Hollywood Boonddoggle

 

Crain's New York

New York’s newly expanded tax credit for film productions is a “net negative” that fails to give taxpayers a return on their investment, even as state leaders have continued pushing to expand it, according to a new study commissioned by the state itself.

New York’s Film Production Credit was grown in last year’s state budget to cover as much as $700 million in costs annually for film and television productions that opt to locate in the state, forgiving 30% of eligible costs for each movie and show. Lawmakers, at the urging of Gov. Kathy Hochul, also extended the program through 2034 — despite longstanding complaints from watchdogs that the incentive may not achieve its stated goal of spurring economic activity and attracting more well-paying jobs.

Those claims are bolstered by the new study by the financial advisory firm PFM Group, which was commissioned by the state’s Department of Taxation and Finance to look into each of New York’s economic development tax credits. The study was required by a 2022 state budget provision and was put together over the course of 2023.

All told, New York gets back just 31 cents for every $1 it invests in film productions through tax breaks, the study concludes after considering the program’s pros and cons. The program has cost the state some $5 billion in the last decade, making it the largest of New York’s many tax incentives.

“Based on an objective weighing of the costs and benefits, the film production credit is at best a break-even proposition and more likely a net cost to NYS,” the authors wrote.

As critics have long argued, the study found that much of the filming activity funded by the credit would have happened in New York regardless, given its existing workforce and infrastructure. And although the productions do attract high-paying jobs, the tax credit’s unlimited duration means it functions more as an “ongoing subsidy” rather than a one-time incentive that could wind down after establishing a steady film industry in the state.

Indeed, many of the productions that continue receiving annual tax credits are long-running television series filmed in New York for years — undercutting the program’s stated goal of attracting new investments. And even the job-creation claim is “inconclusive at best,” the study found. After New York launched the credit in 2004, film industry employment remained stagnant for years until increasing in 2010, and its share relative to the nationwide market has since dropped.

A spokesman for Gov. Kathy Hochul said the office is reviewing the report but pushed back on its conclusions, pointing to other studies that found better results. Among them was a study commissioned by the Empire State Development Corp. which found that New York’s state and local governments reaped a combined $1.70 for every dollar spent on the film tax credit in 2021 and 2022 — although the state by itself (omitting local governments like New York City) still lost out overall, the report found.

“New York's tax credits and incentive programs are critical to growing the state's economy, boosting innovation, and creating good jobs, which is why the Legislature approved them in the first place, and Governor Hochul will continue working with members to improve the programs to maximize benefits for New Yorkers,” spokesman Justin Henry said.

Hochul’s office pointed to the high wages available in film and TV jobs, which often employ people without college degrees. New York has also lost productions to other states that boosted their incentives, such as the 2022 film “White Noise,” which filmed in Cleveland after “extensively scouting New York state,” Hochul’s office said.

The PFM study found that other “qualitative” factors cited by boosters of the tax break are similarly murky, like the exposure that New York state and city might enjoy as a result of all the films and shows set here. Many of those productions, like “Law & Order,” hardly portray New York in a fully positive light, the authors note.

The state’s expansions to the program last year also expanded the credit to cover “above-the-line” salaries for actors, directors, producers and writers, in addition to the “below-the-line” jobs, such as hairdressers and set builders, that had been covered before. Hochul, who pushed for the expansions, argued it would lure more productions to the state and boost an industry that serves as a major union employer.

In the end, the study concludes, the strongest argument for the tax credit may be that it works as a “defense mechanism” — deterring productions from choosing rival states like California and Georgia that offer their own incentives.

 

Movie and TV production tax credits brings diminished results for local jobs

Times Union

  Billions of dollars to subsidize film and television projects in New York hasn't had a statistically significant impact on employment in the entertainment industry, according to a new study.

University of Southern California associate professor Michael Thom conducted a peer-reviewed analysis of a handful of state's that offer the bulk of motion picture incentives in the country and found that — when controlled for economic factors such as the growth in the labor market — there is "not much" of a link between job creation and the lucrative credit offered in New York, which was created in 2004.

