Thursday, July 31, 2008

A Stamp of Disapproval

One of the issues that we haven't mentioned concerning our opposition to the proposed Costco on the West Side: food stamps. The store doesn't accept them, effectively redlining the folks that might be most in need of the putative bargains being offered. Here's what our friend Joel Berg, head of NYC Coalition Against Hunger wrote to us: "One other key point about Costco: their stores refuse to accept food stamp benefits. Given that one in eight New Yorkers use such benefits to survive, Costco seems to be excluding a whole lot of people from their stores."

In fact, when we helped to defeat the store in 1999, the food stamp issue helped to galvanize local community opposition. The NY Times captured this at the time: "But John Fisher, president of the Clinton Special District Coalition and one of the leaders in the anti-Costco campaign, said Mr. Brotman was missing the point. ''He didn't understand New York,'' Mr. Fisher said. ''It's not that people don't want lower prices.'' He said opponents were concerned about the traffic the stores would generate, the impact they would have on smaller stores, the $40 membership fee, the policy against accepting food stamps and Costco's nonunion labor force."

Council member Eric Gioia, one of the leaders of the fight to raise the food stamp allotment for the poor, has even petitioned Costco to change its policies. Here's the item from Berg's Hunger Blog: "City Councilman Eric Gioia recently wrote a letter to the president of Costco, the large discount warehouse retailer, asking the company to start accepting food stamps. After taking the Food Stamp Challenge and living on the average weekly allotment of $28, Gioia is even more sensitive to the fact that poor New Yorkers are unable to eat nutritious, balanced meals on such a meager budget. By getting discount retailers, such as Costco, to accept food stamps, poor New Yorkers will have access to healthy food at more affordable prices."

Costco said that it was considering it, but that was almost one year ago. We also need to remember that BJs, with a no food stamp policy, changed it for its Gateway Mall store in the Bronx in order to cobble the support needed to get the store approved.

One last point here. When the food stamp issue was first raised the last time, we highlighted the comments contained in one of Costco financial filings. The company pointed out to its shareholders that the food stamp policy helped it to reduce "slippage,' implying that by keeping the poor out it advanced the company's bottom line. Nice.

Pulling a Fast One

The NY Sun reports today on the efforts of the Los Angelos City Council to ban new fast food restaurants in a low income neighborhood plagued with obesity. The paper also finds some support in NYC for the initiative: "Support for a fast food ban in New York is growing among city lawmakers after the Los Angeles City Council passed an unprecedented bill Tuesday that would make the addition of new fast food restaurants in certain areas of the city illegal for at least one year."

And, as the LA Times reports, the obesity situation in South Central is acute: "Thirty percent of adults in South L.A. are obese, compared with 20.9% in the county overall, according to a county Department of Public Health study released in April. For children, the obesity rate was 29% in South L.A., compared with 23.3% in the county. And the figures are higher than a decade ago. In 1997, the adult rate was 25.3% in South L.A. and 14.3% in the county. South L.A. also has the highest diabetes levels in the county, at 11.7%, compared with 8.1% in the county."

But will it have any impact? To us, it makes little sense since the saturation already exists, and a one year moratorium sounds just like posturing. The other missing ingredient in the debate is the fact that these outlets, whatever their health impacts might be, are minority owned economic engines for these neighborhoods.

And its not as if the fast fooders aren't adapting to the new health trends: "Fast-food restaurants haven’t missed the cue: From their menus, diners can choose salads over burgers, yogurts over shakes and grilled over fried these days. And many food manufacturers have reconfigured their recipes to eliminate trans fats, the most unhealthful unsaturated fats made of partially hydrogenated oils." So the ball is in the customers' court: start making healthier choices and the restaurants will either get the message or die,

The logic, however, escapes some here in the city. As the Sun points out: "People are literally being poisoned by their diets — LA's idea deserves serious consideration as we look for holistic solutions to a serious problem. A moratorium may help stem the problem," Council Member Eric Gioia, who represents Queens, said in a statement yesterday." Others disagree: "Some city residents, however, immediately voiced opposition to such a ban. "Banning fast food would be stupid," a 38-year-old warehouse worker in downtown Brooklyn, Dennis Bouknight, said. "They should just let people eat what they want to eat."

With calorie posting experiment already in place it's hard to see the city council embarking on this particular venture. However, there's never a shortage of folks eager to engage in the "absurd attempt to make the world over,"

Costco Courts Controversy

The prospect of a Costco warehouse store on the West Side has set the folks buzzing on two popular blogs-and the misinformation is flowing freely-particularly about the traffic implications. On Curbed some folks opine that driving over to Costco on Eleventh Avenue won't be so bad: "I have money. I live in Manhattan and don't live in a tiny rat-hole like yourself.
I don't care about the lack of public transportation because I have a freaking car. I would Love this Costco. I like buying shit in bulk and getting it out of the way, because I can't stand buying toiletries on a regular basis. The parking lot is great!! It would be great to park easily park, get my shit and leave!!"

Others disagree: "If you must shop by car, the Sam's Club in Secaucus, the Costco in Brooklyn, Bronx, Queens or Jersey City, or any others are no more difficult for you to get to, and frankly are probably closer for many of you than 11th Avenue & 53rd Street. And, if you must know, I have three cars, a 4,000 sq ft apartment, and a 6,000 sq ft weekend house. If you like tooling around Manhattan in your car, you are an ass. But, we should not be re-zoning property to encourage someone to build some shopping center that encourages other asses like you to drive around Manhattan to shop for toothpaste."

Another commenter observes that the store with a 2300 car parking facility will not be built utilized by the local neighborhood: "not all New Yorkers live in tiny places, some have storage space and more importantly value their time so buying in bulk." Sorry, but there is a bit of mutual exclusivity here. Those who have money, value their time, will not shlep over to 11th Avenue (by bus? taxi? No subway to be found) to buy a 6 month supply of toothpaste.
And, for those that like to go to a big box store to "stock up on contact solution, toothbrushes, batteries, and pens," there are two K-Marts already in Manhattan. How many times have you headed over to the big K to do the same thing? They also sell oversized package goods at cheap prices. Finally, I understand that Costcos across the country are packed with middle class families buying in bulk to pack the second refrigerator in their basement with a 144-pack of pre-made hamburgers. But, as you all like to lament here, there is no middle class in Manhattan.
I don't care one way or the other whether Costco opens. But it is stupid and false to suggest you are catering to Manhattanites while proposing 2300 parking spaces and a location miles from public transportation. For most Manhattanites, it would be easier to go to the one in Queens."

Over at the Gothamist more popular wisdom is purveyed: "Don't see how this would work in Manhattan?? Are people going to bring their own bags (Costco doesn't use bags) and those little old lady shopping carts with them? I don't see that happening." While another wise West Sider worries about the local economy: "I doubt that the UWS will allow a gigantic warehouse in its neighborhood. I'm all for competition, especially when it comes to food stores, but you have to consider the ramifications from having a Costco. Costco sells non bulk food items such as milk, eggs, juice, fruit, maybe alcohol, etc. If large groups of people start buying their food (and perhaps,alcohol) from Costco, then the local bodegas and wine shops will really suffer. (of course, some people will still shop locally for convenience). Anyway, if your corner stores suffer, then they can't renew their leases. If they can't renew their leases, then the usual suspects will take over their stores. All together now - Duane Reade, Rite Aid, and MORE BANKS. Is that what you want? Hasn't the UWS suffered enough the past 3 years?..."

