New bill would compel steep disclosures on developments that get tax breaks

TRD New York /
Oct.October 17, 2013 03:00 PM

With the city still smarting from the revelation that five developers received tax breaks to build in sought-after neighborhoods under a program for underdeveloped areas, City Council member Diana Reyna has proposed a bill to tighten personnel and construction regulations on developers that get similar deals.

Reyna, who represents the 34th district (covering Williamsburg, Bushwick and Ridgewood, Queens), introduced the so-called Safe Jobs Act last week. The bill would require developers who receive more than $1 million in public funding on a project or operate buildings over 100,000 square feet to disclose a wealth of information about the company, its construction employees and the property itself, and to participate in state-approved training and apprenticeship programs.

The legislation is part a push to fuel responsible economic development in New York City and “build up a pool of qualified, skilled, safe workers in the city,” Reyna told The Real Deal.

The city doles out roughly $2 billion in subsidies for real estate development each year, representatives from her office said.

Specifically, the measure would compel those developers to disclose the type and amount of tax break or subsidy they received, the names and addresses of contractors they employ, a list of jobs the project created, and a list of any legal violations in either their or their contractors’ history.

The disclosures would be reported to the City Council, the mayor’s office and the city Economic Development Corporation, Reyna’s chief of staff, Malcolm Sanborn-Hum, told The Real Deal.

But real estate developers who spoke with The Real Deal are not happy about the measure adding to what they see as their already burdensome thicket of red tape.

Million-dollar subsidies go to “basically every high-rise that gets any tax abatement,” said one prominent developer who asked not to be named. That would include, for example, every project under the popular 80/20 and 421a tax abatement programs, the source said.

“It will become just another paper that they have to fill out,” the source said. “I don’t think any of this reporting translates [to higher safety], even if it is well-intentioned.”

But Reyna underscored that developers that receive subsidies should be held to high standards.

“I’d imagine that Extell [Development] is just one example of many out there,” she said.

The developer made headlines recently after a state corruption task force found Albany had approved 421a tax abatements for One57, even after Extell had started construction on the tower (the subsidies are intended to spur construction, especially in underserved areas). A top-floor penthouse is in contract to an investor group for over $90 million, as reported.

“The question is: just how many Extells are there?” Reyna said. The mega developer declined to comment for this story.

The bill would also tackle the issue of construction workers’ education, which Reyna said was key to creating jobs. The employees of “operations, maintenance and security” companies that fall under the statute would receive free access to continuing education classes under the law.

Construction employers will have to participate in apprenticeship and training programs certified by the state Department of Labor, Sanborn-Hum said.

However, the developer source contended that these requirements would effectively restrict construction work from flowing to non-unionized sites because they would have a hard time “navigating the bureaucratic hurdles.” While unions could help subcontractors deal with the red tape, smaller companies might be unable to handle the additional administrative costs, the source said.

However, many of the approved apprenticeship programs are not run through unions, Sanborn-Hum noted.

“We are just mandating that there be oversight and we feel the best way of doing that is to go through the state,” he said, denying that the bill would play into the hands of unions.

The Real Estate Board of New York said it was reviewing the legislation to see if it would affect members and “will offer our input to legislators and industry partners in due course,” a spokesperson said, declining to comment further.

A representative for the Building Trades Employers’ Association, which represents about 2,000 union construction managers, general contractors and subcontractors in New York City, said the group supports the thinking behind the bill.

“Projects which are granted public financial assistance should be required to build to the highest and safest standards in the industry,” the spokesperson said in a statement. “BTEA contractors sometimes face a competitive disadvantage because its costs include the millions of dollars that we spend and invest in training our workforce in safety and skill development through apprenticeship programs training that our competition does not.”

Reyna said she would not be deterred by any pushback from the real estate community, which developers predicted could be strong.

“I haven’t heard anything [about backlash] yet, but I am up for the challenge,” she said.

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