated to pay and (b) the taxpayer promises to take a specific action that contributes to economic development or otherwise benefits the government(s) or its citizens.” This would appear to also cover state corporate income tax credits and state or local sales tax exemptions, but apparently not tax increment financing.

As part of that process, GASB even commissioned a survey that included citizens groups, county board members and bond analysts. Tellingly, the bond analysts said they are most keen to see both current and future-year costs. For cities like Memphis, where we recently found that Payments in Lieu of Taxes (or PILOTs) cost the city almost one-seventh of its property tax revenue, such losses are apparently becoming bigger concerns for bond investors.

GASB will have a three-month comment period on its proposed rules starting next month (November).

For all the cost-benefit debates featuring inflated ripple-effect claims that beg the more fundamental issue of cause and effect, we have always said: the only thing that can be said for sure is that development subsidies are very expensive, so costly that they undermine funding for public goods that benefit all employers. Therefore, at the very least, taxpayers have the right to know the exact price of every deal and every program (and the outcome of every company-specific deal). GASB now appears to be moving to make some form of standardized disclosure of tax-break costs a reality for reporting periods after December 15, 2015 (and sooner on a voluntary basis).

Some important details remain to be clarified. Based on the board minutes, it appears that GASB will propose giving governments the option of disclosing individual deals or only programs costs in the aggregate (the latter option would be far inferior). We’ll know for sure when the draft standards are published sometime this month. Good Jobs First will publish a detailed analysis of the draft when it comes out.

But for now, the big picture is simply huge: the body that effectively controls how taxpayer dollars are accounted for is finally catching up to the Wild West of record-keeping known as economic development incentives.

Tesla: New Technology, Same Old Subsidy Charade

September 9, 2014

Tesla Motor’s shameful subsidy competition for its battery factory is wrapping up to a close in a state known for big gambling.  The Nevada Governor’s Office of Economic Development (GOED) announced last week it had assembled a breathtaking package for the proposed “Gigafactory” totaling as much as $1.3 billion in tax breaks.  Governor Brian Sandoval has called the legislature into a special session starting this week to approve the deal, which is unprecedented in size in Nevada.  Included are new transferable tax credits based on the electric vehicle manufacturer’s hiring and investment, plus extensions of existing business, sales, and property tax abatement programs that would allow Tesla to operate completely tax-free in the state for ten years.  (The majority of the subsidy package lasts for twenty years.)  If approved in its current iteration, the megadeal will be among the 15 most expensive state subsidy packages in U.S. history.

powered by subsidies

 

Two weeks prior to this announcement and in anticipation of a subsidy shakedown by Tesla, Good Jobs First coordinated with groups in the five states named by Tesla to compete for the battery factory. Along with Arizona PIRG, the California Budget ProjectProgressive Leadership Alliance of Nevada (PLAN), New Mexico’s SouthWest Organizing Project, and Texans for Public Justice, we issued an open letter calling for transparency and cooperation between states forced into a subsidy bidding war for the battery manufacturing jobs.  Media response to this effort was strong, but state lawmakers bound by non-disclosure agreements common to secret site selection negotiations did not comply with our requests.

Aside from the subsidy terms, the only information made public about the pending Nevada deal consists of overly optimistic job-creation talking points.  During last week’s press conference Gov. Sandoval told attendees that 22,000 new jobs would be created by the project and that the total economic impact would be $100 billion over the 20-year subsidy term.  6,500 new direct permanent positions will purportedly enjoy an average wage in excess of $25 per hour, according to the Governor’s office.  A day before the special session is rumored to begin, the economic impact study informing these extravagant economic figures has not been presented for public review and the economic projections are being challenged.  Economist Richard Florida believes 3,000 permanent positions are more likely, and estimates the total job creation impact at 9,750 – less than half of the 22,000 claimed by GOED.