So the battle is on and it's likely that the traffic analysis will prove to be pivotal. In all of our twenty five plus years of doing these fights, it's never been just about the store-whether the folks liked it or not. In fact, just as it was with Wal-Mart on Staten Island, it often plays out that the more attractive the store, the least desirable it is for the host community. Folks should take a trip down to 60th Street and the river to see just what we mean about the site's accessibility-it would be a traffic nightmare without a doubt.

Wednesday, July 30, 2008

Costco Traffic Update

When the Alliance helped to defeat the proposed BJs Warehouse club on Brush Avenue in the Bronx we forwarded the following traffic analysis (information that demonstrated just how developer-driven "analyses" low ball actual traffic generated) that became the linchpin of the successful opposition:

Estimating the Annual Travel Associated with BJ’s

The BJ’s traffic analysis reports average weekday volumes of 6,223 and average
Saturday volumes of 7,608 vehicles per day (parked vehicles only, no trucks, no-drop
offs). However, these volumes are based on counts taken at the Long Island BJ’s in July,
2003 when, according to the Institute of Transportation Engineers Trip Generation
Manual shopper volume is approx. 86% of annual average volume. Moreover, the Long
Island BJ’s is smaller than the one proposed for the Bronx. Adjusting the reported
volumes for these two oversights increases volumes by 39%.

In addition, the ITE Trip Generation Manual (page 1336) provides insight about
the weekly and seasonal operating characteristics of shopping centers (including discount
centers) that effect the totality of BJ’s annual trip generation. Figures 1 and 2 illustrate
these characteristics. Figure 1 shows the weekly variation of traffic with Friday traffic
20% greater than the weekly average and Saturday 50% greater. On an annual basis,
Figure 2 shows that May and June are about 6% greater than annual averages while
December is about 40% greater. In comparison, the Land Use Institute reports December
volumes more than double average monthly volumes. December Saturday traffic
volumes should be used to establish parking requirements. None of these factors were
considered for the BJ’s traffic analysis.

1 Litman, T., “Transportation Cost and Benefit Analysis, Techniques, Estimates and Implications,”

In the final estimate we wrote: "The result is that BJ’s will produce approximately 3.3 million vehicle trips a year. At an average of 3 miles per trip, half on expressways, BJ’s shoppers can be expected to drive nearly 10 million miles a year, much of it concentrated within a couple miles of the intersection of Brush Avenue and Bruckner Boulevard." Now the traffic and shopping patterns will not be the same for Eleventh Avenue, but you can begin to see the magnitude of the problem here. At least the Bronx site was approximate to an expressway.

At the current proposed location there's simply no good access to the site than won't cause massive traffic dislocation and environmental damage. So what we see here, in the mayor's endorsement of the store, is just how Bloomberg represents all of those so-called nasty special interests that he and his followers are constantly inveighing against.


NY1 focuses on the Costco story this morning: "The discount warehouse chain Costco is considering opening a new store along the West Side Highway between West 59th and West 61st streets. It is meeting opposition from some elected officials and critics who don't want Costco competing with local businesses..."

The High Costco of Bloomberg's Environmentalism

Yesterday we had speculated about what Mayor Mike, that recently minted environmental activist, would do about a proposal to bring the auto-dependent box store Costco to an awkward location on midtown. Speculate no more. As the NY Sun reports this morning Bloomberg, when confronted with the choice of deciding between his new green status and a big business, predictably knee-jerked in favor of the business: "The proposal to build a Costco store in an apartment building on Manhattan's Upper West Side is gaining an important supporter: Mayor Bloomberg. At a press conference yesterday, Mr. Bloomberg said bringing the big-box warehouse chain to the city would help New Yorkers weather a difficult economic downturn. "Costco has a reputation of selling in bulk at very low prices, and given the economy today and the public's desire to buy things in bulk and buy them cheaper, it seems to me we should welcome any store that wants to come here," he said."

Bloomberg's support of the Costco proposal underscores the genuine phoniness of his environmental advocacy. He proclaims the store's virtues without even a cursory examination of the putative location; and without even allowing for the caveat of awaiting an environmental review. But then again this is the same enviro who proposed putting a football stadium a few blocks south of the current box store proposal.

Costco will generate tens of thousands of additional car and truck trips down already heavily trafficked Eleventh Avenue. As we told the Sun: "A spokesman for the Neighborhood Retail Alliance, Richard Lipsky, said the Costco store would run counter to another administration priority: reducing traffic. "It is incongruous for the mayor, who supported congestion pricing, to support one of the most auto-dependent retailers in the country," Mr. Lipsky said."

The mayor, unmindful of his own supermarket commission and the way that the box stores erode neighborhood stores, simply can't help himself; appearing to comment here by rote: "If Costco or any other store or company wants to come here, we'd love to be a catalyst and help them find land, create the kind of jobs we need in this city, and give our citizens the opportunity to have a broader range of goods to buy at better prices," Mr. Bloomberg said. "That's what competition is all about."

Pat Purcell offers this rebuttal: "The director of special projects for the grocery workers' union, UFCW 1500, Patrick Purcell, said he was disappointed by the mayor's support for Costco. He noted that a report by the city Planning Commission earlier this year called for creating more supermarkets, a goal he said would be thwarted by competition from Costco. "All this warehouse club is going to do is close markets," Mr. Purcell said in an interview. "It goes counter to everything the administration is doing to bring supermarkets into the city."

None of this thwarts the Sun's strong support for box stores. As the paper editorialized yesterday: "It strikes us as awfully reactionary for a dynamic town. Is this really what politics have come to in Manhattan, the capital of capitalism in America? If our politicians are so opposed to traffic, let them move to the Badlands, where a mail truck passes by once a day. New York is a city, for heaven's sake, full of things that people want to get to and see, which entails cars and trucks and, yes, traffic."

To be fair the Sun, unlike Bloomberg, never supported the congestion tax, so the paper can't be labeled as hypocritical as the mayor now appears. Nevertheless, this location is probably one of the worse we've seen for a store of this size that relies heavily on consumer car traffic. Here's the Sun's view: "We wouldn't suggest that traffic be ignored. It should be planned for and ameliorated to the extent possible. But to allow it to dictate whether new stores can open in the city is an overreaction on the order of prohibiting affection in the city because it might result in children and our schools and subways are already too overcrowded."

According to this view, traffic concerns should never be a deal breaker. Perhaps the Sun should consult with the folks out at Tottenville who deep-sixed Wal-Mart, a store they actually liked, because of deep concern about the traffic in that community? And what about the Sun's view on consumer choice: "But why not let New Yorkers make their own choices of where to shop rather than allowing the politicians to artificially constrain the options?"

If followed literally, it would mean that the paper believes that the entire environmental review process should be scrapped; but why not put that to a vote? In the case of West Side Costco, Council member Brewer isn't ahead of the neighborhood curve, but reflecting deeply held sentiments. Box stores like Costco generate traffic from over a three and four mile radius of a location; making the immediate neighborhood suffer for the supposed economic benefits of others.

As for the economic downturn argument, we side with Pat Purcell. Box stores create an economic oasis in one location, while at the same time creating deserts in surrounding neighborhood shopping strips. That's why proposals for BJs stores in two sites in Brooklyn also make little sense at a time when supermarkets are disappearing in the neighborhoods of the city.

