N.Y.C. Council Calls for IBO to Study Tax Breaks

The New York City Council on Wednesday approved a bill calling on the watchdog Independent Budget Office to review $2.8 billion the city budgets annually for economic development tax breaks.

New York would be the first city to create such a system. Since 2012, 23 states and the District of Columbia have created or enhanced review processes. Utah enacted one in July.

City-funded, nonpartisan IBO already publishes three annual reports that the city charter requires: its fiscal outlook, issued before an upcoming fiscal year; and its analyses of the mayor's preliminary and executive budgets, the latter highlighting changes from the preliminary plan.

While the city, whose annual budget exceeds most states, lacks a review process for tax expenditures, its charter requires a related annual report. "However, it does not tell us how well these breaks are achieving their goal," said a City Council task-force report issued last September.

Mayor Bill de Blasio is expected to release his fiscal 2018 preliminary budget next week.

The bill, which would amend the city's administrative code and is headed for de Blasio's desk, requires agencies to provide IBO the necessary information. For each economic development tax expenditure reviewed and evaluated, IBO would submit a report to the council and post it on its website. The report would detail the data considered, the method and assumptions used, analyze the effectiveness of the tax expense and evaluate its usefulness.

IBO is expected to manage the first year's review with existing resources, according to council officials. After that, the organization would require one additional doctorate-level employee to develop and maintain the evaluation process. Estimated personal-service costs are $73,375 and $146,750 for fiscal 2018 and 2019, respectively.

Council finance committee chairwoman and primary bill sponsor Julissa Ferreras-Copeland, speaking on the council floor at City Hall, said the bill reflects 20 months of work by the task force, beginning in January 2015. The council's powers are now limited, she said.

Fellow councilman and task-force member Dan Garodnick also spoke in favor. "What may have worked at one time may no longer be working or may even be wasteful," he said.

Even with sunset clauses, tax breaks can last long, the task force report said. The oldest in the city is the tax exemption for the land under the Chrysler Building in Midtown, which dates to 1859.

The council had several hearings on Madison Square Garden's $17.3 million annual tax exemption over the past decade, most recently in May 2014. The city approved that deal in 1982, fearing the loss of the Garden's prime tenants, the basketball Knicks and hockey Rangers.

Last week the New York City Industrial Development Agency approved $195 million in tax breaks for Related Cos. and Oxford Properties for their planned office tower at 50 Hudson Yards. It would be the city's fourth-largest commercial office tower.

In testimony before the council in September, IBO deputy director George Sweeting said IBO monitoring "would bring interesting analytic challenges and the opportunity to contribute to the council's important oversight role."

According to Sweeting, IBO and council staff have worked on language regarding the additional responsibilities IBO would assume.

"As this will be ongoing work, IBO will need to ensure that resources will be available in the future as we make commitments of staff and other support to carry out this work," said Sweeting. "Our concern is motivated by the need to ensure that IBO can continue to fulfill its city charter mandates to provide budget reports, information, and fiscal analysis to various elected officials and the public, while also taking on this new responsibility."

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