Special treatment? (Related)

The eastern section (at right) would be exempted from the living wage bill. (Related)

Steve Ross sure knows his way around City Hall (part of the reason he has become one of the most successful developers of his generation). From his start in affordable housing to megadevelopments like the Time Warner Center, Hunter's Point South in Queens and Hudson Yards, Mr. Ross, chairman of the Related Companies, always seems to get just what he wants when the city is involved. One sore spot was the fight over the Kingsbridge Armory, in the Bronx, which was unexpectedly rejected by the City Council three years ago.

The fight centered around whether workers at the armory project, which was to receive a considerable amount of public subsidies, would have to be paid more than minimum wage, something labor unions were lobbying heavily for. That fight led to the eventual proposal of a living wage bill. In an unexpected, if unsurprising, twist, it now turns out City Council Speaker Christine Quinn has carved a portion of Hudson Yards out of the living wage bill, according to The Times.

A large portion of the Hudson Yards project, a 26-acre mixed-use development along the city’s Far West Side, is specifically excluded from the proposed so-called living wage legislation in a draft that was written by Ms. Quinn’s office and is now circulating among supporters of the bill.

Ms. Quinn plans to ask her colleagues next month to approve the long-debated bill, which would require companies and developers that receive substantial city subsidies to pay their employees at least $10 an hour. She had already announced that the legislation would exempt tenants in projects that receive city subsidies from paying the living wage; only the direct employees of the developers and some contractors would be affected.

The Hudson Yards exemption caught many of the bill’s supporters by surprise, according to people who were briefed about the legislation in telephone calls in recent days and in a meeting on Thursday morning.

A Related spokeswoman directed The Observer to Speaker Quinn's office for comment, which declined to discuss the Times' report.

A Quinn spokeswoman told The Times that, "The final version of this bill and its details are still being drafted. The legislation has not been finalized." Presumably this means its parameters, which currently exempt development between 10th and 11th avenues, could still change.

According to a source at City Hall, who was not at liberty to discuss the bill publicly, Related's property is being given the exemption for fear that without it, construction of the commercial towers on the eastern portion of the site could stall. Related recently broke ground on that portion of the project, with Mayor Bloomberg and Speaker Quinn in tow, once Coach agreed to be the anchor tenant of the first commercial tower.

The feeling is that with two more to come, the construction of which it is hoped will catalyze development in the surrounding portion of the neighborhood, it is better to ensure the projects than the wages therein.

"There are a couple special differences here," the source said. "There's a city-specific interest in seeing this through, since we borrowed $3 billion to build a subway out there, which will partly be paid back through commercial development. And there is a particular problem with the yards, versus the development around the Garden or Moynihan Station or elsewhere in the Hudson Yards district, in that you are dealing with the decking, which is especially burdensome."

The council is also trying to determine whether or not the block would be exempted anyway, because it might be de facto grandfathered out of the living wage bill. It has been argued that because of the type of tax benefits and development incentives being offered, it is closer to an as-of-right project than one built with the usual set of negotiated subsidies. In this case, there are subsidies, but they are inflexible and were agreed upon in years past, before the bill passed.

Whether or not this means living wage protections are warranted and appropriate is still to be determined, and could be a topic of great debate among backers of the living wage movement. Still, this provision was pointed to as a reason that other developers could not lobby for their own carve outs in the future.

"We don't want to add any new burdens to hold up that development," another source said.

Update: Even with an exemption for the Related Companies, the Retail Wholesale and Department Store Union supports the bill.

"It's misleading and inaccurate to use Hudson Yards as a litmus test for judging the strength of the final bill," union spokesman Dan Morris said. "We're still on track to get a very progressive bill that goes further than what any other city has done to raise wage standards for taxpayer-subsidized economic development."