What the mayor's support does, however, is to put the lie to all of his PlaNYC blah, blah. You don't create an environmentally sustainable city by encouraging box stores that erode neighborhood shopping-much of which involves walking to the store. His cheer leading for Costco reminds us of the fable of the lion and the scorpion. When the lion agrees to take the scorpion across the river, and ends up being fatally bitten, he asks the scorpion why he would doom the both of them. The reply? "Because that's what scorpions do."

Tuesday, July 29, 2008

Purcell Swings Away for Silver

In this morning's Crain's Insider, UFCW Local 1500's Pat Purcell comes to the defense of Shelly Silver. Here's the item:

The Perils of Insurgency
Insurgent candidate Paul Newell’s claim that Shelly Silver overstated his efforts to keep a local Pathmark open a drew a harsh response from the union representing store workers. “The workers at Pathmark have never met Newell and have no idea who he is,” says Pat Purcell of United Food and Commercial Workers Local 1500. “Silver was the linchpin in keeping that store open and our members employed. His opponent’s cheap, political shot is disgraceful.” Newell says that he has been working with other community groups.

Budget Bell Tolls

Governor Paterson will give a very grim budget message to New Yorkers today. As the NY Times reports: “There will be no confusion about the gravity of the situation,” said Mr. Paterson, who has been sounding the fiscal alarm repeatedly in recent months, as state budget officials began forecasting large budget gaps and a prolonged and deep recession in the state. Risa B. Heller, a Paterson spokeswoman, said that the governor would do more than merely warn of worse times ahead. “The governor will put forth proposals to both get the state’s fiscal house in order and ease the burden on New Yorkers,” Ms. Heller said."

It's about time. Since our elected officials-particularly the mayor-have been partying on the Wall Street generated profits that were bound to come crashing down eventually. Instead of greater efficiencies and government innovations we've been given Lindsay style spending. Nicole Gelinas captures this in this morning's NY Post:
"While Paterson, Bloomberg and the state and city comptrollers already have talked lots about upcoming budget deficits, New Yorkers are used to those warnings once or twice a decade, and big numbers are meaningless after a while.
What's different this time is that the financial industry - the engine of state and city finances - looks to be facing an era of sharply lower profits.
Wall Street's business model is broken; getting it to work again may take half a decade or more. That could leave New York (city and state) facing a prolonged challenge to rival the city's near-bankruptcy in the '70s."

And she goes on to lay the blame where it rightly belongs: "New York, so dependent on the financial industry's continued growth, should shudder. Making this worse: Bloomberg and Govs. George Pataki and Eliot Spitzer used the cash that Wall Street was showering on the city and state not to ease the city's long-term problems - but to allow them to grow worse. The city's tax-funded budget had risen to match the Lindsay-era peak (adjusted for inflation and population) about the time Bloomberg took office six-plus years ago. Now it's 22 percent above the Lindsay mark. Spending rose just 9 percent or so during the Giuliani era, but has jumped three times as much since - the highest rate since Lindsay left office."

So the fiscal chickens are coming home to roost. We're eagerly awaiting the mayor's response to all of this; and just as eagerly awaiting the historical accounting of his spin city mayoralty. Our gut feeling is that the retrospective will not be as kind as the current media sycophancy.

Costco's West End

The NY Sun picks up the Costco story this morning, and the criticism continues to mount concerning the store's location and its potential impact on traffic and small business: "A plan for a Costco store in a Manhattan West Side residential project is drawing opposition from local elected officials, labor unions, and community groups, who may block the outlet from opening at a time when New York consumers could use the access to the lower prices available at the discount chain."

This is, of course, deja vu all over again; plans to put the big box store on the West Side were thwarted in 2000 when various community/business and labor coalitions successfully fought the store's efforts. AS the NY Times reported at the time: "It isn't easy to plop a giant store that sells 36-roll packages of toilet paper into a congested city neighborhood. So Costco, the national wholesale club, thought it had a winner last summer when it came up with a model tailored for the Manhattan market. The company called it Costco Fresh and said it would specialize in food products...But as often happens in neighborhoods slated to get a so-called big-box store, community leaders in Manhattan gave Costco Fresh the kind of welcome they might normally reserve for the West Nile virus."

One of the community leaders who helped lead the fight was Hells Kitchen advocate John Fisher, Fisher countered the arguments of Costco's CEO Jeff Broutman: "But John Fisher, president of the Clinton Special District Coalition and one of the leaders in the anti-Costco campaign, said Mr. Brotman was missing the point. ''He didn't understand New York,'' Mr. Fisher said. ''It's not that people don't want lower prices.'' He said opponents were concerned about the traffic the stores would generate, the impact they would have on smaller stores, the $40 membership fee, the policy against accepting food stamps and Costco's nonunion labor force."

The Alliance was also there, and will be once again in today's fight. We worked with Fisher at the time: "Richard Lipsky, a lobbyist... fought Costco Fresh on behalf of the United Food and Commercial Workers Union and a group of independent supermarkets known as the Neighborhood Retail Alliance..." At a time when the city is looking to preserve supermarkets-particularly in Manhattan-the siting of a 150,000 sq. ft. store selling goceries in the middle of Manhattan will de-stabilize an already unstable retail environment.

We will not be alone in our opposition since area elected officials such as council member Gale Brewer and Assembly member Linda Rosenthal have vowed to fight the store. As the Sun points out: "The district's City Council member, Gale Brewer, is voicing objections to the proposed store, and the chair of the council's zoning committee, Tony Avella, says he would likely oppose the plan as well. The development requires the area to be rezoned, meaning that the council, which typically defers to the affected district's representative, would have to approve the inclusion of the store."

And considering that the mayor has just finished trying to promote congestion pricing it's hard to see his support for an auto-dependent box store on 11th Avenue. Brewer agrees: "Ms. Brewer said Costco raises particular concerns because it relies on bulk purchases for the majority of its business, so using a car is the most convenient way to carry goods from the store. "I can't even imagine it," Ms. Brewer said in an interview yesterday. "I assume you need a car to go to Costco, and I thought we were promoting public transportation and bicycles and greening. Already, if you drive in that area now around rush hour you can't cross 72nd Street for 20 minutes."

John Fisher underscored some of these points eight years ago for the Gotham Gazette: "Real Estate Weekly recently reported (Dec. 1, 1999) that superstores often have profit expectations of $1,000 per square foot (per year). At 70,000 square feet, Costco might expect gross revenue of $70 million/year or $1.3 million/week. How many cars or neighborhood walk-in shoppers would be needed to meet that number? Of course, numbers can be crunched any number of ways, but here's something to chew on: If all patrons are walk-ins with an average purchase of $20, about 65,000 people per week would tromp over to Hell's Kitchen Costco. Has anyone bothered to tell Costco that there aren't that many people in all of Clinton/Hell's Kitchen? Who benefits and who suffers the burden?" And that was for a "scaled-down" Costco.

The one being proposed today is twice that original one in 1999; and unions that have touted Costco for its more friendly labor policies can't see the logic of the store's current proposed location: "The director of special projects for UFCW Local 1500, the grocery workers' union, Pat Purcell, said Costco is "clearly the lesser of evils" among warehouse chains, noting that anti-Wal-Mart groups sometimes held it up as a model big box company. Nonetheless, he warned that the store's location would displace small businesses and cause congestion in the area. "It's less about which retailer and more about the retail model and the location being inappropriate," Mr. Purcell said in an interview yesterday. "I can't see people going for it."

