Crain's New York Business

REAL ESTATE

The full impact and extent of the banking crisis is still being sussed out, but one thing that already seems clear is

Banking crisis could further damage the city’s real estate market The city and the state dish out a combined $10 billion in tax breaks and subsidies every year. The public payoff is murky at best PAGE 13 PLUS Aggressive lobbying keeps tax breaks in place for years PAGE 17

that it signals more bad news for a local real estate market still struggling to bounce back from the pandemic.

One of the biggest question marks came in the wake of the highly touted acquisition of Signature Bank by the New York Community

Bancorp division Flagstar. e transaction failed to include at least one giant piece of Signature’s portfolio: its nearly $50 billion in commercial real estate and multifamily loans.

NYCB CEO Tom Cangemi was asked about

this multiple times on a March 20 conference call discussing the deal. He essentially said the company passed on a chance to increase its real estate exposure at little to no cost

TAX INCENTIVES VISIT CrainsNewYork.com for more on the city’s zombies, including interactive graphics. See DAMAGE on page 22

City’s artificial intelligence companies bucked the VC downturn, raised a whopping $483.6M in 2022

BY CARA EISENPRESS

The promise of generative artificial intelligence to drive business productivity and solve thorny problems has powered a speedy pickup of investment and deals in the space, according to data released by Pitchbook, and companies in the city are picking up a fair share.

Generative AI companies in New York raised $483.6 million last year over 28 funding rounds. That’s a seismic increase from the $41.1 million raised in 2018 across eight

San Francisco–based OpenAI brought the tech to wide attention when it released ChatGPT, a chatbot so accomplished that use cases began to proliferate. Programmers are using ChatGPT to research and write code, and students leverage the tech to do their homework. Publishers almost immediately replaced some writers. Recently OpenAI released an updated version: GPT-4. Engineers have been at work on the technology for 25 years, but few products have been released to the public, and none have had the popularity and promise of OpenAI’s chatbot.

VENTURE CAPITAL FIRMS PUT NEARLY $10 BILLION INTO THE INDUSTRY IN ThE PAST TWO YEARS

funding rounds, especially as large venture capital rounds continue to cool because of shaky market conditions.

Across the country, venture capital firms put nearly $10 billion into the industry in the past two years, Pitchbook found.

Generative AI is technology that can learn as it goes. But unlike tools that simply learn to respond to more and more complex prompts, generative AI tools actually create new, original work. Late last year

EVENTS CALLOUT MARCH 29

FORUM: LIFE SCIENCES

The city has invested deeply in life science infrastructure, such as laboratory space and incubator programs, to compete with heavyweights including Boston and San Francisco. The approximate $1 billion in investments have thus far paid dividends. But despite the windfall of investment, the industry still faces headwinds to attract the top talent, secure enough space and endure a volatile public. Crain’s panel will bring together stakeholders representing the public and private sectors to discuss how the industry can weather the storm, how academic institutions’ innovation labs and research spaces are fueling major discoveries in the sector, what real estate clients are looking for in lab space in New York City, how the life sciences present an opportunity for sustainable economic growth and workforce development, and which neighborhoods are showing promise as future life science hubs.

Time: 8 to 10 a.m.

Location: 180 Central Park S.

CrainsNewYork.com/marchforum

Though the space is undoubtedly trendy, it is finding a path to commercialization fast. Pitchbook estimates the market will be worth $42.6 billion by year’s end and will hit $98.1 billion by 2026.

Part of the success of the technology so far comes from partnerships between AI tools and large firms, such as Microsoft, which has committed $10 billion to OpenAI and incorporated ChatGPT to improve its Bing search engine. The Seattlebased software giant has taken an undisclosed financial stake in New York City–based Paige, which uses artificial intelligence to identify the pathology of cancer based on slides of patients’ tissues. Alphabet, Google’s parent company, put $400 mil-

lion into Anthropic, which has created what it says is a safer chatbot than OpenAI’s. (Sam BankmanFried also invested.) Last week Google debuted Bard, its generative chatbot, for testing by external users.

The speed of adoption has been unheard of, wrote Ali Javaheri and Brendan Burke, authors of the Pitchbook report. “ChatGPT reached 100 million monthly active users faster than any technology productivity app at two months,

surpassing TikTok’s nine months to achieve the same feat,” they wrote.

The top rounds

Financial District–based Asapp, a customer experience company that automates call centers, raised two of the top three local rounds in the past several years. In May 2020 the company closed a $185 million round. A year later it brought in $120 million. Paige is also at the top in terms of fundraising, bringing in $150 million in July 2020 and $125

million in March 2021. The most recent company to fundraise was Runway, a multimedia and design software automation company that can generate images and video content; it brought in $50 million in December.

Two Sigma is at the top of the heap among city firms funding the boom, followed by Remarkable Ventures, HBS Alumni Angels New York, the Partnership Fund for New York City, Coatue Management and Betaworks Ventures. ■

First Republic’s future could lie in serving low-income communities, analyst says

BY AARON ELSTEIN

First Republic’s future remains up in the air days after it was reported that Jamie Dimon was leading discussions among banks to help out the ailing lender a second time.

The San Francisco–based bank has hired Lazard to advise it on the wisest course of action, which could include raising capital, shedding assets or even an outright sale. Its stock trades for about $12 a share, down from $120 when the banking panic began a few weeks ago, and analysts believe First Republic depositors withdrew about half their money after the failures of Silicon Valley Bank and Signature Bank.

Like those two, First Republic held a lot of deposits that exceeded the Federal Deposit Insurance Corp.’s $250,000 insurance limit.

A $30 billion infusion from JPMorgan and other big banks didn’t end the crisis of confidence. While Wall Street awaits a solution,

some are speculating that First Republic will emerge as a very different bank. It may even convert from ser ving high-net-worth clients to focusing on the poor.

That idea was introduced in a recent report by analyst Timothy Coffey of Janney Montgomery Scott, a firm that specializes in following small and midsize banks.

He observed that the last time JPMorgan, Bank of America and others rescued an ailing bank was in 2021, and the lender was Broadway Financial, which serves low- to moderate-income communities in Los Angeles. In 2011 Goldman Sachs and other big New York banks teamed up to rescue a similar lender, Harlem-based Carver Federal Savings.

Coffey said one alternative is for the lender to become certified as a community-development financial institution. The mission of CDFIs is to provide access to financial services to low-income communities, a clientele completely different from First Republic’s ultra-high-

net-worth audience. But becoming a CDFI would make the bank eligible for capital investment from the U.S. Treasury’s Emergency Capital Investment Program, which is providing $9.5 billion in capital to CDFIs. Carver is a CDFI.

It would admittedly be a huge change. Essentially the old First Republic would be gutted. Its clients

would leave for JPMorgan and other big institutions, and its banking charter would be put to new use. First Republic doesn’t seem to have many good alternatives. Coffey warned in a report that by replacing outflows with borrowings and higher-cost deposits, the bank faces a drop in estimated earnings of up to 93%. ■

This startup wants to use AI to maximize your tax refund

Muse Tax, based on the Upper West Side, leverages technology to plan personalized tax strategies

The upstart: Muse Tax

There are many digital services that can calculate how much you’ll owe the IRS on April 15. But what can you do to avoid paying so much next year? For that sort of guidance, taxpayers may pay an accountant $2,000 or more for a custom plan. But one city startup says it can dramatically lower the time and cost of tax planning by using arti cial intelligence.

Muse Tax, an Upper West Side out t founded a year ago by two certi ed public accountants, has developed AI-powered software that analyzes tax returns.

As do existing services on the market, it suggests deductions and exemptions to immediately lower your current bill. But Muse takes things one step further. It also suggests strategies you can take in the year ahead to lower your tax bill going forward. If a taxpayer owns a business and reports a lot of Schedule C income, for example, Muse might suggest forming an S corporation to shield some of that income from taxation. If the taxpayer has children, the rm might suggest starting a 529 plan so that money set aside for education can grow tax-free.

gate the complexities, such as legal and loan issues, associated with buying a home. Nestment co-founder and CEO Niles Lichtenstein says that integrating Muse’s tech will enable the platform to calculate the tax implications or savings for each individual in each co-buying group. “It forti es our mission around having the tools and resources available so people can make informed decisions,” he says.

Muse says it has also struck pilot test agreements with several banks and nancial advisory services.

Among the investors contributing to the startup’s $350,000 in preseed funding is Jordan Fliegel, managing director of accelerator Techstars NYC. “AI is a super hot space, and tax returns are a space where AI has a real role to play,” he says. “ ey’re in this at the right time.”

Fliegel sees a big market for the technology. Most people can’t a ord a CPA to do their tax planning, he notes. “And even if you can, why not get it double-checked?”

ANNE KADET

Muse takes 30 to 45 seconds to scan an uploaded return, crunch the numbers and produce a printable guide—complete with graphics—that provides step-by-step instructions for carrying out its suggested strategies, says co-founder Colin Horsford. It rates these strategies by complexity and ags them when a particular tactic may require the services of a tax professional rather than the do-it-yourself approach.

Rather than compete with existing tax service providers, Muse plans to partner with tax-prep companies, nancial advisers and other nancial service providers that want to integrate Muse’s AI technology into their own client o ering.

One such partner is Nestment, a San Francisco–based startup that helps family or friend groups that are pooling their money to buy a home. e platform helps groups navi-

The reigning Goliath: H&R Block H&R Block, founded in 1955 and based in Kansas City, Missouri, prepared 20.5 million U.S. tax returns last year. Its 2022 revenue topped $3.5 billion.

How to slay the giant Horsford met his co-founder, Busayo Ogunsanya, in 2008 while they were both working in the tax department of Ernst & Young. ey became fast friends. Both went on to launch their own boutique accounting rms, but they shared a fascination with tech and startups. ey came up with their idea while on a trip to Miami to visit a mutual friend.

Upon launching Muse in February 2022, they were quickly accepted into several mentorship programs and an accelerator. Realizing their idea had legs, they made the hard decision to shut down their rms and focus on the startup.

“It was bittersweet because you have clients relying on you,” Ogunsanya says. “But this was an opportunity to serve a much wider audience.”

ey built the rst version of the software themselves— Horsford had already taught himself to code, and Ogunsanya was the master tax strategist with a knack for instructional writing. eir initial plan was to o er the service directly to taxpayers. But potential investors worried that the approach couldn’t scale.

e co-founders soon realized they could reach far more taxpayers by partnering with the rms that they had initially seen as rivals. “We can try to reach 100 million people [ourselves] or go to four companies that have 100 million customers,” Horsford says.

e task of integrating their software with partners’, however, required hiring a small team of developers—which presented a big challenge, Horsford says. e developers they hoped to recruit were used to cushy work environments o ering free food, co ee and fat paychecks—perks that were out of Muse’s league.

e two say they’ve landed great talent by hiring developers who are working remotely—two in California and one in Washington, D.C. “But we really sold people on the potential of AI in the tax industry,” Horsford says. “ at’s been a real bene t for us in terms of recruiting the talent we need.”

The next challenge

e startup will need to raise a seed round and continue hiring to carry out the pilot partnerships they’ve launched, says Fliegel. ey’ll also have to decide on the optimal pricing strategy. “ ey will be delivering so much value for millions of clients,” he says, “and they deserve to extract a nice chunk of that value.” ■

Anne Kadet is the creator of Café Anne, a weekly newsletter with a New York City focus.

MUSE TAX’S Ogunsanya and Horsford are planning to raise a seed round.

