Crain’s New York Business: City hotel owners, council members plead for tax relief for decimated industry
By Natalie Sachmechi
March 10, 2021
A coalition of hotels and City Council members is asking Mayor Bill de Blasio to suspend the 18% interest rate that hotels will be charged for late property tax payments.
In a letter pleading to the mayor for help rescuing the decimated hotel industry, the coalition said that paying the staggering interest would only make matters worse for hotels and keep them from reopening.
“Hotels are not asking for a handout or even a tax break to keep them afloat. They are merely asking you to suspend this interest and provide some room for hotels to survive,” the letter reads.
Since the citywide shutdown in March 2020, hotels have remained largely empty with occupancy rates dropping as low as 15% last spring. Still, hotels were on the hook for property taxes due Jan. 1, and the Hotel Association of New York City estimates that 50 hotels were unable to pay them.
More than 200 hotels in the city have closed in the past year, and several are facing or have gone through foreclosure, and occupancy rates have reached only about 40% this year, analytics firm STR found.
The de Blasio administration has cited property tax revenue as vital to the city’s budget, which has been broadly affected by the pandemic. It’s unclear if the administration will reconsider suspending the collection of accrued interest on late payments.
“The city relies on property tax revenue to pay for essential services like education and public safety, and due to the pandemic, our overall revenue has declined by billions,” said Laura Feyer, a spokeswoman for City Hall. “We are committed to exploring ways to help the hotel industry recover to ensure New York City comes back stronger than ever before.”
The Hotel Association’s chief executive took the city’s response to the letter as a glimmer of hope.
“I don’t view it as a no, but certainly not a yes,” Vijay Dandapani said. “Hundreds of hotels are not able to pay property taxes this year regardless of what interest they will owe on late payments—the question is: Will the city make a very bad situation worse by penalizing them for the pandemic or not?”
The coalition added that interest suspension would not affect the city’s bottom line since “many hotels won’t be paying their taxes or interest payments anyway.” For hotels, a suspension of interest collection could mean the difference between staying closed or reopening without sinking further into debt, the coalition said.
John Fitzpatrick is one hotel owner who had to find another way to pay his property taxes. The hotelier and operator of Fitzpatrick Hotels borrowed money to pay his Jan. 1 property taxes, which amounted to $1.2 million for two hotels. Since March, he’s only been able to keep around 22 rooms at occupancy out of 155, although the rate has crept up to 30 rooms this week.
He’s worried he will have to borrow again come the next tax deadline in June.
The Department of Finance passed legislation last year that would reduce the interest rate of late payments on some commercial properties, although most hotels are not eligible for the break.
A number of the city’s inns, including Millennium Hotels & Resorts, the Fitzpatrick Hotel and the Edison Hotel, signed the letter as well as 24 council members, among them Councilman Keith Powers, whose district includes many of the city’s hotels in Midtown and Times Square.
“Please do the right thing,” the coalition said. “Put a down payment on New York City’s recovery and give hotels space to breathe and rebuild.”