Death of a tax break? Not so fast.

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This week, as New Yorkers “celebrated” tax day, Good Jobs New York and The New York World thought it would be appropriate to point out the lingering effects of a property tax break gone wrong. The result is the expose, Night of the Living Tax Break.

The Industrial and Commercial Incentive Program (ICIP), an as-of-right property tax break, was discontinued in 2008 yet property owners who previously qualified continue to rack up big benefits–over $650 million in exemptions for over 7,000 properties last year. Based on data obtained by Good Jobs New York, The New York World investigated the program’s 20 largest recipients, including the Rego Center Mall in Queens, which received over $9 million in benefits, and the Park Avenue headquarters of JP Morgan Chase, which received $8.2 million, reported in the article as 35% of its total property tax bill. (Previously, Good Jobs New York has identified JP Morgan as the largest beneficiary of discretionary benefits, which we also have detailed in our website.). Other malls and office towers are included in The New York World’s top 20 list of ICIP “Bargain Shoppers”.

The data obtained by GJNY reveals the addresses of recipients of the ICIP subsidy, including block and lot. Often, the owners are listed as LLCs or holding firms. The New York World investigated the top recipients to discover what tenants occupy those properties. GJNY has now incorporated the ICIP data into our searchable Database of Deals, encompassing nearly 40,000 subsidies allocated to New York City properties and businesses. Subsidy information can be searched by program name and borough on our website, and all results can be downloaded in a CSV file.

Subsidy run amok

ICIP was designed to incentivize industrial and commercial businesses throughout the city, and began granting tax exemptions and abatements in 1984, at a time the city feared a massive exit of businesses. ICIP is an as-of-right program, meaning businesses qualify for the tax break for simply being in a particular location and conducting a certain type of business. To be eligible, the building owner must make capital improvements. The value of the tax benefit is based on the portion of the assessed value that increased due to the improvements. Many properties benefit for up to 25 years.

Transparency

As the New York World article points out, the obvious critique of this program is that even though ICIP has been discontinued, it continues to cost the city in foregone tax revenue. The city provides little transparency on which properties receive the tax exemption or if jobs were created or retained at the site. The New York City Department of Finance does publish a list of qualified properties on its website in excel format. However, the available data does not provide the name of the building owner nor the value of the tax break–key components needed to ensure the city prioritizes the allocation of its resources.

Of course, the question remains whether those benefiting from ICIP truly needed it. In his 2008 policy report “Senseless Subsidies”, Manhattan Borough President Scott Stringer claimed “Retaining businesses in New York City, encouraging capital investment, and bolstering our tax base are, of course, valid public policy goals. However, tax subsidies provided under ICIP have become badly disconnected from this core policy rationale, and New York City’s taxpayers are paying the price.”

And, of particular concern to GJNY is the lack of accountability mechanisms in place for holding beneficiaries accountable for the tax benefit received. In fact, companies are expected to submit a “certificate of continuing use” to prove that the land or property continues to function under the same designated use that originally got it the subsidy. GJNY could not find this information publicly and was unable to determine if this information is actually integrated into the process of filing for an exemption.

Rebirth?

In 2009 the ICIP program was transitioned into what is now known as ICAP, the Industrial Commercial Abatement Program. However, in this transition it is unfortunate that the city didn’t incorporate land use policies, or other more strategic city planning goals into shaping this program intended to spur development. Without a more community-oriented focus to incentivizing industries, and with only the barest of transparency and no accountability, it’s clear as-of-right programs like ICIP and ICAP present a drain on the city’s resources and an unfair advantage to the top commercial and real estate players in the city.

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