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What would you tell the mayor?

Mayor David N. Dinkins appealed to all New Yorkers last week for help in fixing the city through "Reform and Renaissance." He even invited individuals to drop by City Hall with suggestions. REW asked some of the top real estate executives in the city what solutions they would propose to the Mayor for the city's real estate industry.

Alan Stein, vice president of marketing for the Rockefeller Center Management Corporation said, "The mayor should express a clear program which allows the business community to contribute where they are ready, willing and able to do so, to increase productivity, quality of life and overall efficiency in city government. He should espouse a program, a grand strategy, of long-term growth which does not over burden the real estate and business communities, the tax base that pays for the much needed social programs."

Nancy Packes, president of Feathered Nest, residential rental company in Manhattan, said: "All communities are organized around labor, so the highest priority is the relationship between local governments and business so that competitive tax and other regulatory provisions must be favorable. Secondly, that artificial incentives, such as we experienced in the 1980's with 421-a, only distort the market force of supply and demand. This concept extends as well to rent regulation. In the end fine art of government is providing support without necessary regulation."

Steven D. Scruggs, director, Corporate Real Estate Services at Jones Lang Wootton USA, believes that incentives for commercial properties are unfairly administered and that the city's key problem is taxes, which he recognizes, because of the fiscal crisis, is not easy to surmount.

During the last few years and the real estate tax assessments were going up, Scruggs said, but now that they are going down somewhat the rate is going up. "The city's tax structure allocates an unequal share of the tax burden on commercial properties," Scruggs said. "The burden will have to go on to the homeowner but the corporations are voting with their feet by leaving."

He is working with one corporate tenant that has been in the city for most of this century. Now, Scruggs said, they are moving to Westchester because they cannot afford to stay. The city will cut a tax relief deal for big tenants he said, but cannot afford to do so for all tenants. "Rather than selective deals for big tenants that make a big splash, they have to devise a broad-based relief mechanism," he said. "They can't do a special deal for every 50,000-foot tenant." Scruggs, said his client was not going to move to Brooklyn and there is nothing the city can do if the company would only stay in Manhattan or leave. "Unless you're NBC," he added.

The city is actually helping the problem in a perverse way, Scruggs noted, because the fastest growing industry in the area is government which has grown 17 percent in the last two years and is leasing more space in the city. "That's not the help that all of us would opt for but it is positive," he noted. On the other hand, Scruggs said, the amount the city is leasing will not offset the other problems in real estate.

Arnold Zabinsky, president of Elm Management, which manages over 100 co-ops and condos throughout the city, said he would like to see an easing of the water and sewer and tax rates on co-ops and condos. "I believe that the original theories -- that by taxing real estate at higher rates it would be taxing the rich and not the poor -- have changed." In the last 10 years, Zabinsky noted, roughly 1 million apartments converted and instead of passing the tax on a progressive rate onto the rich, he said, we are excessively taxing the lower class and the lower middle class which can least afford these increases. "I would rather see the mayor find other sources of tax revenue which would more equitably distribute the tax burden," Zabinsky said. "Maybe they have to reorient the taxes towards progressive income taxes where you could possibly take from the rich."

John A. Werwaiss, the president of Werwaiss & Company which owns and manages industrial property in Long Island City, said the ability to generate taxes is dependent on the economic health of New York City. The problem is not only in the economy of the country, Werwaiss explained, but it is very much a regional problem. "We're getting endless calls from tenants when they get their tax escalation bills," he said. "They say (a) they can't afford to pay them or (b) it's the straw that breaks the camel's back." Werwaiss said there are tenants moving out and others which are refusing to pay the escalations.

The cost of operations is too high, he added, compared to any other city so the tenants are moving.

"It's a confidence issue and no one has confidence in the city's ability to manage its affairs. The city must make do with less tax revenue and simple operate more efficiently."

Tom Cusick, president of the Fifth Avenue Association, said the mayor should be concentrating on the underground economy which has been flourishing during this recession, often at the expense of the legitimate economy. Because of the peddlers, Cusick said, enormous amounts of money have gone into the underground economy which would have been spent in the legitimate economy.

"If it hadn't been spent on T-shirts in front of a department store, then it would have been spent on hamburgers in a restaurant," he noted. "I'd tell the Mayor to go out into the street and look around and see that this is an element of the underground economy, and book vendors and illegal vans and illegal buses are an element, and it's all out there for everyone to see."

Cusick believes resources should be targeted to go after the suppliers, including those selling counterfeit merchandise. "If you were successful in drying up any of this, the money would find itself back in the legitimate economy," he added. Fines on the peddlers do not work, he said, because the people do not pay them. "I would be more interested in drying up the activity by working with the Federal and State tax departments and tracing the suppliers," he said.

Adam R. Rose, senior vice president of Dwelling Managers Inc., said he wants to tell the mayor to focus some attention on the streets. "The illegal vendor and homeless situation are two of the most significant things affecting property values," he agreed. Unfortunately, he said, a lot of the illegal vendors are homeless or underhoused and that is also a problem. "But having portions of our city look like Calcutta does not help the city's image, does not make people comfortable to come here, invest here or do business here," Rose said. While he said he recognizes that we are living in a time of limited resources, he feels a concerted effort, including the police department, consumer affairs, the sanitation department and HRA as some kind of strike force, could have a real impact. "The leveraged results would go way beyond this specific issue," Rose added. "This is a quality of life issue."

Edward S. Gordon, president of the Edward S. Gordon Company, said, "The mayor has to understand that the viability of any city, state or government is predicated on government understanding, that unless business is healthy, there is no possibility of a growth or protection of the tax base."

If the mayor, he said, as well as other government officials throughout the country, manage their fiscal policies with a short term eye, in terms of taxing all levels of business and people, they will be impacting and damaging the future viability of all the cities.

"This mayor doesn't quite understand the seriousness of the decisions that are being made for the long run," Gordon noted.

"You cannot overtax businesses, individuals or real estate without ultimately having the best interest of the community severely affected," Gordon said.

Gordon said the mayor should make real estate taxes "more equitable throughout the city and bring the residential base to where it belongs," particularly in the outerboroughs. "Get it out of the political issue," he advised. Gordon said the mayor should also get more businessmen into decision making roles as opposed to the politicians.
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Title Annotation:ways to improve the city
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Aug 7, 1991
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