WHO OWNS THE BLOCK

New owners for a Greenwich Village theater could shake up a change-resistant block

Movie studio A24 has partnered with financial firm Taurus Investment Holdings to buy the Cherry Lane Theater

BY C. J. HUGHES

Amajor winner at this month’s Oscars was the studio A24, which snagged nine awards, including six in the most talked-about categories: supporting actors, actors, director and film, for Everything Everywhere All at Once

A few days earlier A24 starred in a real estate transaction that attracted much less limelight. But the move, a $10 million deal to acquire the Cherry Lane Theater playhouse in Greenwich Village, for which A24 partnered with the global private-equity firm Taurus Investment Holdings, could have big implications in the neighborhood.

Indeed, on the theater’s block— Commerce Street between Bedford and Barrow streets—there are only about a dozen properties, and A24 and Taurus now own three of them. Two, at Nos. 38 and 42 Commerce, are interconnected and part of the 14,400-square-foot theater. The third, a single-family house at No. 36, was included in the transaction, according to public records, although the buyers did not announce that part of the deal.

Decades ago the Carroad family owned all three of the sites, as well as surrounding properties. In recent decades ownership of the block appears to have shifted to groups tied to Angelina Fiordellisi, Cherry Lane’s executive director, who was the face of the theater sale. Now, there’s a third landlord with a sizable footprint.

In some ways, that management wanted out isn’t surprising. Since buying the theater for $1.6 million in 1996 and spending $3 million to renovate it, Fiordellisi has said she often struggled to keep the nonprofit afloat, even as shows there won rosy reviews.

In 2010, stung by a recession, Fiordellisi revealed the theater was running a $167,000 deficit and would have to be sold, although that fate was reportedly averted after she took on new partners. Likewise, in 2021 the Lucille Lortel Theater Foundation was apparently in contract to buy Cherry Lane, which was still in the red, until the $11 million deal fell apart in a disagreement over its valuation. Fiordellisi again listed the theater, which includes eight upstairs apartments, for $13 million later that year, so this month’s purchase came at a considerable discount.

Fiordellisi did not return phone and email messages seeking comment by press time. A24, which is known for shunning publicity, had no comment; neither did Taurus, whose local developments include a rental building at 542 W. 153rd St. in Hamilton Heights but otherwise appear limited.

But in the press release accompanying the purchase, Taurus’s CEO Peter Merrigan suggested that alterations to the century-old theater, which is protected as a landmark, would be minimal. The deal “provides us with a highly unique investment opportunity due to [the theater’s] location, rich history and cultural significance,” Merrigan said. ■

39 AND 41 COMMERCE ST.

True to its name, Commerce once bustled with businesses, although they were of the 19th century variety. A milkman, Peter Huyler, developed twin Federal-style buildings at the corner of Barrow, at Nos. 39 and 41, historical records show; early residents of properties included bakers, librarians and artists. Both have curve-edged roofs called mansards, for French architect Francois Mansart, which were conceived as an artful way of tying in an added top floor. Parisians embraced mansards passionately in the late 1800s; the buildings added their versions around that time. Doris Keen, a specialist in Ottoman architecture who spent years living in Turkey, bought the twounit No. 39 in the mid-1970s for $32,000, records show, before selling it in 2021 for $5.3 million. The buyer was Isolde, a limited liability company.

The Commerce Inn, a Shaker-style restaurant that opened here in 2021, serves dishes such as pork chops and baked beans in a dining room of unadorned wood. The concept comes from Jody Williams and Rita Sodi, the team behind local hot spots like Buvette. The eatery’s building can be considered one of the block’s newcomers, in that St. John’s Realty Company developed the 6-story brick midrise in 1912. A Manhattan-based shell company called Pride Rock, which appears to be controlled by the Kingman family, bought No. 50 for $2.7 million in 1999. The site also contains 15 apartments, which have the address 75 Barrow St. because of their front door’s location. The apartments, wedge-shaped in some cases, don’t seem to become available often. Pride Rock hasn’t publicly marketed one since 2015.

In a neighborhood full of quirks, this 5-story, seven-unit rental building might be the most idiosyncratic. The 1844 structure, squeezed into a tight corner like an afterthought, was built for A.T. Stewart, an aspiring dry-goods merchant who within a few years had struck it big with a popular emporium at 280 Broadway, near City Hall, according to the city’s Landmarks Preservation Commission. Stewart would later relocate his department store to a two-building spread on Broadway and East Ninth Street; Vornado’s 770 Broadway office building occupies a vestige today. Norman Steele bought No. 48 for what appears to be $8,000 in 1974 and appears to have owned it since. The most recent apartment to rent there, in 2021, was a triplex two-bedroom for $9,500 a month.

38

COMMERCE ST.

This industrial site, built as a brewery in 1836 for Alexander McLachlan and later serving as a box factory, began staging plays in 1923; Bob Dylan performed there decades later. Angelina Fiordellisi, a former stage actress, purchased the site, made up of No. 38 and next-door No. 42, in 1996. The first off-Broadway play performed that year, a comedy about clowns called The New Bozena, was directed by Rainn Wilson, who would later play Dwight Schrute in the American version of The Office. The main theater, in No. 38, offers 179 seats, although Fiordellisi also created a smaller 42-seat venue in No. 42, which in the 1960s was reportedly a popular gay night club. The address’s current co-owner, A24, was founded in the city in 2012 and quickly achieved fame, winning the best-picture Oscar for Moonlight in 2017. The financial firm Guggenheim Partners has been an investor in A24, which was valued at $2.5 billion last year. Commerce Street was called Cherry Lane, for its trees, until the early 19th century.

77 BEDFORD ST.

The 1801 Isaac-Hendricks house, among the oldest structures in New York, takes part of its name from Harmon Hendricks, a copper magnate who prospered during the War of 1812 and died with millions of dollars, a vast fortune by 19th-century standards. Once covered with clapboards, No. 77 now just sports them on a side; the widening of Bedford Street lopped off a front porch in 1930, according to the history site A Daytonian in Manhattan. In 1938 the owner subdivided the interior into apartments. By the 1970s the house was in shambles. It stayed that way until Jacqueline Thion de la Chaume bought it in 1989 and began to restore the 25-foot-wide property. That restored the house to its single-family status. De la Chaume’s estate sold No. 77 for $7.4 million in 2013 to a limited liability company with a familiar face: Fiordellisi, of the Cherry Lane Theater, whose signature appears on the deed.

In a micro-neighborhood that can seem to have been controlled by just a handful of people in any era, this 3-story, 1,000-square-foot single-family house in the mid-1920s was briefly the home of poet Edna St. Vincent Millay, who was among the founders of the Cherry Lane Theater. Millay, the author of the oft-quoted line “my candle burns at both ends,” moved into the building when it was relatively new; the Dutch-style building, which was tucked into an alley, dates to 1873. Just 9 and a half feet wide (and that’s only on the outside), in a city where most townhouses are more than twice that, the fractional abode is believed to be New York’s narrowest residence. The locally notable Carroad family owned “Chez Millay” for years. George Gund bought it for $3.3 million in 2013.

36 COMMERCE ST.

A notable aspect of the Cherry Lane deal is that it included this 3-story 1841 building, a single-family residence nextdoor, according to a deed. A shell company paid $7.4 million for the Greek Revival-style edifice in 2017. That company presumably was controlled by the theater owners, Angelina Fiordellisi and her business partners, who then added No. 36 as part of the theater package. McLachlan, the 19th-century developer of the theater, took No. 36 as his own home. In 1900 Lottie De Ancy, a second-floor tenant, was alerted to a fire in Fannie Little’s third-floor unit by the meowing of Little’s cat. Although firefighters extinguished the blaze, it caused $1,500 worth of damage, The New York Times reported.

48 COMMERCE ST.

75½ BEDFORD ST.

50 COMMERCE ST.

Nonprofit CEO Udai Tambar on the life-changing power of tennis

INTERVIEW BY RAINA LIPSITZ

Udai Tambar sees his job leading New York Junior Tennis & Learning as the next logical step in a career that has been dedicated to serving low-income children. The nonprofit’s mission is to help young people build skills and character through tennis and education. During the pandemic, the organization became increasingly aware of young people’s growing need for mental health support. To help connect struggling students with essential mental health services, it partnered with the Silberman School of Social Work at Hunter College to pair graduate student interns with young people experiencing higher levels of anxiety, depression and stress.

Tambar spoke with Crain’s about how tennis lessons, coupled with a broader commitment to health and education, can help young people succeed throughout their lives.

Tell me how tennis lessons can enrich a young person’s life. We focus on creating success for young people through our host of tennis and education programs. Studies have shown that tennis players live almost 10 years longer than people who are sedentary, and that’s [a bigger benefit] than for people who play soccer or other sports. So it’s not just the physical enrichment; [playing tennis specifically] can actually help you live longer. For us, it’s both tennis and education. Tennis obviously fosters physical fitness, but it also teaches great perseverance, what we call stick-to-it-iveness. We combine this with academic support, leadership [and] development life skills training, and that helps young people succeed on and off the court. We believe that in New York City, talent is universal but opportunity is not. And what we try to do is create opportunities for young people in all communities to reach their full potential.

Takeaway for business professionals

New York Junior Tennis & Learning provides afterschool programming in approximately 30 schools and community tennis programming at roughly 40 sites throughout the city in the summer and at additional sites during the school year. The organization has provided 500,000 hours of free community tennis in every City Council district and reaches 85,000 children annually in all five boroughs; 500 staff members mentor more than 14,000 children each year.

POWER MARKS

EMPLOYEES 500 (Nine direct reports)

ON HIS RÉSUMÉ CEO and president of New York Junior Tennis & Learning; vice president of Community Health at Northwell Health; chief of staff and director of youth and children services for New York’s deputy mayor for health and human services; executive director of South Asian Youth Action

BORN Scotland

GREW UP India and Queens

RESIDES Forest Hills, Queens

EDUCATION Master of Public Administration degree from Princeton University’s School of Public and International Affairs and a Bachelor of Arts degree from Cornell University

BREAKING THE MOLD Tambar is the first person of South Asian descent to lead New York Junior Tennis & Learning.

communities in need, the voices of those communities in need. That’s the way I’ve thought of it throughout my career.

Did you play sports growing up? What did you learn from participating in athletics?

Yes. Throughout high school I played baseball and tennis. And to me, there’s obviously the importance of practice, the importance of bouncing back from setbacks. In any sport, a key part of it is, how do you deal with losing? And if you lose, how do you bounce back? You learn to say, “Hey, I’m going to work a little bit harder,” and that’s a great lesson in life. Often you might apply for a job, you might not get it, or you might want to do something, but you don’t get it on your first try. To me, hard work and discipline and camaraderie are [the biggest benefits of athletic participation]. People think of tennis as an individual sport, but you’re part of a community, and those are lessons I’ve taken with me in my personal and work life as well.

What are some things that the young people you work with need that are beyond the scope of your organization to provide?

That is a great question. As organizations we’re in communities, and the question often is, What’s your lane? What should you be doing and not [be] doing to meet the needs? And what we realized, especially coming out of the pandemic, was that a lot of [young people] were still

dealing with the pandemic, and mental health was a big issue. So to help address that, we partnered with the Hunter School of Social Work to bring mental health services into our schools. We work with them to place graduate social work students in the schools we serve. The demand for this has grown so much that we’ve actually hired a staff social worker for the first time to help us reach more schools. We started out teaching tennis on the tennis court. And over time you evolve and grow to meet the needs of the community more holistically, because that’s what you need to do to make sure that they actually show up to the tennis court and are able to succeed.

Your website praises NYJTL’s partner corporations for demonstrating corporate social responsibility.

What does CSR mean to you?

For us, it’s about really being partners.