"It will fundamentally improve the way EDC, the largest economic development agency of its kind in the country, uses subsidies to structure and negotiate developments deals," he added. "We're proud of what we've accomplished."

mchaban [at] observer.com | @MC_NYC

The bill would require that employers who lease space in city-funded projects pay at least $10 per hour to all workers employed there. The Bloomberg administration fears that the plan would slow development in the city, but backers are pointing to cities where they say the experiment has succeeded: San Francisco and Los Angeles.

Ken Jacobs, the chair of the University of California at Berkeley Labor Center recently conducted a study about San Francisco's experience with living wage, and he found that:

The verdict is clear: labor standards policies of the kind San Francisco put in place improve workers' income, productivity and health, reduce turnover and decrease job vacancies; they have not reduced the number of jobs.

This is good news indeed for the workers and businesses in cities, such as New York, that are considering new living wage policies on economic development programs. San Francisco may be unique in the breadth of protections we provide our workers, but we are not special in our need to improve labor standards.

And The Observer has obtained a letter by David Campos, a member of the San Francisco Board of Supervisors, that pushes his transcontinental colleagues to follow their lead.

"Dear Council Members," Supervisor Campos writes. "I am writing to encourage your support for the Fair Wages for New Yorkers Act. San Francisco has a long history of similar labor standards legislation. I hope you will consider our experience as you make your decision."

Full letter below:

Letter_to_NYC_Council_Members_regarding_living_wage

The other day, I was walking around the city taking photographs of buildings for a marketing brochure I am putting together. I was using my old Polaroid Land Camera--you know, the one where the photograph slides out of the front of the camera and develops right before your very eyes. As I was standing in the street taking the photos, I nearly got run down by a horse and buggy that was racing past me up Madison Avenue. The buggy was traveling at a speed much faster than allowed by law, so I pulled my cell phone out of my backpack to notify the police. My cell is the size of a brick and gets rather poor reception, so I wasn't able to complete the call.

Feeling frustrated and wanting to report the buggy driver, I went into the Betamax video store to ask if I could use their phone to call 911. While waiting to use their phone, I looked at some fantastic 8-track tapes lining the walls of the shop. Unfortunately, the phone in the Betamax store was not working, either, so I went next door to the blacksmith shop and asked if I could use their phone. The blacksmith said he was happy to let me use his phone, but he wanted to show me the new line of buggy whips that he had just put on display.

At this point you must be thinking, "Knakal has lost his marbles." However, this scenario might just be today's reality had New York's current legislators been around for the past several decades.

You see, I would have had to use a Polaroid camera because new technologies would have not been allowed into the city because they would hurt the small businesses that sold the Polaroids. Similarly, CDs and digital audio/video equipment would not have been allowed to pass through the city's borders because of the negative impact they would have on Betamax sellers and stores that sold 8-tracks. And, of course, those job-killing automobiles would never have been allowed to cross bridges and tunnels into the Big Apple for fear that they would put horse-and-buggy drivers, blacksmiths and buggy-whip manufacturers out of business. All these prohibitions would have been legislated with the virtuous objective of "saving small business."

Contrarily, one of the many great things about New York City is the constant desire of companies and individuals to come here to compete. This competition drives businesses to innovate, excel, create new products or figure out how to deliver a better level of service. New businesses need to do business in different ways, looking to differentiate services and products, or they just won't make it. Competition drives entrepreneurs to figure out new ways to compete, to bring new concepts to the marketplace and to figure out how to present better products, offer better value and deliver better services to New Yorkers. If you are not better in some way, it is a challenge to compete.

The fight over Wal-Mart, and whether it should come into the city, is seemingly based on similar principles, with "save our small businesses" as the mantra of the retailers' foes. Opponents of Wal-Mart, including those on the City Council, and most notably the public advocate, use preservation of small business as the keystone to their argument for not wanting the retail giant to enter the city.

But let's face facts. Politics has devolved into a business in which the first priority of an elected official, after getting elected, is to get reelected. The good of the taxpayer all too often takes a back seat to the objectives of elected officials, who are out to sustain their political careers.

