By: Donny Simcha Guttman

In recent years with the sunset of the Covid-19 pandemic, New York City continues efforts on rebuilding economically. Vornado Realty Trust recently made a controversial 99-year lease with NYC Mayor Eric Adam’s administration to redevelop Manhattan Pier 94 into a film studio with pledged subsidies and reduced taxes from NYC.

Vornado has pledged that the studio will create 400 jobs, and an additional 1,300 temporary construction jobs. The city’s part of the deal will be decreased rent and tax exemptions which will cover around $215,000 in expenses for each worker for the first 15 years of the lease. In addition, the city has pledged $73.5 million for repairing and maintenance of the pier until 2060, rent would start at $900,000 and would peak in 86 years at $2.8 million. Beyond 2060, Vornado will maintain the pier. Also part of the deal, as reported by the New York Times, is a reacquisition of current Vornado- leased, Pier 92, to the city. Vornado acquired Pier 92 over a decade ago vowing to double the size of the exhibition center; though, the pledge never came to light.

New York in recent decades has specifically in the filming and sporting industries, given subsidies to companies to move locations to New York. In 2004, New York State created the ‘NYS Film Tax Credit Program’ which encourages filming companies and the like to film their productions in NYS. Subsidies are pledged to the company if the company qualifies for the program. The subsidies include a 30% tax credit of qualified production expenses, and productions with a budget of $500,000 may receive an additional 10% tax credit. Especially with the economic downturn of the past few years, NYS continues efforts to expand this program, including increasing funding for the Tax Credit Program in NYS’s recent budget by more than 60%.

The subsidies that are being given out to filming companies, including ones like Vornado, have once again brought the debate of giving big tax credits and subsidies to big business, at the cost of essential services, rent price increasing and other economic effects, negative and positive. Reacting positively to the deal, Andrew Kimball, president of the NYC Economic Development Corporation said, “We feel very good about these deals, you know.”

In contrast, Timothy J. Bartik, a senior economist at the W. E. Upjohn Institute for Employment Research has said that “This is a very high bid that only seems justified if you think this project is absolutely critical to the future of the film industry in New York.” Pier 94 sits in an area of real estate that for the past 13 years has not been subject to any competitive bidding regulation. In response to the deal, Jeffrey LeFrancois, the chair of Manhattan Community Board 4, which covers a stretch of the West Side that includes the pier said that “Given that Vornado has already had the ability to do this the past 13 years and done nothing, it’s outrageous that they are taking this pier from taxpayers for pennies on the dollar.

“Subsidies are a part of doing business,” he said, “but the loss the city has decided to take here is beyond the standard, given the 99-year lease term.” Mayor Adams, on the campaign trail said on real estate, “I am real estate,” has positioned himself as an advocate for these subsidies.