Recently we had a partnership with Barclays Bank where senior executives from Barclays were interested in giving back to the community. And they spent a day at our Cary Leeds Center up in

the Bronx in Crotona Park. And we have a new program we launched this year, a scholar athlete program, which is very customized, high-level tennis instruction and academic support. Their volunteers came and worked one-on-one with our students on interviewing skills and career awareness. To me, corporate social responsibility is a way of using the skills or assets of a corporation to help the communities that they’re in. Obviously sometimes it’s funding and sometimes it’s the skills of the employees that can help fill a hole for organizations like ours.

What does power mean to you?

Here at NYJTL and throughout my 25-year career, it’s been public service, nonprofits and government. I think of power as amplification. It’s about being in a position of power or privilege, and how do you amplify the voice … the voice of those communities in need . . . and help bring them the resources [and] services [that they need] . . . to help them be successful. I think if you have the power, the privilege, with that privilege you try to amplify resources that are drawn to the

How can Americans without money or status gain more power in their daily lives?

To me it’s about being active. I think of the work that we do—it’s sort of like we’re building or trying to lead a movement for social change. And in a movement, there are different roles for different people. But the main thing is people need to raise their hands and say they want to get involved. Some people will write a check and some people will work with us; some will volunteer their time. [For] those that might not have the financial resources, it’s more just raising your hand or reaching out and saying, “Look, I want to get involved” and being active citizens, and that’s what creates real change.

How do tennis lessons relate to mental health?

We’ve been seeing a lot about mental health and tennis. One easy connection is just raising awareness. You have Naomi Osaka and Serena Williams speaking openly [about mental health]. You have a lot of professional tennis players who are talking about mental health. In the tennis space, there’s awareness about this and there’s a certain vocabulary developing, and that helps when you’re dealing with young people—being able to say, “Hey, this is tough, but you can talk about some of these issues.” Having said that, I think playing tennis does develop some toughness as well.■

ASHLEY HOLT

Goldman Sachs’ median pay declines by 10%, a worrisome sign for New York tax collections

Pay is central to Wall Street work, but owing to last year’s bear market, there was less of it at Goldman Sachs, where wages fell by 10% in the first such decline since it has provided the data.

The median wage for all employees, from senior executives to executive assistants, clocked in at $150,000 last year, down from $166,000 in 2021, according to a regulatory filing from the bank.

Goldman, which declined to comment, wasn’t the only financial institution to pay its people less last year.

Median pay at private-equity giant KKR fell by 30% last year, to $225,000 from $320,000, according to the firm’s annual filing.

At American Express, median pay dropped by 27%, to $49,000, and at Bank of New York Mellon, by 7%, to $70,000.

American Express attributed the decline to hiring more people outside the United States, where wages are lower. The company pointed to language in a regulatory filing saying that for the third consecutive year the firm had no statistical dif-

ON POLITICS

ferences in pay for all genders globally and for all races and ethnicities in the U.S

Economic activity

The drops in pay to rank-and-file workers could be a troubling signal for the city and the state because they rely heavily on the financial sector for tax revenue. Wall Street is responsible for 16% of all economic activity in the city, according to data from the state comptroller’s office, but only about 5% of jobs

ELSTEIN

The comptroller is expected to soon release data showing a big drop in Wall Street bonuses for 2022. That’s because capital markets were dormant much of the year. Tough market conditions help explain the big drop in median pay at KKR, although at rival Blackstone, the figure rose by 3%, to $237,000.

KKR didn’t respond to a request for comment, and Blackstone declined to comment.

Public companies have been required to disclose the median wage for their workforce since 2017. The data is monitored, especially by labor groups, for evidence of how av-

erage workers are compensated relative to top management. Wages rose by 6.1% in the aggregate last year, according to the Federal Reserve Bank of Atlanta. But those gains were devoured by the 6.5% inflation rate.

Raises and cuts

Certain banks raised worker pay at rates significantly above inflation. These institutions tend to be larger and have more diverse revenue streams than those that cut pay last year. At Bank of America, the median pay rose by 15% in 2022, to $117,000, and the median wage at Citigroup rose by 13%, to $62,000.

BofA raised its minimum wage to $22 per hour last year and raised base salaries for most employees earning under $100,000 by up to 7%.

Citi and BNY Mellon did not have an immediate comment.

JPMorgan Chase and Morgan Stanley haven’t yet disclosed 2022

pay data.

Pay cuts were seen at firms whose fortunes aren’t so closely tethered to financial markets.

At IBM, the median wage fell by 10%, to $61,000. IBM declined to

comment.

At Pfizer, it fell by 18%, to $75,000. A spokeswoman said workers in 2021 “had other compensation that this year’s median-paid employee did not have.” ■

Madison Square Garden’s tax break is closer to the chopping block than it has been in a decade

Is James Dolan about to lose his most precious gift from the state of New York?

Madison Square Garden’s property tax break, worth more than $40 million a year, is closer to the chopping block than it’s been in at least a decade. State Senate Democrats included a repeal of the controversial tax abatement in their one-house budget, which sets their priorities ahead of negotiations with the Assembly and Gov. Kathy Hochul. Leading the push has been Brad HoylmanSigal, the Democrat who represents the Garden neighborhood in the Senate.

The reality is that Dolan—the Cablevision heir who also owns the New York Knicks, the New York Rangers, Radio City Music Hall and the Beacon Theatre—wouldn’t even have to fret about Albany Democrats threatening his tax break if he behaved like a conventional billionaire. All he would have to do is cut campaign checks to Hochul and the Democrat-run state Legislature while going about his business.

Instead, he has drawn the scrutiny of city and state lawmakers, members of Congress and the state attorney general’s office by wielding facial recognition technology to eject ticket holders from his properties. Of late, he has targeted attorneys who work for law firms engaged with litigation against his company. No other team owner or real estate mogul would behave so brazenly. The State Liquor Authority could revoke MSG’s liquor license, cutting into Dolan’s bottom line.

ROSS BARKAN

Democrats in the City Council are weighing whether to renew the Garden’s special permit for holding events; the expiration comes this year. Losing the tax break, which has existed for 40 years, would be another blow for Dolan.

Luckily for the billionaire, the Assembly didn’t include a repeal in their one-house budget. Carl Heastie, the Assembly speaker, appears to be less perturbed by Dolan’s recklessness—he recently came to a Rangers game to perform the ceremonial puck drop—and

Hochul has not denounced the abatement either.

“I know how important the Garden is to this city,” she said in an interview with Fox 5. “What’s been proposed by a senator is certainly something we look at. A lot of ideas are proposed, and so I just want to make sure we’re doing the right thing.”

Taxpayer giveaway

If MSG’s tax break survives another year, it will be further evidence that enough New York politicians are willing to tolerate a

taxpayer giveaway with no conceivable policy justification. In the early 1980s, when the fiscal crisis still shadowed the city, Mayor Ed Koch handed out the abatement to MSG to keep the Knicks from moving out of Manhattan. Koch believed the property tax break would be temporary. Instead, it persisted, even as the city recovered and the threat of any move out of Midtown Manhattan disappeared entirely.

There is no chance today that Dolan would abandon Manhattan, where tourists and commuters rou-

tinely help sell out Knicks games. Like any other lucrative venue, the Garden should be paying the property taxes it owes to the city. Hochul and Assembly Democrats have no reason to cater to Dolan any longer.

If anything, they’ll have to start putting pressure on him to move MSG to another Manhattan location if they ever hope to see a new Penn Station. Dolan is partially to blame for such a dismal commuter hub, since MSG sits atop the train tracks. He doesn’t deserve any corporate welfare.

Quick takes

● New York’s marijuana legalization rollout continues to be sluggish as illegal stores proliferate. Democrats in the Legislature plan to address this during budget season, but they have to act fast.

● Is this the year “good cause” eviction becomes law? Both houses of the Legislature included support of the idea in their one-house bills. The real estate industry will hope Hochul can roadblock the progressives in the chamber. ■

Ross Barkan is a journalist and author in New York City.

BLOOMBERG

AARON

BLOOMBERG

DOLAN

Tax breaks in perpetuity are like zombies: They devour state, city government coffers

Asound business wouldn’t lock itself into a multibilliondollar investment without rigorously studying potential returns or having a plan to exit the deal if it’s no longer fruitful. Neither should our government.

But that may be what is happening when it comes to subsidies across the city and the state, which fiscal watchdogs estimate dole out $10 billion worth of subsidies to businesses every year. The deals cause the city to forgo 8% of total tax collections and the state, 5%, senior reporter Aaron Elstein writes in this week’s cover story, “Zombie city.” Such deals are awarded to less than 1% of the city’s businesses.

The hope is that these investments pay long-term dividends in the form of job creation and economic activity that exceed their initial cost. That sounds good, but policy experts are in agreement that a proper analysis has never been done to examine whether businesses have held up their end of the bargain.

The minute number of businesses that are getting hefty incentives are certainly doing their homework when enlisting lobbyists.

OP-ED

Records show that in the past two years, Madison Square Garden paid lobbyists just $650,000 to combat legislation to repeal the Garden’s $87 million tax break over the same years, politics reporter Nick Garber found. Indeed, a 1,300% return on investment isn’t too shabby, especially for a break with no expiration date.

Although this year’s state Senate budget proposal included a provision to end MSG’s propertytax abatement, assessing subsidies via the budgeting process seems among the slowest paths to evaluate deals.

The third-party review of state subsidies expected in January 2024 is welcome. A rigorous city-level evaluation should be conducted in tandem.

Companies that enjoy these breaks argue that the city is an expensive place to do business, and top lobbyist Jeffrey Citron said they would “absolutely leave” without help. But the more than 99% of businesses that do not get breaks choose to stay, and more choose to set up shop in the five boroughs each day.

To be sure, there is a time and place for subsidies to businesses; our city’s economy has yet to reach prepandemic levels, and they can

be a strategic investment to jump-start promising new industries, such as the life sciences. But given the steep opportunity costs of subsidies for the city and state budgets, it’s worth a deep look into whether those subsidies are best spent at such places as MSG, Goldman Sachs and Hudson Yards. New York is the city where companies come to test the strength of their business and subject their ideas to the ultimate test. Our government’s picking of winners and losers through tax abatements runs the risk of

diluting the city’s spirit of grit and dampening entrepreneurialism from some of its largest entities.

Those who have managed to snag one of these sweetheart deals should be admired for their business acumen and political savvy. But such deals shouldn’t exist at the expense of taxpayers and other businesses that then foot more of the bill, and they certainly shouldn’t exist in perpetuity.

If those “zombies” are confident that their benefit to our economy outweighs the exorbitant costs of keeping them here, we hope to see the evidence soon. ■

Here’s how the mayor can help avert a food emergency for older adults

BY JEREMY KAPLAN

Every older adult should be well nourished and connected to the community, allowing them to age in place, with dignity, for as long as possible. Unfortunately, at many organizations, the ability to deliver on this mission is jeopardized by the cumulative effects of years of underinvestment in services for the aging.

Encore Community Services is a nonprofit that provides lifesaving nutritious meals to older adults on Manhattan’s West Side. We serve more than a half-million meals a year at our centers and through our home-delivered meals program. At the height of the pandemic, Encore stepped up and facilitated the recovery meals program across three boroughs, ensuring 9,000 vulnerable older adults received emergency meals until it was safe for them to venture outside.

Our meal recipients are older adults who can’t leave their homes. They are often immunocompro-

mised, live on a fixed income and are isolated. All of them deserve to have food.

It’s time to raise the alarm about the severe systemic risk to services for the aging. The sector’s nonprofits are approaching a crisis, and some may even struggle with solvency if there is not an immediate and long-term funding solution.

The population is aging rapidly, placing a strain on already limited resources. At the same time, functional budget cuts to the city’s services for the aging are taking a further toll on operations. We’ve seen the fastest and highest period of price increases in a generation and are being asked to do substantially more with considerably less.

