The Coop & Condo Tax Break Is About to Expire, Renewing the Existing Bill Will Cost the City Millions in Unintended Benefits

Posted by Doug Turetsky, May 17, 2012

With about five weeks to go in the New York State legislative session, there are still some controversial issues to resolve such as the push to increase the minimum wage, the DREAM Act, and pay hikes for legislators. One issue that has received little if any public notice is the impending expiration in June of New York City’s tax break for coop and condo owners.

If Albany doesn’t act to reauthorize the tax abatement, roughly 365,000 New York City coop and condo owners could see their property tax bills jump. But if legislators simply renew the existing bill, they’ll be giving far steeper tax breaks to many coop and condo owners than originally intended and costing the city hundreds of millions of dollars in foregone revenue.

In the early 1990s, many coop and condo owners complained that the city’s property tax system was unfair, burdening apartment owners with higher tax rates than those paid by owners of one- to three-family homes. A special commission to look at problems with the city’s property tax system was appointed by Mayor David Dinkins and Council Speaker Peter Vallone. The commission concurred with the complaints of coop and condo owners and recommended that taxes on homeowner apartments be brought into line with those one- to three-family homeowners. (For more details on the commission and inequities in the property tax system, see IBO’s Twenty-Five Years After S7000: How Property Tax Burdens Have Shifted in New York City.)

Fixing the inequity between apartment owner and homeowner taxes proved difficult under the constraints of the broader property tax system crafted by the state. In 1997, at the behest of the City Council and then-Mayor Rudolph Giuliani, the state Legislature enacted what was supposed to be a temporary fix for coop and condo owners.

But the temporary fix has in effect become permanent, renewed four times—at no small cost to the city treasury. The total cost of the abatement in 2012 is about $445 million in forgone revenue. An estimated $260 million of that is a tax break for coop and condo owners whose tax burdens are actually lower than what they would face if they were simply moved into the homeowner tax class, according to calculations by IBO’s Ana Champeny. And many of these coop and condo owners live in some of the wealthiest neighborhoods in the city, particularly east and west of Central Park and brownstone Brooklyn.

Why do many apartment owners have lower tax burdens than homeowners? Under state law coops and condos are assessed as if they are rental buildings, meaning that in many instances the properties are greatly undervalued—especially in neighborhoods where values have risen dramatically over the years.

The effect of the state’s assessment rule becomes clear when IBO estimates coop and condo building values using actual sales data rather than the assessments the city is required to use. Take the example of 101 Central Park West. The Department of Finance market value is about $630,000 per unit while the average sales price for apartments sold since January 2011 has been $8.4 million. Using our sales-based market value ($5.8 million per unit) for the building, 101 CPW has an effective tax rate for of 63 cents per $100 of market value in 2012. That’s 19 percent less than the city-wide average effective tax rate of 78 cents per $100 of market value for the one- to three-family homes—before applying the coop and condo abatement. With the coop and condo abatement, apartment owners at 101 Central Park West have an effective tax rate of 52 cents per $100 of market value.

As the clock winds down on this year’s legislative session with no bill as yet introduced to make the promised adjustments to what was supposed to be a stopgap measure, it is likely the coop and condo abatement will simply be renewed as it has been before—an outcome with repercussions for the city’s budget. The $260 million in revenue foregone by providing a benefit for some apartment owners that goes beyond the intended level of tax relief is enough to restore some of the most contentious cuts in the Mayor’s budget for 2013 such as reductions in after-school programs, the subsidy to the city’s libraries, and the closing of 20 fire companies.

Filed in Taxes | | Permalink |

As Rental Subsidies for Families End, Time in Shelter Grows

Posted By Elizabeth Brown, February 23, 2012

February marks the first month that the city will not pay subsidies for families who signed leases under the Advantage rental assistance program. The city officially eliminated Advantage nearly a year ago after Governor Cuomo ended state support for the program, leaving the city without a plan to move families out of homeless shelters and into permanent housing.  While no new families have entered the program in almost a year, the city had been under a court order to continue paying the subsidies for families already enrolled—until earlier this month when the order was lifted. The loss of the subsidy jeopardizes the housing of the 8,000 to 9,000 formerly homeless Advantage recipients still in the program. The city’s decision to stop paying the subsidy comes as more families are already staying longer in shelter and follows shortly after Governor Cuomo’s suspension of $15 million in homelessness aid to the city for the next fiscal year as part of his budget proposal.

