New York Attorney General Eliot Spitzer has had his moments with the real estate industry, and he’ll have plenty more if he’s elected governor in November. As the race nears, his stances on real estate issues are coming into focus.
Spitzer’s eight-year tenure as attorney general includes an investigation of one of the city’s largest landlords, an evisceration of the parties who’ve stalled redevelopment of Ground Zero, proposed changes in rent-regulation rules, and calls for more transparency in the Atlantic Yards project in Brooklyn.
Spitzer, who in September handily won the Democratic primary, has also cultivated an image as the champion of the little guy. He garnered plenty of headlines in his campaigns against Wall Street abuses, and most political observers believe he’d take a similar stance toward real estate if the New York City native reaches the governor’s mansion.
Retooling rent regulation
Spitzer this past summer recommended increasing the threshold for deregulating the city’s 1 million rent-stabilized apartments, saying the amount at which people should start paying market-rate rents should be pegged to inflation.
He didn’t specify if that inflation rate would be locally determined, or put a number on a new deregulation threshold. The law now says that once the rent on a vacant stabilized apartment exceeds $2,000 a month, it can be pulled from the rent-regulation rolls and rent at market rate.
Other rental laws have also come in for criticism from Spitzer.
“If the state’s rent laws were administered properly, they would be effective in redressing many tenant issues,” Spitzer told a group of New York City housing advocates and tenants in August.
Spitzer in August also opened an investigation against the Pinnacle Group, one of the city’s biggest landlords of rent-stabilized apartments (see Pinnacle Group: One big city landlord and many little headaches). Tenants accused Pinnacle of aggressively evicting them and charging market rates for their abruptly vacated apartments.
Opening openness further
The attorney general stayed busy this summer, airing his views on two of the biggest development projects in the city right now — the World Trade Center redevelopment and the proposed Atlantic Yards project.
Spitzer has long been frustrated by the amount of time it’s taken to begin rebuilding at the trade center site. At one point, he said the proposed Freedom Tower could turn out to be a “white elephant.” His critiques have included criticism of the Empire State Development Corporation, or ESDC, a quasi-state agency, and Gov. George Pataki.
Spitzer said through his campaign manager, Ryan Toohey, that state agencies that can be accommodated at market-rate prices should move into the Freedom Tower. The Democratic nominee said he advocates moving the State Executive Offices and the ESDC to the new site from Midtown.
But he said he wouldn’t pull government agencies from other parts of the city or surrounding areas to Ground Zero for fear of having a negative economic impact on those areas.
“I would be less comfortable moving state offices from communities outside the Manhattan central business district, areas where costs are lower and the real estate markets are not quite as strong,” he said.
The Pataki administration supports filling nearly half of the Freedom Tower with government agencies, including state ones.
Spitzer wants more transparency for the massive Atlantic Yards project, whose critics have declared approval of the 16-tower, one-arena complex a done deal from the start. Spitzer’s criticism extends to the workings of the ESDC.
“All of the Empire State Development Corporation projects proceed with no genuine public process,” said Kent Barwick, president of the Municipal Arts Society, whose group wants to see changes in the Atlantic Yards project before it’s built.
Barwick noted that none of the interested parties in Atlantic Yards, including the residents in the surrounding neighborhoods, community boards, the city Planning Commission and locally elected officials, were able to influence the process.
“The hearings are perfunctory; it is the absence of transparency,” Barwick said. “I think people are optimistic that Spitzer will bring to the state development process the same transparency that he has brought to the sale of stocks.”
Mulling Moynihan Station moves
Spitzer also takes a strong stance on the proposed Moynihan Station transit hub around Penn Station. He supports it, as does Gov. Pataki, who’s backed the plan to turn the James A. Farley Post Office into a transit hub and move Madison Square Garden over a block to a new site.
Spitzer wants a closer look at the plan’s costs and contracting practices before it proceeds, and it looks like he’ll get his wish.
In September, state Assembly Speaker Sheldon Silver prompted the Public Authority Approval Board, which holds final approval on Moynihan Station, to delay a vote on funding the project.
At issue were unanswered questions posed by state comptroller Alan Hevesi, who asked in his Sept. 19 letter to the Moynihan Station Development Corporation, a subset of the ESDC, to explain how the sale price for the development rights over the Farley Post Office “was the result of negotiations and, not an independent appraisal and/or open bid?”
Spitzer said the project was another example “of a pattern of irresponsible actions by the outgoing Pataki administration.”
He also said that the project “was hastily submitted to the [control board] for approval, and, therefore, lacked adequate preparation and left major questions unanswered about ongoing financial commitments by the state and other matters.
“The Public Authorities Control Board should not approve this project until these unanswered questions are resolved,” Spitzer said.
Some acquainted with the inner workings of the Moynihan Station project told The Real Deal that the stalemate in the control board approval has less to do with the underlying project than with a need for transparency on deals between the state and developers Stephen Ross of the Related Companies and Steven Roth of Vornado Realty Trust.
“The Pataki administration has made a whole bunch of deals, and at this point they are clearly perpetuating their legacy after the government is long over,” one market insider said. He said the largely closed-door deals between the state and private developers are likely to be targets of a Gov. Spitzer.