Operational costs have skyrocketed, including up to 90% increases in the cost of providing home-delivered meals and up to 20% increases in the cost of providing meals at older adult centers. Yet the rate of reimbursement increases we’ve seen this year do not even meet the minimum we requested

nearly two years ago.

Encore has already maxed out its annual budget for meals. It has become imminently unsustainable to provide weekend meals, but we continue to do so because our clients often rely on us as their only source of nourishment. We urgently need Mayor Eric Adams to authorize an increase in reimbursement rates.

Champions such as Lorraine Cortes-Vazquez, commissioner of the city Department for the Aging, have worked miracles in years past to support the tapestry of nonprofits that serve older adults in our city. Without substantial new investment from the city now, the nonprofits that serve the most basic needs of older adults, including nutrition, may be forced to close their doors.

We urge the mayor to address the critical short-term funding gap for older adult meal providers in fiscal 2023, and to fully fund the city’s Aging Community Care Plan for 2024. The Department for the

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Aging is the lowest funded of all city agencies, with less than onehalf of 1% of the city budget despite older adults making up 20% of the overall population.

To improve the sustainability and broaden the reach of older-adult meal programs in fiscal 2024 and beyond, we are joining with leading aging advocates at LiveOn NY to call for an additional $64.6 million for the Department for the Aging to specifically address hunger among older New Yorkers. This includes $14 million for inflation costs for home-delivered meals (covering raw food, gas and other items), $46 million for inflation costs for congregate meals, $567,000 to address the department’s home-delivered meal wait list, and $4 million to support weekend and holiday home-delivered meals not provided through the department.

It’s time the city makes a longterm investment in older adults. ■

Jeremy Kaplan is executive director of Encore Community Services.

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State must design a health care licensure and regulatory system that can grow and evolve

The pandemic taught us an important lesson: To keep up with the changing landscape of health care and medicine, we must be flexible and nimble.

We modified laws and regulations while we streamlined processes that had once created bureaucratic hurdles and slowed our ability to address health care needs.

Executive orders enabled much-needed flexibility in the past

allow our state to evolve as the health care delivery system and practice of medicine change—and to ensure we are providing the best possible care to New Yorkers.

Gov. Kathy Hochul’s executive budget provides for this evolution, including proposals to improve the licensing and oversight of the medical field. The first proposal, recognizing that assurance of a diverse and skilled workforce is a core public health function, would move the licensing of medical professions from the state Department of Education to the state Department of Health.

three years. They allowed pharmacists to administer an expanded roster of vaccines, enabled licensed nurses from other states to support our frontline efforts and empowered more medical professionals to operate at the top of their license.

But short-term executive orders are not the only solution to address staffing shortages across the state and keep up with the changing health care landscape. We also need permanent solutions to increase our workforce capacity and

OP-ED

It would allow our medical experts and health care regulators to lead the state’s approach to health care licensing and, ultimately, improve the delivery of care for New Yorkers.

Hochul is also proposing to expand what health care workers are permitted to perform under the scope of their license. Many of these changes would codify the flexibilities these workers were previously granted under the emergency orders, provide oversight of these changes and give our state better leverage with its existing workforce at a time when there is a pronounced

shortage of workers in many fields. For instance, these changes would permanently enable experienced physician assistants to practice without physician supervision. They would also expand community paramedicine by allowing emergency medical technicians to perform non-emergent care, including immunizations.

Expanding access

The governor also proposed legis-

lation allowing New York to join the Interstate Medical Licensure Compact for physicians and the Nurse Licensure Compact. These compacts make it simpler for physicians and nurses to practice across state lines, both physically and virtually. These multistate licensing agreements help to expand access to care for patients and increase the talent pool to providers struggling to address staff shortages.

In addition, these compacts help

to streamline the process for these professionals, allowing those licensed in one state to practice in others without the lengthy and arduous process of relicensing.

Thirty-seven states participate in the Interstate Medical Licensure Compact and Nurse Licensure Compact, in addition to the U.S. territory of Guam and the District of Columbia. More than 55,000 physician licenses have been issued by states participating in the Interstate Medical Licensure Compact. With other states embracing these compacts and bipartisan support for this effort in New York, the time has come for us to join.

New York must design a licensure and regulatory system that can grow and evolve with the practice of medicine. These proposed changes will accomplish this goal. They will bring our state in line with others and prepare us for the future. They will ensure New Yorkers receive the best health care possible. ■

Raising the minimum wage does not result in job losses

BY PAUL SONN

Every time we discuss raising the minimum wage, corporate business interests rush in to forecast catastrophic job losses if the wage goes up. This fear-mongering worked for a long time—until the facts started catching up with the debate.

Albany is debating raising the minimum wage again—and a broad coalition of lawmakers, unions and anti-poverty groups is pushing to raise New York’s minimum wage to $21.25 per hour by 2027. That’s the level that the minimum wage would be if $15 had been consistently updated each year to keep up with inflation and rising worker productivity.

Instead, the wage has been frozen in most of the state. That stalled minimum wage happened at the worst possible time—just as the highest inflation in 40 years has

caused prices to skyrocket.

Just as in the movie Groundhog Day, we’re seeing recycled predictions that $21.25 will hurt jobs or be too much for small businesses or for upstate to handle. The thing is, we’ve seen this movie before.

In 2016 New York approved the nation’s first $15 state minimum wage, which gradually raised pay from $9 to $15 per hour. That was a 67% increase—a good deal larger than the 42% increase to $21.25 proposed today. It raised pay by more than $4,000 a year for 1 in 3 New Yorkers, and it led to historic reductions in poverty and earnings inequality.

At the time we heard from the usual suspects that small businesses would suffer and so would workers, who would see their hours cut and jobs eliminated. Guess what? It didn’t happen.

Instead, five independent studies have confirmed that our $15 minimum wage helped millions of New Yorkers without hurting jobs. For example, the Federal Reserve Bank of New York examined job growth in upstate New York along the

Pennsylvania border at a time when New York’s wage was from $4 to $5 higher than the $7.25 Pennsylvania wage. The New York Fed found that pay increased significantly in New York while jobs grew at similar rates in the two states.

Effects analyzed

Just this year the Institute for Research on Labor and Employment at the University of California, Berkeley, analyzed the effects of New York’s $15 minimum wage for the fast-food industry, focusing on upstate counties and on Long Island. Fast food is one of the most

underpaid industries, where any job losses associated with a higher minimum wage would likely appear first. The Berkeley study found again that, across the state, fastfood jobs grew at least as fast or faster than in other states that didn’t raise the minimum wage.

This month more than 200 small businesses from across the state joined the push for the $21.25 minimum wage. Their message is that a $21 minimum wage, gradually phased in, is manageable and actually helps local businesses by putting more money in workers’ pockets, which they spend in their

neighborhoods.

The Raise the Wage Act would deliver urgently needed raises to 2.9 million workers, or 1 in 3 working New Yorkers, averaging $3,300 a year, or $63 a week—enough to actually help families cover sky-high grocery and gas bills.

By contrast, Gov. Kathy Hochul’s proposal ignores the tremendous erosion of the value of New York’s minimum wage since 2019 and proposes only modest adjustments for inflation. It would deliver only very small annual raises averaging $670, or just $13 a week—barely enough to buy a sandwich in New York. Even worse, her plan would cap increases at 3% annually, far less than what inflation has averaged in recent years.

New Yorkers are demanding that lawmakers respond to the cost-ofliving crisis with the urgency it needs—and without falling for recycled talking points. Lawmakers can lead at this moment with confidence that raising the minimum wage to $21.25 will restore broadly shared prosperity for both workers and businesses in our state. ■

Paul Sonn is the state policy program director at the city-based National Employment Law Project.

THE raISE ThE WaGE acT WOULD DELIVER URGENTLY NEEDED RAISES TO WOrKErS

Dr. James McDonald is New York state’s acting health commissioner.

DR. JAMES MCDONALD

WE NEED PErMaNENT SOLUTIONS TO INCREASE OUR WOrKFOrcE caPacITY

BUCK ENNIS

A COVID TESTING SITE outside Grand Central Terminal

THE LIST

LARGEST HEALTH CARE NONPROFITS

New York–area organizations ranked by 2021 total operating expenses

areaareaincludes NewYorkCity andNassau,SuffolkandWestchestercounties inNew York,andBergen,Essex,HudsonandUnioncounties inNew Jersey. To qualifyfor this

nonprofitsheadquartered in the NewYork area.Hospitals,healthsystems, home healthcare,rehabilitationcenters,medicalpractice groups, researchinstitutionsand universities

workin areasunrelatedtohealthcare.Information is fromthecompaniesunless otherwise noted. 1 Figures arefromForm 990. 2 Figures arefromauditedfinancialstatements.

are preliminary. 5 Represents operating expenses; figures are from audited financial statements.

Zombie city

BY AARON ELSTEIN

New York is swarming with zombies. No, not the brain-devouring ghouls in the movies. ese zombies are tax breaks and other incentives that elected o cials and their appointees have dished out over the years to a select number of New York companies and industries. Whether intended or not, they tend to last for eternity—or something close to it.

e Lord High Zombie is Madison Square Garden, which hasn’t paid a nickel in property taxes since the state granted it a blanket and perpetual exemption 41 years ago.

is has saved Chairman James Dolan’s company an in ation-adjusted $916 million in the past 40 years, including $42 million last year, according to gures from the city.

Zombies also can be found at Yankee Stadium and Citi Field. Not only are the Yankees and the Mets exempt from property taxes, but the payments they do make, which would ordinarily pay for city services, instead go to their stadiums’ bondholders until the 2040s, thanks to deals negotiated when the ballparks were built 15 years ago, the Independent Budget O ce said.

Hollywood has its own New York zombie in the form of $420 million in annual reimbursements to movie and TVshow producers who shoot in New York. Gov. Kathy Hochul and the state Legislature have agreed to expand the bene t to $700 million a year and extend this zombie, which made its debut in 2004, until 2034.

e entire insurance industry has been exempt from city income taxes since 1974, a bene t that cost $613 million in foregone revenue in 2022 alone. Cable television bills have been exempt from sales taxes since 1990, costing the state an estimated $461 million last year. Fuel for airlines has been tax-exempt since 1965, costing the state $122 million last year. Expenses for training and maintaining racehorses have been exempt since 1988, costing $6 million last year.

Zombies represent the leading edge of one of New York’s fastest-growing industries: the expansion of tax credits, property-tax discounts, sales-tax exemptions and other forms of nancial support granted to business in the name of economic development. Fiscal watchdogs estimate the city and the state dish out a combined $10 billion worth of subsidies every year. It means the city is foregoing 8% of total tax collections and the state, 5%, in the hopes that they will collect more in the long run.

So what is their return on this considerable public outlay? “ e truth is, we don’t know,” said Andrew Rein, president of the Citizens Budget Commission.

Marilyn Rubin, a distinguished research fellow at Rutgers University’s School of Public A airs and Administration, added: “ ere’s so little information about the level of bene ts produced by subsidies that it can be hard to know what people are arguing about. Fighting against them involves dealing in counterfactuals, and from that word alone, you can see it’s a harder argument than, ‘Let’s help the economy.’ ”

Level of bene ts

What is clear is the value of incentives has tripled since 1990, to $50 billion annually nationwide. But only a handful of states track what they’re getting in return, Pew Charitable Trusts nds, observing in a report last month that “policymakers often do not have the full picture of who

JOHN KAEHNY AND ELIZABETH MARCELLO Democrats love giveaways PAGE 17

MICHAEL KINK Tax breaks provoke income inequality PAGE 18

The city and the state dish out a combined $10 billion in tax breaks and subsidies every year—to 1% of corporate taxpayers. The public payoff for those deals is murky at best

ANA CHAMPENY Data

BUCK ENNIS

REIN of the Citizens Budget Commission questions the value of the lm tax credit.