The city ended Advantage, a rental assistance program that paid a portion of families’ rents for up to two years, when the state withdrew both its funding and the federal match for the program last April. (See Analysis of the Mayor’s Preliminary Budget for 2012 for details.) When advocates for the homeless sued, the city was ordered to continue to subsidize families who had already rented apartments through the program, while the court determined whether the city could stop making payments for these families before their leases end. Although final resolution is pending, in the interim, the order requiring the city to continue payments was lifted earlier this month and the city announced it would not pay the February subsidies. (The case is currently on appeal, the city won in trial court.)

The city had already spent $71 million on the Advantage payments in the first seven months of fiscal year 2012, before the court order was lifted. In addition to these costs, it is likely that the cost of family shelter will now rise. Without an alternate program or change in policies to help families move out of shelter, the length of time that homeless families stay in the city’s shelter system has increased. In the eight months after the city stopped signing new Advantage leases, the average shelter stay for a family was 316 days, nearly two months longer than the average of 258 days during the same eight months in the year before the Advantage program ended.  As families stay longer, the total number of families in shelters has also begun to increase in recent months.  And now that the city has stopped paying subsidies to former Advantage tenants, some of these families may also return to shelter, which would further drive up city homelessness spending.

This potential increase in shelter costs comes after the suspension of homeless aid from Albany. After the state cut Advantage funding last April, it provided a $15 million grant for a loosely defined new homelessness program in New York City—about a fifth of what the state had spent on Advantage in the prior year. According to the Mayor’s Office of Management and Budget it was largely left up to the city to decide how to use the $15 million, and the city used $10 million of the funds to help pay for the Advantage program’s continuing costs.  However, the governor’s most recent budget suspended the homelessness grant for the upcoming state fiscal year noting that, “because the initiative remains under development, additional funding will be suspended pending a determination of the efficacy of the program.”

Thus, the loss of funds from Albany comes when more families are staying longer in the city’s shelter system, and when it is likely that their numbers will continue to increase. Even if the courts decide that the city must pay Advantage subsidies until the end of the remaining tenants’ leases, without a replacement program or policy change the pathway to permanent housing for current and future homeless families remains uncertain.

Filed in Housing | | Permalink |

Where the Jobs Are Growing the Money Isn’t Always So Good

Posted by Doug Turetsky, January 18, 2012

IBO’s latest economic projections for the city anticipate the creation of nearly 39,000 jobs this year and about 50,000 in 2013. That’s good news for the city, which has already regained more than half the 135,000 jobs it lost in the recession. As the New York Times reports today on a U.S. Conference of Mayors’ study, New York City is doing better than many other cities, including Los Angeles and Chicago. In total, the U.S. has regained about a quarter of the jobs it lost.

But before the celebrating gets too loud, there’s another important consideration: the jobs we’re regaining don’t pay nearly as well as many of the ones we lost. While the city shed thousands of jobs in such high-paying sectors as Wall Street, where securities and commodities brokers earn average salaries of about $360,000 annually based on 2010 New York State Department of Labor data, we’re regaining jobs in industry sectors that pay just a fraction of that yearly wage.

The largest job gains projected by IBO are in education, health, and social services (excluding government jobs such as those in public schools or public hospitals). Together these sectors are expected to generate more than 33,000 jobs—or nearly 40 percent—of the city’s jobs growth over the next two years. But the industries expected to lead the growth in that sector have annual average wages below the citywide mean of $77,997 in 2010.

