Author Archive | Syd

Tax Abatements Down by the Riverside

Hundred of millions of dollars were awarded unnecessarily to developers

By Sydney H. Schanberg 

Originally published in Newsday, June 13, 1986

Six years ago, when all the heavyweight builders, architects, real estate lawyers, financiers and public relations men were fighting each other for the right to develop a chunk of prime East River waterfront property known as the “Billion-Dollar Gold Coast” one of the competing lawyers, Charles Moerdler, a former city buildings commissioner, told a reporter: “We’re talking here of potentially the most meaningful dollar investment in the City of New York in many a year. That’s why there’s so much competition.”

One would not have thought with so many biggies painting to be picked by the city to develop the juicy tract, that the city had to put any sweeteners in the pot. Why offer tax incentives when the tongues are already hanging out? In fact, the same newspaper story that recorded the Moerdler comment also said of the $500-million project that “no city or state money is expected to be involved.”

Newspaper archives, it’s been noted before, are always good for a laugh. The private project will now receive tens of millions of dollars in city tax abatements.

Awarded in 1980 to a group of bidders who called their design River Walk, it is still going through the city’s permit process but is slated to go into construction late next year.

How it came to receive this major tax forgiveness is an instructive lesson in the fine-print skills of the Koch administration.

The state statute governing the tax gift is known as 421-a — short for Section 421-a of the Real Property Tax Law. It was enacted in 1971 to stimulate the building of apartments on economically unattractive sites in New York City where housing would otherwise not be built; sites defined in the statute as “vacant, predominantly vacant, or underutilized.” (The developer pays no taxes during construction and then only partial taxes for 10 years afterward.)

Over the years, the program became a giveaway. Hundreds of millions of dollars were awarded unnecessarily to developers who were building luxury projects and would have carries them out anyway, without the tax concessions. Almost all the projects were done in the better neighborhoods of Manhattan.

No one imagines in 1971 that the Trump Tower, on “underutilized” Fifth Avenue, would qualify for these tax gifts, but it got them– $40 million to $50 million worth.

These distortions of the law’s original intent led to a crescendo of protest and pressures against the Koch administration, which finally agreed, after years of foot-dragging, to put limitations of 421-a.

The mayor acknowledged that much of Manhattan had become so attractive and lucrative for developers that tax indictments were no longer needed. So he agreed that from 96th Street southward to 14th Street, and also in parts of Lower Manhattan, 421-a was dead. (He did push through certain geographic exceptions, however — such as the the Times Square redevelopment area, Union Square and the Lower East Side. The critics of 421-a had wanted more of Manhattan covered by the ban, with no exceptions, but this was the best they could negotiate.)

The next step was enactment of the restrictive language — first through enabling legislation in Albany and then in a detailed, implementing statute in the City Council. The new rules when into effect last Nov. 29; projects in the proscribed areas that had not broken ground for their foundations by that cutoff date could not receive 421-a abatements.

Which brings us to River Walk, a project that will run from 16th to 24th Streets along the East River and therefore would seem to fall inside the 96th-to-14th-Streets area of denial.

But then we are told by city officials to look closer at the council’s implementing legislation. River Walk will be built mostly on a concrete platform, supported by pilings, that will extend 500 feet into the river. And the river, if you read carefully, qualifies for 421-a goodies.

Some very clever Koch administration types inserted language that defined the limits of the ban as “the bulkhead line” on both the Hudson River and the East River. And “the bulkhead line” means the water’s edge. So anything built over the water becomes automatically eligible for 421-a.

Nothing was said publicly at the time about this loophole. There was no open discussion. The 421-a critics simply weren’t aware of it, and many of them — like me — have just learned about it.

What it comes down to is that at the very moment when the mayor was conceding that real estate tax inducements could no longer be justified in a large portion of Manhattan because it had become so desirable, he was, virtually by subterfuge, keeping the tax gifts alive for the most desirable tracts inside that portion: the waterfront.

River Walk is the first over-the-water project to benefit from this ruse. But the Koch administration has given a high priority to waterfront development, so more these tax gifts are certain to follow.

River Walk, for reasons beyond the tax abatement, is vigorously opposed by the residents of the neighborhoods around it, who say it is too huge and will overwhelm the moderate-income, low-rise community. They are asking that it be drastically reduced and reshaped.

