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Industry lauds Dinkins' tax freeze.

For many, Mayor David N. Dinkins' announcement that corporate taxes would be frozen for four years was a welcome sign that the administration recognizes the cost of doing business in the Big Apple is extreme.

The mayor made the commitment at the same time he and Governor Mario M. Cuomo revealed that financial services giant Morgan Stanley would remain headquartered in the city and not move to Stamford, Connecticut.

The city is providing Morgan Stanley with approximately $39.6 million in incentives over the 10-years it has agreed to remain. The company, which generates $2 billion in economic activity within the city every year and is expected to pay $911 million in direct taxes over the decade, will also retain 4,100 workers.

New York State also allowed a $9.1 million tax reduction for the company.

A SUNY Cortland economics professor recently charged in a report that the 150 local industrial-development agencies set up to encourage job growth attracted only 23 firms from out of state and have cost $1.3 billion since 1987.

Based on government documents, Professor Robert G. Lynch found merely 1,322 new jobs were created from 1977 to 1986, while the IDA's claim to have created or saved 163,000 jobs between 1970 and 1986. Job claims were never documented or merely moved from one part of the state to the other claims the report written for the Fiscal Policy Institute.

Meanwhile, the Port Authority reports a 5 percent gain in construction contracts in the first half of 1992 and Manhattan leasing activity up 15.4 percent over a year ago.

Steven Spinola, president of the Real Estate Board of New York, said the corporate tax freeze is a step in the right direction. While he said he hoped nobody was thinking about increasing the tax, it is a positive message to send out to the business community.

Spinola said giving corporate incentives, however, is a no win situation.

"You have to keep Morgan Stanley and the other companies, and they have done this," he explained.

The Real Estate Board, however, would like to change the fundamental costs in the city so that every company can have a reason to stay.

But until such changes are made, Spinola says, the city has to be aggressive. "You have to do the special deals because there isn't enough enough as-of-right, he said.

"It continues to be evidenced that the cost of doing business is too high and they have to make some fundamental restructuring," Spinola insisted. "Until then, the city should be thanked for keeping the companies here."

Steven L. Green, chairman of S.L. Green, and co-chairman of the Property Tax Fairness Coalition, said anything that reduces the burden on corporations and businesses in Manhattan and makes it more attractive as a home for corporations helps real estate in the most direct manner.

"From a practical standpoint," Green said, "it will lift the cost of doing business in the city and keep companies from moving to places like New Jersey or the south or southeast that can offer a cheaper cost of occupancy."

Green said the Property Tax Fairness Coalition told the city -including the commissioner of Finance, and Sally Hernandez-Pinero, the former deputy mayor of Finance and Economic Development - some time ago that businesses were going to start leaving the city because of the enormous costs.

"It has happened very quickly," he said.

The city now appears to be concerned about the needs of businesses other than those of the major companies, he said. "Thee freeze sends a message to corporations who don't have the strength to hold a press conference," he said wryly.

"Besides actual dollars, (the freeze) creates a perception that the city is sensitive and not just to the major corporations with 3,000 or 4,000 people," Green continued. "Many more businesses have three or four employees and it means not just the special few or privileged will have fair treatment."

Leslie Himmel, a principal of Himmel + Meringoff Properties, was pleased about the freeze because of similar reasons. She is concerned about the medium size companies that cannot obtain the attractive packages put together for the larger corporations.

"There are hundreds of medium size firms that are the backbone of the city and are shut out of the areas of opportunities," she said. "Anything will help them."

Spinola said the city has become too dependent on the occupancy tax and that is something they should be getting rid of. Although it provides $700 million per year, "On the other hand," he noted, "we don't know how money we are losing with it. Is it any one tax that would have made the difference to keep a company? Clearly we know we're not competitive."

Green says it is inconceivable that the city would end the corporate taxes altogether. "Certainly the real estate industry recognizes we must share some of the burden, but we must also see to it we are not absorbing the entire burden," he said.

Philip J. Rudd, chairman of ABO, said, "Anything that encourages tenants to stay in New York and not flee is a welcome boost."

He noted, however, that most developers and real estate companies are not showing profits and the corporate tax freeze will probably not impact their bottom lines.

William C. Rudin, executive vice president of the Rudin Management Company said, "It's great. It's helpful in keeping tenants in the city and making New York more competitive and helps us rent our space."

Rudin agreed with the other executives who believe that while the city is to commended for making these deals, more has to be done to keep and attract tenants.
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Title Annotation:New York, New York Mayor David N. Dinkins announces corporate tax freeze
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Oct 28, 1992
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