The study represents a continuation of scholarly analyses questioning whether the refundable tax credit, which was recently extended by state lawmakers and Gov. Andrew M. Cuomo, is a prudent investment.

Thom determined that employment in the entertainment industry, which increased in New York by more than 60 percent from 2004 to 2017, based on federal jobs numbers, was largely the product of trends in the overall economy and national growth in the industry. He also found a low correlation between the credit and wages paid in the below-the-line jobs that benefit from the credit.

“It’s not the incentives, its simply the normal ebb and flow of the labor market," Thom said.

This conclusion is vociferously disputed by organized labor groups working in film and television, who point to their own studies and anecdotal evidence that the credits have led to a flourishing sector with wide ripple effects.

Not the sharpest knife in the drawer

From a Bill de Blasio op ed in the Daily News:

They didn't pick Texas, which trumpets its low taxes.

They didn't pick Maryland with its $8.5 billion in incentives, or even New Jersey with its $7 billion.

In the end, Amazon came to New York.

When I took office, the 20-year knock on New York City's progressives was that our love of big government, the labor movement and high taxes would send businesses running.

We ignored the critics, and went on to pass paid sick leave, a higher living wage, a $15 minimum wage and a fair work week.

And this is where Amazon — the world's biggest online retailer — decided to be: in high tax, pro-union, high-regulation New York City. The 25,000 jobs coming to Long Island City in the coming decade represent the single biggest employment boost in the history of our city or state.

You can continue on and read the rest of this delusional bullshit, but let's point out that the type of workers Amazon is planning to hire will not be subject to anything he mentioned and will not be union. And the only reason you got them to come here was because you gave them tax incentives, a helipad and there is a workforce here that can support what they need. But we enjoy you reveling in the fact that this is a high tax state as if that's a positive.

Cuomo decision allows Claire to rezone Flushing waterfront

From QNS:

A 62-acre portion of land on the Flushing waterfront may soon see substantial redevelopment after receiving a special designation from the state.

Governor Andrew Cuomo announced the Brownfield Opportunity Area (BOA) designation for an area of land in the western area of downtown Flushing, bounded to the north by Northern Boulevard, to the east by Prince Street, to the south by Roosevelt Avenue and to the west by Flushing Creek and the Van Wyck Expressway.

The Flushing Willets Point Corona Local Development Corporation (FWCLDC) presented the application for the BOA, which is described as a vacant, underdeveloped and/or polluted area where, under the program, economic environmental conditions are examined and redevelopment opportunities are identified in an attempt to attract public and public investment.

The designation opens up several benefits for future developers, including support from state municipalities and a potential for tax credits.

“I thank our entire board for its support during this process and now look forward to the next phase which will include a formal ULURP application to implement the zoning recommendations included in our nomination study,” said Claire Shulman, president and CEO of the Flushing Willets Point Corona LDC said in a letter to the LDC’s board. “The LDC thanks the Department of City Planning for its stellar work on our nomination study and environmental assessment report. Our staff at the LDC also deserve thanks for their hard work in overseeing and ensuring completion of this critical phase of our work. The LDC will apply for funding for the next phase of our work (implementation) as soon as it becomes available from the state.”

Laying down the law

From the NY Post:

The city has suspended a lucrative tax break from more than 1,700 property owners it says aren’t following the rules – a move that could cost them $66 million this year, officials said Friday.

The owners facing removal from the “421-a” tax abatement program failed to file a mandatory Final Certificate of Eligibility.

Officials said 1,788 properties — from three-family homes to multi-family buildings — didn’t register in time, so the city suspended the breaks. The non-compliant properties have a combined 11,022 apartments.

City officials said they’ll reinstate benefits to owners who comply by May 1.

City gives tax credits for hotel building

From Crains:

Little recent attention has been paid to the tax breaks, which have helped developers build a wave of hotels in onetime industrial neighborhoods—a pattern that Mayor Bill de Blasio has decried for pushing out manufacturers.