This will be one interesting fight, and on the heels of the congestion tax battle, the real wonder will be where the mayor will situate himself. He supported the mega mall off the Major Deegan on "Asthma Alley," but that was before his greening. This will be the first auto-dependent box store test after the mayor has staked out his congestion position. Stay tuned.

Monday, July 28, 2008

Budget Gloom

This morning's NY Post focuses in on the gloomy budget forecasts for both the state and the city: "Gov. Paterson, convinced the state faces its worst fiscal crisis since the mid-1970s, will deliver the grim news in an unprecedented special address to New Yorkers as soon as tomorrow night, The Post has learned." This isn't good news for New York's tax payers.

Which makes our previous posts on the state's failure to collect Indian cigarette taxes all the more compelling. It has now become not only fiscally irresponsible to allow Indian cigarette retailers to skate on paying their taxes, it is at the same time political malfeasance of the highest order. To make any move to balance the budget through tax increases and the raising of regulatory fees is simply both unconscionable and untenable-leaving the governor open to damaging charges.

Now we know that Paterson's talking tough on reducing government spending; that's all to the good: "The governor has said he's tired of the state going from deficit to deficit, spending like it has a credit card that never has to be paid, and that he's prepared to take action," the source said." But we also know that this tough talk is often a prelude to tax increases; and if so, the Indian loophole must be closed.

Posting and Toasting Cigarette Black Market

Kudos to the NY Post for its editorial this morning on the failure of the state to enforce its own law on Indian retailer sale of cigarettes: "Addressing the National Conference of State Legislatures in New Orleans last week, Mayor Bloomberg cut right to the chase. New York, he noted, is suffering a serious case of the shorts, due largely to a weakening national economy and a serious Wall Street downturn - while a big pot of money that could provide some relief is being left on the table. That would be the uncollected taxes on cigarettes sold on Indian reservations.
Thanks to the fundamental cowardice of Govs. George Pataki and Eliot Spitzer (Gov. Paterson is showing yellow, too, but he's new on the job), New York declined to enforce a state law mandating the collection of taxes on all tobacco products sold to non-tribe members."

It is beyond high time that the state-and now Governor Paterson-go after these uncollected taxes:"As Rep. Peter King (R-LI) pointed out in these pages a few weeks ago: "A 2006 state Department of Health report estimated that New York loses $436 million to $576 million a year in taxes from the sale of untaxed cigarettes alone - a figure that could rise to $800 million-plus this year." Whether such money would properly go to plug the MTA's deficit or for other purposes, this is a huge pool of cash. And, budgetary imperatives aside, there's an even stronger reason for collecting the tobacco taxes: It's the law."

In the coming weeks we are looking forward to raising this issue-and creating the kind of coalition that will finally convince state government to get over its cowardice and simply enforce the law. Tax payers are fed up. The Post gets the last word: "Failure to collect breeds legitimate resentment from New Yorkers who are required to pay their taxes - and understandable anger at a government which quails before one class of scofflaw while relentlessly dunning them."

Third Times's Charmless

The Permanent Government types can't seem to give up-Mayor Mike has been so good to them that they are feverishly exploring the ways to keep him in office for another term. As the NY Post reported yesterday: "Big Apple business honchos want four more years of Mayor Bloomberg - and are preparing to do whatever it takes to help him stay in City Hall for a third term. Sources close to the mayor say his deep-pocketed pals are "aggressively pushing" him to run again - his term ends in December 2009 - and are strategizing on how to change term-limits law to make it happen. "We believe it's very feasible," said one source. "If he decides to run again, there are people who want him, and those people are planning to do everything they can. It is a very, very strong movement."

And well they should. Mike has been real good to the real estate developers, and not so good to the small businesses that have suffered under the development scythe. The movement underscores all that we have commented on concerning the myth that the mayor is "above" the special interests because he self-funds his campaigns.

Those who propound this view, predominately the mayor himself, along with his sycophants and toadies, view special interests in the most narrow sense-generally those labor and small business groups that cultivate political ties in order to advance their goals. What this view misses is the extent to which the ruling elites in this city-those highlighted by Newfield and Dubrul in their Abuse of Power treatise-have cultivated and propagated a worldview around the notion of development. This world view is embedded in a "mobilization of bias" that infuses the thinking of editorial boards, consultants and those elected officials who act to implement policies that reflect this bias.

So Mayor Mike isn't above those interests that are central to power in NYC, he embodies them; and that thought of his departure fills these power elitists with dread: they've never had it so good, and the attempt of Peter Vallone to aid this effort is simple misdirection. Vallone, according to the Post, is concerned with preserving institutional memory: "Meanwhile, former Council Speaker Peter Vallone Sr., now a lobbyist and lawyer, told The Post he is currently putting together a team of about 15 good-government people to lobby the public to support longer term limits..."If the public really knew what this does, that it pits elected officials against each other, that it eliminates institutional memory . . . they would never vote for this," Vallone said. "They thought it was a bunch of politicians out for themselves. It's not."

Well, Vallone is narrowly correct when it comes to the City Council, and we believe that 12 years is necessary in order to generate a real system of checks and balances. We don't need to extend the mayoralty, however, and Ed Koch's comments are ironicall to the point: "I believe in the concept of term limits," said former Mayor Ed Koch, who served three terms. "But I don't think eight years is enough. Twelve is enough."

Any neutral observer of Koch's tenure would agree that his last term did little to bolster his legacy. Pete Hamill captures this: "There was something touching about him too. When the lights went out and the rallies were over, there was a sense of loneliness in Koch -– something that made him more human. Then you think about what happened in the third term when so many people he trusted betrayed him, and his sense of isolation grew. He should not have had to go through that." Hamill is, of course, referring to the corruption scandals in the late 1980s.

So eight is enough when it comes to the mayoralty-and given Bloomberg's regal pretensions and arrogance we need to be zealous in the protection of the term limits law. The fact that the real special interests are advancing this only means that the idea is worse than it first appears.

Costco's West Side Story

According to Eliot Brown at the Observer, Extell Development may be looking to put a 150,000 sq, ft Costco into its Riverside Boulevard complex: "Extell Development is in talks with discount bulk retailer Costco to occupy a large underground store as part of a new 3.3 million-square-foot development of mostly residential buildings on the Upper West Side."

This prospect is already generating considerable consternation on the West Side: "The community will be greatly affected by a placement of a Costco," said Assemblywoman Linda Rosenthal, who represents the area. "I'm afraid it's going to bring a lot of increased vehicular traffic." And while Ms. Rosenthal said she had yet to take a firm position on the prospect of a big-box retailer, another area elected official was more direct: "I certainly do not support the Costco or anything like it," said Councilwoman Gale Brewer in a phone message."

It appears to us that Extell has a fairly large hill to climb; 11th Avenue in the area around 59th-61st Streets is a traffic nightmare, and adding thousands of new vehicular trips to the neighborhood doesn't seem like a move that will generate any enthusiasm. Political support, however, will be necessary: "The company's plans for the final parcels between 59th and 61st streets would need approval of the City Council and City Planning Commission, as the firm is seeking to change the initial restrictions to allow for more density and different uses (the original development planned for a commercial tower for NBC at the site)."

It's hard to imagine that the City Council, with the opposition of the local council member and the likely opposition of the UFCW, approving this plan: here's Brown's take: "As a national big-box retailer with no stores in Manhattan, the prospect of a Costco at the development--which would take up about 150,000 square feet--seems prone to controversy, and indeed it was discussed at length at a meeting between Extell (and a string of consultants and lobbyists) and members of the local community board Wednesday night. Extell also wanted 2,300 parking spaces in the complex."

