Letter Report on the Audit on the Calculation and Application of Property Tax Abatement Benefits for the Commercial Revitalization Program by the Department of Finance

The Commercial Revitalization Program (CRP) is designed to increase tenant occupancy in office and retail space in lower Manhattan and reduce building obsolescence by encouraging investment in older commercial space built before 1975. The CRP provides tax incentives through property tax abatements for non-residential or mixed-use premises. To qualify for a CRP abatement benefit, property must be located in the area bounded by Murray Street and Frankfort Street on the north, South Street on the east, Battery Place on the south, and West Street on the west. The abatement is a reduction in property tax for the building owner and is usually passed through to the tenant in lower rent. However, the Department of Finance (DOF) does not decide how the building owner will credit the benefit to the tenant. This is determined between the two parties.

This audit determined whether DOF properly calculated and applied property tax abatement benefits according to the requirements of Section 499 of the New York State Real Property Tax Law.

Results

We found that DOF properly calculated and applied property tax abatement benefits in accordance with program requirements. However, there were some procedural weaknesses that could be improved upon. Our audit found that DOF did not always insist that the building owner submit sufficient documentation such as invoices or checks to support renovation costs when the renovations were completed. In addition, DOF did not always revoke the benefits when the building owner failed to file the CCE form, and building owners did not always inform DOF when a tenant vacated the premises. DOF’s Abatement Revitalization Program (ABRP) database shows that from November 2012 through May 15, 2013, a building owner continued to receive CRP benefits totaling $9,475 without a penalty for not informing DOF that the tenant vacated the premises.

The audit made the following three recommendations to DOF to address these issues:

• Require building owners to provide sufficient reliable supporting documentation (invoices and canceled checks) indicating the total renovation costs expended.
• Continue to revoke benefits when a CCE form is not submitted.
• Recoup the benefits granted to the owner of the building where the tenant vacated the property identified in this audit.

We received a written response from DOF, in which DOF has agreed with our findings and recommendations and described the steps it has taken or will take to implement the report’s recommendations.