Real estate execs defend 421A tax credits at heart of probe

August 12, 2013 01:30PM

Five of the city’s top developers have found themselves in hot water for getting tax breaks at their luxury projects, but their actions may be less a question of special treatment and more a hopeful gamble, industry insiders told Crain’s.

Governor Andrew Cuomo’s Moreland Commission inquiry focuses on the use of 421a tax abatements, a 1971 program created to spur residential building by providing payment for including affordable units in the city. But some of the cases under investigation, such as Extell Development’s One57 in Midtown and Silverstein’s 30 Park Place in the Financial District, picked up the tax credits and broke ground on projects in areas off-limits to the program. It seems they believed the rules for those areas would later change and enable them to receive the abatements.

“There would be these weird periods where the legislation would be up again,” one source told Crain’s. “If you look at it from the point of the real estate industry, if a project stopped to a dead halt every time tax legislation came up for renewal, projects would be dying all the time, so developers got in the habit of just plowing ahead.”

Gary Barnett purchased $18 million in credits, potentially nabbing $35 million in tax savings over 10 years for his project, and Silverstein doled out approximately $4.7 million for credits.

The debacle, industry experts cited by Crain’s said, comes down to technicalities. Buildings in lower density areas — even ultra-pricey developments 56 Leonard in Tribeca and 150 Charles Street in the West Village — can still pick up 421a tax credits and use those benefits. [Crain’s]Julie Strickland