Indeed. We should remember that it was about 8 years ago that a similar move to put Costco on the West Side (in two locations; one in Clinton, and the other in Chelsea) was defeated by the Alliance, the UFCW's Local 1500, and the strong grass roots opposition from an array of community groups. One of the leaders in that fight was the local council member, Christine Quinn.

Rangel'$ Community Auction

In yesterday's NY Times the paper highlighted the way in which Congressman Charlie "Stabilized" Rangel has a number of good friends among the city's largest real estate developers: "In many ways, Vornado Realty Trust, the Kimco Realty Corporation and Apollo Real Estate Advisers represent the real estate vanguard of the new Harlem...Executives and people tied to the companies, along with other real estate concerns, have donated hundreds of thousands of dollars to Representative Charles B. Rangel’s fund-raising operation since the 2004 election cycle."

And what are these companies up to in the community? Well, just like Columbia over in West Harlem,they're actions are (or will be) displacing long time Harlemites from their neighborhood: "Vornado is building an office tower on 125th Street that some residents fear will accelerate gentrification. Kimco moved to push out longtime local store owners to demolish a building and put a new retail complex in its place. And Apollo is leading a contentious effort to turn the historically rent-stabilized Delano Village apartment complex — which has been renamed Savoy Park — into a more profitable property."

So what we have here is another example of a used-to-be-a politician who came onto the scene as a defender of the community but who as evolved into a poseur who's grown fat defending interests that are antithetical to the folks that they represent. We saw the happening over ten years ago when Rangel was shilling for the building of a Pathmark supermarket-even getting an $800,000 grant from HHS for the project (not to mention the suspicious actions of the now-defunct HUDC). For another view on Rangel, see Seth Lipsky's Op-Ed this morning at the NY Sun.

As the time aptly points out: "Mr. Rangel responded in part by stressing his long history in the neighborhood and his affection for it. But even as he extols the old Harlem, he is generating significant campaign contributions from those at the forefront of the new." How surprising. It's about time that Rangel gets the scrutiny he deserves, and the community gets more effective representation for its interests.

In the middle of all this is Vornado Realty and Trust. Vornado and Rangel are looking perfect together: "The aides said Mr. Rangel supported, in concept, one of the more controversial projects in the neighborhood, the office tower proposed by Vornado on 125th street, where Major League Baseball plans to move its new cable network. An executive for Vornado gave a total of $9,600 to Mr. Rangel’s fund-raising operation in March and April 2007. The Vornado project was to be the first prime office tower to be built in Harlem in more than three decades. Some residents complained about the scope of the project and argued that commercial gentrification could force many small businesses out."

Another major Rangel donor is Kimco Realty: "Kimco, along with another company, bought a sprawling building at 125th Street and Frederick Douglass Boulevard last summer, with plans to bulldoze it and erect a new complex. But the plan prompted protests from business owners and residents, who called on the City Council to pass legislation to create a historic Harlem district to preserve businesses run by Harlem residents. The owners and residents, led by the Save Harlem Association, also filed a lawsuit against the developers; it was settled this year for an undisclosed sum."

Kimco is also exploring plans in Brooklyn that would displace a number of local supermarkets. All in all this Times piece is a cause for concern. The eighty year old congressman is at a stage that he just might be feeling a sense of droit du seigneur when it comes to the Harlem community. It's the reason why term limits is such a good idea, and Rangel now becomes its poster child.

Indians: Take a Hike!

In Saturday's NY Post, the paper continues to blast away at the MTA and its lack of managerial competence: "Here we go again: Seems like only yesterday (actually, it was March) that the MTA socked riders with a steep fare hike. Yet now it's expected to ask to do so again next July - six months sooner than planned. Ouch! This time, Executive Director Elliot Sander & Co. want jumps of about 8 percent - depending on what the state and city are willing to kick in (assume: zero). Should riders have to pony up so soon - and so much? Not until the agency gets its house in order - starting with plans for keeping its equipment fit and completing its many upgrades and expansion projects. Not until it can spell out how it's going to get the money it says it needs - some $30 billion over five years - to do that."

Which brings us to Mayor Bloomberg's suggestion that the MTA could plug its budget shortfall by tapping into the uncollected Indian cigarette taxes. As the Gothamist points out: "Hizzoner said yesterday that the cost of subway and bus rides won’t have to go up much at all if the state collects taxes on cigarettes sold on Indian reservations. "That just alone would replace one of those fare increases," Bloomberg told reporters, insisting that the tobacco revenue could plug a $700 million hole in the MTA’s budget."

Indeed it could; and if lawmakers get their act together than its possible that there could be a continual tax stream for transit needs. What should be done here is for the State Department of Taxation and Finance to conduct an accurate accounting of the black market sales that are currently taking away from the revenues of legitimate store owners. Once completed, the state will have a good idea of the amount of loses that the non-taxed sales amount to.

What's clear is that the state may not realize just how much it is missing because of its nonfeasance in this matter. As the NY Sun has reported: "A 2007 report by the Independent Budget Office, a nonpartisan city agency that analyzes the city's finances, found that 27% of city smokers and 34% of upstate smokers sometimes bought "under-taxed" cigarettes in 2006. These smokers avoided the tax by buying cigarettes from other states, ordering cigarettes over the Internet, and purchasing cigarettes at Indian reservations. The city lost an estimated $40 million in tax revenue as a result of cigarette tax evasion in 2006, according to the report." We believe that the dollar amount's a great deal larger than that.

This gap between taxed and non-taxed cigarettes-a number that we estimate is probably north of $500 million a year-should then be used as the benchmark for a dedicated fund earmarked for transit. A fund that should be part of a comprehensive overhaul of the transit agency's operation. NO more money until, as the Post says: "Not until an adult like Richard Ravitch and his panel figure out how to get beyond the never-ending MTA funding woes and craft a plan to ensure long-term fiscal soundness for the system."

Friday, July 25, 2008

Mayor Still on the Warpath

Mayor Mike gave a speech yesterday to the National Conference of State Legislatures, and as the NY Daily News describes it, Bloomberg still wants to tap the uncollected Indian cigarette tax revenues in order to defray the rising cost of mass transit: "After November, New York State is going to discover a very large deficit. The MTA is already discovering a very large deficit. And the public is starting to say, 'Hey, how come you aren't putting in the security systems that you promised? How come you aren't giving us the new buses we need? How come you aren't expanding all of the services that will help me get to work?'" The mayor also said the state should start collecting tax revenues from the Indian reservations that sell cigarettes to offset the MTA's proposal of two new fare hikes"

And he's absolutely right. In fact, the legislature should begin to examine using these uncollected funds for a dedicated revenue source for transit needs. As part of this legislative initiative, there needs to be a full evaluation of how to effectively revamp the MTA so that the additional funds aren't squandered into the agency's fiscal black hole.

Miseducated Testers

Andrew Wolf reiterates his strong criticism of the mayor;s educational reforms today, with a look at similar failed efforts in England-the focus here is on the failed nature of the tests themselves: "If we were somehow travel ahead in time, say a decade from now, and land in New York City, one thing is for certain: we will be still be talking of the crisis in education, complaining about graduation rates, wringing our hands over the loss of our competitive position in the world marketplace. The Bloomberg reforms? They will fade away as surely as the morning dew."

