NYC Developer Pays $3M Penalty for Shorting Building Workers

A developer in New York City is paying up after violating the conditions of a tax break by shorting workers at two luxury apartment buildings in the outer boroughs.

Under the terms of a settlement with New York Attorney General Letitia James’ office, rental developer Heatherwood Communities will pay $3 million, including penalties and more than $700,000 in wages and interest to two dozen underpaid workers at 421a buildings in Long Island City and Williamsburg.

James’ office announced the settlement Thursday in conjunction with city comptroller Brad Lander and the building employees union 32BJ SEIU.

Heatherwood qualified for the now-defunct 421a tax abatement when it developed the 145-unit 27 on 27th at 27-03 42nd Road in Long Island City and the 94-unit 568 Union Avenue in Williamsburg. The property tax break’s most notable requirement is that a portion of the units in projects that receive it must be set aside as affordable, but it also mandates that building service workers are provided prevailing wages and benefits.

Prevailing wages during the two-year period scrutinized by the investigation would’ve ranged from $22 to $26 an hour. But the probe found that affected workers didn’t receive half of that; those in the Williamsburg building were allegedly paid $9 to $14 per hour, while those in Long Island City received between $8.50 and $15 per hour. None received benefits. James’ office launched the investigation following a whistleblower complaint.

Under the settlement, the workers will receive a combined $723,324, which includes 16 percent interest. Heatherwood will also pay $1.1 million to the city and $686,000 to the state in penalties. It will need to continue paying prevailing wages.

“These individuals worked day and night to make ends meet but were denied their hard-earned money,” James said in a statement announcing the settlement. “Paying workers fair wages and benefits is not a luxury, it’s the law and Heatherwood cheated these workers and taxpayers.”

Heatherwood, based in Commack in Suffolk County, did not immediately respond to a request for comment. Its portfolio includes two rental buildings each in Long Island City and Williamsburg and several more on Long Island, according to its website. Last year, it proposed a 428-unit, three-building luxury rental complex near the West Hempstead Long Island Rail Road station, an estimated $170 million project.