19 years after 9/11, does Lower Manhattan still need subsidies?

Several tax breaks were renewed in the state budget

New York /
Sep.September 11, 2020 04:15 PM
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)

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.”

Write to Kathryn Brenzel at [email protected]


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