By LOUIS FLORES
A corruption-riddled property tax abatement program exploited by real estate developers to save over $1 billion each year in property taxes unceremoniously came to an end on Friday.
The 421-a program, as the tax abatements are known, was not renewed by officials with two special interest groups into whose hands negotiation of the costly public tax policy was outsourced by an agreement of the New York State legislature and Gov. Andrew Cuomo (D-New York).
After the New York State legislature was unable to timely pass compromise 421-a legislation last June, legislators passed a five-day extender that created uncertainty amongst real estate developers typically accustomed to receiving guaranteed legislative outcomes. Unions had been seeking wage concessions from real estate developers, and real estate developers were opposing the wage demands in an effort to protect their enormous profits. Real estate developers have spent a lot of money both lobbying and acting as very generous campaign contributors to state and city politicians.
Ultimately, in an omnibus bill known as the “Big Ugly,” legislators and Gov. Cuomo finalized the 2015 legislative session by agreeing, in respect of the tax abatement program, to extend the program through 15 January 2016 and to outsource its negotiation to two groups : the Real Estate Board of New York, a powerful lobbying group of wealthy real estate developers, and to the Building and Construction Trades Council of Greater New York, an umbrella group for construction workers’ unions.
“Unfortunately, despite a good faith effort by all parties, REBNY and the Building Trades were unable to come to a final agreement on the renewal of a 421-a program that would provide good wages to construction workers across the city,” wrote Gary LaBarbera, president of the umbrella group, in a statement released publicly via the union groups’ Web site, adding that, “We remain ready to engage with all stakeholders in the weeks and months ahead to achieve our goals of creating needed affordable housing and middle class jobs for New Yorkers.”
On Friday evening, it was not possible to reach for comment an official with the Real Estate Board of New York.
A spokesperson for City Hall did not answer a request made by Progress Queens for comment.
The success of the controversial twin rezoning proposals being championed by Mayor Bill de Blasio (D-New York City) largely depended on the largess of the property tax breaks being offered to wealthy real estate developers. Now, Mayor de Blasio's real estate industry-friendly agenda is in jeopardy.
The 421-a tax abatement program has been blamed by tenant activists for unleashing gentrification responsible for mass tenant displacement and the endless upward spiral in rent costs in New York City, creating an affordable housing crisis many, in turn, claim has been responsible for the spike in homelessness and the increasingly over-crowded apartments in which tenants are forced to live in order to help pay the uncontrollable rise in rents.
For now, the tax abatement program would “remain suspended” and that “no new applications shall be accepted” until the two special interest groups reach agreement, according to a provision in the wording of the section of the omnibus bill, as note by ProPublica journalist Cezary Podkul.
The two special interest groups had been entrusted, reportedly at the urging of Gov. Cuomo, to negotiate the fate of the tax abatement program that costs New York City taxpayers approximately $1,1 billion each year. It’s unclear why, if real estate developers prized the tax abatements so much, they would not agree to some wage concessions with the umbrella union group, although, to some labour activists, it appeared that the ability of the umbrella union group to remain autonomous in its negotiations was a win in keeping unions independent from the political pressures of politicians, namely Gov. Cuomo and Mayor de Blasio, who are extremely dependent on the campaign contributions of real estate interests. In contrast, Progress Queens reported last year that some of the key tenant advocacy nonprofit groups had been unable to maintain their autonomy from pressures to support renewal of the 421-a program.
The strange circumstances leading up to the outsourcing to special interests groups of public tax policy legislation included the prominent prosecution of former New York State Assemblymember Sheldon Silver (D-Lower East Side) and former New York State Senator Dean Skelos (R-Rockville Centre) on federal corruption charges. In the criminal cases against each former legislative leader, the role of real estate development companies were prominently featured, particularly Glenwood Management. Glenwood Management has received substantial property tax abatements under the 421-a program. At the same time that Glenwood Management was lobbying to influence legislation or to maintain close ties with the legislative leaders for that purpose, the legislative leaders received financial support, either in the form of large campaign contributions, referral fees on legal work, or, in the case of former State Senator Skelos’ son, situations that led to payments of money or to assistance in finding “no-show” jobs.
The last time the 421-a program was renewed, in 2011, negotiations preferred by Glenwood Management prevailed, according to press reports of the trial testimony presented against the former legislative leaders.
Since 2011, the easy political landscape facing real estate developers has progressively eroded due to the corruption prosecutions by the office of U.S. Attorney Preet Bharara, the nation’s top Federal prosecutor in New York’s southern district.
After Gov. Cuomo made a surreptitious deal with the New York State legislature to close a corruption fighting panel in 2014, U.S. Attorney Bharara’s office launched an investigation into special legislation that provided a major real estate developer, Extell Development Company, property tax abatements worth $35 million under the 421-a program in and around the time that Extell Development Company made $300,000 in campaign contributions to Gov. Cuomo. The legislative deal to close the corruption fighting panel, known as the Moreland Commission, was thought to have ended subpoenas the panel had issued to real estate developers, seeking information about their campaign contributions. However, the U.S. Attorney’s Office continued with some of the probes originally begun by the Moreland Commission, and, in recent statements made by U.S. Attorney Bharara, some of those investigations “continue still.”
In the face of mounting criticism over the role that large campaign contributions made by real estate developers dependent on the 421-a property tax abatements, as well as the role that some lobbyists played as campaign contribution bundlers, demands were made for ethics reforms. Nevertheless, last year, Gov. Cuomo improbably defended accepting campaign contributions from real estate developers, adding that the would continue to accept campaign contributions from Glenwood Management.
Perhaps the prosecutorial scrutiny of the on-going investigations by U.S. Attorney Bharara may have had the largest role in scuttling the scandal-ridden tax abatement program. In 2014, it was reported that the U.S. Attorney Bharara's political corruption investigations were widening to include the use of court-approved wiretaps targeting lobbyists, according to a report published by DNAinfo. In a cruel twist of fate, the dazzling trial evidence presented by Federal prosecutors against former State Senator Skelos and his son, Adam Skelos, included recordings of wiretapped conversations that featured the younger Mr. Skelos using pejoratives to describe U.S. Attorney Bharara’s use of wiretaps.