A massive amount of financial support that organized labor can, and often does, bestow upon candidates is clearly impacting positions taken by opponents of Wal-Mart coming to the city. This, however, is a risky position for politicians to take. While the position will make unions happy and increase the likelihood of labor's financial backing, a recent poll of New York City residents indicated that 71 percent would like Wal-Mart to operate within city limits.

The desire to have Wal-Mart here is not surprising given that city residents travel outside New York to spend approximately $195 million per year at Wal-Mart stores in the surrounding metro area. Wouldn't it be better for New York to have this economic activity occur in the city rather than in New Jersey or Connecticut?

Moreover, New York City is Wal-Mart's No. 1 market for its online division.

CLEARLY, WAL-MART WOULD do well in New York City, creating jobs and providing city residents with the ability to choose among a larger selection of products at more affordable prices. The desire for political financial support is outweighing the desire to give New Yorkers an option to buy products less expensively. Why would elected officials protect small businesses that unfairly charge higher prices to consumers, especially when unemployment levels are so high and so many New Yorkers are concerned about their finances?

In a recent survey that we conducted, we visited a Wal-Mart store just outside the city and compared prices to three different retailers here in town: a national drug store train, a local neighborhood pharmacy and a small neighborhood convenience store. In all cases, the prices of identical products at Wal-Mart were lower than the prices available at the New York City stores. The difference in price ranged from a low of 26 percent in savings on Benadryl, to as much as a 134 percent savings on Listerine. On average, Wal-Mart prices were 52.4 percent less than identical products available in the city.

Opponents of Wal-Mart say that the retailer should not be allowed entry due to the tremendous competitive advantage that it has over small businesses. What is difficult to understand is why Wal-Mart is singularly being vilified when there are other national retailers that offer economies of scale to New York City consumers, including Duane Reade, Walgreens, Costco, Target, CVS, T.J. Maxx and Staples.

Why not allow Wal-Mart to come in and compete with existing businesses? Those businesses would simply have to step up, compete and in some way differentiate themselves or their products-the epitome of the free-market system.

If opponents ideologically believe that a large global company that benefits from economies of scale negatively impacts small businesses and, therefore, should not be allowed in the city, then I should draft a letter to the City Council and the public advocate asking them to banish CB Richard Ellis, Cushman & Wakefield and Jones Lang LaSalle from the city. How absurd would that be? (Clearly, I would never do this, as I have many friends at these firms and believe that free-market competition brings out the best in people.)

THE LARGER PROBLEM with elected officials interceding in this way is that it is extraordinarily dangerous when they start dictating which businesses are free to join the competition and which businesses are not.

Let's take for example the debacle that the Kingsbridge Armory has turned into. The Kingsbridge Armory is a hulking building in the Bronx that has been underutilized for far too long. The city has spent millions of dollars on upkeep, and the property has generated no property taxes for decades. A private-sector developer was prepared to invest $310 million of capital into the building, but restrictions placed on the developer by elected officials killed the project.

At the time, opponents of the proposed private-sector development stated that they would rather have no jobs than jobs that they didn't deem to be appropriate. Clearly, this did not represent the opinions of the tens of thousands of jobless reside
nts in the Bronx, where the unemployment rate remains at 12 percent today, the highest in the state. This rate is only about 2 percentage points lower than the peak rate of 13.9 percent experienced in January of 2010, right around the time when this development was sledgehammered by politicians. Elected officials required that a living wage be paid by all tenants that were to occupy space within a redeveloped armory, an unreasonable request. This folly instantaneously vaporized 2,000 desperately needed jobs.

During a meeting I had with an elected official who was an outspoken opponent of the proposed redevelopment, he admitted that he had underestimated the negative impact that a living-wage requirement would have on it.

So here we sit, 16 months later, and the status quo exists. Two thousand people have not received gainful employment in the Bronx, no real estate taxes are being collected by the city and no prospects for a viable utilization of this facility are on the horizon.

We have yet to see any of the opponents of the project come up with $310 million of their own to put into rehabilitating this property. One of the arguments the opponents of Kingsbridge used was the protection of small businesses and the impact a large retail facility, with national retailers, would have on local small businesses.

