Worth the Cost?

An Examination of the Commercial Revitalization & Commercial Expansion Programs

With Lower Manhattan commercial vacancy rates rising and employment falling, the Giuliani Administration crafted the Commercial Revitalization Program, which the State Legislature approved in 1995. The program provided subsidies to commercial tenants, encouraging them to renew or sign new leases in Lower Manhattan. In 2000, the Commercial Expansion Program was created to bring some of these benefits to some other areas of NYC. Among the findings in my examination of the efficiency and effectiveness of the two programs: 

1. Both before and after the Commercial Revitalization Program started, commercial vacancy rates and employment in Lower Manhattan followed similar trends as the rest of the city. IBO’s analysis suggests that the program did not decrease vacancy rates and had little, if any, effect on employment. 
2. Over 60 percent of participants in the Commercial Revitalization Program spent more on upgrades to their office or commercial space than they received in tax abatements. This suggests that many of these participants would have spent at least their required $5 per square foot absent the program. This is less pronounced among Commercial Expansion Program participants, about 40 percent of whom spent close to their required $2.50 per square foot on upgrades for firms with fewer than 125 employees. 
3. On average less than 30 percent of the physical improvements made in conjunction with the two programs are reflected in property tax assessments of participating buildings. The failure to capture the value of these upgrades in building assessments means that over the years the city has likely lost potential tax revenue.