The city’s Industrial and Commercial Abatement Program dates back to the 1970s. ICAP was intended to spur landlords to invest in their real estate when few were doing so, and to attract and strengthen manufacturers, like those that once thrived in Williamsburg.

The program nearly zeros out property taxes for as long as 15 years and discounts them for up to a decade beyond that. The William Vale, for instance, used ICAP to wipe out about $1.7 million of its roughly $1.8 million recent annual tax bill, according to the city’s Independent Budget Office. The Williamsburg Hotel sought the benefit but missed a deadline to apply; sources said the developer is still seeking to qualify for the program.

Ironically, the incentive has helped to elbow out some of the businesses it was created to preserve.

“It appears to have fostered hotel growth in areas like Gowanus, Sunset Park, Williamsburg and other neighborhoods that were once primarily industrial,” said Doug Turetsky, chief of staff at the IBO, which has studied ICAP and its predecessor, the Industrial Commercial Exemption Program.

Hotel development has spread rapidly into those areas as tourism in the city has set record highs year after year.

Because hotels such as the Wythe tend to be more lucrative than industrial and other commercial uses in many areas of the Bronx, Brooklyn and Queens, hotel developers can afford to pay more for land. Also, unlike retail and residential uses, hotels generally have not needed special permission from the city to be in areas zoned for manufacturing. The result has been that hotels have been supplanting manufacturing and industrial businesses that once populated Williamsburg, Long Island City and similar areas.

Real estate investment firm Madison Realty Capital has estimated that 10 million square feet of industrial space has been converted to hotels or other uses in the city during the past decade. The tax break has fueled that.

Flushing landlord cheated tenants, city

From the Village Voice:

One stormy evening last summer, in a corner of a playground on Union Street in Flushing, a small crowd gathered. They were residents of 140-35 Franklin Avenue one block to the south, and they were there to hear Aaron Carr, a former state legislative aide who now runs the nonprofit Housing Rights Initiative, explain how their landlord had been swindling them out of hundreds of thousands of dollars in rent money.

Their building, a six-story apartment complex typical of this low-rise immigrant neighborhood, had turned up during a trawl by HRI staffers through city tax records, Carr explained. The building’s owner, Hewlett Associates, had filed with the state in July 2007 for a J-51 tax abatement, a rebate available to landlords who upgrade their buildings. By law, anyone getting J-51 money for a building must agree to keep it rent-regulated as long as it receives the tax break; Hewlett, however, had recently filed a property tax form with the New York City Department of Finance that casually listed its J-51 benefits while listing only 14 rent-stabilized units — in a building of 113 apartments.

Appeals court grants homeowners a water tax credit

From the Daily News:

New York’s top court gave its legal blessing Tuesday to Mayor de Blasio’s plan to give homeowners a $183 credit on their water and sewer bills.

In a 5-2 decision, the Court of Appeals overturned two lower court rulings and declared the Water Board can give the credit to a select group of customers.

“It is clear from the governing statutes that water and sewer rates may be determined in accordance with public policy goals and not only economic goals,” Judge Eugene Fahey wrote for the majority.

“The court’s decision clears the way for the Water Board to provide welcome financial relief for more than 664,000 New York homeowners,” de Blasio said.

Forest Hills empty storefronts are bad news

From CBS 2:

There are many empty storefronts in the main shopping district in Forest Hills, Queens. They stand out like the empty space left when a tooth has been pulled, and business owners say it hurts just as much.

A staggering increase in the number of vacant storefronts is the city’s latest economic crisis, with many wondering why nothing has been done. According to a new report by the City Council, 600,000 people are employed by small retail businesses and restaurants in the city.

This made a City Council hearing on vacant storefronts all the more disheartening, Kramer reported. Members of the De Blasio administration were unable to tell Councilman Dan Garodnick and others what’s going on and what they’re doing about it.

Councilwoman Karen Koslowitz, who represents Forest Hills, says the city has to do something.

“We have to look at each neighborhood to see what is going on, and why is this happening, and also have conversations with the landlords,” she said.

