Tuesday, November 24, 2009

One Fine Day

In Sunday's NY Post, the paper gave the NYC Department of Consumer Affairs a ream of free publicity-and nary a dissenting voice was heard about how DCA vigilant may be doing more harm than good: "New Yorkers are getting short-changed by supermarkets, delis, drugstores and gas stations that illegally inflate weights and measures, charge higher-than-marked prices and slap the sales tax on nontaxable items. City inspectors issued 2,976 violations so far this year to retailers who soak their customers -- a 58 percent increase over last year's 1,882 tickets."

Yikes! It sure sounds pretty bad-but we're so grateful that city regulators are on the case of all of these malevolent local businesses. Of course, what is left out in this kind of ticket blitz is just how much it costs NYC consumers when regulators are doing the blitzing. In fact, in our view, the aggregate cost of the fines adds to the already overly costly business climate in the city-a situation that has contributed to the high store vacancy rates in neighborhoods throughout the city.

What's really missing from the Post article, however, is just how pointless and arbitrary these fines and violations can often be. There are a myriad of fines for things like missing a light bulb on an exit sign, having your fruit overhang your outdoor stoop stand, and a fine for the failure to item price every single one of your products in a grocery store. These fines-some as high as $1500 a piece-can really add up.

And we haven't begun to even factor in our supremely vigilant Department of Health that is simply driving restaurants, bars, nightclubs, and food markets nuts. Make no mistake about it, this is big business for NYC-and adds to the small business failures that have driven local unemployment numbers so high.

But what about short weights? Here's the Post's take: "We have zero tolerance for an uncalibrated scale, and when the economy is in distress, that's especially important," said Jonathan Mintz, commissioner of the city Department of Consumer Affairs. "In the vast majority of cases, we don't think it's purposeful fraud. But whether it's a significant overcharge or a small overcharge to a significant number of people, that's unacceptable. Pennies add up."

Let's deconstruct. First: "When the economy is in distress..." Okay, we guess the commissioner is expressing support for strapped consumers-but at Whole Foods? Seriously, though, if the economy is distressed, shouldn't we be even more solicitous about being overly zealous in our attack on the retailers who are providing the employment? And, by the way, many so called short weight violations due to faulty scales inure to the benefit of consumers-and actually shortchange the big bad retailers. But why get in the way of a good storyline.

In examining DOH fines, the NY Post found a drastic escalation in the levies under the current administration. As the paper pointed out a few years ago: "The Health Department expects to collect a record $27 million in fines this year, about 25 percent more than it projected 10 months ago, The Post has learned...Last year, the Health Department projected that fine revenue would total $21.9 million by June 30, the end of the 2007 fiscal year. Last week, that was revised upwards to $27 million."

And so it goes with DCA as well-and we refer you to our section on DCA fines at the Alliance web site for more on this situation. All of this falls quite neatly into the narrative that Steve Malanga over at the City Journal has laid out about the city's hostility to small business.

Here's Malanga's money quote:

"Doing business in Gotham has rarely been easy for the nearly 200,000 small firms that form the backbone of the city’s local economy. Virtually everyone who runs a business in New York has long had to deal with uncompromising inspectors, unsympathetic city bureaucracies, and complex regulations, to say nothing of profit-crushing taxes. But over the past few years, small businesses’ woes have worsened significantly, say many entrepreneurs and business groups. Taxes, fees, and fines are worse than ever; city departments have stepped up inspections and enforcement; city agencies have stymied efforts to cut red tape; and at a time when the national and city economies are struggling, commissioners have promoted new social policies that have added to businesses’ burdens. “In 25 years, this is the worst I’ve seen things,” claims Ramon Murphy, owner of two bodegas and president of the city-based Bodega Association of the United States."

And what about the taxes? The city has been squeezing local businesses-particularly on the their property taxes; and, at the state level, the current budget crisis has underscored just how a bloated government bureaucracy is harmful to business growth. This hasn't, however, stopped the Working Families Party from urging even higher taxes as an alternative to needed budget cutting.

So before the NY Post goes about reprinting some DCA press release we suggest that it gives more attention to how the city over-regulates and over-taxes retailers-and how groups like the WFP exacerbate this ominous trend by introducing job killing measures such as the current paid sick leave bill, legislation that we have described as the mandatory retirement act for small business employees.

And, by the way, where are the short weight fines for the city's proliferating bands of fruit and veggie peddlers? DCA is apparently too busy making it hard for the tax paying store owners to succeed in this most difficult of business environments to worry about people doing business right on our streets. If things don't change soon, neighborhood shopping strips will be better utilized as play streets.