We anticipate that about 15,000 jobs will be created in health services, where salaries average roughly $54,900 a year (labor department salary estimates for these jobs include government positions). This industry includes occupations such as home health aides, medical assistants, and nurses. Another 10,000 jobs are expected in education, where the average salary is nearly $52,600. The education industry includes jobs ranging from child care workers to teachers to support staff. IBO also expects about 7,000 jobs will be gained in social assistance, where annual salaries average just $27,800. Social assistance includes occupations such as social workers, pre-school teachers, and recreation workers.

The average salary is even lower for the waiters, food prep workers, bartenders, dishwashers and other restaurant and bar staff whose occupations are included in the leisure and hospitality industry. We project food service and drinking places will add 15,000 of the 19,600 jobs expected to be gained in leisure and hospitality over the next two years.  But the average annual salary for food and bar staff is just $24,050—less than a third of the citywide average—although tips help increase the take home pay.

The other industry we expect significant growth in is professional and business services, with a 19,200 increase in jobs over the next two years. This is a fairly well-paying industry as a whole and it lost a considerable number of jobs in the recession. About 11,000 of those jobs are projected to be in professional and technical services, which averaged $109,500 in annual salary in 2010. This portion of professional and business services includes occupations such as lawyers, accountants, and computer programmers.

But another 8,000 jobs to be gained in professional and business services are in administrative and support services, which doesn’t pay nearly as well, averaging $50,400 a year. The administrative and support services include jobs such as telemarketers, secretaries, and security guards.

The growth in comparatively lower paying jobs is better than the alternative—job losses. But lower paying jobs don’t give as big a boost as higher paying ones to the local economy and the city’s tax revenue. And that means less relief for a city budget already straining to keep up with the demand for public services.

Filed in Local Economy | | Permalink |

Senior Centers Come, Senior Centers Go

Posted by Nashla Salas and Doug Turetsky, December 8, 2011

You may soon need a scorecard to keep track of many of the city’s senior centers. Against a backdrop of limited funding, the city has closed some senior centers and curtailed services and changed the status of others, yet also launched an initiative to create new senior centers.

In October, the Mayor announced that community-based organizations were selected to create eight new senior centers as part of his “Age-Friendly NYC” initiative. But less than two years ago, the Mayor was proposing to close 51 senior centers across the city.

The plan to close the more than four dozen centers was one of the most controversial parts of the Mayor’s budget plan in the spring of 2010. In the end, 27 centers were shuttered and 24 were spared. The Department for the Aging closed the centers based on criteria such as the number of meals served, the center’s level of use, and the quality of recordkeeping by the center’s operator.

Not long ago there were more than 300 centers in the city’s official network of senior services. Now there are 256—a count that doesn’t include some of the centers that were spared in 2010.

Of the 24 senior centers that were not closed under the Mayor’s proposal, the Bloomberg Administration agreed to maintain city funding for seven. The City Council agreed to provide $1.6 million to keep the other 17 centers open. The funds took a while to reach the centers, long enough that one, Glenridge—located in Ridgewood, Queens—closed its doors. The funding for Glenridge was subsequently redirected by the Council to 12 different agencies serving seniors.

The Council has again provided $1.6 million in the current fiscal year for the 17 centers, including $130,000 for Glenridge. But the building Glenridge had operated in has been sold with no immediate plan for the senior center to be allowed to reopen there. The president of the senior center’s board told the Times Newsweekly last month that Glenridge is “in the process of dissolving completely.” IBO assumes the Glenridge funds will again be reallocated by the Council. Other City Council allocations for the 17 centers range from $20,000 for the Wilson M. Morris Senior Center in West Harlem to $185,000 for the Rain Bailey Avenue Senior Center in the Morris Heights section of the Bronx.

Despite the public funds, the 17 centers were cut loose from operating under the aegis of the Department for the Aging. The department does not consider the 17 as part of the city’s network of senior centers, which makes them ineligible for city funds to support transportation and food, two prime services for seniors.

While these centers have been orphaned from the city’s official network of senior centers, the Bloomberg Administration is moving ahead with its plan to create eight new centers under its Age-Friendly NYC initiative. Eight organizations were selected to operate what are being called Innovative Senior Centers. Among them, Bronxworks will run a center that includes a community garden, SNAP in Queens will provide vegetarian meals, and SAGE will offer services to the city’s LGBT seniors. The centers, which are expected to open in January, will receive a total of $3.5 million in city funding for their first year of operation; these city funds will be supplemented by philanthropic support. The Bloomberg Administration intends to announce the creation of more centers under the initiative in the coming months.