For anyone paying attention to the super-hyped “Gigafactory” site selection competition, the announcement that the company had selected Reno, Nevada came as no surprise.  Although Tesla has maintained over recent months that it was also negotiating terms with Arizona, California, New Mexico and Texas, it broke ground outside Reno early this summer.  The location is proximate to lithium mining operations, boasts freeway and class 1 rail access, and is less than a day’s drive from the Tesla assembly plant in Fremont.  Storey County, Nevada – Tesla’s future home – is famous in the state for approving industrial permits in less than a month.  In hindsight, Tesla’s unusual announcement that it intended to break ground in several sites is starting to appear disingenuous.

What exactly the company has been seeking over the past few months is more of a mystery.  Tesla has announced, at various points during this period, that it wanted laws changed to allow direct sales of its cars to consumers, as is the case in California.  It emphasized that the most important factor for launching the Gigafactory was expedited permitting, so Tuscon, Arizona issued Tesla an unsolicited blank building permit in July.  Initially mum on the topic of economic development subsidies, (and well after reports surfaced of a $800 million subsidy offered by San Antonio, Texas) CEO Elon Musk announced last month during a conference call that he expected the “winning “ state to ante up a $500 million investment for the battery factory.

In the context of all of this messaging on the company’s priorities, the size of the subsidy offered by Nevada is all the more confounding.  During last week’s press event in Carson City, Musk repeatedly stressed that incentives were not among Tesla’s most important considerations in its location decision.  What remains unanswered is why Nevada was compelled to offer more than double the $500 million subsidy originally sought by Tesla.  Until the veil is lifted from secretive corporate incentive negotiations, the public will be left out of the critical conversations that determine the who, where, and why of business subsidy decisions it is forced to fund.  In the meantime, many questions remain as the state’s lawmakers move toward a vote on the largest subsidy package in Nevada history.

Cook County, IL Succeeds at Truth in Taxation!

July 11, 2014

Screen Shot 2014-07-11 at 3.07.30 PM

One year ago today, Cook County Clerk David Orr announced plans to print TIF revenue diversions on county property tax bills. We previously blogged about this effort, eagerly awaiting this TIF transparency enhancement.

Wait no longer! The Cook County Clerk’s office made good on its promise of taxpayer transparency and has issued property tax bills containing information about TIF for each individual property owner. For that we congratulate them on bringing needed sunlight to TIF in Chicago and other municipalities in Cook County.

We hope jurisdictions across the country take notice of Cook County, Illinois. Taxpayers have a right to know how their taxes get spent. With so much property tax revenue in Chicago never ending up in the city’s general revenue fund, printing TIF costs on tax bills enables citizens to make better judgements about the value of TIF projects and how their taxes get spent. We applaud such efforts.

For more Good Jobs First research on TIF revenue diversions in Chicago, see our 2014 report.

For more about how Cook County printed TIF on property tax bills, see the County Clerk’s website and watch the Youtube Video below:

$2.6 Billion Spent on Cleaning Up DC Rivers Must Address Local Job Creation

June 7, 2013

SinkorSwim_WebBoxOver the next decade, DC Water will use a regressive Impervious Area Charge (IAC) to fund $2.6 billion in needed water infrastructure investments. Middle- and low-income residents and neighborhoods will carry the highest burden of the DC Water fee increase that will pay for these improvements.

Despite the fact that the funding burden of these projects falls heavily on the most vulnerable residents, DC Water has not implemented a local hiring agreement, even though putting residents to work on the project may be the best way to reduce the harm of a regressive fee. These are among the findings of Sink or Swim? Who will pay and who will benefit from DC Water’s $2.6 billion Clean Rivers Project?, a study published this week by Good Jobs First.

More coverage of the report can be found over at the Washington Post and the Washington City Paper’s Housing Complex Blog.