Wolf highlights just how the testing regime in England, initiated by Sir Michael Barber, is similar to our own; and how both approaches lead to failure: "The trouble is that the test administration and grading is as faulty there as it is here in America. The issue in Britain right now is that the all-important standardized tests given to pupils aged 11 and 14 were botched, leaving the educrats, in this case an agency called the Office for Standards in Education, Children's Services and Skills, or Ofsted, without timely data."

Sound familiar? The problem lies with the fact that the tests are designed to grade the achievements of the adults-pols, principals and teachers-and when this is put in place the results are predictably bogus: "Or, to put it a different way, it turns out the tests there, like those here, are now designed to evaluate adults, rather than children. And British education officials, just like those in New York, are being accused of having deliberately dumbed down the tests to boost the prospects of those adults.:

So what happens when the testers are evaluated by independent evaluators? "As the Daily Mail in Britain noted on Monday, "chicanery is inevitable because it's not just teachers but ministers who are being tested on their promise to improve education, so ... such tests will always show that standards are rising, even when the opposite is the case. The outcome has been that, while children have been subjected to an ever-expanding battery of tests, their qualifications have become progressively devalued. As measurable achievement has been ostensibly going up, the amount pupils actually know has been going steadily down."

A case here of Tweedle Dee and Tweedle Dum, with the NYC DOE being the Dum. The Kleinnemen, aided and abetted-and most importantly, insulated-by the mayor's Teflon dollars, will eventually be judged. As Hegel once observed: "the owl of Minerva spreads its wings only with the falling of the dusk."

Pointing Toward Defeat

Could the Willets Point redevelopment project be added to the growing list of major Bloomberg defeats? According to the Queens Gazette it certainly looks possible: "Mayor Michael Bloomberg last week rhapsodized in an op-ed piece about his "All Star City", with "the eyes of every baseball fan turned toward New York City in anticipation of the 2008 All Star game" at Yankee Stadium. But this special moment was occurring at about the same time that the mayor seemed to be heading for another major defeat comparable to previous stumbles, such as his plans for a new football stadium over the Chelsea rail yards and for congestion pricing. The mayor's latest Waterloo seems certain to be his grandiose vision of replacing the ugly bit of real estate called the Willets Point junkyards with spanking new high-rise apartment buildings, a convention center and an assortment of new businesses."

If it happens, he'll only have one man to blame: Hiram Monseratte. Once considered merely a gadfly, Monserrate has parlayed an outsider status into a role of major power broker: "The smoldering discontent that greeted the proposal several years ago has in recent months erupted into a major conflagration as the plan's many opponents have come together with a single voice demanding that the mayor make major changes in the plan or face certain defeat by the City Council. In recent weeks, Councilmember Hiram Monserrate (D- Corona), who has led the opposition to the plan, has increased the intensity of his protests. Two of his main supporters, Councilmembers John Liu (D- Flushing) and Tony Avella (D- Bayside), have been joined by several colleagues whose total number guarantees the majority needed to defeat the proposal if it comes before them. Monserrate, who represents Willets Point in the council, has repeatedly called upon the mayor to address concerns of displaced businesses, lost jobs and inadequate public housing raised by himself and various groups."

Who would have thought over two and a half years ago, when Hiram first began what looked like a quixotic venture, that a multi-billion dollar redevelopment plan would fall victim to his lance? It just demonstrates that where real political leadership exists, communities and businesses can be protected from rapacious development schemes. It's too bad that the cohort of such leaders is a small one indeed.

Thursday, July 24, 2008

Bloated Budget Bilge

In a NY Post editorial today, the paper underscores the extent to which our elected officials don't quite get the budget calculus: "The Financial Control Board this week pegged the city's gap at $20 billion through 2012. Statewide, reality is already biting: Comptroller Tom DiNapoli says that first-quarter business-tax revenues were nearly half a billion dollars short. Bloomberg and Paterson seem to understand the predicament - but then they go make matters worse."

How so? By adding payroll, as Paterson has done, and by creating new language regulations (and let's not forget the "Healthy Bucks" giveaway) as Mayor Mike has done. And then the mayor chides the MTA on bloat! "Bloomberg, predictably, blasted the MTA's proposed fare hike: "Anybody that tells me they've got a $10 billion budget, and they can't find ways to cut 5 percent, that's just poor management." Maybe MTA bosses are taking their cue from . . . him.
Bottom line? The Budget-Blues Brothers are paying no real heed to their bottom line."

As we've been saying for a long time, the mayor has an extremely expansive notion of what government can and should do; and now the chickens are coming home to roost. With no real action on government reform directed at reducing its size and scope during Bloomberg's six and 1/2 years in office, there will be a bill to pay pretty soon-and tax payers and businesses better be prepared for the storm..

Regulation Strangulation

It now appears as if the City of Los Angeles is looking to ban the use of plastic bags in supermarkets: "The City Council voted Tuesday to ban plastic shopping bags from stores, beginning July 1, 2010. Shoppers can either bring their own bags or pay 25 cents for a paper or biodegradable bag. The council's unanimous vote also puts pressure on the state, which is considering an Assembly bill that would impose bag recycling requirements on stores. City officials said their ban would not be implemented if the state passes the bill and requires at least a 25-cent charge per bag."

So the LA City Council's action is designed to push the state to place a deposit on 25 cent plastic bags, a measure designed like the bottle bill to insure that the bags are returned for recycling. The cost that the measure would add to the operation of the store is not considered important as long as the environment is saved from the bane of plastic.

But as dangerous as the idea is for the economy of stores, it makes more sense than the recently passed NYC measure that went into effect this week. The NYC bill creates a voluntary collection system that, while it imposes obligations on retailer, has no incentives for the consumer to return any plastic bags.

Our Guess? That the law is just the first step towards the California model; with supermarkets increasing their role as garbage dumps for the greeniacs. When will our enviros understand that stores cannot bear the costs of all of their schemes without some serious repercussions? Regulatory costs are directly correlated with the loss of local supermarkets.

At some point we'll need to consider the health of the local economic environment, and whether there is healthy food available along with good jobs, Small business is not a plaything for those with no concept of how the free enterprise system works. There is cause and effect, and there's no benefit without a cost-it's time for our electeds to examine the cost side of the ledger.

Observations on Tuck-It-Away

In this week's Observer, Eliot Brown focuses in on the ongoing battle being waged by Nick Sprayregen (our client) against Columbia University and the state: "For more than three years, Nicholas Sprayregen has kept his word to Columbia University. The largest private landowner in the footprint of the university’s planned 17-acre West Harlem expansion, he has vowed time and again to fight the university’s attempts to oust him, so long as the school threatens the use of eminent domain. Now, as the bulk of the area’s politicians have endorsed the expansion, community opposition has gone from a boil to a simmer and all but one other private-property owner has agreed to sell to the university, the fight’s final chapter is poised to be strictly a legal one between two parties: the university and Mr. Sprayregen."

As the Observer points out, this is not an easy battle since the NY State's eminent domain laws are big obstacles for those looking to keep their property: "New York's laws on eminent domain are viewed as rather favorable to the state when compared with other laws nationwide, making the climb for Mr. Sprayregen a distinctly uphill one. Landowners in other eminent domain cases often hope that a prolonged legal battle will derail a project through a changing political landscape or economic climate. But Columbia’s plan seems prone to more stability than a typical private developer’s. The university has a multibillion dollar endowment; already owns the bulk of the land in the footprint; and has always said the expansion is a long-term proposition,..."