The funds are being found for these new centers even as the Mayor’s budget plan for next year includes a $23.5 million, or 17 percent, reduction in city funding for the Department for the Aging. Last June, the Council restored $14 million that the Bloomberg Administration had proposed cutting in basic support for the operations of the senior centers that remain in the city network, along with another $3.5 million for transportation and food.

Although the new innovation centers are likely to be spared from the city’s budget pressures, other senior centers could find themselves “aging out” of the network.

Filed in Seniors | | Permalink |

Living Wage, Again

Posted by Doug Turetsky, November 30, 2011

Amid the uproar during the past few weeks over the proposed living wage law there’s one important point that you might have missed: the city already has a living-wage law. Its rules cover thousands of workers employed under more than $1 billion worth of contracts with the city.

In fact, New York City had one of the first living-wage laws in the country, though the city’s first bill covered just a couple thousand workers. Passed in 1996, over the veto of then-Mayor Rudolph Giuliani, the legislation was championed by advocacy organizations such as the Industrial Areas Foundation as well as local unions. It required that private firms contracting with the city to provide food services, security guards, cleaners, and temporary office workers pay their employees a living wage that ranged at the time from about $7.25 to $12 an hour.

The number and type of workers covered by the city’s living-wage rules expanded in 2002 when Mayor Michael Bloomberg signed a law that extended living-wage provisions to home health care and child care workers whose agencies had contracts with the city. The Brennan Center at New York University estimated that under the new requirements the pay of 50,000 home health care workers would rise immediately and later the pay of up to 9,000 child care workers. Shortly after the law went into effect, Steve Malanga wrote ruefully in City Journal, “Thanks to Mayor Bloomberg, New York will now have the largest number of workers covered by any living-wage law in the nation.” For a complete list of covered workers and wage rates, click here.

The proposed living-wage bill now garnering so much attention moves away from a focus on city contracts for services and instead aims at economic development projects. The bill would cover all workers in projects that receive certain public subsidies worth $1 million or more. But it would exempt from its wage rules businesses with revenues of less than $5 million a year, all manufacturing firms, and nonprofits. IBO’s George Sweeting submitted testimony to last week’s City Council hearing on the proposed bill in which he said about six or seven projects a year would be affected by the proposed rules, based on the economic development projects subsidized by the city in 2002-2008.

That’s a small number compared with the 437 contracts the city signed in fiscal year 2011 that are subject to the existing living-wage law. These contracts were valued at $533 million, according to an annual report by the Mayor’s Office of Contract Services. Over the past four fiscal years, the city has signed nearly 1,100 contracts worth more than $1.5 billion that must comply with living-wage rules.

Too bad so much of the debate that continues to simmer on the new living-wage bill largely ignores the fact that the city already has a fairly significant commitment to living-wage provisions. Maybe the $1 million shelled out by the city’s Economic Development Corporation for a study of the potential effects of a living-wage law would have benefitted by looking at what’s happened under the rules that already exist here.

Filed in Contracting, Economic Development | | Permalink |

Less Trash, Less of it Recycled

Posted by Doug Turetsky, November 10, 2011

An October 26th Daily News article reported that New Yorkers put out less trash for curbside pickup in fiscal year 2011 then they did in 2010. But lower trash levels are not a citywide phenomenon. The one exception: the Bronx.

Some sanitation experts say there’s more trash in the Bronx destined for landfills or incinerators because the borough diverts a comparatively small share of its trash to recycling.
In 2011, the Bronx diverted a paltry 10.3 percent of its refuse to recycling, well below the diversion rate of the other boroughs. Manhattan topped the charts at 19.0 percent with Staten Island a close second at 18.6 percent. Seven of the Bronx’s 12 community districts recycled less than 10 percent of their trash. Of the city’s 47 other community districts, only 6 had recycling rates below 10 percent.

