Thursday, January 29, 2009

The Real Main Street Crisis

As we have pointed out, the effort by the state's liquor stores to preserve their monopoly over wine sales employs the imagery of shops closing on "main street;" going so far as to call their coalition-"Last Store on Main Street." Well, setting aside self serving hyperbole, there is a real crisis on the city's commercial strips. and this whine is for real.

As Albor Ruiz underscores this morning: "Small, friendly and convenient, bodegas are more than businesses - they are veritable neighborhood institutions. Yet they are disappearing faster than you can say "stimulus package." Ramón Murphy, president of the Bodega Association of the United States, and a bodega owner, is sounding the alarm about the state of the business to which he has dedicated 24 years of his life - and that has allowed him to raise four children."Bodegas are family businesses, and every time one closes, two or three families suffer," he said at his Red Apple Grocery, at 134 Hamilton Place in Manhattan. "Last year, 137 of them went down only along Broadway from 230th St. to 197th St.," Murphy added. "Hundreds of bodegueros [bodega owners] are throwing in the towel. Every day, two or three bodegas close in New York."

The closing of bodegas-and green grocers fall into this category as well-is a calamity for New York; and is as severe a situation as the closing of the big banks and brokerages: "Lost in the din about hundreds of billions to bail out banks, the auto industry and financial institutions is the fact that the 9,000 New York bodegas are becoming a dying breed. If something is not done, it won't be long before they become extinct, leaving thousands without a means of support. The disappearance of bodegas is the economic crisis hitting at the most basic level, and its impact in human terms is very real. After all, since the mid-1980s, small businesses have been the creators of the majority of new jobs in the city."

What lies behind the threat? The recession is, of course, a major culprit; but there are other factors as well: "The recession has meant fewer customers spending less. For bodega owners dealing with skyrocketing rents, high taxes and often excessive regulations - typical of New York City - life has become harder."

This bodega crisis actually started when Mayor Bloomberg diverted half of their cigarette sales to the black market with his confiscatory tax increase of 2002. After that, over $250 million a year was lost to the stores, as illegal street sales flourished. As we told the NY Times then: "Richard Lipsky, a lobbyist for the owners of small delis, bodega owners and convenience stores, predicted in an interview that many neighborhood stores would not survive the higher tax as many smokers would buy their cigarettes over the Internet, from Indian reservations, from adjoining states or from smugglers."

Mike Bloomberg's response at the time was to call the situation a, "minor economic issue." But when seen in the context of the mayor's 20% commercial real estate increase-passed through to the stores as a rent hike-and the city's regulatory Jihad of fines and violations, we now face a crisis of the highest magnitude. In a recent survey, store owners cited, "operating costs," as the main reason their stores were at risk of closing.

In response, stores are asking for the passage of a rent protection bill: "Yet Murphy says the main reason bodegas keep crashing like rows of dominoes is the one-sided process of lease renewal ."Leases are the No. 1 problem," he said. "Landlords either do not renew them or want to raise the rent four or five times. Often, you have to give money under the table for the lease to be extended." That's why the Small Business Preservation Act, sponsored by City Councilman Robert Jackson (D-Washington Heights), is so vital, Murphy said. The bill, introduced last June, would provide relief from unfair evictions."

In the midst of all this economic hardship-and don't forget that the supermarkets in the city are a dying breed as well-comes the effort of some environmentalists to expand the responsibilities of local stores for bottle collection; adding water and juices to the deposit stream (a close to 50% increase in the amount of containers mandated to collect). With so many stores closing, this isn't the time to increase the regulatory costs of doing business in New York.

So let's drop the bottle bill expansion; and while we're at it, how about using some of the stimulus money to lower the cost of doing business in the neighborhoods-in the form of tax relief for local small businesses. We might even find a way to allow the bodegas to sell wine by lowering the licensing fees for small stores. Lowering costs and increasing business opportunities is the policy direction we should be taking at all levels of government in order to relieve the real crisis on main street.