ZOMBIES

these programs benefit.”

New York officials push back against any notion they’re flying blind. The state “routinely conducts analyses on key projects to ensure a positive return for the residents of the state in terms of economic and fiscal benefits,” said Empire State Development, New York’s economic development arm. “The incentive programs administered by Empire State Development are smart and strategic investments in New York’s economic potential, and the governor’s proposed expansions of these programs will lead to job growth, increased opportunity and a better quality of life for New Yorkers.”

Gifts that keep giving

BY THE NUMBERS

$916M

AMOUNT MADISON SQUARE GARDEN has saved on property taxes since the state granted it an exemption 41 years ago

$420M

AMOUNT OF ANNUAL reimbursements to movie and TV-show producers who shoot in New York

Economic development subsidies became widespread starting in the 1980s, when federal support for cities declined and flight to the suburbs caused urban tax bases to wither. In return for a promise to stay in Rockefeller Center, Mayor Ed Koch gave NBC a gift in 1988 that’s still giving: a property-tax discount that cut what would have been a $21 million bill last year in half, according to data from the New York City Industrial Development Agency. The discount expires next year.

Recipient businesses say life without subsidies is inconceivable, even if it would mean a fairer tax system for the estimated 99% of businesses that don’t get a deal, and more money for essential needs like transit.

“The city is expensive, and without help companies would absolutely leave,” warned Jeffrey Citron, managing partner at law and lobbying firm Davidoff Hutcher & Citron. “That’s not theoretical.”

The Hochul administration concurs. When long-term funding of the film credit program was uncertain, production fell off and relocated to other states, “many of which have more generous production incentives than New York,” Empire State Development said, noting that Steven Spielberg’s remake of West Side Story was filmed in New Jersey.

Still, decades of academic research show the benefits of economic development incentives are inconclusive. That’s in part because findings depend on the assumptions used, Rubin said.

“Without a doubt, there is a lot of art to this science,” she said.

“The one thing right-wing, left-wing and centrist economists agree on is subsidies don’t work,” said John Kaehny, executive director of budget watchdog Reinvent Albany.

Set them and forget them

Two such subsidies singled out these days for their sheer lack of effectiveness are the Commercial Revitalization Program and the Commercial Expansion Program, created in 1995 to encourage businesses to rent space downtown and in the Garment District by providing property-tax reductions for landlords and rent-tax reductions for tenants. In a 2018 report, the Independent Budget Office found the tax breaks didn’t have any significant effect on vacancy rates and “may even discourage employment growth” because physical improvements are necessary to qualify for them. Still, Hochul has proposed to extend the subsidies, which the Citizens Budget Commission says cost the city $44 million a year, by an additional five years.

A 2020 study underwritten by the state shows the film and TV credits sparked a great surge in work at New York’s studios and soundstages, which have been busy ever since the rise of streaming uncorked a huge boom in production. But the state’s claims about job growth in the study are based on assumptions that no filming of any sort would take place in New York without the incentive, the Citizens Budget Commission noted. The study did not distinguish between full- and part-time work when measuring job creation.

“The state has spent $6.5 billion on the film credit yet hasn’t shown it’s worth any money, let alone that much money,” Rein said. Empire State Development said there

Multiplying fast: There are 310 entities with deals to make payments in lieu of taxes, or PILOTs The PILOTs, shown with dots, total $521M in tax exemptions

The city’s real property tax is its largest revenue source, expected to raise about 48% of total tax revenue in FY22 Budget revenue breakdown

Real property tax

SOURCE: NYC Industrial Development Agency

is “no factual evidence” to support the Citizens Budget Commission’s position.

Even lawmakers concerned about government spending tend not to object to tax incentives, in part due to a quirk of budgeting: The items don’t show up in budget documents as expenses but as a reduction in tax revenue. Unlike education, health care or other big-ticket costs, incentive programs usually don’t need reauthorization every year.

“Lawmakers generally tend to set them and forget them,” Rubin said.

Last year, however, the Legislature demanded the Hochul administration get a grip on what it’s getting in return. Kathryn Wylde, CEO of the Partnership for New York City, told a state Senate panel that Albany must find ways to attract and retain businesses without resorting to “extraordinary subsidies.” She pointed to Excelsior, a program that links tax breaks to job creation, as an example of

$31.75B $29.3B

Other sources of city revenue

subsidies gone amok.

SOURCE: Department of Finance

“Almost any business with the right consultant can get a tax write-off,” she testified.

A third-party review of state subsidies is expected in January 2024.

The public’s return-on-investment may be murky, but the private sector’s return-on-lobbying is crystal clear.

Hudson Yards provides an example. The supertall towers were built with subsidies including a 30-year deal on property taxes that lasts until 2044 and saved more than $50 million off the towers’ theoretical property-tax bill of $150 million last year, according to the New York City Industrial Development Agency. The cost to Hudson Yards developer The Related Cos. for lobbying city officials was $120,000 last year.

Related declined to comment, but it referred to a 2019 consultant’s report, paid for by Hudson Yards’ developers, which said the complex has “contributed to the viability of

BUCK ENNIS

MAP: FLOURISH

PROTESTERS gather outside Madison Square Garden to oppose state tax breaks. The stadium hasn’t paid any property taxes since the state granted a blanket and perpetual exemption in 1982.

ZOMBIE STARTING LINEUP

MADISON SQUARE GARDEN

MADISON SQUARE GARDEN’S zombie stands alone because no other New York company enjoys a blanket and perpetual break on property taxes.

As budget negotiations kicked off in Albany, for the rst time the state Senate said it wants this monster of a subsidy killed. But the Assembly didn’t agree. Ultimately, it’ll be Gov. Kathy Hochul’s call.

The tax break dates back to the spring of 1982, when the Knicks and Rangers considered moving to New Jersey, a threat that couldn’t be dismissed because the NFL’s New York Giants had ed 10 years earlier to East Rutherford, New Jersey. In exchange for a promise the Garden’s teams would stay put, city leaders agreed to grant a temporary reprieve on property taxes, which somehow morphed into a permanent abatement when the state Legislature approved it.

“I went to bed at night believing it was a 10-year abatement,” former Mayor Ed Koch told The New York Times in 2002. A negotiator for the city said a permanent tax break “was not my understanding, not what I negotiated,” but “somehow there was a slip between the cup and lip.”

According to a formal memorandum of understanding dated July 15, 1982, MSG’s tax exemption “shall continue, as long as both of said teams play their home games therein and no longer.”

“Madison Square Garden is a signi cant job creator and an economic leader within both our community and the city,” MSG said in a statement.

THE YANKEES, METS AND HUDSON YARDS

TWO OF THE HIGHEST-PROFILE RECIPIENTS of payment in lieu of taxes are the Yankees and Mets. Both baseball teams negotiated PILOTs when they built new ballparks on city-owned land 15 years ago. The Yankees paid $84 million in PILOTs last year, which represent a $27 million savings on their tax bill. The Mets paid $44 million in PILOTs, for a $66 million exemption.

None of the payments from the teams go to the city’s coffers, however. Instead, the funds pay holders of the bonds used to nance the construction of Yankee Stadium and Citi Field, the Independent Budget Of ce said. The PILOT agreements expire in 2046 for the Mets and in 2047 for the Yankees.

commercial development in a previously fringe location” and is generating revenue for the city in excess of payments to bondholders. e tax breaks are “consistent with long-standing city practice to stimulate development where it is not occurring.”

PILOT deals

Hudson Yards’ property-tax exemption is called a payment in lieu of taxes, or PILOT. ese deals were created about 40 years ago so large tax-exempt organizations such as universities would pay something for government services. at said, neither Columbia University nor New York University pays PILOTs, although the Independent Budget O ce estimated the city could collect $147 million if colleges and hospitals paid taxes on housing for students, faculty and sta .

PILOTs work like this: A government agency, such as the city Economic Development Corp., buys land and leases it to a business. Because government agencies are exempt from property taxes, the business renting the property is exempt too, and the parties negotiate a PILOT at some rate lower than the tenant would otherwise pay. PILOT payers include some of Manhattan’s largest developers and businesses, including the Durst Organization and Goldman Sachs.

Negotiations between public and private-sector ocials over deals like this are inherently imbalanced, said Peter Solomon, a deputy mayor for economic policy and development under Mayor Ed Koch. Government negotiators generally aren’t as experienced as their counterparts across the table and typically aren’t held accountable for crafting bad deals because they’ve moved on to other jobs by the time one is identi ed, he explained.

“When government o cials negotiate, it’s not their own money they’re giving away,” Solomon said.

Although more than 300 companies pay PILOTs instead of property tax, according to city records, nearly a quarter of the $220 million in savings last year went to a single recipient: Hudson Yards. e bene ts tend to ac-

The Yankees declined to comment, and the Mets didn’t return phone calls. Of ce tower developers have also negotiated PILOTs. The Durst-owned 1 Bryant Park tower paid about $53 million in PILOTs last year, according to gures from the Independent Budget Of ce, saving $21 million from its property tax bill.

One World Trade Center paid $66 million in PILOTs, said a spokesman for landlord Port Authority of New York and New Jersey, which city documents show saved the tower $100 million in its theoretical property tax bill. Hudson Yards saved more than $50 million last year, thanks to its PILOT agreement with the city.

THE FILM AND TV INDUSTRY

THE FOLKS WHO MAKE movies and TV shows in New York are among the biggest winners in the governor’s 2023 budget.

Hochul has proposed to expand and extend a tax credit for lm and TV production in the state to $700 million a year from $420 million. The administration argues that other states have amped up incentives to attract productions, so New York must up the ante or risk losing them, such as Steven Spielberg’s West Side Story, lmed in New Jersey.

Actors, directors, set designers and so on all congregate in New York, which has had a ourishing theater and movie scene for a very long time, critics such as the Citizens Budget Commission and Reinvent Albany note. Why single them out for special tax treatment?

Governors seem to really like the lm and TV credit, which started as a $25 million package in 2004. Hochul has proposed extending the credit to help defray “above the line” costs for actors, directors and screenwriters, in addition to “below the line” costs for set builders, hairdressers and camera crews that have been covered by the credit since inception.

Entertainment industry unions say Hochul’s reforms “will stem a current loss of production and lift our industry to new heights.” Expanding the tax credit “will sustain and create strong union jobs with critical health and retirement bene ts for many years to come,” they say.

TAX INCENTIVES

INSURANCE COMPANIES

IN THE 1970S many of New York’s leading employers were calling the movers. PepsiCo had ed for the suburbs. Avon, Nabisco, Shell Oil and Western Union had all pulled up stakes. An especially bitter blow came in 1974, when General Electric relocated its headquarters from Midtown to Fair eld, Connecticut.

Insurance industry of cials threatened to follow them unless they got an incentive to stick around. Keen to keep good-paying jobs in Manhattan, in 1974 the state Legislature passed a bill that exempted insurers from city income taxes with no sunset provision. The bene t was worth $15 million a year at the time, equal to 0.1% of the city’s budget, according to U.S. Census Bureau data.

Nearly 50 years later, the insurance industry’s carve-out costs the city $613 million a year in foregone revenue—equal to about 1% of total tax collections, according to the Department of Finance’s gures. The bene t has grown along with insurance pro ts.

The New York Insurance Association says insurers are taxed at a higher effective rate than other businesses because they pay $2 billion in franchise taxes based on premiums written. A state budget document says franchise taxes are imposed on corporations “for the privilege of conducting business” in New York.

