Programs that offer tax credits to firms that meet certain criteria are scrutinized

By Jimmy Vielkind and Katie Honan 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 14, 2020).

A year after Amazon.com Inc. abandoned its plans to build a campus in Queens, state lawmakers who opposed the project are looking to rein in the subsidy programs that New York City officials used to lure the company.

Senate Deputy Majority Leader Michael Gianaris, a Democrat whose Queens district included the project site, said he is drafting legislation to restructure two city programs that offer companies tax credits for relocating jobs or undertaking construction in neighborhoods outside the core of Manhattan.

The deal with Amazon would have directed up to $1.3 billion in city tax incentives to the company over the course of 15 years to develop a campus in Queens's Long Island City that would employ up to 40,000 people.

"These programs are broken and represent a lot of what's bad about economic development policy," the senator said in a recent interview.

His prime target is the city's Relocation and Employment Assistance Program (REAP), which is set to expire on June 30 unless it is reauthorized by state lawmakers.

The program offers companies up to a $3,000 annual tax credit for each employee hired in designated neighborhoods outside the core of Manhattan.

Nearly 200 firms received a total of $33 million through the program in 2019, city budget documents show.

Under the program, Amazon was promised nearly $900 million of credits over 20 years for creating up to 25,000 jobs. According to the Citizens Budget Commission, a nonpartisan fiscal watchdog, this would have been the largest award ever given through the program, which is available to any company that meets its criteria.

Amazon abruptly canceled its plans for the Long Island City campus on Feb. 14 last year, blaming opposition from some state and local lawmakers, as well as progressive groups.

Mr. Gianaris said incentives for a single project should be capped so that benefits can be spread. The Amazon proposal showed one company can "completely raid the system," the senator said.

Mr. Gianaris said he also hoped to make changes to the city's Industrial and Commercial Abatement Program (ICAP). It reimburses firms for part of the costs of major construction and renovation outside the core of Manhattan.

The city's Economic Development Corp. said in a statement that in 2016, companies receiving REAP credits supported 10,407 employees. Queens had the biggest boost from the program, with 106 companies -- most with 100 employees or less -- receiving a total of $17.8 million in credits, data for that year show.

Some small-business owners said REAP has helped them grow.

Liz Neumark founded Great Performances, a catering company, in Manhattan in 1980. After being priced out of the borough, she began a move to a larger facility in the South Bronx last summer, with the pending approval of a REAP benefit that could bring an annual tax credit of more than $500,000, she said.

She currently employs more than 1,000 people, and the benefit could grow as she expands her business.

"The REAP program has played an enormous part in our strategic and financial planning for the move," Ms. Neumark said.

Senate Majority Leader Andrea Stewart-Cousins, a Democrat, said she was open to re-evaluating the programs. A spokesman for Assembly Speaker Carl Heastie, a Democrat, didn't respond to requests for comment.

A spokesman for Gov. Andrew Cuomo, a Democrat, didn't return an email seeking comment. The governor's economic development czar, Empire State Development President Eric Gertler, said REAP and ICAP are important tools to support job growth.

New York City Mayor Bill de Blasio, a Democrat who championed the Amazon deal but later soured on the company when it announced its exit, said on Monday he was open to changing the programs.

"I think every incentive program deserves that constant reassessment for changing conditions," Mr. de Blasio said.

 

(END) Dow Jones Newswires

February 14, 2020 02:47 ET (07:47 GMT)

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