Silver has asked for a new review of the plan to move Madison Square Garden, but proponents of the plan say this could take up to a year, and seriously delay or hurt the original plan.
Hitting brakes on rail yards
Silver was a key figure last summer in the defeat of Mayor Michael Bloomberg’s plans for a New York Jets stadium over the rail yards on the far West Side of Manhattan.
The rail yards tumbled into play again this past summer. The city bid $500 million for development rights on the yards, which are owned by the Metropolitan Transportation Authority, a state agency. Both Bloomberg and City Council Speaker Christine Quinn, a Democrat, supported the city’s bid, which was withdrawn in late September.
Spitzer said he thought the bid was too low, however, and that the bidding process was rushed. The yards have been valued at as high as $1.5 billion.
The MTA now plans to sell the West Side rail yards to a private developer after the city rezones the area for high-rise development.
“Eliot continues to believe that the MTA should conduct a fair and open bidding process that offers a level playing field to all bidders,” said campaign manager Toohey. “This bidding should be based on the city’s new zoning plan, which was put into effect after the time of bids related to the proposed Jets stadium site.”
Where the men who would be governor stand on real estate
By Gabby Warshawer
Much like real estate, the politics of the New York governor’s race are all about location. Where the candidates stand on real estate issues like property taxes, affordable housing, and major mixed-use developments is helping define the race between Democratic nominee Eliot Spitzer and his Republican challenger, John Faso.
Property taxes
Spitzer has proposed $6 billion in property tax relief over three years, a plan largely aimed at middle-class families.
Both Spitzer and Faso’s property tax relief plans center on the School Tax Relief Program, or STAR.
The program exempts a portion of a property’s value from school taxes; the basic exemption is currently $30,000. In New York City, the program also offers a discount on local income tax. The state reimburses school districts for the lost revenue brought about by STAR exemptions.
Spitzer’s plan would increase the tax exemptions most New Yorkers receive through STAR, and all homeowners — except those with incomes over $265,000 — would get a tax cut through Spitzer’s program.
Critics contend the STAR system overwhelmingly benefits schools in districts with higher property taxes. The districts with higher property taxes have more money to begin with and receive more money through the program, rather than STAR apportioning more money to disadvantaged districts.
Faso’s plan calls for doubling the current STAR exemptions and for capping school property tax levies at 4 percent or, if it’s lower, the rate of inflation.
Faso also wants to dedicate $700 million in tax credits to New York City residents, since property taxes have less bearing on city school district finances than in the rest of the state.
Ken Sherrill, a political science professor at Hunter College, said there’s a larger issue here that needs to be dealt with by state governments.
“At some point, the question of whether local property taxes should be used to fund local schools needs to be addressed,” Sherrill said. “It’s very hard to have a system where children in more affluent school districts end up getting much more money put into their education.”
Affordable housing
Although Spitzer and Faso have detailed plans to preserve and expand affordable housing throughout the state, Spitzer’s includes a blueprint for increasing the amount of affordable housing in New York City.
Faso takes a stronger stance on using private developers and less state money to create private capital in public housing projects. Spitzer, meanwhile, says the state should encourage the New York State Housing Authority to spend more of its resources on affordable housing.
Faso’s plan includes reforming the workers’ compensation system; tweaking the Scaffolding Law, which imposes liability on employers at building sites; consolidating the Division of Housing and Community Renewal with the Housing Finance Agency; making public on the Web all applications and allocations of housing tax credit awards; and reforming New York’s Brownfields Law.
Spitzer’s plan also calls for reforming the Brownfields Law to increase New York’s supply of available land. Spitzer’s broader measures include better management of state and federal housing resources and reforming zoning laws so that higher-density building is allowed in more areas.
Spitzer says he is dedicated to preserving existing affordable housing units in the city, including those in the Mitchell-Lama program; raising the $2,000 threshold at which landlords of rent-stabilized units can charge market rates; and reforming the housing maintenance code enforcement system so that there are avenues for corrective action aside from just taking matters to Housing Court.
Sherrill said it makes sense that Spitzer’s affordable housing plan is more in-depth than Faso’s.
“Affordable housing is a traditional Democratic issue, and talking about affordable housing is a traditional way of reinforcing the base of the Democratic party,” he said.
Major developments
Spitzer and Faso overlap most in their visions of World Trade Center redevelopment.
“You can’t expect a governor to stand aside on something like this,” said Sherrill. “Whenever a new administration comes into power, there’s going to be an adjustment period between mayor and governor.”
Last month, Spitzer and Faso both endorsed an agreement under which federal and state agencies would occupy half of the 2 million square feet in the Freedom Tower. The two candidates also agreed with Gov. Pataki’s plan to move the governor’s New York City offices into the tower.
Both men, however, differ on plans for the far West Side rail yards. Spitzer wants a deeper evaluation of the parcel, which has been appraised at as high as $1.5 billion. (The city withdrew in late September its $500 million bid for the yards, which are owned by the Metropolitan Transportation Authority, a state agency; the MTA now plans to sell the yards to a private developer.)
Faso supported the city’s bid.