Meanwhile, two state lawmakers are taking action, introducing legislation to create a property tax exemption for landlords who offer mom and pop stores a long-term lease with fair increase to help them stay in business.

Developers exploit low-income housing loophole

From the Wall Street Journal:

Consider the Low Income Housing Tax Credit, created by the 1986 tax reform. This $9 billion credit masquerades as an antipoverty program, but it mainly subsidizes developers, investors and the financial industry.

To stimulate low-income housing construction, the federal government allots a share of tax credits to the states, which dole them out to selected developers. The credits cover part of the construction costs of multifamily housing projects. The developers must cap rents for a share of the units, so the benefits of the tax credit are meant to flow to tenants in the form of lower rents. Yet the developers usually sell the credits to banks and investors, often using syndication companies as intermediaries. The investors, developers and middlemen—not poor families—end up grabbing most of the benefits.

421a didn't do what it was supposed to do

From the Daily News:

The city lost out on as much as $2.8 billion in wasted tax breaks for condos under a program meant to spur housing development, according to a new study by a budget watchdog group.

The Independent Budget Office estimates that $2.5 to $2.8 billion of the property tax breaks given out over a decade as part of the 421-a program were wasted because they benefited homeowners rather than advancing the program’s stated goal of encouraging housing development.

New 421a regulations will cause NYC to lose a lot of $

From DNA Info:

Developers have warned that Mayor Bill de Blasio's plan to build 80,000 units of affordable housing would be in jeopardy without the state's 421-a tax break. But a proposed update to that law could actually cost the city billions of dollars in what advocates describe as a "wasteful giveway."

Under a new 421-a agreement up for approval by state lawmakers, the Real Estate Board of New York trade group that represents developers says it needs the program to put shovels in the ground for affordable and market rate rentals.

But an analysis from the Alliance for Tenant Power — a coalition of housing, community and legal service groups — said the new program would cost the city $2.4 billion a year in lost tax revenue.

That’s double the $1.2 billion the program cost the city in 2016, which only yielded about $100 million a year worth of affordable housing, the group said.

Cuomo brokers 421-a deal

From Crains:

Gov. Andrew Cuomo has brokered an agreement between the city's real estate lobby and the building trades union to revive 421-a, a controversial property tax break for developers that the city and many in the industry believe is essential for the construction of rental housing.

"The deal reached today between these parties provides more affordability for tenants and fairer wages for workers than under the original proposal,” said Cuomo. "While I would prefer even more affordability in the 421-a program, this agreement marks a major step forward for New Yorkers."

The deal was reached between the 100,000 member Building and Construction Trades Council of Greater New York and the Real Estate Board of New York. Key to the agreement is a wage floor for certain construction projects. The revamped program would require average wages of $60 an hour including benefits for construction workers on Manhattan projects containing 300 or more rental units. The average wage for similar sized projects along waterfront Brooklyn and Queens communities would be $45 an hour.

"We applaud Gov. Andrew Cuomo and his administration for bringing all parties together to finalize an agreement on an important public policy that will allow for the development of critical affordable housing, and establishes wage standards for construction workers in New York," said Gary LaBarbera, president of the Building and Construction Trades Council.

Cuomo had previously signed a 2015 law that extended the tax break and increased the amount of affordable housing that would be required in exchange for receiving it. But he held off putting it into place until developers and the construction trades union agreed on how much laborers would be paid at sites getting the tax break. The two sides were originally supposed to reach a pact by January, but negotiations stalled and dragged on until Thursday’s announcement.

We may have given away tax breaks for nothing

From the Times Ledger:

The city has been giving tax breaks to developers without tracking how effective their projects have been for economic development, according to a new report.

Last Thursday, the City Council’s Committee on Finance released a report on development tax expenditures, with recommendations on how to evaluate their effectiveness. The report, published by the Council’s Task Force on Economic Development Tax Expenditures, calls for the establishment of a standardized and regular evaluative process to improve transparency and the Council’s oversight.

