Trump built his New York empire as king of the tax break
NEW YORK — The way Donald Trump tells it, his first solo project as a real estate developer, the conversion of a faded railroad hotel on 42nd Street into the sleek, 30-story Grand Hyatt, was a triumph from the beginning.
The hotel, Trump bragged in “Trump: The Art of the Deal,” his 1987 best-seller, “was a hit from the first day. Gross operating profits now exceed $30 million a year.”
But that book, and numerous interviews over the years, make little mention of a crucial factor in getting the hotel built: an extraordinary 40-year tax break that has cost New York City $360 million to date in forgiven, or uncollected, taxes, with four years still to run, on a property that cost only $120 million to build in 1980.
The project set the pattern for Trump’s New York career: He used his father’s, and, later, his own, extensive political connections, and relied on a huge amount of assistance from the government and tax- payers in the form of tax breaks, grants and incentives to benefit the 15 buildings at the core of his Manhattan real estate empire.
Since then, Trump has reaped at least $885 million in tax breaks, grants and other subsidies for luxury apartments, hotels and office buildings in New York, according to city tax, housingandfinancerecords.The subsidies helped him lower his own costs and sell apartments at higher prices because of their reduced taxes.
‘Exploit the government’
Trump, the Republican nominee for president, has made clear over the course of his campaign how proud he is that “as a businessman I want to pay as little tax as possible.”
While it is impossible to assess how much Trump pays in personal or corporate income taxes, because he won’t release his tax returns, an examination of his record as a New York developer shows how aggressively he has fought to lower the taxes on his projects.
Trump successfully sued the administrations of Mayors Edward Koch, Rudy Gi- uliani and Michael Bloomberg after they denied him tax breaks for Trump Tower, his signature building on Fifth Avenue, and, two decades later, for Trump World Tower for what were some of the highest-priced condominiums in the city in 2001.
The tax breaks for those two projects alone totaled $157 million.
The tax break at the 44-story Trump International Hotel and Tower at Columbus Circle came to $15.9 million.
No possible subsidy was left untapped. After the terrorist attacks on the World Trade Center, Trump lined up a $150,000 grant for one of his buildings near ground zero, taking advantage of a program to help small businesses in the area recover, even though he had acknowledged on the day of the attacks that his building was undamaged.
“Donald Trump is probably worse than any other developer in his relentless pursuit of every single dime of taxpayer subsidies he can get his paws on,” said Alicia Glen, Mayor Bill de Blasio’s deputy mayor for hous- ing and economic development, who first battled Trump when she worked in Giuliani’s administration.
In seeking those subsidies, Trump is not that different from many other developers. But the level of subsidies he has received along with his doggedness in claiming them seem at odds with his rhetoric as an outsider candidate who boasts of his single-handed success and who has denounced what he calls the pay-to-play culture of politics and a “rigged” system of government.
“His whole MO is to exploit the government for everything he could get,” said Jerilyn Perine, the city housing commissioner during the Giuliani and Bloomberg administrations. “In the end, the letter of the law gave it to him.”
Without addressing specific questions about his pursuit of tax breaks and other subsidies, Trump in a telephone interview defended going after them. “In many cases, they made the difference between building and not being able to build,” he said. “I’ve gotten incentives in other parts of the world as well.”
In the mid-1970s, eager to make his mark in Manhattan, the 30-year-old Trump focused his attention on the failing Commodore Hotel on East 42nd Street, next to Grand Central Terminal. The owner, the bankrupt Penn Central Railroad, was keen to sell.
No ‘quid pro quo’
It did not seem like an auspicious plan. The city was in the midst of both its own fiscal crisis and a broader economic one; the neighborhood near the terminal had gotten seedy; and Trump did not have the capital for the project. He needed his father, Fred, to guarantee a portion of the construction loan. Hyatt, which was going to run the hotel, took a 50 percent stake in exchange for guaranteeing the rest of the project.
But Trump insisted that the project was not viable without a city tax break.
In pressing for government approval, Trump proved to be the quintessential insider, at least through his father: The elder Trump was a major donor and friend of Mayor Abraham Beame and Gov. Hugh Carey, both Democrats.
After phone calls from Beame and other Democratic politicians, the project was approved, though the partners in the hotel had to pay a modest rent for the land based on a percentage of their profits.
Trump said the decision was made on the merits. “Wewere a contributor like many people were contributors,” he said. “But there never was a quid pro quo.”
City officials initially estimated the tax break on the Hyatt was worth $4 million a year to Trump. But according to a recent analysis conducted by the city’s Finance Department at the request of the New York Times, the actual annual giveaway was far higher: $6.3 million in 1983, rising to $17.8 million in 2016. The combined value of the forgiven taxes is $359.3 million, with four years left on the abatement.
Trump said the tax break did what it was supposed to do. “The hotel was a great success for the city,” he said. “It regenerated interest in that area.”