Time for Adams to examine these bad breaks

Heeding signs that a shaky economy threatens local tax revenues, Mayor Adams’ latest budget includes $2.5 billion in cuts to city-funded spending for this year and next, leaving many city jobs vacant, slowing the expansion of pre-K for 3-year-olds and reducing subsidies to the city’s libraries. With the mayor projecting budget shortfalls of nearly $3 billion next year and almost $6 billion in 2026, deeper cuts are likely.

Yet the mayor is leaving a substantial part of the budget out of the equation: property tax exemptions. These exemptions, totaling billions of dollars, are potential tax revenue the city forgoes.

Although the mayor and the City Council can’t start or stop these exemptions — that’s a power held by Albany — the mayor and other elected officials could be pressing for routinely re-evaluating these tax breaks.

The property tax is the bedrock of the city’s revenue stream, expected to provide $31.3 billion this year, 46% of all city tax revenue. Yet the tax roll is pockmarked with dozens of holes that prevent the city from collecting a substantial amount of revenue — and further complicate a tax the Daily News and many others have derided as inequitable and opaque.

In total, the city will forgo more than $19 billion in potential property tax revenue this fiscal year, according to figures provided by Independent Budget Office economist Yaw Owusu-Ansah. Roughly a quarter of that amount is because the city itself owns the property. Similarly, Metropolitan Transportation Authority and New York City Housing Authority properties go untaxed, sites that would otherwise net more than $1.5 billion in revenue.

Collecting taxes from the MTA, NYCHA or other public entities would be counterproductive. Most New Yorkers would probably agree that exemptions such as the break for low-income senior citizen homeowners, which costs the city about $185 million this year, make sense. But that still leaves millions of dollars in exemptions worth re-evaluating, many of which accrue to some of the wealthiest institutions and individuals in the city.

Two of the largest property-owning entities in the city — Columbia University and New York University — pay no property taxes because they’re educational institutions. In total, private colleges and universities will forgo paying nearly $450 million in city property taxes this year for their school buildings, dorms and other sites, with a large share of that savings going to Columbia and NYU, where annual tuition costs more than $65,000 and $58,000, respectively. Schools such as Harvard and Yale make payments equivalent to a portion of their local property taxes and don’t appear to be suffering from the expense.

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The city’s nonprofit hospitals and health centers also reap large tax exemptions — nearly $760 million this year for their medical facilities and housing for some staff. New York-Presbyterian, among the city’s largest hospital networks, garners a nearly $100 million exemption on its Washington Heights location alone. With $6.7 billion in revenue in 2019, 27 of the hospital network’s staff earned more than $1 million in compensation.

Malfeasance is no barrier to the tax breaks. The Central United Talmudic Academy, which recently admitted to defrauding federal programs, is paying $8 million in fines and restitution. CUTA receives its property tax exemption, worth at least $12 million this year for two sites according to Department of Finance records, as an educational institution. Yet a recent New York Times investigation found that it, like some other yeshivas, focused almost exclusively on religious education, with little attention to English, math, history and other fundamental subjects.

Many property tax exemptions are on autopilot, continuing unchecked every year. Take the exemption for Madison Square Garden, which costs the city $42 million in forgone revenue this year. Since its inception in the 1980s, the tax break has netted the Garden’s owners more than $600 million in savings.

The City Council has repeatedly questioned the necessity of this tax break. Yet the break persists. That’s because the power to end it — and other tax breaks — resides in Albany. Well-targeted lobbying and campaign contributions help ensure MSG’s exemption continues, at no cost to the state budget. Consider it a kind of unfunded mandate.

Not all tax exemptions continue in perpetuity. The 421-a program expired in Albany this year, felled by its cost and the paucity of truly affordable housing it created, as documented by city Comptroller Brad Lander. Still, because the program granted developers exemptions for up to 35 years, the city will be forgoing billions of dollars of tax revenue for years to come, including nearly $1.9 billion this fiscal year.

The end of 421-a shows the importance of periodically reassessing these breaks. If reassessment shows some breaks offer little benefit to the city, will Mayor Adams have the swagger to take on the elite institutions and individuals — and their Albany enablers — who benefit from many of these property tax exemptions? If he doesn’t, it’s everyday New Yorkers who will pay the price.

Turetsky worked at New York City’s Independent Budget Office from 2001 until July 2021.