Last week, Governor Andrew Cuomo announced his Fiscal Year 2019 Executive Budget of $168 billion for New York State, a 2.3% increase over last year. With great emphasis on the impact of both federal tax policy and budget cuts on New Yorkers, Governor Cuomo proposed a budget that closes a projected gap of $4.4 billion through a slate of changes including new targeted taxes, fees and credit deferments to increase revenue.
Last year, Governor Cuomo and the Legislature passed a budget funding a 5-year statewide affordable housing plan with emphasis on supportive housing. This program, which more than doubled historic capital levels, is underway and funding projects across New York State to meet a variety of housing needs including senior housing, downtown revitalization, zombie homes and public housing preservation and others. The funds for this program were reappropriated this year to allow for implementation. For full details please see the linked NYHC Analysis of NYS 2019 Executive Budget chart.
Other notable policy changes are as follows:
Potential Capital Projects Cuts to Pay for Debt Service
According to the Executive Budget Summary, “The substantial reduction to personal income makes it necessary to make capital spending reductions in order to stay within the debt cap in future years. The spending reductions are expected to be managed within anticipated underspending on capital projects throughout the plan period.” It is unclear if any capital funding budgeted for affordable housing will be impacted in the future.
Temporary Deferral of Certain Tax Credits Including State Low Income Housing Credit (SLHC), Brownfield and Historic Credit
Taxpayers must defer their usage of most business credits for tax years 2018 through 2020, where such credits exceed $2 million. They can begin to use deferred nonrefundable credits in full starting in 2021, and may use 50% of refundable credits in 2021, 75% of the remainder in 2022, and the remainder in 2023. For SLHC, uncertainty in claiming credits could impact pricing in the long run. For developers that claim Brownfield or Historic credits directly, they will be impacted. For projects that rely on Brownfield credit equity as a permanent financing source, the proposal deferrals will cause delays in permanent financing.
New Real Estate Transfer Tax Report Filing for Co-ops
Under existing law, a real property transfer report (Form RP-5217) needs to be filed whenever a deed is recorded. Because cooperative housing apartment units are transferred by the sale of a share or shares in a cooperative housing corporation, those transactions, like the transfer or acquisition of an entity with an interest in real property, do not require the filing of a deed and, therefore, do not require the filing of a real property transfer report. This proposal requires a real property transfer report filing, RP-5217, for co-ops and co-op shares with the Department of Taxation and Finance (“DTF”) whenever there is a sale of a co-op apartment or unit, or whenever there is a transfer or acquisition of a controlling interest in an entity with an interest in real property (i.e., an equity sale).
Freezes STAR Benefits Increases
A zero percent cap is proposed upon the growth in Basic and Enhanced STAR benefits, beginning with the 2018-19 school year. STAR was enacted in 1997 to offset rising property taxes for homeowners and to provide additional targeted property tax relief to senior citizens.
Eliminate the 25% Match Requirement For Localities Utilizing federal Community Service Block Grant
The Community Service Block Grant (CSBG) is a federal anti-poverty program that is administered by the Department of State. State law currently requires recipients of CSBG funds to provide matching funds.
Enhance the Brownfield Opportunity Areas (BOA) program
Optional pre-nomination studies are eliminated. The nomination process is expanded to include plans that are financed with local or other State funding, thereby authorizing the Secretary of State to accept and designate such plans. These changes would encourage implementation of various projects that will be eligible for tax credits and other benefits
Expand Definition Of An Authorized Entity That May Utilize Design-Build Contracts in the Infrastructure Investment Act
The set of authorized entities that may utilize design-build contracts are expanded to include the Dormitory Authority, the New York State Urban Development Corporation, the Office Of General Services, the Department Of Health, and New York State Olympic Regional Development Authority as established in the Infrastructure Investment Act.
Reauthorizes and Extends MWBEs In State Contracts And Expands Upon Those Provisions Based Upon the Findings of The 2016 Disparity Study
Extends the provisions of law relating to participation by minority and women-owned business enterprises (MWBE) in state contracts for five years, and implements certain findings and recommendations of the 2016 MWBE Disparity Study.