Still, the citywide recycling rate declined overall in 2011 to 15.4 percent from 15.7 percent in 2010. Every borough except Staten Island saw the share of its refuse diverted to recycling fall in 2011. Only 25 of the city’s 59 community districts met or exceeded the citywide goal in 2011 of diverting 16 percent of its trash to recycling. In the same Daily News article, Council Member Letitia James, who chairs the City Council’s sanitation committee, blamed low recycling rates on the city’s failure to adequately educate the public.

Although the Mayor’s PlaNYC lists several initiatives to encourage recycling, including the expansion of education programs, funding levels for education efforts have varied over time. Numbers compiled by IBO’s Yevgeniya Bukshpun show the extent of the fiscal ups and downs. Spending on recycling education and outreach tumbled from just under $11 million in 2007 to barely $5 million in 2010. It rebounded to nearly $10 million last year but IBO currently projects it to total about $450,000 less than that this year.

Inconsistent funding of education and outreach may not be the only reason many New Yorkers find it hard to know (or care) what should and shouldn’t be recycled. There have also been some abrupt changes in the program.

In an effort to save money, the city temporarily stopped collecting glass and plastic in 2002—only metal and paper were recycled. In July 2003, plastic recycling resumed, but the city temporarily shifted to alternate week pickups of recyclables. For many New Yorkers, this meant letting recyclables collect in their apartments or basements for a couple of weeks—or simply tossing it with the regular trash. Glass was not recycled again until April 2004. Anecdotal evidence such as a peek at neighbors’ recycling cans give an indication there’s still confusion over what is and isn’t recycled.

While more education and outreach programs could relieve the bewilderment over what’s recycled, it won’t address the “slimming down” of some of what is recycled. Sanitation experts generally talk about how much is recycled in terms of the diversion rate: the share by weight of our curbside trash stream that’s set aside for recycling.

Declines in the city’s diversion rate may in part be because recyclables don’t weigh as much as they used to. Some plastics have gotten lighter and newspapers and magazines are shrinking (along with their readership and advertising pages). Some of the drop in recyclables, as well as regular trash, may also be a side effect of the sluggish economy—people are buying and throwing out less.

Perhaps there’s a lesson to be learned from this fall off in curbside trash. While recycling is the “apple pie” of environmentalism, it might make sense to increase the emphasis placed on those other two “Rs” in the litany of environmentally sound trash management practices: reuse and reduce.

As IBO has well documented, it costs more to collect and dispose of a ton of recycling than the city’s regular rubbish, although the gap has been narrowing as the cost of exporting trash to landfills and incinerators has escalated. But stuff that never winds up at curbside for pickup, whether recycling or regular trash, costs nothing for collection and disposal. Of course, additional efforts to decrease the amount of stuff that winds up in the city’s waste stream may take more investment in public education and outreach.

Filed in Environment, Sanitation | | Permalink |

It’s Not Just OWS: How Wind, Snow, and the Red Sox Drive Police Overtime Spending

Recent reports that the first month of the Occupy Wall Street protests cost the city $3.4 million in police overtime no doubt led to some raised eyebrows. While a substantial sum, it equals just a fraction of police overtime spending in recent years.

In fiscal year 2011, which ended on June 30, police overtime totaled $549.5 million. And it has been climbing steadily. Just looking at the prior five years, spending on police overtime grew from $412.0 million in 2006 to $538.4 million in 2010, according to numbers assembled by IBO’s Bernard O’Brien. Some portion of the increase is probably a reflection of wage growth during the five years, not just more overtime hours.

The New York Police Department categorizes part of its overtime spending in terms of planned and unplanned events. Planned events, meaning the event has occurred annually for at least three consecutive years, include goings-on such as the New York City Marathon ($2.3 million in police overtime last year), the Thanksgiving Day Parade ($192,763), and the Steinway Street Festival ($3,474).

