A Discussion
Original Intent

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Encourage needed upgrades for existing
housing
Reduce operating costs for highly subsidized
projects
Stimulate needed residential construction and
related economic activity
Hold city expenditures to the minimum
needed to reach these objectives


1950’s
Encourage needed upgrades for existing
housing


1960’s
Reduce operating
costs for highly
subsidized projects


1970’s
Stimulate needed residential construction and
related economic activity


1990’s
Reduce operating
costs for highly
subsidized LIHTC
projects


Many places have PILOT programs
DC, Philadelphia, Seattle, Cincinnati have as
of right programs
◦
◦
◦
◦
May cap total amount awardable in a year
May require affordability
Usually 8-10 year abatement period
Some programs are highly targeted (e.g. SRO
program in DC)
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
Usually require a threshold investment
May require affordability component
◦ Seattle – 20% of units “affordable”
The Context
Mortgage Recording
Real Property
$414
Transfer
Other,
$788
$3,069
Commercial Rent
$603
Sales
$5,528
Real Property
$16,860
UBT
$1,675
Banking Corporation
$1,336
General Corporation
$2,300
Personal Income
$7,608
Source: Fiscal Year 2012 Adopted Budget
Commercial
Industrial
$755.3
Individual Assistance
$674.3
Other
$18.8
Other Residential
All Residential
$1,527
$252.6
420-c
$57.0
J-51
$256.7
421-a
$911.6
Article 11
$49.1
Source: Annual Report on Tax Expenditures Fiscal Year 2011
420-c
12,000
Article 11
37,164
421-a
583,776
-
200,000
400,000
Units with Tax
Exemptions
$57
Article 11
$49
421-a
124,267
J-51
420-c
600,000
800,000
$912
J-51
$257
$0
$200
$400
$600
$800
$1,000
Annual Dollar Costs of
Exemptions (in millions)
Source: Annual Report on Tax Expenditures Fiscal Year 2011 and DOF Data on J-51
In FY 2011 $911.6 million in Tax Revenue was Foregone in 421-a
What Year Did Exemption Starts?
1988-2000
‘02
‘03 ‘04
‘05 2006
2007
2008
2009
2010
2011
‘01
$0
$200
$400
$600
421-a Tax Expenditure,
in Millions
$800
$1,000
$250
$200
$150
$100
$50
$0
Source: RGB 2011 Income and Expense Study

Talked to 28 industry and government
leaders about,
◦ Objectives and effectiveness of programs
◦ Administration of programs
◦ Practical issues

Many old tax incentive programs designed to
take advantage of different state and federal
programs
◦
◦
◦
◦

Article
Article
Article
Article
2 for Mitchell Lama
5 for federal programs
4
16/UDAAP
These are not growing and slowly fading out
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Is this still a valid objective?
◦ New variations
 Energy efficiency
 Preserving at risk buildings
 Preserving affordability

J-51
◦ Is it too complicated?
 Processing takes too long
 Approval amount subject to too much variation
◦ Does the Roberts decision make this program more
“efficient” going forward

J-51
◦ Is the term long enough?
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
Is this a valid objective of public policy?
Does the incentive generate construction that
would not otherwise occur?

421-a
◦ Panelists said current tax rates are a significant
barrier to new construction.
◦ Could a reformed tax policy for new rental housing
achieve the same objective more efficiently?

421-a
◦ Does the economic value of the incentive go to the
seller of the land or to the project?
◦ How can we insure it goes to the project?

Should the 421-a link to rent stabilization
continue?
◦ Does the Roberts decision make these programs
more “efficient” going forward?

In general, do the tax incentives match the
term of affordability restrictions of the
projects?
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Article 11/ 420c
Generally seems to be working
Possible changes
◦ Should one program go the Council and the other
be as of right?
◦ Could Article 11 extensions be approved without
Council approval?

Are there new priorities that should be
brought into the tax incentive process?
◦ Over Mortgaged buildings
◦ TPT projects
◦ Preserving former Section 8 and Mitchell Lama
projects
◦ Energy efficiency
◦ Preserving affordability