“I think it is clear that property and casualty insurers are not receiving a tax break,” said Cassandra Anderson, vice president of the insurance association.

THE CHRYSLER BUILDING

ZOMBIES

FROM PAGE 15

crue to a small number of recipients because sectors such as nance, real estate and entertainment, which get a lot of incentives, are dominated by a handful of big players. In a 2013 study Rubin found that only 1% of all New York companies ling general corporate tax returns get state tax credits.

“For far too long New York state has used economic development spending to pick winners

results and follow-up.

“Corporate giveaways are a way politicians try to show they’re creating jobs,” Kaehny said. eir power is being used to bring a new zombie to life in Times Square.

is one is called the New York City Musical and eatrical Production Tax Credit. It was created after theaters went dark three years ago and began life as a $100 million reimbursement, much like the lm and TV one.

e Hochul administration wants the bene t expanded to $300 million a year and extended by two more years. Originally, the credit was to wind down as tourism recovered, but that language was removed, the Citizens Budget Commission said.

, the Chrysler Building has never paid property taxes to the city. That’s because it sits on land owned by the nonpro t Cooper Union for the Advancement of Science and Art. Even though the landmarked tower isn’t used for educational purposes, according to a state law enacted in 1859, it is exempt from property taxes. The city challenged the law when the Chrysler Building was built, but in 1936 a court ruled in the landlord’s favor.

and losers,” Ashley Ranslow, New York state director of the National Federation of Independent Business, told the state Senate last year. “ ere must be a shift in the state’s priorities that no longer subsidizes big businesses and industries at the expense of small businesses.”

A zombie is born

One trouble with incentives is governments sometimes bet big on the wrong horse.

e idea for Hudson Yards was hatched in 2005 by business and political leaders concerned that the city lacked “modern commercial space needed for future o ce-based employment,” according to the consultant’s report. Today nearly 20% of city o ce space is vacant because the market suddenly changed. e question now is how many subsidies will be granted to turn older buildings into desperately needed housing.

Just as in the movies, zombies are almost impossible to kill. One reason is tax incentives are a good way for political leaders to befriend donors. Another is that they give elected o cials a sense of control over the economy and generate good publicity. Nearly every program is accompanied by a joyful birth announcement and a ribbon-cutting ceremony, with less attention on

Rudy Callegari, co-founder of Edge Auto Rental, which transports crews and sets to movie studios and theater stages, said the expanded bene t would help bring shows to Broadway that might not otherwise be nancially feasible. Without the tax credit for producers of movies, TV shows and musicals, work would quickly dry up for his nearly 100 employees, 75 of whom are people of color, Callegari said.

“ e credit isn’t just important,” he said. “It’s vital.”

It so happens that one of the oldest zombies in New York is for newspapers and periodicals.

ey’ve been exempt from sales taxes since 1965. e paper and ink used in printing them are exempt too, and the total carve-out cost the state an estimated $44 million last year. e carve-out has been extended to digital audiences as well: Internet access fees have been exempt from state sales taxes since 1997, costing the state an estimated $639 million last year in foregone revenue.

Diane Kennedy, president of the New York News Publishers Association, said she’s not aware of any point in the state’s history when newspapers and periodicals were subject to sales tax. Paper and ink are components of a manufactured product, and in general such items are exempt. She said the exemptions “help to make the news more a ordable to individuals, which encourages them to become informed about the activities of their government and issues facing their communities.” ■

According to the lease between Cooper Union and the building’s operator, money that the building would owe in property taxes goes to the college. The arrangement cost the city $20 million in foregone revenue last year. A Cooper Union spokeswoman didn’t respond to a request for comment.

THE HORSE RACING INDUSTRY

SOME MIGHT SAY the high-water mark for horse racing came when Secretariat blew away the eld at the 1973 Belmont Stakes. Others would go further back, to when Groucho and Chico Marx did a hilarious bit in A Day at the Races. Either way, there’s little question that racing’s glory days are in the past.

Yet the industry retains political clout in Albany. Gov. Kathy Hochul has proposed a $455 million loan so the New York Racing Association can redevelop the grandstand and clubhouse at Belmont Park. In return, the association would give up its lease on the Aqueduct Racetrack near John F. Kennedy International Airport so the state could lease it to someone else, perhaps a casino developer.

In the meantime, the racing industry retains a couple of tax breaks secured in better days. The costs of training and maintaining racehorses in New York are tax-exempt. Certain racehorses purchased out of state for the purpose of racing in New York are exempt too. Those zombies date back to 1988 and 1981, respectively.

—Aaron Elstein

CALLEGARI of Edge Auto Rental sees tax incentives granted to the city’s theater industry as a vital part of the sector’s nancial health.

“CORPORATE GIVEAWAYS ARE A WAY POLITICIANS TRY TO SHOW THEY’RE CREATING JOBS”

Lifting the curtain on the aggressive lobbying that keeps New York’s zombie tax breaks in place

From MSG to the film industry, companies spend heavily to press politicians to keep their abatements—with impressive results

BY NICK GARBER

For the past decade, state lawmakers have introduced the same bill to repeal Madison Square Garden’s $42 million-a-year tax break. Despite a solid slate of co-sponsors and considerable media attention, it never made it out of committee before this year.

Brian Kavanagh, the Manhattan state senator who has backed the legislation since 2017, knows one reason why.

“MSG has lobbied very aggressively,” he told Crain’s. “I heard from their lobbyists almost immediately when we put the bill in in the first place.”

Lobbying helps explain how the same tax breaks make their way into budgets year after year, even as experts question whether the city and the state get a worthy return on their multibillion-dollar investments. For most companies and industries, the cost of hiring lobbyists is a drop in the bucket compared to the money saved from the abatements.

Garden owner James Dolan and his company, MSG Entertainment, have long been known for their high-powered lobbying operation in Albany. In 2005 the defeat of Mayor Michael Bloomberg’s plan for a new West Side stadium was widely credited to the millions in lobbying dollars spent by MSG, which viewed the stadium as a potential competitor.

Little has changed since then. MSG paid state-level lobbying firms more than $231,000 last year, and records show it lobbied specifically against Kavanagh’s repeal bill in at least two years: 2019 and 2021.

MSG’s lobbying spending in the years it pushed against the bill totaled about $650,000. Its tax abatement in those same two years added up to $87 million.

As it pushed to kill the bill, MSG’s listed targets included

the State Senate majority leader’s office and 17 individual lawmakers from around the state, including Kavanagh himself. MSG’s talking points centered on the arena’s economic benefit to the city and the money the company has invested into improving the 55-year-old building—a pitch that might have resonated with some colleagues, but not with Kavanagh. “I haven’t found any of the arguments persuasive,” he said.

Warning lawmakers

Among the lobbyists MSG has enlisted in recent years is Kasirer, the city’s top lobbying firm and among the biggest in the state. Its founder, Suri Kasirer, said she no longer represents MSG—but warned lawmakers against trifling with tax abatements once they are enshrined in law.

“If somebody engages in a business decision on the basis of a tax incentive, it is very hard to change that,” Kasirer said. “If you are a government that just sort of changes the rules midway, people don’t have confidence in doing business with you.”

Kasirer’s other clients include the Motion Picture Association, whose $322,878 in lobbying spending last year included a focus on the state’s film tax credit program. Months later Gov. Kathy Hochul unveiled a budget that would expand the $420 million initiative to $700 million— over the objections of fiscal watchdogs.

“These films are job creators, and they also benefit the local community,” Kasirer argued.

New York policymakers may be growing more skeptical of hefty tax breaks, according to Evan Stavisky, a lobbyist with the Parkside Group. He divides the discourse into two clear eras: before the city’s 2018 deal with Amazon for a new corporate headquarters, and after it.

Amazon famously withdrew within months, and the ire directed at the $3 billion in tax incentives offered to the company has deterred politicians from crafting similar packages, Stavisky said.

“After the multibillion-dollar Amazon deal, many policymakers took a closer look at the whole process,” he said. “There doesn’t seem to be quite the consensus that there used to be.”

Indeed, more of Kavanagh’s colleagues appear to be seeing his side of things. In mid-March, for the first time, state senators included a repeal of MSG’s tax abatement in their own budget proposal, raising the possibility that it could make it into the final state budget due April 1.

The coming weeks will show whether tax break skeptics have won over enough politicians to strike the biggest abatements from the next state budget.

Kasirer said her clients are accustomed to the scrutiny that accompanies any tax break struck with the government. But the corporate world has come to expect some enticements for doing business in New York.

“That really is the way the private sector works,” she said. “There’s a naiveté in feeling like we shouldn’t be giving anybody help.” ■

NOW IS THE TIME TO FREEZE NY DEMOCRATS’ MISGUIDED LOVE AFFAIR WITH TRICKLE-DOWN ECONOMICS AND CORPORATE GIVEAWAYS

NEW YORK IS ESSENTIALLY a one-party state. Democrats have every statewide office and supermajorities in both houses of the Legislature.

Because they run the show, it matters what New York Democrats think. Their legislation, budgets and campaign language show they aspire to be champions for working families and the vulnerable, willing to tax the rich and take on big fights for social justice.

JOHN KAEHNY

Reinvent Albany works closely with Democrats in the Legislature and statewide offices. We support many of their initiatives to strengthen everyday democracy and improve government accountability and transparency.

New York Democrats have passed some of the most progressive state tax codes and ask the wealthy to pay their fair share. But looking closer, they are not the “tax the rich” party. They are the “tax some of the rich—the rest we subsidize” party.

ELIZABETH

If you doubt it, take a look at the massive amount of existing corporate giveaways and the proposed $7 billion in taxpayerprovided reimbursable grants that the governor and the Legislature are about to give to Hollywood TV and film producers in the next decade. Under this program, we calculate, New York taxpayers will pay producers $66,000 a year for each full-time job they create or $660,000 per job in the course of the deal.

Unfortunately, New York Democrats seem to have fallen in love with massive corporate giveaways that are utterly at odds with their basic values. New York’s state and local governments spend an astonishing $10 billion in taxpayer money a year on corporate giveaways that do not work and are rooted in trickle-down economics. Dozens of state and local programs provide grants and tax abatements to business owners so they will ostensibly hire more people.

Yet research in the past 40 years by independent scholars has definitively refuted the claim that corporate giveaways are a good use of taxpayer funds. Take a look

at some of the 25 major studies highlighted in our March report, “Debunked,” all written by reputable scholars who are not paid by subsidized businesses or economic development officials. They show corporate giveaways have little effect on the number of new firms established, job growth, firm location decisions and overall economic growth. In fact, corporate giveaways have the opposite effect: They contribute to inequality and poor fiscal health.

The problem for taxpayers is that such facts and independent analyses do not stand a chance when pitted against the political reality that governors and legislators—and judging by the budget, New York Democrats—love corporate giveaways.

Politicians like corporate giveaways so much because the taxpayer-subsidized businesses and industries—as well as labor unions—have armies of consultants, lobbyists and media firms spinning narratives that these programs create jobs that benefit the average person. We have all seen the ribbon-cuttings, the hard hats, the shovels in the ground, the supportive statements from management and labor, and the backdrops of cheering workers.

Campaign contributions are the icing on this cake. Our “Debunked” report includes studies showing businesses that make campaign contributions are four times more likely to receive a subsidy, and that subsidy is 63% larger than those of companies that do not make campaign contributions.

Corporate handouts don’t stand up to basic scrutiny: They exist solely because of politics, not because they are a cost-effective investment of tax dollars. It’s time to freeze corporate giveaways—not expand them.

