NYC Co-Op Should Get Amazon-Style Tax Break, City Comptroller Says

Jan. 4, 2019, 10:02 AM

Residents of a New York City affordable housing co-op should get the same sort of property tax breaks that Amazon is getting for its HQ2 project, the city comptroller said.

City Comptroller Scott Stringer (D) objected to the ballooning assessment for the 1,000-resident Citylights co-op in the Long Island City section of Queens. His Jan. 3 protest combined two high-profile issues: the city’s much-maligned property tax system and $3 billion in subsidies offered by the state and city for Amazon to locate part of its secondary headquarters in the same area.

“Across the city, the very New Yorkers who made their neighborhoods desirable for companies to move in are being priced out,” Stringer said in a news release. “Meanwhile as its new neighbor negotiated billions in subsidies, Citylights residents are stuck with more than $5 million in taxes because their city failed to act.”

His complaints in a letter to Mayor Bill de Blasio (D) mirrored longstanding criticisms of the city property tax system that led to an April 2017 legal challenge by a coalition of real estate interests and community groups, which in turn led to the May 2018 launch of a city commission to examine possible reforms to add more fairness and transparency to the system.

The city Finance Department doubled the assessment of the Citylights building over two years, from $51.7 million to $96.9 million in fiscal 2018 to $101.6 million in the current fiscal year, Stringer said. Adding to that burden was the expiration of the building’s tax break for affordable housing, known as a Payment-in-Lieu-of-Taxes (PILOT) agreement, which he said could raise monthly carrying charges for residents by nearly 60 percent over the next five years.

By then, Stringer said in the letter, residents will face an average additional cost of $1,000 per unit from a $5.8 million property tax bill. They’re already paying more per square foot for their ground lease with a state economic development program than what Amazon and other commercial neighbors will pay, he said in the release.

Amazon in November 2018 announced plans for a new corporate headquarters to complement its Seattle base which will be split between two locations: Long Island City and Crystal City, Virginia. The online retailer pledged to add 50,000 workers and spend $5 billion on new construction backed by hefty incentives.

Stringer urged the mayor to work with the Empire State Development program and Citylights residents to “craft a solution that will prevent the displacement of potentially hundreds of families from their homes” and to intervene in the review of the property assessment.

“The Department of Finance regularly works with residents to provide property tax relief through a number of programs, and we encourage every property owner at Citylights to find out their eligibility,” a city spokeswoman said in an emailed statement.

Legal Challenge on Hold

The coalition that sued the city to overturn the property tax system, Tax Equity Now New York, welcomed Stringer’s protest and urged him to join in the legal challenge.

The city comptroller “has the unique vantage point to identify systemic inequities based on individual property tax cases,” Martha Stark, a former city finance commissioner who is the group’s policy director, said in a statement.

The Citylights dispute buttresses the group’s bid for a court-ordered solution, she said, maintaining that it shows that “the property tax structure is rife with inequities and illegalities that must be addressed by the court, not politicians and commissions.”

The city in November won a stay of the group’s legal challenge while it appeals a state Supreme Court judge’s September refusal to dismiss the case. It argues that improvements in the system would be better carried out through the work of the New York City Advisory Commission on Property Tax Reform, convened by de Blasio and City Council Speaker Corey Johnson (D).

Commission Moving Ahead

The commission is moving ahead with crafting its report and recommendations, following five months of public hearings. The mayor and council plan to use the report to design a proposal for state legislative changes to the system.

In a Dec. 31 brief in support of its appeal of the stay, the coalition argued that the city was just seeking to delay the proceedings and avoid the “sunlight” that discovery would bring to the inner workings of the city system. But the appeal of the stay wouldn’t be heard before March at the earliest, and briefs in the appeal of the judge’s rejection of the city’s bid to have the entire case dismissed are due in April.

Representatives of Empire State Development didn’t immediately respond to a request for comment.

To contact the reporter on this story: John Herzfeld in New York at jherzfeld@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Megan Pannone at mpannone@bloombergtax.com

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