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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.


It Takes a Big Man to Make Big Promises

By Sydney H. Schanberg

First published in Newsday, September 11, 1987

Every time you look up, there he is — the world’s most successful public relations man. He’s in Moscow trying to talk the Communists into luxury-hotel capitalism. He has become the gambling king of the East Coast and is now reaching for a casino in Australia. He says he is John Cardinal O’Connor’s adviser on real estate, and according to one published account, gave the cardinal as a character reference on his application for a Nevada gaming license. He has issued a kind of press-release foreign policy, and a Republican operative in New Hampshire is trying to draft him for presidency.

That’s not even the quarter of it. He recently bought his own private Boeing 727 with two bedrooms and a sauna, after which he commissioned the world’s longest limousine. He continually makes big rolls on the stock market, manipulating certain prices higher, at which point he sells for impressive profits. For all his wealth, he manages to get big tax abatements on his luxury apartment projects in New York City. He feuds with the mayor and calls him a moron and worse. His autobiography, “Trump by Trump,” is due out this winter. And there’s got to be a sequel, because he’s only 41 years old. 

The part I like best about Donald Trump is his deep and abiding concern for the homeless and the poor. He never misses an opportunity to tell us — in print, on radio and on television — how every upset he is about the working-class people who can’t afford decent apartments at the going rates and about those who end up completely shelterless, living on the streets. It’s terrible, he says, as he dedicates his latest condominium tower for the moneyed, with his name in giant letters on it. 

And even last week, when he purchased full page ads in The New York TimesThe Washington Post, and The Boston Globe calling for more “backbone” in America’s foreign policy, he took care to include an expression of his pain over the plight of the troubled among us. He said we ought to stop carrying wealthy nations like Japan and Saudi Arabia on our backs and instead make them pay us for defending them militarily in the Persian Gulf and elsewhere. Then we could take these billions of dollars and use them to “help our farmers, our sick, our homeless.”

It cane as no surprise that Mayor Edward Koch, another public-relations virtuoso and thus a rival of Donald Trump’s for the world title, sneered at the foreign-policy ads and said that as a politics, Trump was “a flop” and “a schoolboy.” Trump responded by calling Koch a “jerk” and “a loser who will go down as the worst mayor in the history of the city.”

They’ve gone through this routine before, so it’s quite polished by now. In their last go-around, which had something to do with Trump’s grab for big tax abatements, the mayor called him “Piggy, Piggy, Piggy” and Trump purred back with “moron.” It’s not always easy to understand their splitting matches, given that they’re so much alike in their religion: Mirror Worship. Not only that, but Koch is just as verbal a champion of the downtrodden as is Trump — so that’s something else they have in common.

Nonetheless, yesterday brought a new chapter in the sandbox war. Trump, smarting over Koch’s barbs about his international views, volunteered some insults about Koch’s plans to visit Nicaragua as head of a fact-finding group. “How can our idiot mayor go to Nicaragua,” Trump asked, “when he can’t even run New York City? The man is totally incompetent…” and more of the same.

The only thing Trump left out this time (he must have been so overwrought he forgot) was a sentence about poor people.

After he got through reading his anti-Koch remarks to a New York Newsday reporter, he said, “I know you guys like this kind of stuff.” He’s right. That’s what makes him the master of public relations that he is.

He can deny all he wants any designs on the White House, but Trump has the kind of instincts that are perfect for the age we live in — the age of stage smoke and magic mirrors and imagery. He looks out and sees public-relations mayors and public-relations senators and a public-relations president. In short, he sees the kind of men we admire and elect these days and he naturally asks: Why not me?

For example, he offered us a couple of years ago his belief that he could do a better job at negotiating arms control with the Soviet Union than “the kind of representatives that I have seen in the past.” Blowing high-grade smoke, he added: “It would take an hour and a half to learn everything there is to learn about missiles. I think I know most of it anyway.”

When Trump bought Resorts International’s casino and extensive properties in Atlantic City earlier this year, he said he felt a sense of social responsibility to the slum-ridden New Jersey casino city and was therefore going to build housing there for families with small pocketbooks. “With the vast land holdings we now have, we want to create some moderate and low-income housing on a private basis,” Trump said. “So far, nobody has been able to do it, but we have an opportunity now and we are making a commitment to do it.”

That was on March 19. On July 23, he amended his pledge. He said that Resorts had big financial pressures and “must straighten out its affairs” first. This meant, he said, that until he completes the costly Taj Mahal — a new casino that he has under construction, which will be the world’s largest — the low-income housing will have to wait.

The March commitment got substantial news coverage; the July pullback was hardly noticed.

In an age where smoke is everything, Donald Trump can blow it with the best of them.



It’s Time For Trump to Leave Havelot for Camelot

By Sydney H. Schanberg

First published in Newsday, October 23, 1987

Some people think it was bad taste for Donald Trump to announce that he had just made $175 million on the stock market and gotten out early, before Monday’s great crash. It was callous and unfeeling, they said, to boast about your high-rolling profits while little people, small investors, were holding their heads and watching their modest nest eggs shrivel and fade into painful puniness.

These critics just don’t understand Donald. He wasn’t rubbing it in. Sure, he asked his public relations representative, Howard Rubenstein Associates, to call all the newspapers and tell them Donald had been smarter than the rest, that he had not only avoided loss but had walked off with a fifth-of-a-billion gain. But all Donald was trying to do by bringing his good-fortune story to the attention of the media was set an example. That’s all he ever wants to do. He wants to show us what brains and competence can accomplish.

