HELL'S KITCHEN — A city agency voted on Tuesday to give hundreds of millions of dollars worth of tax breaks to the Related Companies' massive Hudson Yards development, a move that will help the developer build the new skyscrapers.
But it also could cost the city dearly for years to come, according to the Independent Budget Office.
Related is set to get $328 million in tax breaks on its 80-story North Tower and its 1.1 million-square-foot shopping mall, the budget office said, raising concerns about what the city will get in return.
"Giving up tax revenue that would have come from the shopping mall means the city’s tab will continue to grow," the IBO's Doug Turetsky wrote in a recent report, referring to the billions of dollars the city has spent for infrastructure improvements in the area.
The 20-year, 40 percent tax breaks were first proposed for Hudson Yards in 2006 by the city's Industrial Development Agency and were meant to attract development and investment to the area.
The IDA's board voted to officially give the tax breaks to the two Related buildings on Tuesday, essentially ratifying what the City Council already approved in its widespread 2005 rezoning of the area.
But the Independent Budget Office is now questioning what the city is getting out of the deal, because property tax revenue from Hudson Yards is supposed to go directly to the city's Hudson Yards Infrastructure Corporation to help it pay back $3 billion in bonds that were used to spur development in the area and extend the 7 train westward.
The city is already struggling to pay back the bonds, because the mega-development was delayed by the financial crisis, which means the expected property taxes have been slow to come in, the IBO said.
However, a representative from Related stressed that the tax benefits were established seven years ago and will help the company create 24 million square feet of new office space and will help create thousands of jobs.
“These tax provisions, approved by the City Council in 2005, help ensure the realization of Hudson Yards, which is critical to the future economic success of the city," said Kate Blumm, a spokeswomen for the city's Economic Development Corporation, in a statement.
"The value of this financial assistance is modest relative to the impact of the Hudson Yards project, as much of the assistance will be redirected to fund infrastructure and the improvement of public spaces."
Related also has to build a massive platform over the MTA's West Side Rail Yards in order to construct the North Tower — a hugely expensive project that the tax breaks will help mitigate, officials said.
Together with Oxford Properties, Related broke ground on the first building in the 26-acre development, a 47-story office tower, last December. Once completed, the skyscrapers will be home to Time Warner, Coach, cosmetics giant L'Oreal USA and German software maker SAP.
The completed development will include an arts-filled Culture Shed, along with a school, hotel and condos.