NYC mulls property-tax break for $2.7B Hudson Yards tower

New York is considering a $100 million property tax break for a new Hudson Yards skyscraper proposed by developer Tishman Speyer, in what would be the largest economic subsidy since Mayor Zohran Mamdani took office.

An arm of the city's Economic Development Corporation is slated to vote Sept. 15 on the measure, which would support a 48-story office building in the neighborhood, a district on Manhattan's far west side that's thriving by almost any economic metric. 

Construction of the $2.7 billion project, known as 99 Hudson Boulevard, is scheduled to begin in January, according to Tishman Speyer's application for financial assistance filed with the city's Industrial Development Agency. A public hearing on the application is taking place on Thursday. 

If approved, the subsidy could put Mamdani at odds with his progressive base, who argue tax giveaways benefit the wealthy at the expense of essential services and housing.  

"Hudson Yards has done extremely, extremely well," said John Kaehny, executive director of Reinvent Albany, a government watchdog group. "A good economic development project or a good subsidy project phases out because if it works, you don't need it anymore. Hudson Yards has basically worked, and there's just no reason to offer that."

A spokesperson for Mamdani did not respond to a request for comment. The mayor has previously said that subsidies as a general practice aren't necessary to compete for business. 

The IDA's tax-exemption policy says the agency has discretion over whether to provide assistance. Staff and the board can consider factors such as expected job creation, public support or whether the project would be completed "but for" the subsidy. 

The tax benefits for 99 Hudson will cost the city $92.2 million, while generating almost $860 million in direct and indirect tax revenue, according to an analysis by the IDA.  

Tishman Speyer acquired the site for 99 Hudson Boulevard, across from the Jacob K. Javits Convention Center along 11th Avenue, in 2016. The planned 1.3 million-square-foot (121,000-square meter) tower would be the developer's second skyscraper in Hudson Yards. 

The company also developed The Spiral, a 66-story office tower with 60 outdoor terraces. It's home to Pfizer Inc.'s headquarters, and HSBC Holdings Plc, AllianceBernstein Holding LP and hedge fund Marshall Wace LLP also lease space there.

Expected to open in 2030, 99 Hudson "will transform a long-vacant lot into a world-class office space while generating jobs, tax revenue and meaningful improvements in the public realm," a Tishman Speyer spokesperson said in a statement. 

Transforming state-owned rail yards and a swath of warehouses and parking lots into a new business and residential district was one of former Mayor Michael Bloomberg's top priorities. Developers needed government tax breaks to make commercial projects in the district feasible, he argued. Bloomberg is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.

During the administrations of Bloomberg and Bill de Blasio, the IDA gave about $1 billion in tax breaks for developers Related Cos., Brookfield Properties and Tishman Speyer, according to agency documents. 

De Blasio also used the agency to bolster the life-science industry, while his successor Eric Adams prioritized investments in a Queens movie and TV studio and clean energy, including a project to redevelop the South Brooklyn Marine Terminal into an offshore wind staging and port facility. 

But Mamdani's economic agenda has focused on affordability. His highest profile initiative is the creation of city-owned grocery stores, which will offer a 30% discount on produce, meat, bread and milk. The city will spend $70 million to build the stores, and more to subsidize their operations.

Booming development

Hudson Yards got off to a slow start. It was rezoned in 2005, and in December 2006, a city agency began selling debt to finance the extension of the No. 7 subway line — running south and west from Times Square to 34th Street and 11th Avenue — which was key to the project.

Then came the Great Recession, and the city was forced to step in and cover $360 million in interest payments on $2 billion of municipal bonds backed by payments from developers in lieu of property taxes.

But in the past decade, developers have built a mega complex boasting some of the highest office rents in New York City, according to Avison Young, a real estate services firm. BlackRock Inc., Wells Fargo & Co., KKR & Co. and a slew of other blue-chip companies have moved to the 26-acre site. 

Meanwhile, one-bedroom apartments in Related's One Hudson Yards run between $5,700 and $7,900 per month, according to StreetEasy.

Hudson Yards has largely paid off its tab with New York City's taxpayers.

A 2018 report by researchers at the New School pegged taxpayer costs for Hudson Yards at $2.2 billion, including foregone revenue from developer tax breaks, infrastructure cost overruns and city debt support.

In the past decade, the Hudson Yards Infrastructure Corp, created by the city to issue bonds for the redevelopment, has transferred about $2 billion in surplus revenue collected from developers to the city after paying debt service, according to HYIC financial reports.

Steven Fulop, president of the Partnership for New York City, a business advocacy group, said approving Tishman Speyer's tax breaks is critical to New York City's competitiveness. 

"Major office construction projects unlock significant private investment, create thousands of jobs, generate tax revenue and turn vacant sites into productive engines of the city's economy," Fulop said in a statement. "At a time when New York needs sustained economic growth, the city should do everything it can to move such ambitious projects forward."