How Much Is The Tax Abatement Worth?

The State of New York now
requires that co-ops and condos
that want to continue receiving
the property tax abatement need
to pay their employees prevailing
wages if they’re not union
buildings. How has this affected
the workload for management?
For buildings that have union
employees already, it really didn’t
add a lot of work to their portfolio.
But if you had a non-union
building where the shareholders
and unit-owners were getting the
co-op and condo tax abatement, it
added a huge amount of information
that you needed to generate
to the board so it could decide
whether to give up the abatement
for their owners or increase the
pay of all their workers to the prevailing
wage.
Benefits are part of the equation,
too, aren’t they? Yes. It was
not only wages that had to go to
a certain union level, it was also
the supplemental benefits package,
which was an extra $14-plus
an hour that you had to pay each
worker. So there were a lot of calculations
to figure out what each
employee was entitled to based on
their longevity in the building, their
vacation pay, and also health, dental
and 401k benefits. You could
include those benefits in the wages,
but most boards didn’t want to do
that because it added on unemployment
insurance, Medicare
and worker’s comp contributions,
which would mean an additional
13% in costs to the building.
How many of the non-union
buildings managed by Halstead
decided to pay prevailing
wages so they could keep the
tax abatement? More than half
of our boards decided to pay the
increased wages. Some were
driven by the desire to keep their
staff because they knew that they
were really good workers who
could get opportunities not only
in union buildings but in other
prevailing-wage buildings that
were paying the total package.
So I think that may have swayed
some of the boards, but it was not
the majority. Most of the decisions
were based on the benefits to the
shareholders or unit-owners.
Does the extra work for property
managers mean that you’ve
raised fees for your co-op and
condo clients? It is a lot of extra
work, but we have a basic fee.
So regardless of new compliance
rules and any extra work that we
have to do, we cannot charge
extra. We do, in some cases, have
incremental increases for some
of this new compliance work, but
predominantly we stick with the
management fee.
As a property manager, do you
sometimes feel overwhelmed by
all the new laws and mandates?
Yes. I think that the prevailing
wisdom in our industry now is
that some of these new compliance
laws sound simple to enact,
but they’re really difficult to get
the information and figure it out
in the time frames allotted. With
some of this stuff, we don’t even
understand what we need to do
to comply, so there’s a learning
curve. That was particularly true
with the prevailing wages. We
spent months trying to figure out
what we needed to do. And then
finally on July 1, 2022, we were
setting up not only health plans
for these guys but dental plans and
401K plans because we had to get
to that prescribed total.
Do you advise your boards which
way to go, or do you simply present
them with options?
Well, we do both. We give them
the information for them to make
the decision, but most of our
board members are pretty sophisticated
and knowledgeable. They
make the final decisions.