The obvious questions to ask New York Democrats: Why are New York taxpayers paying business owners to employ people to make lawn furniture and sitcoms? Why not use New York’s public funds to buy goods and services that create jobs and cleaner water, better transit, nicer parks, and more child and elder care? ■

John Kaehny is executive director and Elizabeth Marcello, Ph.D., is a senior research analyst at Reinvent Albany, a nonprofit that advocates for transparency and accountability in New York government.

ALAMY

KAVANAGH

RIGOROUS DATA SHOULD SHOW WHERE INCENTIVES WORK BEST

NEW YORK STATE and its localities have long been national leaders in economic development spending, totaling around $10 billion annually. Despite the extreme paucity of rigorous evidence demonstrating that many of these dollars have driven substantial job or economic growth, the state has regularly expanded these programs, and this year appears to be no exception.

The executive budget proposes to increase the film tax credit to a possible lifetime cost of $14.6 billion, up from $9.6 billion now; extend four city tax incentives that cost $44 million annually; and double down on the state’s propping up of the horse racing industry with a $455 million facility renovation. For the most part the state Legislature supports the governor’s proposals, with some modifications to make them even more generous.

This is one area in which New York should stop following its motto—“Excelsior.” Not only are these evidence-baseless programs likely inefficient investments; they perpetuate the interstate competitive race to the bottom and governments’ habit of allocating huge sums without real evidence of impact.

Let’s break this down further.

The budget proposes to extend and expand the Empire State Film Tax Credit despite New York’s already granting $6.5 billion in credits without performing a rigorous analysis to demonstrate whether the program was needed to attract productions or whether the foregone tax revenue exceeded the additional economic activity catalyzed. The proposal would increase the annual credit cap from $420 million to $700 million, extend the sunset from 2029 to 2034 and increase the credit’s value for beneficiaries.

Both legislative houses accept the expansion, and the Assembly wants even more.

The Legislature also accepts the executive’s proposal to extend four city tax incentives that cost $44 million a year in foregone revenue. The effectiveness of two of these decades-old programs has never been evaluated, and the city’s Independent Budget Office found that the others—the Commercial Revitalization Program and Commercial Expansion Program—did not significantly improve office vacancy rates or employment in Lower Manhattan compared to nonparticipating areas, such as Midtown.

Then there is the proposal to provide cash or support borrowing totaling $455 million to renovate and expand Belmont Park—essentially doubling down to support the downstate horse racing industry that likely could not exist without state subsidies. This proposal has one potential upside: returning the Aqueduct Raceway land to the state sooner. The Legislature generally agrees with the Belmont subsidy, but the Senate wants an affordable housing component at Aqueduct—perhaps that’s OK—while the Assembly actually wants to remove the requirement to return Aqueduct to the state. Not for nothing, both parcels are in transit-rich areas, which these days make many think about housing.

Nobody should ignore that New York needs to focus on smart investments and management to grow its economy. But there also is a nearly click-bait, addictive quality to many so-called economic development programs for public officials who receive substantial local accolades for each announcement.

Yet the essential question is rarely asked and more rarely well answered: Is this spending effective? Well-designed and implemented programs increase employment and spur economic growth that otherwise would not have happened in a cost-effective manner. A thorough, rigorous evaluation would identify whether a given incentive program had induced additional economic activity. It would compare that benefit to the cost, as well as to what we might gain if we used those resources in another manner—what economists refer to as the opportunity cost.

To be fair, there has been improvement, and some real hope is on the horizon. The state finally published a database of many of its economic development deals and standardized the definition of a job—both actions are critical to answering the essential question. Furthermore, a state-contracted evaluation of the efficacy of New York’s economic development incentives is underway. If appropriately rigorous, it should help direct spending to cost-effective programs that grow the economy.

To compete for businesses, jobs and residents, New York should focus on developing human capital—both educating and training New Yorkers and attracting great talent, providing high-quality, essential public services, and maintaining its infrastructure so that goods and people can move easily and safely.

Ensuring that New York is an affordable, attractive and, yes, fiscally stable place to live and operate a business will help grow jobs and increase the quality and vitality of all New Yorkers’ lives. Depleting precious resources for unproven and unproductive programs diverts money that either should be in the taxpayers’ pockets or deployed to higher-impact uses. ■

OP-ED

BUDGET GIVEAWAYS AGGRAVATE INCOME INEQUALITY IN NY

NEW YORK IS THE MOST unequal state in the country— and our massive corporate handouts have only been making things worse.

A recent report from the Institute on Taxation and Economic Policy found that we’re the worst in the nation for wealth inequality—just 0.4% of our state’s population holds a fifth of the concentrated wealth in the U.S.—and our income inequality is also the worst in the nation.

The state Legislature has made efforts to address extreme inequality, implementing modest tax increases on the biggest corporations and the wealthiest New Yorkers to fund our schools and communities. These popular and effective policies have been echoed by national Democrats, including President Joe Biden.

This year in Albany we can do more. But Gov. Kathy Hochul’s regressive budget proposal won’t help. She has pledged to block more tax reforms, and she’s doubled down on massive giveaways to wealthy corporations in the name of “economic development.”

The Legislature has admirably stepped up to make billionaires and millionaires and wealthy corporations pay what they owe in taxes. But they haven’t taken enough steps to address corporate handouts and tax giveaways.

It’s time for state lawmakers to freeze state and local spending on corporate giveaways—just stop them cold.

Our “economic development” programs have drawn criticism from the left, the right and the center for ineffective spending and straight-out corruption.

In terms of results, they’ve only given us more inequality and more popular anger at government misuse of public resources.

State leaders, including Hochul and former Gov. Andrew Cuomo, have thrown money at private businesses in wild and wasteful ways. A data and call center in Lockport got a half-billion dollars in subsidies amounting to $2.4 million for every job created. A money-losing startup just got a quarterbillion dollars in subsidies to create 68 jobs in rural Genesee County—that’s a ridiculous $4 million per job.

Out-of-control “economic development” programs have been marked by a string of corruption convictions for fraud, bribery and misuse of public funds, from Syracuse to Buffalo to Long Island.

It shouldn’t surprise anyone that a multibillion-dollar slush fund for the richest New Yorkers is unpopular with everyone else in the state. Each year nearly $10 billion in taxpayer money goes to state and local “economic development” schemes that amount to blank-check giveaways for real estate developers and corporations, even as housing becomes more unaffordable for everyday New Yorkers and wages for working people remain stagnant. These giveaways have so far led to sluggish economic growth and even more corruption scandals.

State lawmakers should take this opportunity to freeze “economic development” spending and block Hochul’s new proposals for giveaways— particularly while an audit of current spending is underway by the Department of Taxation and Finance.

Senate Majority Leader Andrea Stewart-Cousins and Assembly Speaker Carl Heastie should work to end the practice of giving away public money to corporations, such as Amazon, at the expense of our public schools.

And they must end the corrupt and, frankly, silly tradition of giving away direct grants and subsidies to billionaire developers, such as James Dolan, Steven Roth and Stephen Ross.

Public funds should be invested in high-quality early childhood education, public higher education, affordable and supportive housing, and clean, renewable energy—areas that benefit all communities and businesses.

If we stop new spending on corporate handouts this year, we can finally begin to reduce inequality. We can reprogram and reinvest billions of public dollars toward New Yorkers and our communities. ■

Michael Kink is executive director of the Strong Economy for All Coalition, which includes labor and community groups that advocate policies to benefit working New Yorkers.

MICHAEL KINK

Ana Champeny is vice president for research at the Citizens Budget Commission.

ANA CHAMPENY

NEW YORK NEEDS TO FOCUS ON SMART INVESTMENTS AND MANAGEMENT TO GROW ITS ECONOMY

CALL IT A WRAP ON WASTEFUL FILM GIVEAWAY

SUSPENDING DISBELIEF can make for a great entertainment experience in the movie theater, but it makes for terrible tax policy.

In the past two decades, film and television producers have cajoled governors and state lawmakers into subsidizing their projects. It takes the form of a generous tax credit worth 25% of “below the line” project costs. Because of the way the subsidies work, producers can collect a piece of the $420 million in annual “credits” worth far more than they pay in state taxes. The state routinely cuts checks for $10 million or more to highly profitable productions with bankable stars, such as Blue Bloods and John Wick 3. Gov. Kathy Hochul is proposing to further sweeten the deal by jacking the film credit up to 30% and handing out $700 million per year in credits.

Proponents put on a great act to defend the practice, but when the show’s over, arguments for the film credit boil down to how other states offer incentives. The argument goes that some shows and movies—and jobs!—would go to those other states if New York didn’t shower producers with public money.

And here’s where disbelief takes hold in the halls of state government.

The state’s own consultant reports have repeatedly shown that the state’s taxpayers lose about 50 cents for every dollar awarded in film credits—quite the plot twist, considering that economic development incentives are supposed to leave the public with more money when all is said and done.

Claims about jobs that depend on the credit also tend to be hyped, based as they are on assumptions that nothing would be filmed here without a handout (even though only a fraction of projects get the credit). The claims ignore how production has continued in states that repealed their film credits.

And the subsidies are rarely considered in the context of their opportunity costs— that is, how many jobs a comparable tax cut or state program might instead support.

The problem is, like people sitting in a movie theater or queuing up Netflix, New York’s political class has good reasons to take a break from critical thinking and play along.

Grateful film and television types, including some labor unions, are generous campaign contributors.

Sony executives cited former Gov. Andrew Cuomo’s defense of the film credit in pushing others to boost his reelection.

Supporting the film credit also means getting to rub elbows with celebrities. Upstate politicians tell places like Buffalo they’re on the cusp of becoming a snowy version of Hollywood—provided Albany keeps paying movie crews to put on their parkas.

But no one can say New York gets the best use out of $420 million (or $700 million) by sprinkling it on some of the world’s richest entertainers working in an industry that was deeply rooted here long before the film credit.

New York should cancel the film credit for any projects not already in the works. And it shouldn’t stop there: Because of its size, the Empire State can upend the industry’s extortion of other state governments by forming an interstate compact to pledge it won’t re-enter the film credit business.

BUTTON TEXT

Progressive lawmakers in Connecticut are already pushing to end Hartford’s wasteful film credit, and freed from competition, New York’s biggest competitors— California and New Jersey—would likely welcome the chance to repurpose hundreds of millions of dollars as they grapple with deficits and debt.

The film credit has cost New York taxpayers more than $6 billion. Here’s hoping the plans for a sequel kill the franchise. ■

Ken Girardin is a fellow at the Empire Center for Public Policy in Albany.

KEN GIRARDIN

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Notice of Formation of XN CAPITAL PARTNERS LLC.

Articles of Organization filed with the Secretary of State of NY (SSNY) on 3/6/23. Office Location: New York County. SSNY has been designated as agent up who process against it may be served. The Post Office address to which the SSNY shall mail a copy of any process against the LLC served up him/her is: 1 Union Square, South 210, New York, New York 10003. The principal business address of the LLC is 1 Union Square, South 210, New York, New York 10003. Purpose: any lawful act or activity.

Notice of Formation of LAUREL BRAND LLC

Arts. of Org. filed with the SSNY on 1/17/23.Office location: NY County. SSNY has been designated as agent upon whom process against it may be served. The Post Office address to which the SSNY shall mail a copy of any process against the LLC: 17350 State Hwy 249, Ste 220 Houston, TX, 77064, USA. The principal business address of the LLC is 234 E 7th ST Apt 5FW, New York, NY, 10009, USA. Purpose: any lawful act or activity.

Notice of Formation of OPSO LLC

Arts. of Org. filed with Secy. of State of NY (SSNY) on 01/09/23. Office location: NY County. Princ. office of LLC: 447 Broadway, 2nd Floor Suite #1591, New York, New York 10013. SSNY designated as agent of LLC upon whom process agains it may be served. SSNY shall mail process to Firstbase Agent LLC 447 Broadway 2nd FL #187 NY, NY 10013. Purpose: Any lawful activity.