Just follow my lead, he keeps saying to all of us. Heaven knows we need role models. I have only one beef. We would have appreciated this stock market escape a lot more if he had told us about it while he was bailing out, when we too could have grabbed a bailing can, instead of after the fact, when we were no longer afloat.

But this probably never occurred to Donald, what with all the foreign affairs and social issues that are on his mind. Last month, when he took out full-page ads in The New York Times and other major papers to criticize American foreign policy for its lack of “backbone,” a Trump aide explained: “Donald is drifting toward a greater social role, that’s why he purchased the ads. It’s that perfectionist thing in him. He sees things that could be better and asks why not.”

Could it be that Donald, the builder of castles, is dreaming of leading us back to Camelot? Or is it Havelot?

You see, as outlandish as this may sound, there are people who think Donald behaves ostentatiously and crassly, flaunting his wealth, boasting about his deals, asking the public to measure his self-worth by his net worth. Then, too, he throws major tantrums when he doesn’t get his way — suggesting an errant child more than an incipient national leader.

Yesterday, he was in New Hampshire, the state of the first presidential primary, addressing a group of Republican leaders on cosmic issues — the trade deficit, the Persian Gulf, etc., etc.

But in New York earlier this week, his lawyers were in court trying to evict an old lady from one of his buildings. He’s been trying to throw her out since he bought the place in 1981. There’s nothing very cosmic about a landlord trying to force a tenant out; it’s known as good old greed. The two bedroom apartment at 100 Central Park South falls under rent control, so the monthly rent is only $203 — and Donald, if he gets the woman out, can sell it as a condominium for a very large amount. 

It’s hard to reconcile $175-million scores on the stock market with grubby attempts to evict old ladies. I guess that’s why the Howard Rubenstein public relations company didn’t mention the eviction proceeding when it called the newspapers to report Donald’s Wall Street winnings.

For the record, the tenant’s name is Suzanne Kaaren Blackmer. She’s 74. She’s been in the apartment since 1945. She is the widow of the actor Sidney Blackmer and was an actress in her own time. She says her income is mainly from Social Security and a small pension from the actors’ union. She is represented by a lawyer from a legal services office for senior citizens.

Trump contends that her primary home is in North Carolina; she says the apartment has always been her home. The case will be decided in the courts, but one wonders why Donald, with assets maybe as high as $3 billion, engages in such petty pursuits. Is it because he can’t stand losing, no matter how small the issue? Or is it because he thinks we are so blinded by the rays from his piles of gold that we simply won’t see the seamy side of his activities? Given the state of national manners and our worship of profit and those who amass it, maybe he’s right. The cover stories that lionize him would suggest this.

My guess, however, is that Donald Trump’s almost desperate search for public approval will have no lasting result until he actually does something of social value. People may envy a Midas, or even someone who has built a Midas image through hype, but envy does not necessarily carry respect or liking with it.

Donald has passed up all sorts of opportunities to win the respect of New Yorkers. For example, he expresses constant distress about the homeless problem, but makes no move to build housing for the homeless, or even low-income housing. 

But he has not run out of chances to be remembered positively forever. Right now, on the largest undeveloped tract in Manhattan, a 76-acre stretch along the Hudson River on the Upper West Side, he wants to erect the world’s tallest building at 150 stories, plus 11 other skyscrapers, plus a hotel and a giant shopping mall. The project — with the thousands of people and vehicles it would draw — would quite simply drown the surrounding community.

Donald Trump, with all his winnings, could donate the land to the city as a great park. It could be an extension of historic and important Riverside Park. New York hasn’t seen a gift like this in ages. A grateful city might even name it Trump Park.

Talking about his material successes in his forthcoming autobiography, Donald Trump writes: “I don’t do it for the money. I’ve got enough, more more than I’ll ever need. I do it to do it. Deals are my art form.” 

Do the biggest deal of your life, Donald. Create a work of art, create a great park.



The Dark Side of the ‘Lucky Guy’

On June 9, Broadway’s 67th annual Tony awards will be announced and celebrated. One of the lead actor nominees is Tom Hanks, for “Lucky Guy,” a tale of the life of the late Mike McAlary, a tabloid columnist who became known in New York as a hard-charging crime and police reporter who got to major police and crime stories before his newspaper competitors. He was bold and flashy and won a Pulitzer prize in 1997. He died in 1998 from colon cancer.

But in 1994, he made a mockery of journalism by writing three columns about a woman who was raped in Brooklyn’s Prospect Park. He got some bad information from police sources and rushed into print saying the woman was a “hoaxer” who was not raped or attacked in any way but made up the story to draw attention to her concerns about the treatments of gays and lesbians. When the police medical report confirmed she had been raped, finding semen inside her body and on her clothes, McAlary refused to accept the findings. What they found, he said in one of his three columns, was “at best, saliva.” Mc Alary never sought to interview the woman and he never apologized to her.  That was heinous journalism. The woman sued him for libel.

The woman’s attorney, Martin Garbus, went to see the play and wrote a piece worth reading for The New York Times entitled The Damage Done by a ‘Lucky Guy.

I wrote three columns for Newsday in 1994 and 95 about the facts of the case, the unlucky victim, and the trial that exposed the dark side of tabloid journalism as practiced by Broadway’s “Lucky Guy”:

Tangled Webs Woven with Personal Ties

Fighting Her Accusers and the ‘Demons’

A Novel Take on Responsible Reporting


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