NEW YORK, Aug 28 (Reuters) - New York City’s tax breaks to spur commercial property projects more than doubled over the last 10 years, rising to about $500 million in the last fiscal year, according to a report released on Thursday.
Growth in the tax incentives, however, is expected to slow due to reforms the state enacted at Mayor Michael Bloomberg’s request, the Independent Budget Office said in the report.
The city’s economic development arm had found that only about one out of every four projects would not have been built without the benefits, which offer tax breaks to property developers for as long as 25 years.
The cutbacks could be a bitter pill for developers already struggling to get financing from banks that have become much less enthusiastic about real estate loans.
The Independent Budget Office said its study “provides strong evidence that (the) Industrial and Commercial Incentive Program benefited a far broader group with more generous benefits than might have been necessary to meet the policy goal.”
The reforms, which began this June, include switching to tax abatements, which work like tax credits, instead of offering tax exemptions, which are deductions. The tax breaks apply to increases in property values resulting from new buildings or improvements, for example.
The original program, created in 1984, had been gradually expanded to more of Manhattan and the city’s four outer boroughs, as well as utilities, which got some of the biggest tax breaks.
The average cost of a tax break leaped to $88,969 in the fiscal 2008 year ended June 30, up from $46,532 in 1998, when measured in current dollars, the study found.
The new tax break plan drops utilities and is expected to award fewer breaks to fast-food restaurants and chain stores. (Reporting by Joan Gralla; Editing by Leslie Adler)
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