Notice of Formation of Student Forever One LLC

Arts. of Org. filed with Secy. of State of NY (SSNY) on 02/14/2023. Office location: NY County. Princ. office of LLC: 447 Broadway, 2nd Floor Suite #1682, New York, New York 10013. SSNY designated as agent of LLC upon whom process agains it may be served. SSNY shall mail process to Firstbase Agent LLC 447 Broadway 2nd FL #187 NY, NY 10013. Purpose: Any lawful activity.

POSITIONS AVAILABLE

A nonprofit organization in Far Rockaway is seeking sealed bids for sales and installation of security related enhancements. The project includes CCTV System and related equipment, impact resistant doors and related equipment, Physical access control systems and related equipment and Perimeter fencing and security personnel. Perimeter fencing quote needs to be clearly divided showing the 50k, 45k and 10k costs respectively.

Election criteria will be based on knowledge of surveillance and security, adherence to work schedule, prior experience, references and cost.

Specifications and bid requirements can be obtained by contacting us at hsgfarrockaway@gmail.com.

All interested firms will be required to sign for the proposal documents and provide primary contact, telephone and email address.

Bids will be accepted until May 1st. and work is to commence by May 15th and completed by May 31st, December 31, 2023, and August 31,2024 respectively.

Wildlife Conservation Society (WCS) Invitation to Bid HVAC Construction Services, Prospect Park Zoo, Boiler Burner Replacement, Proposal Due Date: May 19, 2023 (Electronic submission to bids@wcs.org). Pre-Bid Conference Site Visit (In Person): April 25, 2023. The project is funded by the City of New York through its Department of Parks and Recreation and is subject to certain NYC requirements And WCS policies. For a copy of the RFP please email janderson@wcs.org.

Software Engineer, iOS positions w/ Warner Bros. Digital Network Labs, Inc. in NY, NY. Develop innovative consumer-facing mobile products in a fast-paced environment characterized by ongoing iteration & product dev’t. Hybrid work schedule. Salary range is $109,283/yr - $174,000/yr, depending upon qualifications. Email resume to GMRI@warnerbros.com.

Ref: 6864754SEI2.

Sr. Manager, Currency and XP Measurement positions at NBCUniversal Media, LLC in NY, NY. Work closely w/ VP of Measurement Innovation & Advanced Analytics to develop analytic solutions to enable full funnel outcome measurements across NBCUniversal’s platforms. Hybrid work schedule. Position based in NY, NY. Salary range is $130,000/yr$150,000/yr, depending upon qualifications. Send resume to: Elsbeth Velasco-Fulgencio at elsbeth.velasco@nbcuni.com, & indicate you are applying for the Sr. Manager, Currency and XP Measurement (JM23LN) opening. NBCU is an

because it already works in the city’s multifamily market. The bank wants to focus on diversifying its holdings through the Signature acquisition and will concentrate on commercial and industrial lending—it did take on $3.7 billion in Signature’s loans to manufacturers, law firms and other businesses.

“We don’t have a whole lot of office,” Cangemi said, “but we are a major, long-term lender in the non-luxury, rent-regulated marketplace in New York, so we know this product very well.”

Endless office woes

But despite NYCB’s stated goal of diversifying its assets, it opted to steer clear of the sector given the grim realities of the market.

“There’s a lot of rumbling about office, so we just felt it wasn’t the appropriate time to be significantly higher there,” Cangemi said.

The city’s office buildings have been in a tailspin since the pandemic began, with a dramatic increase in remote work that shows

few signs of abating more than three years in. The Federal Reserve warned in February that overvalued commercial real estate could threaten the stability of the financial system even before the banking crisis began in earnest, and the crisis itself now seems poised to make this problem even worse.

Credit Suisse, for instance, is another financial institution that has been struggling, and although UBS has stepped in to keep it alive for now with a $3.2 billion takeover, ripples could end up hurting SL Green Realty, one of the city’s major office landlords.

SL Green owns 11 Madison Ave., which is home to Credit Suisse’s regional headquarters. And the collapsed bank is no ordinary tenant in the prewar tower by Madison Square Park.

Spread across 1.2 million square feet as the tenant with the largest footprint, Credit Suisse is also one of SL Green’s most lucrative tenants, accounting for 3.2% of the rent revenue across its entire portfolio.

Should Credit Suisse decide to scale back its New York footprint in the wake of an anticipated downsizing and layoffs, SL Green could feel the sting, analysts say. Credit Suisse pays $64 a square foot annually for its lease, which extends until May 2037, filings show.

SL Green had no comment on

CORPORATE SUBSCRIPTION

Credit Suisse. But a source familiar with the company’s deal at 11 Madison said that, as with other commercial leases, it was written in order to be hard to break. Also, a merger with a well-capitalized bank such as UBS could actually bring about some stability, said the source, who added that it’s not inconceivable that UBS could even take the 11 Madison space for its own offices somewhere down the road.

The landlord Paramount Group, another publicly traded company that has seen its fortunes sink, may also be nervous. First Republic Bank, which received a $30 billion lifeline as its equity value sank in trading last week from more than $20 per share to less than $12.50, is the most profitable tenant in Paramount’s portfolio.

Indeed, First Republic shells out 6.2% of Paramount’s rent rolls, ahead of second-place Credit Agricole, which is at 5.8%, filings show. First Republic leases four locations from Paramount, though filings aren’t clear about exactly where. Paramount does own 11 properties in Manhattan but also has towers in San Francisco, where First Republic is headquartered.

Residential reticence

The city’s residential market has held up much better than its commercial one since Covid appeared, but NYCB may have wanted to avoid taking on Signature’s multifamily loans because of the bank’s

THE COMPETITIVE EDGE

focus on rent-regulated apartments. These have become much less attractive investments since the state passed a 2019 rent law that limited how much landlords can increase rents on empty regulated apartments and how much they can raise rents to pay for improvements. NYCB acknowledged shortly after the law passed that it was hurting business.

Cangemi stressed that NYCB would still remain a major player in the multifamily market given the investments it already has in the sector.

“We know the book,” he said. “We’re going to service the book as long as we have to.”

But this exposure that it already has is also what is making it hesitant about taking on more, according to Cangemi.

“We have to acknowledge how concentrated we are,” he said.

The Federal Reserve hiked interest rates by a quarter of a percentage point on Wednesday and indicated that additional increases could be coming, a sign that officials still view inflation as a bigger problem than the banking crisis. ■

BLOOMBERG

“WE KNOW ThE BOOK WE’RE GOING TO SERVICE ThE BOOK AS LONG AS WE HAVE TO.”

City-based facial chain looks to make skin care fast, accessible

First launched on the Upper East Side, Silver Mirror has found success with its membership model

BY SHELBY ROSENBERG

On a student trek through India in 2012, Matt Maroone and Cindy Kim, both working on their MBA at the University of Pennsylvania’s Wharton Business School, met and connected over their passion for retail entrepreneurship.

e two stayed in touch as Kim went on to found Korean beauty e-commerce company Peach & Lily that same year. And in 2014 Maroone founded Pick t, an app that helped users make fashion decisions.

But even in the throes of building their new businesses, each felt something was still missing. Kim, who had ongoing issues with her own skin, felt there was even more room to innovate in skincare. Meanwhile, Maroone found himself craving the personal connection with end-consumers that app development lacked, and had started to explore brick-and-mortar ventures on the side.

In late 2014 Maroone broached the idea of a joint skin care business to Kim. rough extensive research over the following months bolstered by Kim’s knowledge of Korean skin care, they hit upon one ritual popular in South Korea that hadn’t yet caught on in the U.S: fast and a ordable facial treatments normalized as a monthly routine.

Deciding to adapt that facial model to New York City, then their home base and where Kim had grown up, they spent much of 2015 developing the concept for Silver Mirror Facial Bar: prioritizing e cient and a ordable

treatments without skimping on the small details that make facials feel like a luxurious indulgence.

Competitors at the time were o ering 90-minute facials for around $250, but Kim and Maroone wanted their facials to be fast enough for busy New Yorkers to schedule on the y and reasonably-priced enough to t into a monthly budget.

Silver Mirror’s facial treatments are customized to each client and last either 30 or 50 minutes. Ranging from $76 to $145, they target concerns from aging to acne, and utilize a variety of machines and modalities.

e pair opened their rst 950-square-foot space in May 2016 on the Upper East Side.

“Opening in New York was terrifying. e rent for our rst location was $17,000 a month, and Cindy and I bootstrapped that with our own funds and access to debt,” said Maroone. “We wanted to do things the old-fashioned way instead of raising a ton of money from private equity or venture capital and giving away all of our company at the beginning.”

Keep it affordable

To keep their facials a ordable, they decided to incentivize their biggest fans to keep coming back through a membership model. Silver Mirror members pay for one facial every month at a 20% discount from the non-member price. ey also receive 10% o products, additional facials and add-ons, such as dermaplaning and extractions.

ough these hefty discounts risked tanking their margins, the duo banked on the calculation that they’d make up for those losses by bringing more people through the door, more regularly.

So far that’s panning out. Maroone said they’ve never had a month-over-month decline in net membership and have never experienced a year-over-year decline in sales even while limited to 50% client occupancy in 2021 as Covid-19 cases soared in the city.

“I’ve been very surprised by the variety of clients,” he said. “It’s actresses on Broadway. It’s investment bankers, marketing executives, students, even people in their 90s.”

In the past decade other facial bars have opened in the city, touting 30-minute facials and laser treatments at low prices. But Maroone is quick to distinguish Silver Mirror from the “fast facial” model.

“We think of ourselves as a more premium, luxury experience,” he said. “A lot of these companies are trying to build models that you can ip. But from the beginning, we never had an exit plan.”

In 2018 the company opened a second location, in the Flatiron District, followed by a third, in the Dupont Circle neighborhood of Washington, D.C., in 2019. In 2021 Kim left Silver Mirror amicably to focus on other ventures, though she retains a minority stake. For Maroone, however, it’s full steam ahead.

Last October the company added a fourth spot, in the D.C. Navy Yard, and a month later opened its fth space, in New York City’s Bry-

FOCAL POINTS

COMPANY NAME Silver Mirror Facial Bar

FOUNDED 2016

CO-FOUNDERS Matt Maroone and Cindy Kim

EMPLOYEES Early on the co-founders worked the front desk themselves, only hiring their rst store manager in 2020. Now, they have 108 staff (including managers), with plans to hire more.

LOCATIONS Six total in New York, Washington, D.C., and Miami

REVENUE $7 million in 2022, with $14 million projected by the end of 2023

FLAGSHIP SERVICES Silver Mirror’s 30-minute signature facial includes skin cleansing, exfoliation, extractions and a vitamin-enriched oxygen treatment. The business also offers 50-minute facials targeting a variety of skin conditions.

WEBSITE silvermirror.com

ant Park. A sixth opened this past January in Miami, Maroone’s hometown. He plans to open six more locations in these three cities by the end of this year, with possible expansions to other states in 2024.

Last year the company pulled in $7 million in revenue across its rst three locations; it is projecting $14 million in revenue in 2023.

Six years on, Silver Mirror has yet to team up with investors, though Maroone said there’s been interest.

“If we nd the right investor and the right valuation, we’d love to make it happen. But we’re in a very comfortable place where we’re using our earnings to grow at a healthy pace,” he said. “Retail companies that grow too quickly rarely last for the long haul, and we want to build something that’s here to stay.” ■

SILVER MIRROR’s Maroone has expansion plans for the chain.

BUCK ENNIS