Prologue

This chapter introduces the development of Stuyvesant Town by MetLife, with the strong support of Mayor Fiorello La Guardia and Robert Moses. It shows how the tenants of Stuy Town used their organizing mettle to successfully push back against MetLife's racism and to integrate the community. It also recounts how the tenants organized again several years later to resist the impacts of an immediate rent hike when MetLife's tax abatement was set to end. The chapter highlights the formation of the modern Tenants Association, which won a critical victory by getting their rent protections extended. It focuses primarily on the period from the 2006 sale to the uncertain years following Tishman Speyer's default in 2010 and the negotiated sale to the Blackstone Group in 2015.

Impact of Property Tax Abatement on Employment Growth

Property tax abatement incentives, used by 70% (35 states) of the states in the United States, redirect property tax revenue from the local community to firms in hopes that inducing these firms to relocate will bring economic development benefits to the local community. However, if unsuccessful, property tax abatement incentives might uniquely concentrate the costs of a failed economic incentive strategy within a single community. Using a sample of 45 industries in 43 cities, the authors examined the employment impact of property tax abatement incentives. Property tax abatement incentives were positively associated with employment growth, but only in the early years when the abatement policies were still new. The authors also explored heterogeneity in these results among industries. Property tax abatements targeting service industries, which are less likely to benefit from automation improvements, were associated with larger employment gains.

Measuring the Efficiency, Equity, and Success of Philadelphia’s Residential Property Tax Abatement

Philadelphia’s 10-year property tax abatement program is a tax expenditure meant to stimulate economic development through residential construction and renovation. In an era when many cities appear to be experiencing renewed growth after the urban decline of the late 20th century, it may be time to reevaluate these sorts of economic development policies. This article explores three possible ways to evaluate Philadelphia’s tax abatement as a case study for other cities with similar programs and asks whether it is the appropriate time to either restrict or end the program. The article assesses the abatement for its efficiency and equity, but most importantly, for whether and how well it achieved its goals. Based on this evaluation, Philadelphia’s policy does not hold up well against the efficiency and equity criteria and its goals are either too broad to measure, or impossible to evaluate without a similar city to compare against. As a part of the analysis, the author considers the key questions of how much of the city’s real estate comeback is directly due to the abatement and how to best reshape the policy to target Philadelphia’s goals in 2018. The article also presents examples of abatement policies from other cities as models of how to shape such programs to fit a local context. The author finds that Philadelphia and cities with similar policies should look to other cities’ targeted abatement programs and evaluate local priorities for growth when considering restrictions or terminations of their programs.

Towards enhancing tax abatement transparency: Reviewing the promises and limitations of GASB 77

In August 2015, the Government Accounting Standards Board (GASB) adopted Statement 77, requiring government disclosure in audited financial reports of a particular type of tax expenditure, tax abatements. GASB's reporting standards move tax abatements from a budgetary environment to an accounting environment. This paper evaluates GASB 77's provisions to encourage an early and on-going dialogue about the Statement's prospects for achieving greater transparency compared to existing tax expenditure reporting efforts. We conclude that GASB 77 will be most beneficial to consumers of financial information in medium and large jurisdictions where there is no alternative tax abatement disclosure platform, or where the alternative offers less transparency than what can be achieved through financial reporting.

The Fiscal Impact of Local Property Tax Abatement in Indiana

Property tax abatement is widely used by local governments in the U.S. with the goal of attracting and retaining businesses. This analysis examines the efficacy of such abatement using data on Indiana counties from 2002 through 2011. The analysis suggests that local tax abatement tends to be correlated with higher effective tax rates in a county. These correlations exist in the absolute size of abated property relative to the existing assessed value of property taxes and in the frequency of use of tax abatements. In addition, there is not a strong relationship between abatement and the growth of assessed value over time. The implication is that, on average, the use of abatements as a tool for growing a property tax base is not particularly effective. These findings cast doubt on the ability of Indiana’s system of property tax abatements to increase the tax base or control property tax rates.

Tax delinquency and abandonment: An expanded model with application to industrial and commercial properties

This study expands on the literature of residential abandonment by considering five types of industrial and commercial properties and three levels of explanatory variables – parcel, neighbourhood, and city. Using data for Cleveland, Ohio, it shows that tax policies have a limited impact on abandonment. Instead, two categories of variables not previously modelled are significant and policy relevant. First, the more specialised a property and the greater the cost of conversion to alternative uses, the greater the likelihood of tax delinquency and abandonment, suggesting policies to ease transition to new uses. Second, abandonment spillovers are highly significant even after accounting for neighbourhood common factors. This suggests that spatial solutions such as land use planning may be more effective than tax abatement policies in dealing with abandonment, and approaches to abandonment must be differentiated by type of property. Residential abandonment should be re-examined in light of these findings.

Tax abatement reporting: Perspectives of users and preparers

Using tax abatements to spur economic development can be controversial. The potential benefits are stressed when abatements are granted, but subsequent reporting may be insufficient for citizens to hold governments accountable for actual results. We solicited perspectives on tax abatements from three user groups (citizens representing advocacy groups, county board members, and financial analysts) and county officials involved in financial reporting, budgeting, or property tax administration. Users and preparers expressed generally similar views about the need for reporting; however, some differences were evident in the degree of support for reporting specific information items and the format for making information available. We also found that much information desired by users is not available to them currently, and governments may need to create mechanisms to collect information.