How Hochul’s film tax credit, casino plan affect real estate

Proposal boosts sound stages, avoids pied-à-terre tax for MTA

Governor Kathy Hochul, casino chips, film camera
Governor Kathy Hochul (Illustration by The Real Deal with Getty)

While Gov. Kathy Hochul’s housing and 421a proposals captured real estate’s attention this week, two other aspects of her $227 billion budget have implications for the industry.

One is her call for using revenue from the three planned downstate casinos to fund mass transit, the Wall Street Journal reported. That, along with an expanded payroll tax and other measures, would provide $1.3 billion annually to the Metropolitan Transportation Authority, which is facing huge budget gaps because of low ridership.

If the legislature accepts the idea, it could make revenue potential a greater factor in the bidding process.

The state might look more favorably on Manhattan venues, such as those proposed by SL Green, Vornado and Stefan Soloviev, than on the Coney Island development championed by Thor Equities’ Joe Sitt or a Nassau County project. Three downstate licenses will be awarded, but two are expected to go to existing racinos in Yonkers and Queens.

The casino revenue would begin flowing into the MTA’s coffers in 2026. Specific amounts would depend on the license-award process, a spokesperson for the governor said. There would also need to be a change in state law, as tax proceeds from gambling are required to go to education.

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Just as significant to real estate is that Hochul did not propose a tax on the industry to fund the MTA, as the legislature did during a previous budget crisis at the transit agency. Real estate interests fended off lawmakers’ push for a recurring pied-à-terre tax by proposing a new transfer tax on expensive home sales. The so-called mansion tax was adopted.

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Another proposal that will affect real estate is an expansion and extension of a tax break for film and television productions. Hochul would increase the tax break to $700 million from $420 million and extend it for five years to 2034.

Critics say the credit doesn’t provide value for taxpayers. (Also, the New York Post portrays it as a quid pro quo for Hollywood donors, as if Steven Spielberg needs the money.) Proponents say it protects and creates thousands of jobs by keeping production in New York and away from emerging competitors, such as New Jersey.

The tax credit certainly fueled the growth of sound stage projects across New York City, although it’s not clear that productions would abandon the city now that so many venues and a critical mass of production talent are here.

— Holden Walter-Warner