The project consists of six acres on land and 24 acres to be constructed over water. Its structures will include five residential towers — ranging from 25 to 45 stories — with 1,888 apartments, all of them to be sold or rented at luxury rates. Also in the plans are a 245-room hotel, 2,075 parking places, and office building, retail space and two marinas.

Officials at the city’s Public Development Corp., which late last year took over responsibility for waterfront development from the Department of Ports and Terminals, say the 421-a “bulkhead” language was written before their time by they insist there will be no windfall for the builders of River Walk or any other over-the-water projects.

These officials say they will closely scrutinize the project’s financial plan before setting the final annual rent of the developer’s land-lease with the city.

What they’re suggesting is that if the 421-a tax gift raises the developer’s profits to excessive levels, they’ll raise his rent. We look forward to reading the fine print.

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Strictly Beau Monde

By Sydney H. Schanberg

Originally published in the New York Times, December 18, 1982

The state’s highest court scolded the city government this week for having denied a tax abatement to the glass and steel creation of Donald Trump, master builder — the structure that he calls, interchangeably, the Trump Tower or ”the world’s most talked about address.”

The Court of Appeals ruled unanimously that the city had gone beyond the law and used arbitrary reasons in deciding that young Trump’s 68-story edifice at Fifth Avenue and 56th Street did not qualify for having $20 million written off its tax bill. The seven judges told the Koch administration to go back and think it over and do the right thing for ”the world’s most talked about address.”

Sad to report, however, the city is behaving mean-spiritedly and is now looking for new ways to thwart the great builder and hold on to the tax money for the support of patently less important addresses — such as the Men’s Shelter and Bellevue Hospital.

Don’t the Koch people have any sense of gratitude for the uplift this visionary is giving our town? Don’t they realize that we will all be basking in the renascent glow from the shiny people who are buying the 263 condominiums in the Trump Tower at prices ranging from an embarrassing $500,000 for the economy one-bedroom unit up to $10 million for the premiere penthouse triplex in the stars?

I think it’s best to let the building’s prospectus and purring brochures speak for themselves: ”Imagine a tall bronze tower of glass. Imagine life within such a tower. Elegant. Sophisticated. Strictly beau monde. ”It’s been fifty years at least since people could actually live at this address. They were Astors. And the Whitneys lived just around the corner. And the Vanderbilts across the street.

”You approach the residential entrance — an entrance totally inaccessible to the public — and your staff awaits your arrival. Your concierge gives you your messages. And you pass through the lobby.

”Quickly, quietly, the elevator takes you to your floor and your elevator man sees you home. ”You turn the key and wait a moment before clicking on the light. ”A quiet moment to take in the view – wall-to-wall, floor-toceiling – New York at dusk. The sky is pink and gray. Thousands of tiny lights are snaking their way through Central Park. Bridges are becoming jeweled necklaces. ”Your diamond in the sky. It seems a fantasy. And you are home.

”Maid service, valet, laundering and dry cleaning, stenographers, interpreters, multilingual secretaries, Telex and other communications equipment, hairdressers, masseuses, limousines, helicopters, conference rooms — all at your service with a phone call to your concierge.

”If you can think of any amenity, any extravagance or nicety of life, any service we haven’t mentioned, then it probably hasn’t been invented yet.”

And can you believe it? The Mayor is trying to make life difficult for these people. Trying to cast a pall over their amenities. Trying to take away $20 million of their extravagances.

What kind of grinch would want to hassle that anonymous wage-earner who has purchased Triplex N for $10 million? Perched on the top three floors, Triplex N has (and this is but a partial list): ”five bedrooms, seven bathrooms, skylit garden/playroom, roof terrace, (interior) elevator serving all floors of the unit … unlike anything you’ve ever seen … wraparound views of Manhattan … sculptured staircases … sumptuous tubs … his and her bathing suites … worthy only of the world’s most talked about address.”

City Hall is trying to argue that the 1971 state law authorizing tax abatements for new residential construction was designed to stimulate the creation of low- and middle-income housing, not units that are ”unlike anything you’ve ever seen.” (The median rent in other buildings currently receiving such write-offs from the city is $465 a month. The ”carrying charge” alone on Triplex N is about $3,400 a month.) The court said there was nothing in the statute’s language that makes such a distinction.

