REBNY, Building Trades and Cuomo did not actually reach agreement on 421a
Despite last week’s proud and glowing announcements by Gov. Andrew Cuomo, the Real Estate Board of New York, and the Building and Construction Trades Council of Greater New York, sources confirmed to The Real Deal that they have not reached a consensus on a new deal for 421a. In fact, there’s significant dispute over what the parties even agreed to last week.
On Thursday, REBNY and Building Trades released a joint statement outlining the basic terms of its long anticipated agreement on a renewed 421a developer tax exemption and higher wages for construction workers at select projects that received the tax benefit. But nearly a week later, a fundamental dispute over a key element of the plan has surfaced.
“The issue is whether the 35-year 421a exemption will apply to all projects or just those that pay higher construction wages,” said one industry source who’s close to the negotiations. “And that’s unsettled.”
Yesterday, Crain’s reported that an anonymous, high-ranking staffer in the governor’s office said that the new 421a would only extend exemptions to 35 years at projects required to pay higher construction wages. According to the terms of the agreement announced Thursday, those projects are restricted to south of 96th Street in Manhattan and also the Brooklyn and Queens waterfronts, where wages must average $60 an hour and $45 an hour respectively.
Representatives for both the governor and Building Trades confirmed to TRD that, contrary to what has been initially been reported, this is indeed their interpretation of the clause on exemptions. A source close to the negotiations said that the actual agreement — not the press release sent out — clearly distinguishes that the 35-year exemption only applies to projects with a wage agreement. The language of the agreement, as provided by the source, specifically states that “eligible buildings” for the 35-year exemption are only those with the wage requirement. A copy of that agreement, however, has not yet been released.
But REBNY is sticking to the language of the Thursday announcement, that unrelated to wage increases, buildings in a citywide amended 421a program “would receive a 100 percent property tax exemption benefit for 35 years.”
REBNY and government officials confirmed that all sides were aware of the content of the release that was distributed to the media. Administration officials later told The Real Deal that they were not involved in crafting the language. Cuomo’s office distributed its own release at roughly the same time, but notably omitted any details of the 35-year exemption period. It’s not clear why none of the parties publicly explained how the embarrassing disagreement occurred.
When pressed about the lack of true agreement with Cuomo and Building Trades, REBNY would only provide a statement from president John Banks that didn’t address the issue. The statement only rehashed that 421a is necessary to promote the creation of affordable housing in the city, and said nothing about what is still a clear deadlock between REBNY, the governor and Building Trades. Similarly, the governor’s office simply maintained that the REBNY and Building Trades’ release was incorrect.
“The geographic region outside of the wage zone was never part of the discussion,” an administration official said.
A representative for Building Trades declined to comment.
The discrepancy puts a serious damper on last week’s announcement, calling into question how ready a 421a bill will be — even if a special legislative session is called. Although the legislation has been held up by pending wage negotiations between REBNY and Building Trades, a bill still needs to make its way through the state legislature before the currently expired 421a can come back into effect. REBNY and the governor’s office seem to agree that the new bill will largely take the form of the June 2015 agreement, but the deal reached last week doesn’t specifically address issues like what condo projects will qualify for the tax abatement. In the 2015 agreement, Manhattan condo projects were excluded and only small Queens and Brooklyn projects — consisting of 35 units or less — were allowed to receive the tax break.
Requests for comment from Republican Senate Majority Leader John Flanagan and Democrat Assembly Speaker Carl Heastie were not returned by press time. According to Politico, the legislature has shown little interest in calling a special session to resolve the issue before January. They also might not be too inclined to go to bat for Cuomo on this, since efforts to increase pay for lawmakers — which would have been the first in roughly two decades — fell flat earlier this week.
The news that the 421a agreement is effectively back on the operating table comes as a shock to those in the industry who have already begun working off the assumption that 421a would carry a 35-year tax exemption for every project that receives the benefit. One government relations attorney told TRD that REBNY gave every indication that the extended term of the tax exemption was to apply to all projects, not just those in prime development zones required to pay higher construction wages. “This is really a surprise to us,” the attorney said.