Not surprisingly, Occupy Wall Street falls under the category of unplanned events. And there are a lot of them each year, some stemming from acts of nature, others very much manmade. The tornados that swept Brooklyn, Queens, and Staten Island in September 2010 caused $318,407 in police overtime. Last December’s blizzard dumped $1.6 million in overtime costs on the city. The snowstorms that followed in January piled on another $883,721.

Baseball games are events of our own making that can also mean police overtime, especially when the Red Sox come here to play the Yankees. The two teams squared off in the Bronx in August and September last year, generating headlines and $410,948 in police overtime spending. And that doesn’t include the playoffs against the Twins last October, which knocked in $305,045 more in police overtime. (The Mets, it seems, simply don’t ignite the same passion—or extend their season long enough—to warrant added overtime.)

Presidential visits, international events, and Mayoral initiatives also can boost the city’s police overtime bill. Last fiscal year, President Obama visited the city seven times, resulting in $2.4 million in overtime for the local police force. When Osama bin Laden was killed by Navy SEALS in Pakistan in May, it triggered $773,981 overtime for extra security in the city. Mayor Bloomberg’s Summer Streets initiative, which opens seven miles of streets for walking, biking, and playing on three consecutive Saturdays in August, cost $709,358 in 2010.

With all the events, planned and unplanned, that occur in the city, the need for police overtime might seem like a given—especially as the number of officers declines. Since 2006 the number of police officers has dropped by nearly 2,000 to 33,777 at the end of last fiscal year.

If recent history is any guide, size of the force isn’t all that matters when it comes to police overtime. For example, in the two fiscal years prior to 9/11, police staffing hit all time highs, yet police overtime spending continued to rise. Then, in the aftermath of 9/11, antiterrorism efforts multiplied while the number of officers began to decline. Yet overtime spending, excluding costs stemming from 9/11) leveled off (see IBO’s Police Overtime: Tracking the Big Growth in Spending for more details).

While the cost of police overtime seems to follow its own laws of gravity, it’s likely that we’ll see substantial overtime costs for Occupy Wall Street and other goings-on around town for some time.

Filed in Municipal Labor, Police and Fire, Public Safety | | Permalink |

State Cuts to the Court System Likely to Carry a Price Tag for the City

Posted by Bernard O’Brien, July 27, 2011

New York State’s budget for this year includes $170 million in savings from cuts to the Office of Court Administration, which has already resulted in the layoff of more than 400 state court system employees, or about 2.5 percent of the system’s workforce statewide. But savings realized by the state from these cuts could mean millions of dollars in additional costs to New York City if the pace of processing criminal cases slows. That’s because people under arrest may be spending longer periods awaiting trial in the city’s jails—additional jail time that will largely be funded by the city.

The likelihood of slower court processing is almost certain. As state Chief Administrative Judge Ann Pfau told the New York Times, “Delays are going to be more built into everything we do, unfortunately….If you are waiting for a trial, the trial that is ahead of you is going to take longer.”

Much of the fiscal effect on the city would show up in the Department of Correction’s budget. More than 70 percent of inmates in city jails on Rikers Island and in borough-based facilities at any given time are detainees, meaning they are being held pending disposition of the criminal charges they are facing. The pace of criminal case processing in the courts is therefore a major determinant of the cost of running the city’s jail system, where the department’s total cost of incarcerating each inmate averages $387 per day.

For those inmates convicted of serious crimes and sentenced to time in the state prison system, the time they will actually spend in state prison (at the state’s expense) is reduced by the amount of time already spent in city custody prior to conviction and sentencing (almost entirely at the city’s expense). So that means the longer prisoners remain in city custody during adjudication of their cases, the larger the city’s—and the smaller the state’s—share of total imprisonment costs.

As reflected by the trend line in the graph below, the average amount of city jail time deducted from the state prison sentences of convicted felons from the city has already been moving upward in recent years, rising from 5.5 months in 1994 to 9.6 months in 2010. This trend is consistent with the slower pace of deciding some cases in recent years. While the Office of Court Administration’s own standards call for felony cases to be decided within six months from the date of filing, the percentage of felony dispositions in the city failing to meet that standard grew from 23 percent in 1994 to 37 percent in 2010.