“The city gives billions in economic development tax incentives each year, and we do not know how well they work. We should know their effects to ensure the public is getting the best bang for its buck,” said City Councilwoman Julissa Ferreras-Copeland (D-East Elmhurst), who is the chairwoman of the Council’s Committee on Financing. “I am proud of the work the Task Expenditure Task Force has done, which will help make the government more transparent and prudent. I look forward to working with the Speaker and my colleagues to develop a process that will allow us to evaluate these programs, understand their effects, and make better decisions about our scarce resources.”

The city funded $7.7 billion towards tax benefits aimed at spurring economic growth and development in Fiscal Year 2016; however, no public process exists to evaluate whether the benefits achieved their stated goals.

Time to scrap the filming industry's tax credits?

From NY1:

The tax credt program was created so New York could compete with places like Canada and Louisiana, which were luring productions with tax incentives.

New York's credit amounts to 30 percent of most production costs, excluding actor, director and producer salaries.

The program has exploded from $25 million in credits a dozen years ago, to $420 million a year today.

Economist E.J. McMahon of the Empire Center for Public Policy believes the program should be scrapped. "This is a scam,” he says.

He argues that many productions getting credits would shoot in New York without them.

Shows like Saturday Night Live, which began in New York City 41 years ago. It is hard to envision the show being produced anywhere else. Yet it got a $12 million state tax credit for its 2013-14 season, the most recent records show.

“All of the claims about economic impacts and job creation are based on the premise that we would have nothing at all without the credit, which is simply ridiculous,” says McMahon.

Even a commission formed by Governor Cuomo in 2013 suggested scaling back the program, saying it didn't appear to pay for itself, a finding state officials dispute.

Critics like McMahon say the industry's glamour and its growing political clout help to protect the credit program.

NY1 found that giant entertainment companies like Fox and CBS have donated more than $900,000 to state political campaigns and committees in seven years. Officials argue if the tax credit goes, the studios will follow.

421-a not renewed by Albany

From DNA Info:

Albany wrapped up its last official session of 2016 on Thursday, without renewing or replacing the state's controversial 421-a program — a tax break for certain newly-built residential developments that expired in January.

Lawmakers were slated to reconvene in both the Senate and Assembly early Friday, but it was still unclear Friday morning whether they'd resolve the issue before adjourning for the year.

Without a tax break program, developers warned that rental housing development is likely to shrink and put a major dent in Mayor Bill de Blasio’s plans to build 80,000 new units of affordable housing over the next decade.

State lawmakers this week proposed a replacement bill that sets new wage floors for construction workers on projects receiving the tax breaks. And while the real estate community seems placated, construction workers and housing advocates say the new plan doesn't do enough.

Both sides agree though that 421-a had been a large drive of rental development in the city, and without it, some sort of subsidy would be needed to replace it.

On Wednesday, the mayor criticized the existing program for wasting taxpayer dollars to subsidize luxury housing.

Experts say the loss of 421-a could also greatly hinder the mayor's recently-approved Mandatory Inclusionary Housing plan, which largely relied on the tax breaks to make it easier for developers to build housing that includes affordable units.

2 huge Astoria projects may never happen

From the Queens Tribune:

But was this really done right? No less than a week after the ground breaking of Hallets Point affordable housing, the developer said that most of the project is effectively on hold because of the expiration of the tax break known as 421-a, according to reports.

Jonathan Durst, the president of The Durst Organization, was quoted in a NY1 article saying, “We’re cleared with 421-a on the first phase, but if 421-a becomes unavailable, those remaining four or five phases won’t be built.”

The 421-a tax break creates a real estate tax break and property tax break in exchange for providing a significant amount of affordable housing.

Jordan Barowitz, vice president and director of external affairs for The Durst Organization, confirmed Durst’s statement saying that the first phase of the project is under an old 80/20 housing program, which the Housing Finance Agency offers as a tax exempt financing to multi-family rental developments in which at least 20 percent of the units are set aside for very low-income residents by using funds raised through the sale of bonds.

Barowitz explained that the project can not go through until this issue is fixed because there is currently no plan covering the next few phases.