Cities rarely spend so much — $2.6 billion — on infrastructure projects. A strong Community Benefits Agreement could make this public infrastructure investment provide a jobs stimulus benefit to District residents without spending an additional dollar. A proposed Community Benefits Agreement (CBA), like the District’s amended First Source Law, would establish a minimum percentage of work hours that must be performed by District residents, increasing to 50% over the next decade.

The report was commissioned by the Washington Interfaith Network (WIN) and The Laborers’ International Union of North America (LIUNA).

Among the major findings:

  • The impact of the IAC – measured as a share of 2013 property taxes – will be four- to five times greater for homeowners in poor neighborhoods than for those in affluent neighborhoods.
  • Small businesses, especially those east of the river, will feel a heavy burden from IAC fees. Office buildings on K Street will feel little impact.
  • There is no indication that District residents will benefit in proportion to their burden. Contractors on major DC Water projects currently employ more North Carolinians than residents from Wards 7 & 8 combined. Over half the contractor workforce lives outside Washington, D.C. and its immediate surroundings.
  • Continued failure to hire local residents will result in a massive transfer of wealth out of the District. We estimate that over the next thirty years, D.C. ratepayers will be billed $4.2 billion in IACs, including $1.1 billion from Wards 7 and 8 alone.

District residents will pay for these infrastructure investments through a regressive fee for the next thirty years. Low- and middle-income residents will be hit the hardest. These are neighborhoods that have historically been excluded from opportunities in construction careers; to not leverage $2.6 billion in public spending for District construction careers would represent a tremendous missed opportunity.

New Jersey’s Revel Casino May Fold

December 7, 2012

Revel CasinoNew Jersey’s embattled Revel Casino received more bad news this week.   State Senate President Stephen Sweeney has called on the Division of Gaming Enforcement to investigate the Casino’s “precarious financial position.”  Despite the fact that it has been operating at a loss in 2012, Revel management has claimed that its inability to make good on its construction debts and city property tax bill is a result of Hurricane Sandy.  Predictions that the casino will fold are growing louder.

The controversial project was awarded a $261 million tax subsidy by the state in 2011 to assist its investors in leveraging additional financing to complete its stalled construction.  While this recent news bodes poorly for investors and the state’s Economic Development Authority, it may be a relief for existing casinos in the region that are forced to compete with massively subsidized new development.

Striking Chicago Teachers Highlight TIF

September 14, 2012

This past week, the Chicago Teachers Union (CTU) strike has been making national headlines. But what major media outlets have overlooked is the role of tax increment financing (TIF) in worsening the fiscal situation for the Chicago Public School (CPS) system. The strikers, however, are making an issue of it. As Good Jobs First has documented time and again, TIF and other subsidies frequently divert property taxes away from school districts.

In Chicago, as well as Illinois generally which has about 1,000 active TIF Districts diverting over $1 billion each year, the problem is particularly severe: 10 percent of Chicago property tax revenues are diverted into TIF coffers. The CTU estimates that at the end of 2011, Chicago had $831 million in unallocated TIF funds sitting in bank accounts. Nearly half that money would have otherwise gone to schools. That number is also far bigger than the $700 million budget shortfall CPS had for the 2011-2012 school year which remains relatively unchanged for 2013. Instead, TIF monies are frequently utilized as subsidies for corporations.

Yesterday, thousands of teachers picketed a Hyatt hotel which had received $5.2 million in TIF subsidies chanting “give it back.” Speakers gave impassioned arguments against the use of TIF. The choice was not a coincidence: Penny Pritzker, a billionaire whose family owns the Hyatt chain, is also an appointee to the Chicago Board of Education.

Protestors contend that the TIF money used on the hotel would have been better spent on improving the education system. As one protestor commented, “I think it’s really important to bring awareness to the fact that, according to what I found out, $5.2 million has been given to developers [to build the Hyatt hotel]… That’s money that could have gone to classrooms, and computers, so many other things.”

Ultimately, all Illinoisans should also care about TIF in Chicago and elsewhere. The burden of school funding lost because of TIF property tax diversions is likely being made up for by all Illinois taxpayers.

