Sunday, January 1, 2017

Why Developers of Manhattan Luxury Towers Give Millions to (Republican) Upstate Candidates

In 2014, an obscure campaign in the foothills west of Albany between a sheep farmer and a home builder mushroomed into one of the most expensive State Senate elections in New York history. Each side’s supporters spent at least $3.5 million, or more than four times the cost of the average U.S. House of Representatives contest that year.
The bulk of money poured in from outside the district. Labor unions and national committees for campaign finance reform backed incumbent Democrat Cecilia Tkaczyk, the farmer. Some contributions to her opponent, Republican George Amedore Jr., which helped fund his television attack ads, were harder to trace. The money came from the Senate Republican Campaign Committee, which collected it from limited liability companies at glamorous Manhattan addresses, including Hawthorn Park, a 339-unit luxury tower with sweeping views of the Hudson River, as well as The FairmontThe Encore and The Pavilion — all high-end rental towers.
The LLCs, in turn, were arms of Glenwood Management, a developer of upscale Manhattan residential properties, and the New York real-estate industry’s largest contributor to political campaigns. Each election cycle, millions of dollars flow to Albany from luxury residential buildings, office towers and parking garages controlled by some of New York City’s biggest tycoons. What the buildings have in common is that they’re owned by LLCs, a structure shielded from New York’s tight restrictions on corporate campaign donations. Thanks to their vast networks of such entities, developers can give virtually unlimited sums each campaign season. In one day in 2014, Glenwood funneled $450,000 in contributions to two accounts for the Senate Republican Campaign Committee through 18 separate LLCs.
Exploiting the LLC loophole has been a shrewd investment for the real-estate industry. The state oversees New York City’s system of capping rent increases, known as rent stabilization. By influencing state elections, developers have undermined rent stabilization and preserved a key tax break that saves them far more money than they spend on political campaigns. The value of that subsidy, which is known as 421-a, has soared from $73 million in 1986 to an estimated $1.4 billion this year. In return for the tax benefit, owners are supposed to limit rent increases and set aside a portion of units in high-demand neighborhoods for below-market rents — though they often don’t fulfill their commitments.
For developers, “it’s critically important to beat candidates like CeCe Tkaczyk if they want to maintain their hold on rental laws,” said David Donnelly, director of Friends of Democracy, a Super PAC that spent on Tkaczyk’s behalf. “It is one of the costs of doing business.” Read full story here 

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