Perdido 03

Perdido 03

Thursday, March 7, 2013

Bloomberg Caught Secretly Funneling Tax Money To Real Estate Cronies

From Juan Gonzalez in the NY Daily News:

The Bloomberg administration secretly funneled more than $9 million in city property taxes to the Hudson Yards project on Manhattan’s far West Side without informing the City Council, a Daily News investigation has found.

That $9 million is on top of $234 million the mayor gave the Hudson Yards Infrastructure Corp., the private group spearheading the new 50-block district by extending the No. 7 subway line to 34th St. and 11th Ave.

This money could have gone to regular city services but went instead to a favored project of the real estate industry.

And while Mayor Bloomberg’s aides at least negotiated the bigger subsidy with the Council, they never disclosed the $9 million they allocated to Hudson Yards from the property taxes of buildings that existed before the project began.

The Olivia, for example, is a luxury building on W. 33rd St. built in 2000, five years before Hudson Yards. Yet the Olivia’s $6.7 million property tax is now subsidizing the project, finance records obtained by The News show.

Then there’s the Glass Farmhouse on W. 37th St. Converted into luxury condo lofts in 1998, its nearly $1 million property tax is also going to Hudson Yards.
City Council Speaker Christine Quinn, whose district includes Hudson Yards, was surprised to learn about this arrangement. “ It is important that these payments are done in a transparent way,” Quinn said.

What's worse, the Hudson Yard Project Bloomberg pushed so heavily is lagging in development and thus needing more tax money to shore it up:

Scores of hotels, office buildings and apartment buildings would quickly sprout in the area, City Hall predicted .
But the Council also reluctantly agreed to subsidize possible shortfalls in the project’s revenues during the early phase.
Eight years later, new development is drastically below projections, and the bill for city subsidies keeps growing. Last year, Hudson Yards took in just $27 million in taxes from “new construction” but had to pay $114 million in debt service.
That’s why Bloomberg has repeatedly asked the Council for subsidies for the bonds.

And just how did Bloomberg get away with secretly funneling tax money from older buildings in the area to fund the project?

City Hall did not disclose until now that $9 million of the paltry $27 million in revenue actually comes from pre-Hudson Yards buildings like the Olivia and the Glass Factory.

“There was never any discussion of involving buildings built before 2005 in paying for Hudson Yards,” said Joe Restuccia of the Clinton Housing Development Co.

The city included revenues from such buildings if their permanent certificate of occupancy was issued after January 2005, said Deputy Budget Director Ray Orlando.

The Olivia and the Glass Farmhouse got temporary certificates when they opened, but took years to get permanent ones — a loophole City Hall used to hand their tax payments to Hudson Yards. The city must pay any project shortfalls, Orlando said.

But a subsidy openly agreed to between City Hall and the Council is one thing; secret subsidies that mask Hudson Yards problems are something else.

It's a joke that Comptroller John Liu has had his political career essentially destroyed by campaign finance fraud allegations involving his aides when Bloomberg secretly routes tax money to a project run by his real estate cronies and nothing happens to him.

In fact, this isn't the first time Bloomberg has funneled tax dollars to his real estate cronies at Hudson Yards, as Juan Gonzalez of the Daily News reported back in December 2102:

Private developers were supposed to pay for the grand Hudson Yards project on Manhattan’s far West Side, but right now taxpayers are being made to finance an ever-growing bill for the development.
The Bloomberg administration paid $234 million during fiscal year 2012 to a city-created development group that oversees the huge new commercial and residential complex, one of the mayor's most ambitious projects.

City Hall quietly earmarked most of that money — $155 million — to the Hudson Yards Infrastructure Corp. in late June, because the group has not been generating enough revenue to pay the annual interest due on $3 billion in bonds it issued.

Hudson Yards Corp. floated those $3 billion in bonds to pay for an extension of the MTA’s 7 subway line to 34th St. and 11th Ave., plus a new boulevard that will run between 10th and 11th Ave. Initial plans by Bloomberg’s aides called for private developers to pay enough money in fees, air rights, and taxes to Hudson Yards Corp. to pay back the $3 billion in bonds.
But when the City Council approved that plan in 2005, the Council also agreed that if revenues from private developers were not sufficient to pay debt service in the early years, the city would make up the shortfall.
In fiscal 2012 alone, six years after the project started, the city transferred $79 million to Hudson Yards Corp. from the general budget to make up for anemic revenues from developers. That’s nearly double the $42 million it paid in 2011.

Then in June, in the midst of final budget negotiations with the Council, Bloomberg aides added another $155 million to help Hudson Yards Corp. make up for even bigger revenue shortfalls expected for both 2013 and 2014, a city official with knowledge of the transaction said.

“Consistent with the city’s general approach to managing its budget and debt service, the city decided to make a grant to HYIC at the end of FY (fiscal year) 2012 to pre-fund future (interest) costs,” David Farber, spokesman for Hudson Yards Infrastructure Corp., or HYIC, said.

And that's not all the money the public is forking out.

This column reported last December that an analysis by the city's Independent Budget Office found nearly $160 million of additional “infrastructure projects” related to Hudson Yards that Bloomberg’s people have buried in the budgets of other agencies.

All the rosy predictions have not materialized of a new commercial district springing up in the Hudson Yards area once a new subway got underway.

So much money going to subsidize Bloomberg's real estate cronies - some of it without the knowledge or approval of the City Council.

No wonder Bloomberg wants to cut $260 million from city schools even if a judge refuses to allow Cuomo to cut $260 million in state education aid.

Bloomberg wants to funnel that money to his real estate and business cronies.


  1. Once again, thank God for Juan Gonzalez! Maybe the real estate deals are one of the ways that Bloombuck$ has been able to increase his fortune so dramatically.

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