Pritzker’s role on the board of education and Hyatt’s TIF funding are not the only reasons that labor is unhappy with Hyatt. A Unite Here campaign called Hyatt Hurts has been calling attention to what it alleges are unfair labor practices at the company and calling for a boycott.

We hope investigative journalists everywhere take notice: TIF has caused serious budgetary harm in Chicago and deserves more serious scrutiny in every school district.

Abatements and TIF: Worse Than Ever for Schools

June 22, 2012

A study just released by the Census Bureau helps explain why property tax abatements and TIF are growing issues for people who care about public education.

For the first time in 16 years, it reports, local funding (65 percent of which comes from property taxes) provided the greatest share of school funding. That reverses a long-term trend in which state funding has become a larger share of the pie (with federal support accounting for only a small share).

But with states balancing their budgets in part by slashing aid to school boards and other local government bodies, local revenue matters more than ever.

That’s why costly long-term property tax abatements, routinely granted to large companies in the name of economic development, hurt schools more than ever. The same can be said for tax increment financing (TIF) districts, which can divert huge sums of property taxes (and sometimes others) for decades.

And that is bad news for real economic development that benefits all employers currently in a community. Schools also matter a lot for expansion and attraction. Because when an employer considers relocating to an area (and moving key personnel), the first thing those key employees want to know is: how good are the schools?  And the HR director wants to know: we will be able to hire well-educated new-hires? And they will also ask: has school quality been supporting strong home values?

Now more than ever, protecting the local property tax base from costly and unfair abatements and TIF matters for long-term economic development and a sound business climate.

See also Stateline’s coverage here.

Taxing the Tax-Exempt

March 5, 2012

Tax Day is approaching, and we will soon hear a rising chorus of criticism of large corporations such as Verizon and General Electric that don’t pay their fair share.

That’s as it should be, but there is another group of big entities that also dodge taxes but receive a lot less scrutiny: major non-profit institutions such as universities and hospitals.

Strictly speaking, giant non-profits are not dodging taxes, since they are largely tax-exempt. But that’s precisely the problem. These rich and powerful institutions increasingly behave like for-profit corporations yet are given privileged status under the tax laws. At a time when governments at all levels are desperate for revenue, that privilege is no longer a given.

The latest battleground over non-profit tax exemption is Providence, Rhode Island, where Mayor Angel Taveras has been trying to get local institutions such as Brown University to do more to help the struggling city. The Ivy League college has been making voluntary payments to the city, but Mayor Taveras wants Brown, which has an endowment of about $2.5 billion, to play a greater role in averting the possibility that Providence could end up in bankruptcy. Brown’s facilities in Providence are reported to be worth more than $1 billion, which would mean $38 million in revenue for the city if they were taxed at the commercial rate. Brown is paying about one-tenth of that amount. The mayor’s effort has won support from students at Brown, who have recently held rallies calling on the university to pay its fair share (photo).

It probably comes as a surprise to many that Brown is paying anything at all to the city. Providence’s arrangement with Brown is part of a limited but growing trend among cash-strapped local governments to persuade big non-profits to make voluntary payments in lieu of property taxes, or PILOTs. These are cousins of the PILOT agreements that for-profit companies often negotiate with localities when they are receiving large property tax breaks but want to be sure (often for public relations purposes) they are contributing something to vital local services such as schools and fire departments.

A 2010 report by the Lincoln Institute of Land Policy found that localities in at least 18 states have negotiated PILOT deals with non-profits. This often occurs quietly, but Providence is not the only city that has gotten into a high-profile tug-of-war with large tax-exempt institutions. Perhaps the most contentious case is Boston, home to numerous universities and hospitals with deep pockets.

