By Chris Bragg
Downtown business leaders breathed a sigh of relief recently, when they learned the State Assembly would continue to give rent relief to Downtown tenants, with a three-year extension of the Commercial Revitalization Program.
The program gives a $2.50 per-square-foot tax abatement to building owners, who are then required to pass on the savings to their tenants via reduced rents. The idea behind the program, which has existed since 1995 and was set to expire at the end of March, is to encourage businesses to occupy commercial and retail space Downtown.
Eric Deutsch, president of the Downtown Alliance, praised State Assembly Speaker Sheldon Silver, who represents Lower Manhattan, for pressing other Albany legislators to pass the extension.
“At a time when we’re making a recovery,” he said, “they realized that Lower Manhattan is still in a phase of rebuilding from 9/11 and facing a major period of construction….
“One of the things I’m most happy about is that Speaker Silver made sure this was renewed on time. When there’s uncertainty, that’s when people make decisions not to lease Downtown.”
The rent relief, which is good for the first five years of a lease, applies only to buildings built before 1975, giving companies an incentive to move into commercial spaces considered in the “class B and C market” which might otherwise be less desirable than newer buildings.
The program also requires tenants make certain minimum investments to keep the buildings in good condition.
But David Dyssegaard Kallick from the Fiscal Policy Institute, a non-profit advocacy group, said these types of tax incentives allow landlords to jack up rents and keep the profits reaped from the tax abatement, minimizing the benefit for tenants.
Deutsch, however, said safeguards overseen by the city Dept. of Finance prevent landlords from pocketing the tax relief.
Kallick also said that companies such as Goldman Sachs, which is building a new headquarters in Battery Park City, won’t make the decision to stay or move Downtown because of lower rents. “Everyone’s pleased to see business picking up Downtown, but there’s no need to subsidize that if you make it a good place to live,” Kallick said, adding that the money would be better spent on parks, community facilities and schools.
But Deutsch said the program would primarily be used by companies far smaller than Goldman. “It’s really helpful to small businesses,” he said, “which have really been the backbone of the recovery of Lower Manhattan.”
Pre-1975 buildings in the area bounded by Murray St. and Frankfort St. on the north, South St. on the east, Battery Park on the south and West St. on the west are eligible for the program.
The Lower Manhattan Energy Program, which offers relief of energy costs of up to 45% for Lower Manhattan businesses, is set to expire this June. Deutsch said he’s confident that program will also be renewed.
