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06.11.2008
Editorial: Money for Nothing
$2.4 million for Toys R' Us? New York needs to overhaul its senseless commercial tax incentive program.

Manhattan borough president Scott Stringer released a report last month naming the companies who benefit from a tax program designed to stimulate business, and it is full of the kind of red meat beloved of reporters. Many promptly questioned why Toys R’ Us is getting a $2.4 million tax benefit this year just because they are located in Times Square? And did Burberry really need a $226,328 inducement to open shop on 57th and Fifth? And why on earth would the city be supporting even more Duane Reade and CVS outlets? Stringer’s report, called Senseless Subsidies, is full of such eye-opening figures, and makes a strong argument for overhauling the Industrial and Commercial Incentive Program (ICIP), under which all of the aforementioned abatements were granted.

ICIP was developed with the best of intentions, and if revised, could be an important tool for business in New York. It is an as-of-right tax exemption and abatement program launched with the express goal of encouraging the construction and renovation of commercial and industrial properties in the city, and helping businesses that could not launch here without it. ICIP is applicable to commercial and industrial building projects all over the city, with an exclusion zone for new construction between 59th and 96th streets, and one for renovations between Murray and 96th streets. According to ICIP’s many critics, the problem is that it is so broadly applied that it may counteract some of its own policy goals. According to the report, as early as 1985 there was data indicating that 71 percent of ICIP beneficiaries would have located or stayed here regardless of the help.

Senseless Subsidies is understandably focused on Manhattan, and looks specifically at public health and small businesses. Stringer argues that tax support for chain stores can drive out local businesses, and that in areas like Harlem, air pollution and obesity are big problems, and that we shouldn’t be subsidizing gas stations and fast food outlets.

The report is based on a 2007 city-wide analysis from the New York City Economic Development Corporation whose results are damning. In fiscal year 2007, ICIP cost the city $409.5 million. All its recipients must have benefited, and some in the way that its creators had hoped, but overall, the EDC report found that between 1989 and 2004 $2.8 billion in benefits went to projects that would have occurred with or without the subsidy. When the tax revenues from these same companies are factored in, the overall net loss to the city is $1.1 billion.

The EDC and Stringer do not quarrel with the idea behind ICIP, nor do we. In an era of astronomically high commercial real estate prices, the city can and should have a hand in new business development. It expires on June 30, and we hope that the city and state will take some of the report’s many sound suggestions for refinement. As it stands, though, ICIP is too blunt and expensive a tool for the job.

Anne Guiney