Tuesday, August 6, 2013

NYC Developers Subpoenaed by Anti-corruption Committee

The Moreland Commission is probing possible links between campaign donations from developers and huge tax breaks they were granted on luxury apartment towers they are building. Subpoenas were sent to several high-profile Manhattan developers involving projects at 30 Park Place, One57 and 520 Fifth Avenue. Buildings in high density neighborhoods like the financial district and midtown, where the buildings are located, are normally disallowed such credits.

The Wall Street Journal has reported the names of three of the firms: Silverstein Properties, Extell Development and Thor Equities, all of which had been served concern ultra-luxury towers they are either building or planning to build.

Fisher Brothers was also subpoenaed, in its case for a residential tower rising at 86 Trinity Place, the former home of the American Stock Exchange. Friedman Management was also subpoenaed, in its case for a project it is building at 113 Nassau Street, also in lower Manhattan.

At issue is the inclusion of the five buildings in state legislation that will allow them to receive negotiable certificates to substantially lower their tax bill. Buildings in high density neighborhoods like the financial district and midtown, where the five buildings are located, are normally disallowed from using such credits.

The Moreland Commission, an investigatory panel put together by Gov. Andrew Cuomo late last year to uncover state corruption, plans to examine whether campaign donations to lawmakers in the state assembly and senate could have swayed them to make the exception for the five buildings, where apartment units will sell for millions of dollars each.

The big tax breaks at properties like One57, whose penthouse sold for a whopping $90 million, has raised eyebrows among government watchdog groups.

Susan Lerner, the executive director of Common Cause New York, which presented data on campaign giving to the Moreland Commission, said there has been a pattern of giving from the city's powerful real estate industry to far-away state legislators. The contributions, she said, allow the industry to sway officials who can adopt the industry's position without having to suffer the potential consequences of that advocacy at the polls.

"Our research shows that 75% of the contributions from the real estate industry is made to state senators and legislators outside of the city," Ms. Lerner said.

In a report, Common Cause tabulated contributions by the Real Estate Board of New York and its affiliates to various campaigns across the state. The good-government group noted that the donations went largely to candidates outside of New York City, mostly rural and suburban Republicans, who dilute or block legislation that runs counter to real estate's interests, such as pro-tenant rent-regulation bills.

Others have argued that developers like Extell Development were right to be awarded the tax benefits. The company broke ground on One57 in 2009 during the depths of the downturn and when it was uncertain whether the development would be a financial success. It created much needed construction jobs at the time and was at the forefront of residential development that has rebooted the city's residential development pipeline.