State Lawmakers Push Back on Incentives to Attract Companies to NYC’s Older Office Buildings
An existing and proposed tax break program intended to attract companies to New York City’s older office buildings and Manhattan neighborhoods north of 96th Street and in the outer boroughs are at risk of being rejected by state lawmakers. The Relocation and Employment Assistance Program (REAP) is an existing program created in 1987 that will expire June 30, 2025, if not renewed. An annual credit of $3,000 over a period of 12 years per eligible employee, or per “eligible aggregate employment share” is provided for relocating to a designated location according to details on the New York City Department of Finance (DOF) website. The second program would add a proposal from Mayor Eric Adams dubbed Relocation Assistance Credit for Employees (RACE) intended to “incentivize out-of-state companies to move to New York City and sign leases for at least 20,000 square feet of space at qualifying buildings.” The Gov. Hochul supported program that was included in her budget plan offers a “$5,000-per-employee tax credit for over 10 years.” According to the most recent year data available provided in the article by Crain’s New York, REAP cost the city $26 million in 2021 and benefited 178 companies. The proposed RACE program would cost the city $150 million over 10 years according to information reportedly provided by city hall, but the Adams administration believes “it will be outweighed by $385 million in returns to the city by attracting taxpaying businesses to older buildings sitting empty since the pandemic; and is intended to replace the Lower Manhattan REAP, which covers office buildings below Houston Street, that expires this year but has not been proposed for renewal.
However, since both the state Senate and Assembly omitted them from their own one-house budget proposals last week, the odds that one or both might be excluded from the final budget plan are higher. Lawmakers are siding with the fiscal watchdogs that have argued over the years that due to a lack of sufficient evidence it has never been proven that these type of incentive programs generate enough return to offset the loss of tax revenues. New York City Council Speaker, Adrienne Adams further pointed out that, “while the city creates new tax breaks and expands some, it rarely seeks to end or reform existing ones,” resulting in “hundreds of millions of dollars spent on economic development-related tax breaks.”
Source: https://www.ibo.nyc.ny.us/iboreports/two-conflicting-tax-programs-reap-and-race-march-2025.pdf