Tax breaks on real estate deals for people like A-Rod cost city 900M a year

In the Press

Tax breaks on real estate deals for people like A-Rod cost city 900M a year

Juan Gonzalez
New York Daily News
02/25/2011

Yankees star Alex Rodriguez will pay virtually no property tax for a $6 million apartment he is buying on the upper West Side.

Rodriguez will be billed around $1,200 this year in real estate tax for his 3,000-square-foot, five-bedroom penthouse with spectacular views of the Hudson River.

Over the next 10 years Rodriguez and his fellow residents will continue to receive huge discounts on their tax, a city housing official said.

For Rodriguez, a full tax bill would be at least $60,000 annually, the latest city assessment records show.

A spokeswoman for Extell, the company that built the 2-year-old luxury Rushmore Towers near the West Side Highway, declined to discuss the taxes on the slugger's new bachelor pad.

But the only two penthouses that went into contract this month at the Rushmore, each of which was listed at more than $6 million, have been assessed at a little over $100 per month in taxes, one real estate expert told the Daily News.

So how is it possible that tens of thousands of ordinary city residents struggle each year with soaring tax bills for their co-ops, condos and homes, while the Yankees' $33-million-a-year star gets to pay next to nothing?

Well, Rodriguez and many other well-heeled New Yorkers have learned to take advantage of a little-known tax abatement program that has existed for decades.

The politicians and real estate insiders call it the "421A" program. It grants as much as a 98% percent tax abatement for up to 25 years to condo owners in newly built housing.

The bulk of the 421A benefit has gone to luxury housing in Manhattan, though a few reforms by City Hall and the Legislature in 2007 at least required developers to build 20% affordable housing to qualify for the tax abatement.

This year alone, the 421A program will cost our city more than $900 million in lost revenues, the Independent Budget Office says.

That's money that could prevent layoffs of firefighters and teachers. That could fund senior citizen centers and pay for after-school programs.

You haven't heard much about this, but the 421A program ended in December for any new construction. But the city's powerful real estate industry is determined to get it renewed and even get it expanded. Its lobbyists are working feverishly behind the scenes to pressure Council and lawmakers in Albany.

Brooklyn City Councilman Brad Lander has been leading the fight against that renewal.

It's too much of a giveaway to developers, Lander says, especially since there's already a glut of luxury housing in this town.

The developers want to link any extension of rent stabilization laws for tenants, which the Legislature must vote on by June, to a deal on extending the 421A tax abatement for builders.

The industry hopes Gov. Cuomo, who made a name for himself a long time ago as an advocate for affordable housing, will take their side.

In so many ways, big and small, the minority who have the big money keep trying to get government to give them more financial breaks at the expense of the rest of us.

"Where's the fair share if people who have paid millions of dollars for an apartment get away with paying no real estate taxes, when people in co-ops are being slaughtered?" said Bayta Lewton, of the Coalition for a Livable West Side.

Even before the pennant race begins, A-Rod has become the poster boy in another race - to end these tax abatements that have run amok.

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