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Tax Incentive Tied to Prevailing Wages Being Abused in New York

The streets of Park Slope, Brooklyn

In New York, a little known tax abatement program gives developers tax breaks for setting aside 20 percent of new units for middle and lower income families. The popular program helps encourage development, promote equality, and provide quality jobs as employees at the buildings must be paid prevailing wage. Sounds like a win-win-win, unless of course the developers take the tax breaks and then refuse to pay the prevailing wage.

Such is the case with the development at 150 Fourth Avenue in Brooklyn’s Park Slope neighborhood. After taking advantage of the tax abatement program, developers paid their workers half of what is mandated. Now, the union that represents building support workers, the 32BJ SEIU, is fighting back. Via to the New York Daily News:

In Park Slope, six building employees at 150 Fourth Ave. were fired in February after they complained about working for $10.50 an hour without benefits, far lower than the estimated prevailing rate of $21 an hour.

“We decided to come together to fix things,” said former concierge José Casillas. “The building responded by just getting rid of us for trying to make things better.”

The majority of the 92 sites that qualified for so-called 421-a benefits have been luxury developments in Manhattan, but 26 Brooklyn projects also have taken advantage of the tax break.

In 2011, the program cost the city more than $900 million in lost revenue, according to the Independent Budget Office.

Still, many of the workers at those sites are being vastly underpaid, according to a new union survey.

“This is a more systemic issue throughout the 421-a buildings,” said 32BJ Secretary-treasurer Kyle Bragg.

Many lament the Department of Housing Preservation and Development’s lack of power to enforce the laws:

The law does not authorize the agency to determine compliance with its prevailing wage requirements,” HPD spokesman Eric Bederman said. “32BJ should be aware that the proper course of action is to seek a determination through the court or by other means.”

Still, union officials — along with mayoral hopefuls Christine Quinn and Bill de Blasio — are calling on the city to investigate.

“Although the law is in place, the city has not ensured that these buildings stay in compliance,” 32BJ’s Bragg said.

The policy, which has become increasingly popular during the Bloomberg administration, has good intentions. However, with its large expense and lack of enforcement some experts suggest it is time for reform or repeal. NYC Real Estate expert Mitchell Hall outlines the pros and cons for the 421a tax benefit:

Pros: Reduced property taxes for 10 – 25 years will make the apartment more affordable and possibly increase the sale price in the short-term.

Cons: The new higher tax amount at maturity may decrease the value of the unit. Monthly affordability is part of the equation that determines sale price. Low monthlies often garner higher sale prices and high monthly costs can lower sale price. A tax abatement may not be a good for buyers on a fixed income or who’s income may decrease rather than increase over the years.

Former workers at the 150 Fourth Avenue development must now take on the legal system to seek justice and kneecap this illicit employer behavior:

Casillas, 45, has filed a complaint against his former boss with the federal labor board, charging he was unfairly fired.

“I don’t have any regrets,” he said. “I’m hopeful that I get my job back with good benefits. I want to fight to make sure this doesn’t happen to me or anyone else again.”


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