Increases in jail time translate into additional city costs. For example, if slowdowns in case processing result in another month being added to the average time state prison-bound inmates spend in city jails, IBO estimates that the city would incur about $15 million in additional annual expenses at the Department of Correction. In addition, longer periods of incarceration for the thousands of detainees held temporarily in city jails each year but not ultimately destined for state prison—those held on misdemeanor charges, alleged felons ultimately acquitted, etc.—would also result in additional corrections costs borne by the city.

Besides potential increases in corrections department costs, the hit to the city’s budget from delays in criminal case processing could show up in other places as well. For example, police overtime expenditures could be driven up if cutbacks in court staff result in a longer arraignment process, with police officers spending additional time processing arrests. According to a number of recent press accounts, the time from arrest to arraignment has already increased.

So when it comes to cutbacks to the court system to help close the state’s budget shortfall, some of Albany’s savings may come at New York City’s expense.

Filed in Criminal Justice, Social and Community Services | | Permalink |

City’s Multitude of Property Tax Exemptions Add Up to a Wealth of Revenue Foregone

Posted by Doug Turetsky, July 15, 2011

In one respect New York City is much like most other cities and towns across the country: the property tax is by far the biggest source of tax revenue. For 2012, the fiscal year that began two weeks ago, the property tax is expected to bring in $17.6 billion, about 42 percent of all the tax revenue the Bloomberg Administration expects to collect this year. But it could be more, a lot more, if not for the slew of tax exemptions doled out —$13.5 billion worth in 2012 based on an analysis of the city’s property tax roll for this year by IBO’s Ana Champeny.

That’s $1 billion more than the $12.5 billion in property tax breaks the finance department estimated for 2010. Some of the breaks are permanent and may actually be worth more than estimated by either IBO or the finance department.

Many of these exemptions are permanent; for example, the U.S. Supreme Court ruled in McCulloch v. Maryland (1819) that the Constitution exempts the federal government from state taxation. Because so many exemptions are permanent, there’s not much incentive for the city to invest in more accurate assessments. But it’s still instructive to have a handle on how much the city loses to all the various exemptions, some imposed from above and others granted more locally.

The biggest beneficiary is government itself: city, state, and federal as well as government-related entities such as the Metropolitan Transportation Authority and the New York City Housing Authority. New York City government holds more than 7,500 properties with a tax value of nearly $5.0 billion. The city will forgo $751.4 million in taxes on properties held by the transportation authority. Albany and Washington control properties with a tax value of $700.7 million that goes unpaid. Foreign governments also get a free ride that will cost the city $74.2 million this year on 311 properties.

The second largest beneficiaries of property tax exemptions in terms of tax dollars forgone are institutions, which range from cemeteries to private schools and colleges to churches, synagogues, and mosques. Together these institutions are exempt from paying $2.0 billion in property tax this year.

Among these institutional beneficiaries, houses of worship saved the most. This year, more than 9,500 churches, synagogues, and mosques will get a pass on $626.9 million in property taxes. About 40 percent of the religious institutions qualifying for the exemption are located in Brooklyn, long known as “the borough of churches.” But the sobriquet comes with a price tag of $186.2 million in forgone property tax. Manhattan may be far less spiritual in terms of the number of exemptions for houses of worship, but because of higher property values they come at a greater cost than in Brooklyn. Roughly 1,200 religious institutions in Manhattan will not be burdened by bills for $198.2 million in property tax.

Hospitals, medical clinics, and other health care facilities located in the city are also substantial beneficiaries of property tax exemptions, with the city foregoing $515.5 million in 2012 property taxes. Private elementary and secondary schools and colleges and universities are exempted from paying $430.2 million in property tax (for fuller discussion of the college and university exemption, see IBO’s Budget Options for New York City).

Other institutions benefitting from the property tax exemption are foundations and charitable organizations as well as many cultural organizations. Foregone property taxes will save charities $218.2 million and cultural organizations $103.5 million this year.
The city also provides property tax exemptions through about two dozen different programs to encourage construction or renovation of residential buildings, foster commercial development, or assist individual New Yorkers such as veterans or senior citizen homeowners. Some are targeted to very specific sites such as the exemption for Madison Square Garden ($15.1 million in 2012). Conversely, this year, more than 21,000 properties enjoy $168.6 million in J-51 tax exemptions to spur residential renovations.

