What Will I do as Mayor to Keep New York City Afloat Economically During the Current Economic Crisis? Empower small businesses in every borough by creating a City of New York Heritage Enterprise Fund (NYCHEF) that will be a part of a borough-wide commercial Real Estate Investment Trust (REIT.) The Fund is designed to encourage citizens to take charge of their own neighborhoods and help their neighbors to find a “NEW” pioneering sprit to reinvent themselves economically.
As former president of the City of New York’s 350th Birthday Committee I sought to find a way to revitalize some of the City’s impoverished neighborhoods. After conferring with Wall Street brokers and small businesses I’ve come up with a novel strategy of melding Wall Street with Main Street by forming a Real Estate Investment Trust (REIT) to either buy or rent buildings within the five boroughs to empower and enrich all of the citizens sense of ownership. My plan would restore neighborhoods and commercial corridors to create new small business and jobs. This would become a part of a broad new initiative by all New York citizens, who by working together, can find unity, hope and create opportunity in commonly supported and unique urban development programs over ten years to reshape New York.
The focus is to create and encourage pathways that facilitate the fluid establishment of community business entities while utilizing established business sector acumen. In those areas where small and community based businesses best serve municipal development, NYCHEF will serve to produce public funding to work in concert with private capital formation to achieve profit oriented goals. That “profit orientation” will be the redefined blend of changing community needs and directions with newly burgeoning vistas that will broaden the pallet of modern business investment. The REIT assigned purpose is to create jobs, expand businesses (individually and collectively), and acquire real property in the City of New York, other areas of the nation and worldwide. The benefits of this device would be earnings and annual dividends for members. As structured, the REIT would pay either diminished or no taxes.
By creating this fund we believe that whether or not citizens or small businesses can afford $24 or $2.6 million, every citizen can be an equal partner with every other in "buying back" the City once bought for a reputed $24. What past and current government administrators may have seen as impossible, 8.5 million enterprising and ambitious citizens may see as sound investment. Our goal is to enlist the City of New York’s greatest wealth, its skilled, talented and most creative people to pioneer new community educational and cultural ventures which encourages new initiatives and enterprises that allow individual interest groups and communities to solve their own Needs in a new urban frontier.
A revolution is best conceived as the active phase of evolutionary change. In the future, nothing short of a revolution of ideas and creative new economic constructs will be necessary to accommodate the coming changes marking currently embryonic and surfacing business models. Striking new measures combining historically unrelated business entities are anticipated to dot the future landscape. These novel enterprises will be a result of American business’ attempt to keep pace with changing international forces that will affect the evolving international marketplace.
Along with changing national policy, municipalities will be an integral part of this altered landscape. Public goals must be tailored to partner with private business entities in ways that were non-existent in earlier eras. The counterpart is also true. Trade, commerce and other business associations must better accommodate the needs of the public sector. Wall Street’s current appeal to the public for “rescue” articulates this new relationship. Associations, partnerships, collegial agreements and a broad range of business alignments will take shape to sharpen national potential. Indeed, nations will take on a whole new persona as new alignments and alliances metamorphose over time. Advantages to this new system of design will be an expanded field upon which private investment and public goals can share profit streams. That new sense of profitability will also undergo a facelift that will broaden definitions to be more inclusive of measures of community advance and improvement and not solely dollar return on investment. The schism that is currently widening between Wall Street and Main Street will be significantly diminished allowing lines of communication to remain unfettered. The public will feel and be more truly aligned with the interests of the business sector and all parties will benefit from this new and enlightened arrangement. In general, REIT can be a good way to diversify ones investment holdings, especially if they are familiar with real estate.
The NYCHEF will be managed by government, with a board of directors comprised of City of New York officials and businesses, small and large, representing all five boroughs. The REIT will rent available commercial properties. All land owned or acquired by the City will be assigned to the REIT. The REIT board would interact with the Securities and Exchange Commission. Floated bonds and stock options would be unique features of this new instrument. Long-term leases would be a feature of this instrument with unique property transfer mechanisms in place in commercial business contexts. In the event that one of the individual REIT principal investors departs, the REIT would reserve the right to sub-lease to other principals or members. This feature helps assure the long-term survival or this instrument.
