Trump's Tax Break Cost New York $410 Million In Lost Revenue

One of Donald Trump's first mega real estate deals saw his acquisition of the dilapidated Commodore Hotel in New York City in 1976 with the aid of a lopsided tax break, which later led to the city losing more than $410 million in forgone revenues over the next four decades.

Only 29 years-old at the time, Trump received the unprecedented 40-year tax break needed to acquire and redevelop the hotel. He did this with the help of his late father, Fred, and the assistance of the late New York mayor Abe Beame, to whom the Trumps had made huge political donations.

As narrated by Wayne Barrett in 1992, Trump's first biographer, Trump bragged to the executive handling the sale he could use his political clout to get tax breaks for the deal. The very next day, this man was taken to city hall where he met Beame and Fred Trump.

“Anything they (the Trumps) want, they get,” said Beame.

What the Trumps got from Beame was the controversial 40-year tax break. In 1975, New York City was fighting to stave-off bankruptcy and was in the midst of the worst fiscal crisis in its history. It was later discovered that Stanley Friedman, Beame's deputy mayor, was responsible for the 40-year, $400 million tax abatement on Commodore Hotel property.

Trump reached an option agreement with Penn Central that owned the hotel to purchase the Commodore. Trump, however, couldn't produce the $250,000 necessary to secure the option. Trump turned to his millionaire father for help.

The abatement moved forward as if the agreement with Penn Central had been signed, and as if Trump had paid the required $250,000 to secure the option. Trump used the option agreement to convince the Hyatt hotel chain to partner with the Trump Organization and purchase the Commodore. The Trump-Hyatt partnership eventually collapsed, however.

Years later, Trump was ordered by city officials to supply a copy of the signed agreement with Penn Central. Instead of fully complying, Trump sent the option agreement without any signatures.

The Trump Organization rebuilt the hotel at a cost of $100 million. The Commodore reopened in September 1980. Its new reflective glass facade was assailed by the American Institute of Architects’ guide to New York buildings as an “utter and inexcusable outrage.”

In 1989, New York State officials ordered the Commodore to pay New York City $2.9 million in rent withheld by the hotel in 1986 due to "unusual" accounting changes approved by Trump. After an investigation, New York City auditors noted the hotel didn't have the basic financial records required by law and was using procedures that violated Generally Accepted Accounting Principles (GAAP).

That Trump fudges his tax obloigations isn't surprising because he's worked hard to avoid taxes. “That makes me smart,” he said during a 2016 presidential debate.