As a New York Times article recently noted, cities and towns across the country are taking second looks at some of the tax exemptions they’ve granted. Some are focusing on “eds and meds,” seeking to negotiate voluntary payments or an increase in payments in lieu of the full property tax, often referred to as PILOTS. As New York City grapples with its own ongoing budget shortfalls, local policymakers may feel the need to reassess some local tax breaks as well.

Filed in Local Economy, Taxes | | Permalink |

Despite Cut in Capital Spending, Mayor Plans to Build a New Jail, Renovate Others

Posted by Nashla Salas, June 15, 2011

Tough fiscal times have led the Mayor to propose a 20 percent reduction in planned city capital spending. That means less money for affordable housing construction, building new schools, or rehabbing city parks. Because of this, some New Yorkers may be surprised to learn that the Bloomberg Administration is still planning to commit more than $620 million in 2011 through 2015 to the construction of a new jail on Rikers Island, the renovation of jails in Brooklyn and Queens, and the closing of other facilities. What may make this even more surprising is that when the changes are complete, the system will have less capacity than it does now.

While the jail proposal has also been cut back—by nearly $115 million or 16 percent in the May 2011 Capital Commitment Plan compared with the September 2010 plan —some may question the need for it at all. Part of what’s driving the initiative is dilapidated conditions. Some of the structures being used on Rikers were only meant to be temporary. Another reason is to reverse a Giuliani Administration initiative that closed the jails near the borough courthouses and placed all inmates on Rikers Island. That proved to be a costly decision, ratcheting up overtime and other expenses in order to transport inmates to court dates.

As a result, the Department of Correction is going ahead with a jail renovation initiative which includes the construction of a new 1,500 bed jail on Rikers Island and reopening detention facilities in Brooklyn and Queens, in conjunction with reductions in the capacity of a number of other facilities. Because the initiative would remove more beds than are being added from the new construction, the city’s overall jail capacity would be reduced by nearly 3,000 beds.

Prior to the implementation of the renovation plan, the city’s jail capacity totaled about 19,400 beds, including 16,400 in Rikers Island-based jails and a total of 3,000 in four facilities in Brooklyn, Queens, Manhattan, and the Bronx. When the renovation plan is finished, capacity will stand at about 16,550.The planned overall reduction would bring capacity more in line with the jail population, which has decreased from a daily average of more than 14,500 in 2003, the peak over the past decade, to 13,362 last year.

The largest project in the plan to renovate Rikers Island is a new 1,500-bed jail at a cost of about $563 million. Also included is a new 800-bed annex to the Rose M. Singer Center ($4.4 million), which is set to open in the next two months. This facility houses detained and sentenced female adults and adolescents. The new beds will partially offset the reduction of thousands of older beds at the 10 current Rikers jails. Many of the older units were meant to be temporary, have been costly to maintain and are overdue for closure. One of the oldest facilities, the 1,194 bed James A. Thomas Center, has already been closed.

While all the capacity changes will occur in the Rikers Island facilities, the plan also calls for reopening jails in Brooklyn and Queens which have not housed inmates since 2003 and 2002, respectively, although their beds were still counted in the system’s capacity. Improvements to the Queens facility total about $550,000 in elevator replacement work. Renovation of the Brooklyn House of Detention will cost $3 million, but a previous proposal to increase its capacity has been dropped. It is expected that the Brooklyn House of Detention will reopen by the fall and the Queens House of Detention will be reopened in the spring of 2012.

While the Rikers Island renovations have drawn little public attention, there have been mixed reactions to the plans to reopen the Brooklyn and Queens facilities. Advocates and families of those arrested have complained of the inaccessibility of Rikers Island and prefer that inmates be housed in borough facilities near their homes. On the other hand, residents near the Brooklyn facility have in the past complained that reopening a jail in their neighborhood will stifle development.

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