Another affordable housing project that was supposed to be under the 421-a tax break is Astoria Cove. While there have been rumors that the Astoria Cove project is no longer in the works, Alma Realty – the developers of the project – say that the project is still moving forward and the land will continue to be used for Astoria Cove. There is still no date on when the project will be completed.

Mass transit commuters to save more $

From Crains:

Tucked into the massive federal spending and tax-cut agreement reached by congressional leaders this week is a measure that will save New York mass-transit commuters hundreds of dollars apiece each year. Employers will save as well.

The provision nearly doubles the maximum amount of pre-tax income they can use to pay transit fares. Currently $130 a month, the limit will be raised to match the amount that people who drive to work can spend in untaxed earnings on parking fees—$255 per month in 2016.

Moreover, just like the parking benefit, the transit break will be permanent and will rise annually with the cost of living if Congress passes the mammoth bill as expected.

The biggest beneficiaries will be high earners who regularly take the Long Island Rail Road or Metro-North and spend at least $255 a month on fares. By participating in a commuter-benefit program such as TransitChek offered by their employers, they will be able to spend $3,060 annually in untaxed income on fares, up from $1,560—yielding a tax savings of about $1,200 instead of $625 for someone in the highest income-tax bracket.

The reduction in taxable income lessens employers’ payroll taxes, such as Social Security and Medicare. It adds up to 7.65% of what their workers spend in pre-tax money. It is nearly always greater than the $5 to $7.50 per employee per month that businesses pay a third party, such as WageWorks, to administer the program. But businesses with low participation rates among employees could end up paying more than they save.

Tenants not benefiting from 421-a

From Brownstoner:

Despite some of the most extensive rent regulation laws in the nation, a bureaucratic entanglement is leaving New York City tenants at the mercy of developers’ illegal and unpunished abuse of tax breaks, according to a report.

The developers and landlords of several glassy new luxury condo towers have been swindling residents out of thousands of dollars each month by illegally increasing rents beyond regulated caps, found a new investigation by ProPublica and WNYC.

In luxury apartment buildings like Williamsburg’s The Driggs, pictured above, generous 421-a abatements give property owners massive tax cuts in exchange for designating a certain number of those apartments rent-stabilized. The Driggs received a 93 percent property tax reduction this year through the program, from $678,000 to $47,000, according to ProPublica.

The city hands out more than $1 billion in tax breaks every year through 421-a, yet ProPublica found many developers are not carrying through with their part of the deal. The government does little to ensure landlords are not overcharging tenants, the report said.

Forget what you heard about the economic benefits of the film industry and recycling

From the Wall Street Journal:

Proponents argue that film tax credits create well-paying jobs for local residents. Some even suggest that the incentives pay for themselves by boosting the economy and increasing government revenues. The Motion Picture Association of America claims: “Pure and simple: film and tax incentives create jobs, expand revenue pools and stimulate local economies.”

But real life is no Hollywood dream. Nearly every independent study has found that these arguments are more fiction than fact. The left-leaning Center on Budget and Policy Priorities put it best in a 2010 report: “State film subsidies are a wasteful, ineffective, and unfair instrument of economic development.”

From the NY Times:

In New York City, the net cost of recycling a ton of trash is now $300 more than it would cost to bury the trash instead. That adds up to millions of extra dollars per year — about half the budget of the parks department — that New Yorkers are spending for the privilege of recycling. That money could buy far more valuable benefits, including more significant reductions in greenhouse emissions.

It would take legions of garbage police to enforce a zero-waste society, but true believers insist that’s the future. When Mayor de Blasio promised to eliminate garbage in New York, he said it was “ludicrous” and “outdated” to keep sending garbage to landfills. Recycling, he declared, was the only way for New York to become “a truly sustainable city.”

But cities have been burying garbage for thousands of years, and it’s still the easiest and cheapest solution for trash. The recycling movement is floundering, and its survival depends on continual subsidies, sermons and policing. How can you build a sustainable city with a strategy that can’t even sustain itself?