The Shel Game

Silver and his Albany pals mint hundreds of millions in corporate handouts without anybody noticing

The New York state legislature has been getting lots of props of late. Awarded the title of "most dys functional" in the nation last year by NYU Law School's Brennan Center for Justice, Albany's finest have earned praise for exhibiting unprecedented functionality: passing an on-time budget for the first time since trilobites prowled the seafloor, instituting an oversight process for public authorities, and even closing a loophole that had allowed state employees to dodge ethics charges by quitting their jobs.

What didn't make the papers, though, might be a better indicator of how the people's business gets done in New York State. In the waning hours of June 24, as legislators prepared to pack up for the summer, Assembly Speaker Sheldon Silver's long-awaited "Marshall Plan" for Lower Manhattan landed on their desks. Barely an hour later, the bill had passed unanimously—at which point staffers finally briefed legislators on what they had just approved.

The result was what Bonnie Brower of City Project calls "one of the most outrageous giveaway packages for business that I've seen in years." Among the goodies for downtown businesses: a five-year waiver of the commercial rent tax in Lower Manhattan, sales tax exemptions on office furnishings, state-funded rent breaks of up to $5 per square foot for businesses relocating to the World Trade Center site or to the new 7 WTC building across the street, and an expansion of the Relocation and Employee Assistance Program providing per-employee tax breaks. Especially troubling, says Brower, is that "there's no effort to target the benefits to exclusively new businesses, much less to businesses that actually need help."

How did all these plum subsidies pass without a single nay vote? "I embarrassingly admit I did not read this bill," says State Senator Liz Krueger—and if Krueger, one of the senate's sharpest critics of unwarranted corporate subsidies and shady legislative process, didn't crack the 27-page bill before casting a vote, it's a fair bet that few of her colleagues did either.

The trick here is common in New York's "three men in a room" government: Once Silver, senate leader Joe Bruno, and Governor George Pataki had worked out the details, the bill was submitted along with a "message of necessity" from the governor, a procedural get-out-of-debate-free card for matters of extreme urgency. As a result, the normal three-day discussion period was waived, allowing the bill to go straight from the printer to the floor before anyone had noticed.

Legislators like Krueger were left to question the bill after the fact. "How much are we going to pay for this, and what's the win?" she says. "Are we actually creating new jobs and new economic activity, or are we just shifting them from one part of New York City to another?"

Even now, it's hard to put a number on how much the subsidy package will cost. A state "budget implications" memo estimated that sales tax breaks alone would amount to an $18.1 million annual loss to the state treasury, with the city taking a similar hit. Commercial rent tax breaks, according to the city Office of Management and Budget, will cost the city $39.5 million in lost revenue over the next three years.

The big question mark, though, is the rent breaks. At $5 a square foot, on a parcel set to encompass more than 10 million square feet, they could be a huge boon to downtown corporations—or to developer Larry Silverstein, whose still-vacant 7 World Trade offices would look a lot more enticing with state kickbacks for every tenant. (Silver's office did not return phone calls on the subject.)

Moreover, this wasn't the only last- minute goody bag to emerge from the session's final days. Other Silver-and-Bruno-approved bills provided $150 million in state money to help build new stadiums for the Mets and Yankees, subsidies to ethanol producers (of which, Krueger notes, the state currently has zero), and more than $70 million in tax credits for Besicorp, a company in Bruno's district whose majority owner just happens to have recently spent six months in jail for illegal campaign contributions.

Krueger, who has filed suit against messages-of-necessity abuse and other unseemly legislative practices, notes that some programs may be worth state subsidies—but when debate is stifled, it's impossible to tell. "Maybe somebody could have made a good argument for all this," she says. "But that argument wasn't made."

 
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