Report: Real Estate Subsidies Draining City Coffers
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The city’s largest subsidy program for commercial property will cost the city $512 million in 2008 in foregone tax revenues, a $100 million increase over last year.
The Industrial and Commercial Incentive Program, which has been widely criticized as an inefficient form of city investment, has drawn further criticism from a new report issued by the City’s Independent Budget Office today.
The report details how efforts to substitute the ICIP with the new Industrial and Commercial Abatement Program — designed as a more efficient subsidy program for industrial and commercial development — does not go far enough.
The new ICAP came into effect in July replacing the ICIP.
Because of the way the ICIP was structured the city will be on the hook for tens of millions of dollars over the next several decades.
“The new Industrial and Commercial Abatement Program includes significant changes to eligibility and benefit schedules that should slow the growth in foregone tax revenue that would have occurred under ICIP. Because of the incremental nature of both the old and new programs it will take many years for the city to fully realize those savings,” the report said.
According to a research analyst for the subsidy watchdog group, Good Jobs New York, Allison Lack the new ICAP has succeeded in remedying some of the flaws of its predecessor program.
“We think that ICAP has made some strides in narrowing down the available commercial benefits for retail and it does, in Manhattan, lower the amount of time that commercial properties have access to the subsidies. But it still allows them the subsidy for ten years and many of these are large midtown Manhattan commercial firms that don’t need the help. And these are substantial buildings that would otherwise contribute a large amount to the tax base,” Ms. Lack said.
The IBO report found that over the last ten years the tax expenditure associated with ICIP grew more rapidly. The cost of the program to the city had more than tripled since 1998 increasing to $512 million in 2008 from $170 million in 1999 with an average annual growth rate of 13%.