The court is right — if we start discriminating against the rich, then who’ll be next? Donald Trump couldn’t agree more. He took all the risks, after all. He raised the $200 million to build the tower. Is he now to be penalized because the condominiums on the top 38 floors — which are in such sumptuous demand that he’s raised the prices four times since the sales office opened a year ago — will bring him $300 million (not to mention the revenue from the 18 retail and commercial floors)? What’s wrong with a reasonable profit?

What would the city do with young Trump’s $20 million, anyway? They’d just spend it on more cops and sanitation workers and subway repairmen. Who’s going to need cops and street sweepers and subway mechanics if young Trump keeps getting tax abatements and keeps building these swell apartments? Pretty soon, there’ll be so much housing that we’ll all be able to live strictly beau monde.

Now do you realize how important this issue is? Don’t drag your feet any longer — write to the Mayor immediately and tell him to lay off Donald Trump.

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The Killer-Idea Menace

By Sydney H. Schanberg

Originally published in The New York Times, June 12, 1982

Is our brain fiber so eroded by Perrier water and our spine so softened by beanbag chairs that we can no longer do battle with ideas from an alien galaxy? Can we rise anymore to a challenge? Is this the Big Apple – or only a rotten nectarine?

These knotty questions arise because the anti-Red brigade in the State and Justice Departments has blocked over 300 foreigners from coming to the United Nations disarmament session on the grounds that they are Soviet dupes with alien ideas, bent on capturing our hearts and minds.

I say let them in. We can handle them. Does Lawrence Eagleburger, the State Department official who seems to worry most about these aliens and their little red books, really think they would be any match for Mayor Koch, Donald Trump, the Financial Control Board, Vito Battista, Rosemary Gunning and The Wall Street Journal? Do they stand a chance against George Steinbrenner, gypsy cabs without springs, the West Side IRT and deli waiters whose insults would wither Lenin himself?

Anyway, these intruders have long since been tamed into submission by our jungle. They’ve been coming here for years without hindrance from Eagleburger, and all their invidious sowing of anti-American ideas hasn’t made the slightest dent in the Laffer Curve.

Hundreds of these now-proscribed people — such as members of the Japanese group, Gensuikyo — came to the first United Nations disarmament session in 1978; and all they left behind were some sandals discarded for Guccis and their welcome contributions to the sales tax.

Now I do realize that all Communists are not benign, that this country has adversaries and that we must be vigilant and militarily prepared. But in my experience, that very real problem has virtually nothing to do with people hawking ideas. It has to do, rather, with dictatorships seeking to amass world power and dominate others. Hitler, as far as I know, was not a member of the World Peace Council or its purported affiliate, Gensuikyo, which have got the Eagleburger aerie so stirred up.

”They are undesirable,” says Kenneth Adelman, our No. 2 delegate at the U.N. ”We have absolutely no legal obligation to let Tommy Bulgaria or anyone else from Soviet-front groups come here, participate in demonstrations, get on air time and do the Soviet Government’s work for it.”

I don’t know Tommy Bulgaria, but my contacts with Communists — in my reporting tours overseas – suggest that it is not subversion through ideas that we should fear. It is paralysis through boredom.

At their worst, these Communists were droning ideologues, all of whom should have been on retainer for the National Association of Insomniacs. At their devious best, they were masters at honing their rhetoric into a weapon akin to water-drip torture.

I recall the arrival in April 1975 of the victorious Chinese-backed Khmer Rouge in Phnom Penh, where they were nervously awaited by five Russians left behind in the Soviet Embassy with the sole mission of making friendly contact with their new Cambodian ”comrades.” The Mao-oriented Khmer Rouge were having none of it. They tore down the Soviet flag, stomped on Brezhnev’s picture, fired a rocket into the building and then, in the ultimate assault, forced the Russians to stay up all night and engage in a debate on Marxism-Leninism.

By morning, the Russian will had been sapped. Defeated and glazed of eye, they packed up their canned black bread and sour cream and drove, humiliated, to the French Embassy, where all the other foreigners had taken sanctuary.