Boston, where more than 50 percent of the land is tax-exempt, has made limited use of voluntary PILOTs for several decades. Although the city’s program was said to be the largest in the country, it was generating modest amounts of revenue.  In FY2008 the total was about $30 million, but half of that came from the Massachusetts Port Authority, which runs Logan Airport and the Port of Boston; the rest came from about two dozen healthcare and educational institutions.

In 2009 Boston Mayor Thomas Menino decided to shake things up by forming a PILOT Task Force. The group issued a report in December 2010 recommending that the city seek to enlist all non-profits owning property worth at least $15 million into the PILOT system with payments equal to 25 percent of what their tax bills would be if they had no exemption. The city eagerly agreed, and last year it began sending letters to several dozen major non-profits asking them to pay up.

Boston inspired other Massachusetts cities such as Worcester, home of Clark University, to join the PILOT bandwagon. (Cambridge did not need inspiration; it has been collecting voluntary payments from Harvard, whose assets now exceed $40 billion, since 1929).

The Boston approach has also generated a lot of criticism from those who argue that sending out letters pressuring non-profits for specific sums is not exactly voluntary and may be tantamount to putting those institutions back on the tax rolls, albeit at a discounted rate.

As much as non-profits may grumble about PILOTs, these payments are quite benign compared to the fate that has befallen some hospitals: the complete loss of their tax-exempt status. For years, healthcare activists have charged that many non-profit hospitals were not functioning as true charitable institutions and should thus not enjoy the privilege of tax exemption.

In 2004 officials in Illinois sent shock waves across the hospital industry by revoking the tax-exempt status of Provena Covenant Medical Center in Urbana. Six years later the state supreme court upheld that determination. In the intervening period, some other Illinois hospitals lost their exempt status and the question of whether non-profit hospitals were doing enough to deserve tax exemption became an issue at the federal level, thanks to relentless efforts by Iowa Sen. Chuck Grassley.

The issue flared up again recently in the wake of a front-page New York Times article reporting that major New York non-profit hospitals have been providing little in the way of charity care, even though on top of their tax exemption they are allowed to tack a 9 percent surcharge on their bills to pay for such care.

Whether as the result of PILOTs or loss of exempt status, increasing numbers of large non-profits will probably find themselves paying more of the cost of government. This is good news for revenue-starved public officials, but how long will it be before these non-profits decide to follow the lead of their counterparts in the for-profit world and begin seeking subsidies to offset those obligations?

Cross-posted from the Dirt Diggers Digest

NYC Unleashes Decades of Subsidy Data

February 1, 2012

After years of nudging by Good Jobs New York and others, subsidy transparency in the Big Apple took a giant leap forward yesterday.

Thanks to the New York City Council and a bill sponsored by Brooklyn’s Diana Reyna, the New York City Industrial Development Agency released data on 623 discretionary subsidy deals. The new report – which includes data as far back at the 1980’s – is trend-setting for being in excel (not just in PDF format) and for including all currently subsidized firms. Previous reports were only required to include project for a seven-year window. Previously, GJNY transcribed this data from PDF’s to create its “Database of Deals” and we will merge the two databases giving New Yorkers of all stripes: advocates, community organizers, elected and public officials, journalists and academics a unique tool that shines a light on how discretionary subsides are allocated.

As we explained in October of 2011 when the bill was passed, New York City is on an up- swing with regards to subsidy transparency. The report, formally known as the Annual Investment Projects Report, includes 126 fields of data including:

  • Current employment, promised employment and employment at time of deal
  • The amounts and types of city subsidies used to date and remaining
  •   Amount of subsidies recaptured
  • Percentage of employees that are city resident
  • Percentage of employees offered health benefits

Combining new subsidy deals, extensive company-specific data in a downloadable, excel format makes what we believe, to be the country’s best local subsidy disclosure report. Though, as reported last month, New York State still has plenty of room for improvement.

Good Jobs New York will be reviewing the data in the weeks ahead and will report back our findings. In the meantime, we encourage you to do the same!


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