Wall Street’s role would entail the enrolling of investors to buy bonds/stock in the REIT while paying dividends and offering citizens and businesses a sense of ownership, as improved neighborhoods become the patterned outgrowth. A REIT requires management to pay out all earnings as cash flow. Several features such as an internationally marketed “Charter Card Program” encouraging tourism would also be created to supplement the REIT activity base giving discounts to tourists’ worldwide visiting the City of New York and patronizing small REIT member businesses. Other multiple offerings will be conceived as future features of this mechanism.
Recently, the White House and some representatives in Congress have been talking about the need for companies to "give something back" by investing some of their profits in inner-city businesses and development projects that would create jobs. Under the proposed expansion of the federal Empowerment Zone/Enterprise Community (EZ/EC) program, businesses would be eligible for employer wage credits, deductions on qualified tangible property, and tax-exempt bond financing.
Using the Internal Revenue Code (IRC) to help achieve economic and social goals, Congress created empowerment zones to stimulate growth in distressed communities in urban and rural America under the Revenue Reconciliation Act of 1993. With the addition of IRC Sections 1391 through 1397D, Congress believed the expansion of business and employment opportunities could alleviate the economic and social problems of those areas. The federal government cultivated Empowerment Zones and Enterprise Communities, an interagency program designating both rural and urban communities, to receive varying amounts of special federal assistance. Each community receives a variety of tax incentives and some assistance from social services. However, the emphasis of the program is on having communities bring together all available resources to attract private capital and create jobs.
Empowerment zones are designated by either the Secretary of Housing and Urban Development (urban areas) or the Secretary of Agriculture (rural areas) and retain their designated status for 10 years. To qualify, an area must meet certain population, area size, general distress and poverty criteria. The local and state governments must also nominate the area.
Formally designated on December 21, 1994, these zones included portions of Atlanta, Baltimore, Chicago, Detroit, New York, a cross-border of Philadelphia-Camden, New Jersey; three counties in the Kentucky Highlands; six counties in the Mid-Delta region of Mississippi; and four counties in the Rio Grande Valley in Texas. Although more than 500 areas were originally nominated, 105 received designations. Six urban and three rural areas were chosen as empowerment zones, and 60 urban and 30 rural areas as enterprise communities. Under a separate funding program, two "supplemental zones" and four "enhancing communities" were designated. These areas qualify for a total of $2.5 billion in federal tax benefits and $1.5 billion in "flexible" grant assistance. Local government, business, and community leaders have been developing strategic plans to help these areas use the federal incentives to attract private investment.
Under IRC §1396, an employer can receive a credit for a percentage of certain wages paid and some training and educational expenses incurred on behalf of a qualified zone employee. The amount allowed for any tax year is 20 percent of the first $15,000, up to $3,000 of qualified wages paid to each employee who resides in the zone and performs substantially all employment services within the zone in the employer's trade or business during any period. The amount of this credit reduces the employer's deduction for such wages. This credit applies to wages paid or incurred in 1994 and later years and is added to those credits that make up the general business credit. Additionally, it can offset a percentage of tax even for those employers subject to the alternative minimum tax.
The tax incentives for empowerment zones are available only for trades or businesses that satisfy the criteria for "enterprise zone businesses," meaning a corporation or partnership whose sole trade or business is the active conduct of a qualified business within an empowerment zone. It must derive 80 percent of its gross income from the qualified business; substantially all of its tangible property must be located in the zone; and substantially all of its employees' services must be from within the zone. There are similar rules for proprietorships.
Qualified wages include salary and wages in addition to certain amounts paid or incurred by an employer for educational assistance on behalf of qualified employees. The credit is available for full and part-time employees however, the employee must work for the employer for at least 90 days. Now, the White House proposes to create 22 new empowerment zones and 80 new enterprise communities. The bill would cut the capital gains tax for empowerment zone businesses and individuals if at least 50 percent of the gains are reinvested in empowerment zone developments or improvements. The bill would increase the limitation on tax-exempt enterprise zone facility bonds from $20 million to $40 million. The bill also would increase the §179 expensing for enterprise zone businesses from $20,000 to $35,000. The bill would expand the definition of empowerment zone to include up to one mile of land surrounding the enterprise zone. The bill also would ease restrictions on tax-exempt financing for businesses in the proposed and existing zones and communities.
The City of New York City Heritage Enterprise Fund is a novel device designed to both further and enhance objectives shared by business and the municipality.