And while Sprayregen appears pessimistic (“I’m pessimistic that we will be successful,” he said, surrounded by piles of documents related to the expansion. “I have a feeling that if we’re going to get anything, the only way it’s going to happen is that we’re first going to have to lose in the New York courts and then appeal to the U.S. Supreme Court, and hopefully have them take on the case, and then win. “That’s obviously a long shot.”), from what we know of him he is definitely looking forward to the attempt to change the law in this country.

One observation of our own on the swap plan. The Observer's take is as follows: "Mr. Sprayregen met community opposition last year in an attempt to rezone his properties himself, and he has all but given up hope on a land-swap proposal he made to Columbia, saying university officials in a recent meeting seemed unwilling to part with the property he was eyeing." Well, not quite.

The land swap is still viable and Sprayregen, while remaining a pessimist regarding the university's good intentions, is still exploring the economic feasibility of a swap; and what makes it still a possibility is the complete absence of any housing in the CU expansion plan-a central tenet of the Sprayregen concept. If the deal is fully developed and unveiled, we promise that it will have tremendous political support-and the support of labor as well.

If that happens, the elitist posturing of the university will become untenable, and the political position of project opponent Bill Perkins will be strengthened. In the context of an expansion that will displace thousands-and in the middle of a city wide election cycle-the university and its rent subsidized supporters will be significantly challenged; and the courts will take cognizance of CU's intransigence.

Wednesday, July 23, 2008

Serrano for Mom & Pop

In a post this morning at Room Eight, State Senator Serrano comes out in defense of small neighborhood retailers. Here's the money quote: "First, we are losing the businesses that matter most. As part of the Supermarket Task Force that I started earlier this year, I mapped out the closures of several East Harlem supermarkets in recent years. This represents a loss of jobs, and reduced access to nutritious and affordable food.

At the core of the crisis is rent, which is doubling and even tripling in some areas of Upper Manhattan. In the Bronx, artists are getting creative and using their own walk-up apartments as gallery space. For the most part, though, there’s no substitute for a storefront.

Meanwhile, big box stores are sprouting everywhere you look, including East River Plaza in East Harlem and the Gateway Center at (the former) Bronx Terminal Market. But for all the time and money this City has expended on a corporate future, it has barely lifted a finger to protect mom and pop."

We need to mobilize all of our resources in order to preserve what has made New York City unique: its vibrant and diverse neighborhoods. If nothing is done soon, NYC will begin to resemble little more than a suburban shopping mall.

Times Opines Away on MTA

The NY Times editorialists are like a little dog with a bone when it comes to congestion pricing. In this morning's editorial on the MTA fare hike, here's what the paper had to say: "Legislators, particularly those in Albany, bear an even greater responsibility to help after they rejected a congestion-pricing plan that would have brought the M.T.A. $500 million in additional funds annually. They spurned it anyway, leaving the M.T.A. to rattle a cup and riders to reach ever deeper into their pockets."

Yet, while all in the know are saying that the agency is poorly managed, what sense does it make to throw money at this problem before overhauling the management structure? And the congestion tax is certainly not the way to go. Before we hit beleaguered tax payers with an additional burden two things are necessary.

In the first place, a full examination of the MTA's books is needed. Here's what the governor told the Times yesterday: "Mr. Paterson said he asked the authority to re-examine its financial situation and report back to him. “What I am asking the M.T.A. is to go back and take another look at their books.” But can the agency be solely responsible for this task? Is this a physician heal thyself moment? Isn't it time to put the agency into receivership?

Secondly, as we have already pointed out in a previous post, there's a wonderful new source of tax revenue that the Times needs to become the champion of-Indian cigarette tax revenues (Will this be the only taxing source that the paper doesn't support?). As NYACS points out, in fiscal year 2000-2001, before the current round of city and state cigarette tax increases, the state was losing around $250 million a year in lost tax revenues.

AS a NYACS press release pointed out earlier this year-citing its 20 year battle for fair enforcement: "The legal action is supported by the New York Association of Convenience Stores, which has waged a 20-year-long battle to get New York State to exercise its right under the U.S.
Supreme Court’s landmark 1994 Attea ruling to collect taxes on Indian sales to non-Indians.
NYACS estimates that Governor Spitzer’s inaction is costing licensed non-Indian retail
businesses over $1 billion annually in lost sales and costing taxpayers at least $500 million annually in lost revenue to the state (about $1.2 million per day)."

Indian retailer tax enforcement is an idea whose time has come. Let's close the loophole, protect local businesses and the health of New Yorkers, and help reduce the tax burdens that the citizens of our state are forced to bear. That's a decongestant that will help all of us-motorists and mass transit riders alike-breathe a little easier.

Bloomberg Urges Indian Giving For Fare

With the MTA proposing a fare increase for the second straight year, the agency is finding that city and state law makers are in no mood to comply. As the NY Times reports this morning, "A proposal by the Metropolitan Transportation Authority to increase transit fares and tolls in 2009 drew sharp criticism from an array of powerful officials on Tuesday, as the mayor, City Council speaker and Assembly speaker said they would oppose it, and the governor pledged “to do everything I can to prevent it.”

The mayor was particularly sharp in his remarks, implying that the MTA is not being managed efficiently: “Anybody that tells me they’ve got a $10 billion budget and can’t find ways to cut 5 percent, that’s just poor management,” Mr. Bloomberg said at a City Hall news conference." Speaker Quinn was no less harsh: “Before the M.T.A. comes asking for more from the city, the state or the public, they need to do a little more housekeeping, which means cutting their overhead, cutting their management budget and cutting their administrative budget.”

At his City Hall press conference, however, the mayor for the first time suggested a new source of additional revenue. As was reported yesterday in The Politicker; “There is certainly not going to be more money coming from the city," Bloomberg said. "We don’t have it. If the state mandated that we had to put more money in, we’d have to raise city taxes." Bloomberg said revenue has to be found elsewhere and suggested the state collect taxes from cigarettes sold on Indian reservations."

This suggestion has a great deal of merit. Here's the NY Sun's take: "Mr. Bloomberg said the city has no additional money to provide the MTA. He also said that if the agency can't sufficiently cut back its expenses without government funding, it would be showing "poor management." He encouraged the state-run agency try to find new sources of income, and specifically pointed to a tax on cigarette sales at state Indian reservations, a strategy he predicted would bring in between $200 million and $300 million a year."

Or more even. According to a New York Association of Convenience Stores report earlier this year: "The fiscal toll of the New York State tax department’s continued refusal to curb rampant cigarette tax evasion has climbed to more than $1.6 million per day in lost tax revenue, according to a new economic analysis. If the Spitzer administration enforced the collection of taxes on Native American tribal sales of cigarettes to non-Indian customers – as it is supposed to under current state law – new revenues to the state would range from $575 million to $625 million per year, the report said."

This is money that the beleaguered state and city treasuries are badly in need of, and the legislature has already passed the enabling legislation that consecutive governors, including Governor Paterson, have been loath to enforce. It's a dereliction that is costing small business owners all over the state, as customers flock to the "no tax" reservation sources.

In fiscal hard times this failure is especially egregious-and according to a story in this morning's NY Post, it's only going to get worse for New York's tax payers: "An increasingly pessimistic state financial monitor warned yesterday that falling tax revenues and increasing expenses are going to produce monumental, higher-than-forecast city budget gaps starting next year. In a sobering report, the Financial Control Board said the bloodbath on Wall Street and the sharp downturn in the overall economy is going to produce an estimated $4.3 billion shortfall in fiscal 2010 and a $7.5 billion hole in fiscal 2011."

