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Budget, Education & City Services

Consideration of Council legislation that would exempt certain small commercial tenants from the commercial rent tax

WHEREAS, In 1963 the City of New York imposed a commercial rent tax ("CRT") as a means of avoiding a constitutional limit on property tax revenue; and

WHEREAS, In the 1990's this tax was phased out in the Bronx, Brooklyn, Queens and Staten Island as well as upper Manhattan; and

WHEREAS, CRT is applicable only to those businesses below 96th street with an annual rent base of $250,000; and

WHEREAS, All commercial tenants with annual or annualized rents less than $250,000 are exempt from CRT; and

WHEREAS, Tenants that are governmental or non-profit organizations, tenants located in the World Trade Center Area, retail tenants in lower Manhattan and those eligible for the Commercial Revitalization Program are exempt from CRT; and

WHEREAS, CB5 recognizes that the CRT was initially conceived and applied to larger businesses below 96th street but as rents have steadily increased in lower Manhattan the small and medium sized businesses once exempted are now affected by this tax; and

WHEREAS, The annual base rent floor of $250,000 was established in 2001 and has not since been adjusted despite the steadily increasing rents within this area; and

WHEREAS, This has resulted in hundreds of small businesses becoming subject to the CRT in the intervening years as their rents rose above the base floor; and

WHEREAS, This has resulted in small and family owned businesses struggling to maintain their business; and

WHEREAS, Proposed legislation is proceeding throughout the City Council that would increase the CRT taxable threshold to $500,000 annual rent and phase-in the tax for tenants paying been $500,000 and $550,00 annual rent;  and

WHEREAS, CB5 recognizes small businesses which once gave New York its flavor are fast diminishing due to rent increases and are frequently replaced by national chains and/or empty storefronts; and

WHEREAS, The importance of small businesses in the district and throughout New York City cannot be overstated; and

WHEREAS,  Rent increases over the last few years are threatening small neighborhood businesses that residents rely on and the CRT is worsening the affordability problem;

WHEREAS, Supermarkets are a particular segment that are facing an affordability crisis; and

WHEREAS, Legislation is proceeding through the New York City Council that would require the Department of Finance to exempt grocery stores from the commercial rent tax if they meet certain floor space and affordability requirements; and

WHEREAS, The purpose of this bill is to help prevent affordable grocery stores from closing due to the increased cost of commercial rents and also promotes healthier grocery store retail practices by requiring that a minimum of 500 square feet of floor space be devoted exclusively to the sale of fresh produce in particular; and

WHEREAS, Community Board Five finds it critical that our elected officials signal clearly that they will take all reasonable measures to support small businesses in New York City; therefore be it

RESOLVED, Community Board Five supports the proposed legislation to exempt certain groceries stores from commercial rent tax, and be it further

RESOLVED, Community Board Five supports current legislation to increase the CRT taxable threshold to $500,000 from the current $250,000; and be it further

RESOLVED, CB5 believes that the bill should be amended to include indexing of the CRT taxable threshold to account for inflation.

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