New Yorkers are tougher than those Russians. The denizens of Elaine’s or Ruelles stay up all night discussing drivel far more mind-numbing than Hegelian dialectic and emerge into the morning sunlight without a wrinkle in their beautiful-people personas.

And beyond Elaine’s for a moment, perhaps the strongest evidence of our country’s advantage over the Soviet Union is that this conference, with its marches and open-air rallies, could never be held in Moscow, where fear of outside ideas results in their suppression. Our openness is our greatest strength. It’s a pity that the sky-is-falling bureaucrats in Washington are too insecure to understand this.

In their paranoia, they dug deep into their cold-war bins to dust off the hoary and hysterical McCarran Act of 1952, which sought to close our doors and ears to ideas other than our own.

It’s a good thing the statute applies only to aliens, because in addition to ”subversives,” it also excludes ”chronic alcoholics” and those suffering from ”moral turpitude.” Can you imagine, under those standards, how many members of Congress returning from junkets could be barred re-entry to our shores? I say that for better or worse, we should remain tolerant and continue to let our Congressmen into the country — along with members of the World Peace Council, tedious and undesirable as some of them may be.

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The Self-Importance of Being Donald

btkf-trump-1986.com

Photo: cbsnews.com

By Sydney H. Schanberg

First published in New York Newsday, May 20, 1986

Donald Trump likes to get his way and when he doesn’t, he sues people. I don’t have a complete list, but recently he has sued New York State, he has sued real estate competitors and he has sued Chicago Tribune because the paper’s architecture writer said some unkind things about Donald’s taste in design.

When he loses a case—which he does with some frequency—he simply changes lawyers and tries again. One gets the feeling he doesn’t care much for lawyers.

In fact, his most recent court suit is against a law firm that had the effrontery to represent some tenants who Donald Trump was trying to evict.

He has accused this firm—Fischbein, Olivieri, Rozenholc & Badillo—of engaging in acts of wickedness, usually depicted only in headlines about the mob: harassment, coercion, attempted extortion and obstruction of justice “in furtherance of this illicit scheme of commercial blackmail.” And he is seeking $150 million in damages from them.

What the tenants’ lawyers actually did—one learns from the court history of the case—was get Donald angry by frustrating his desire to drive the tenants out of 100 Central Park South so he could tear down the 15-story building and put up another Trump tower or palace or hanging garden.

Donald wasn’t just angry, he was livid. The tenants had won; they were staying. He had lost and he still faces serious charges, now being heard both in court and before a state agency, of having abused and harassed the tenants.

Not one to stay on the defense, Donald went after the lawyers. His latest suit against them was filed last week in state Supreme Court. Donald tried out his act first in federal District Court some months ago; he got nowhere.

It was thrown out there with unusual celebrity by Judge Whitman Knapp, whose language was blunt. The federal Court of Appeals was equally curt, not only affirming the Knapp decision but sending it back to the lower court to consider whether Donald should pay damages for having brought a frivolous lawsuit.

The gist of Knapp’s decision was that the tenants’ lawyers had done nothing more than represent their clients in vigorous and effective fashion. Being a man of civility, the judge fell just short of laughing at the charges, which were brought under the federal law against racketeering, known as RICO. He did refer to them, however, as “ludicrous” and deserving of “short shift.”

Having failed in federal courtrooms, Donald changed lawyers and is now clogging the state calendar with this foolishness.

His old lawyer on the case was A. Richard Golub, whose failure in the racketeering field has nonetheless not disqualified him from other of Donald’s litigious activities; there is so much to sue about. Donald’s new representative on racketeering is the law firm of Finley, Kumble, Wagner, etc., whose reputation for serious endeavor seems jeopardized by the humorous papers the firm filed against the tenants’ law firm last week.

It’s not that anyone has to feel sorry for the tenants’ law firm or for the three partners who are names as individual defendants—Richard Fischbein, David Rozenholc, and Herman Badillo, the last being a former Bronx borough president, congressman and deputy mayor. They are not pussycats; they are tough, savvy, aggressive lawyers and can look after themselves.

But it’s a lousy precedent to fill up the court dockets with suits by losers against the lawyers who represented the winners. Just because Donald hates losing—and who doesn’t?—shouldn’t give him the right to misuse the justice system. Donald, however, sometimes behaves as if the normal rules that apply to others don’t apply to him.

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