In this climate, the failure to collect Indian retailer tax revenues amounts to malfeasance on the government's part, and Mayor Mike should be applauded for making the case. Now it's up to store owners, tax payers and elected officials-along with health advocates who're seeing their anti-smoking campaigns stymied by an aggressive black market-to come together to insist that this tax loophole be shut so that mass transit riders aren't stuck with an unnecessary fare hike.

Tuesday, July 22, 2008

Bucking Good Sense

In this morning's NY Post, Jeff Stier has an excellent critique of the DOH "Healthy Bucks" program: "City Health Commissioner Thomas Frieden apparently didn't notice the scandalous revelations about City Council "member items" earlier this year - at least, it hasn't stopped him from jumping feet first into his own no-accountability giveaway. His department is giving away 30,000 taxpayer-funded $2 coupons this month as part of its Health Bucks program - and says it may hand out "significantly more" later this summer. Getting people to eat more fruits and vegetables is a worthwhile goal. But the plan invites corruption - and could worsen the problem it's supposed to fix."

And Stier puts his finger squarely on the problem-the failure of the giveaway to include local food stores: "The coupons will supposedly help inner-city residents get purportedly hard-to-find vegetables for free. Like food stamps, they can pay for produce only at certain green markets - farmers markets out on the sidewalk, schoolyards or parks - in the South Bronx, Harlem and some Brooklyn neighborhoods. (Poor residents of other areas are out of luck.) Yet green markets are only open in harvest months. And the program does nothing to persuade consumers to make wiser purchases the rest of the year. Indeed, the program diverts consumers from supermarkets and bodegas - which Frieden's team seems to think don't supply quality and affordable produce now. But the program does nothing to get these year-round venues to change."

That's, of course, if you accept the analysis that the local stores don't currently supply the produce. If they do-and many certainly are stocking plenty of fruits and vegetables-than the bucks program is siphoning business away from stores, especially supermarkets, that are being driven out of the city by high rents and over-regulation. In this context, the coupon giveaway is nothing but another city reg that hurts local business.

Stier also underscores the important difference between this program and WIC: "Other food vouchers - like those in the federal Women, Infants and Children program - come with sensible rules requiring users to buy the least expensive product. Health Bucks, by contrast, are meant to go for green markets' overpriced organic produce. Nor do Health Bucks get people to change their overall eating behavior and food choices. Recipients can buy exotic purple potatoes on the taxpayer tab - and make tasty, fattening mashed potatoes - but that's no boon to health. But it's all just peachy as far as the Health Department is concerned: As a department spokesperson told me, "Potatoes are vegetables, too."

What makes WIC work well is the fact that the program is monitored by the state and is run through stores that must adhere to the regs if they want to stay in the important revenue producing program. Healthier eating is important in order to address the city's obesity problem; healthy local stores must be part of the solution, and so far the city is lagging way behind in insuring that they are-more interested in trendy giveaways than in developing a coherent program for supermarket retention.

Commercial Rent Control: Remedy for Neighborhood Stores?

There's no question that independent stores are disappearing in the neighborhoods of NYC. What to do about the trend is another matter. The current issue of City Limits focuses on the issue: "From tailored zoning regulations to special tax arrangements to bringing back an idea from the 1980s of "commercial rent control," land use analysts are examining the options. State Assemblyman Richard Gottfried, who represents the area, is one who's interested in the potential of commercial rent control. “Just as residential rents can drive people out of the community if they’re not protected by rent stabilization, the same can happen with commercial tenants,” says Gottfried. “A neighborhood can have whole blocks or avenues of stores wiped out in a very short period of time as these come due, because landlords can refuse to renew a lease or insist on any rent they can get without limitation. Without some kind of rent law in place, a landlord needs no excuse for throwing residential or commercial tenants out on the street.”

Our old friend Sung Soo Kim weighs in on the matter: "Sung Soo Kim, founder and president of the Small Business Congress of New York City, a federation of 70 trade organizations, agrees that when it comes to disappearing businesses – whether Coliseum Books or CBGB's – “Rent is the major issue.” Kim says the city averaged 6,000 commercial evictions per year under Mayor David Dinkins; this number jumped to 7,500 per year while Rudy Giuliani was in office, and has soared to more than 10,000 per year under Bloomberg. In 2006, Kim cites data that there were more than 14,000 commercial evictions in the city. While these figures are for commercial evictions, a broader category than small businesses, he’s convinced that the vast majority of the casualties are small businesses."

Not everyone sees rent control as a solution, but it is clear that local businesses are leaving our commercial strips; and along with them the vitality and color of the city. Council member Gale Brewer feels that something needs to be done: "We definitely need to address this issue,” Brewer says today. “It destroys neighborhoods; it destroys families.” She is focused on the wave of drugstores and banks that have been replacing small, local retail outlets in her district. While some argue that there is little difference between chains (sometimes referred to as formula businesses, given the generic models on which they’re constructed) and local retailers, a growing body of research contradicts such arguments."

Local business recirculate money to a much greater extent than do the national chains, something that Stacy Mitchell has written extensively about. As City Limits points out: "When Borders chain bookstore threatened to open a new store in the heart of downtown Austin, Texas, a local consulting firm called Civic Economics produced a study (commissioned by the Austin Independent Business Alliance and another organization called Livable City) that found that for every $100 in sales, Austin’s local businesses were pumping $30 back into the city. In contrast, only $9 of every $100 spent at a proposed Borders would be spent in Austin. A similar study of a Northside Chicago neighborhood by the same firm found that “for every one hundred dollars in sales, the locals generate sixty-eight dollars worth of local economic activity and the chains just forty-three dollars.”

Clearly, however, something needs to be done-and zoning remedies have been suggested: "The question is to how to target protections to save small businesses. Research by the Pratt Center suggests that given the current role of chain stores in forcing out small businesses, zoning regulations focused on particular neighborhoods may be one promising way of meeting this challenge. A measure as conceptually simple as store size caps can inoculate a neighborhood from chain stores, reducing the pressure on rents. The Pratt Center points to three cities that have adopted such caps in particular neighborhoods, and another 27 that have adopted citywide size caps."

Disagreeing, Julia Vitullo-Martin points out that there is plenty of underutilized NYCHA space (good for supermarkets as well), that could be used for local shops: "Julia Vitullo-Martin, director of the Center for Rethinking Development at the Manhattan Institute, rejects all of these approaches. The best fix for rising rents would be to increase the supply of land by "eliminating artificial restrictions," including zoning, and encouraging property owners with street frontage to rent it. Vitullo-Martin points, for example, to the opportunity provided by the Fulton Houses across the avenue, a New York City Housing Authority complex. "Of its 343 developments, NYCHA offers commercial leases in only 28," she wrote in an e-mail. "What an amazing and destructive restriction on the supply of land – not only could NYCHA reap revenues from good retail, its tenants would benefit from having the services they need – grocery store, pharmacy, bank, dry cleaner, etc."

Local stores are good for the city's economy, and are the essence of a neighborhood: "The shop owners "know exactly how we like our coffee,” says Acevedo. “What newspaper we read. If one of our kids is diabetic, they know what to sell them.” All this is at risk. “It’s just a family feeling that we have with these small businesses, and we don’t want to lose that either.” We need to do something about this alarming trend.