Not allowing competition stifles innovation and impedes progress. Wal-Mart would be good for New Yorkers and for New York. Moreover, singling out one company and telling them they cannot come to New York is bad for the city. I would like to write more about this, but my horse and buggy is waiting for me, and I can't keep the driver waiting.

rknakal@masseyknakal.com

Robert Knakal is the chairman and founding partner of Massey Knakal Realty services and in his career has brokered the sale of more than 1,125 properties, having a market value in excess of $7 billion.

The Bloomberg administration on Thursday announced that it had picked a private consultant to craft a report on the issue—good, independently-produced data on the topic has been in short supply—and it expects the study to be complete in spring 2011. The consultant, Charles River Associates, is being paid $1 million.

Not to say a city-led study will really settle much of anything in what is a rather polarizing debate. Already, the concept of making a report has been criticized by elected officials and unions, who think the report's outcome is predetermined, and it will pan living wages (indeed, it would be a surprise, to say the least, if the Bloomberg administration ended up putting out a report recommending a high minimum wage on subsidized projects, given that the mayor has been on the record opposing the concept). And it doesn't help the optics of the whole thing that the list of academics participating on the research team include David Neumark, who has written articles and studies critical of high minimum wages. (David Lombino, a spokesman for the city's Economic Development Corp., said that there are six academics on the consulting team, and Mr. Neumark is not heading up the effort. "He's not a leading member of the team," he said. "It's to be expected that there will be a diverse set of opinions as part of their team.")

With that said, it's hard to argue with more data, regardless of who's paying for it and whatever the end recommendations are.

The whole situation is not unlike the paid sick leave issue, for which a bill expanding required benefits to workers has broad support within the City Council, but not from the leadership or the mayor. Its supporters have been pushing for a vote, but after the Partnership for New York City said it wanted to bring in more data on employers, Council Speaker Christine Quinn said she wanted to wait until the Partnership's report comes back. 

ebrown@observer.com

The Bloomberg administration's plan to study the effects of living wage laws came under attack today from a set of Council members and City Comptroller John Liu, who called the effort a "sham."

The issue came under fire as the city-controlled Industrial Development Authority authorized $1 million to fund the study. With two bills brewing in the Council on living and prevailing wage issues, the Bloomberg administration is planning to name a consultancy to create a report on the topic, determining the effects that laws that increase the minimum wage for certain jobs and projects would have in the city.

The main issue cited by the elected officials today was the process: the city is planning what it terms an independent study, although it would control the flow of information and will presumably have influence on the recommendations (as is common for government-sponsored studies). The city has set up an advisory committee that includes representatives from groups and unions on all sides of the issue, although the specific charge and structure of the committee is not well defined, or clear to all its members.

Nine Council members wrote a letter to Economic Development Corporation president Seth Pinsky asking him to take a more objective approach, given that the Bloomberg administration has repeatedly voiced opposition to many living wage requirements.

"I welcome informative data that helps us make decisions, but given that the city has already indicated that it is skeptical of this policy, how can we be confident that the study will be objective and independent?" Councilman Brad Lander said today via phone. (The full letter suggests a structure with more neutral experts)

Mr. Liu was a bit less reserved, saying in a statement that the EDC is "intent on squandering a million dollars on this charade of a study."

More from his statement:

"It is important to study this issue, but not this way. ... [M]y opposition to this million-dollar sham is based entirely on the question of its merit - or lack thereof."

A spokesman for the EDC, David Lombino, defended the study, noting in a statement that there would be an open dialogue during the study:

"We're undertaking the most comprehensive study on the effect of living wage that has ever been undertaken anywhere in the country and we have a balanced group of external stakeholders in place that will have an opportunity to shape and contribute to it. Our methodology will be public, and if individuals disagree with the results they will, of course, have an opportunity to voice their concerns."

The debate does have a hint of political jockeying all around.

The Bloomberg administration clearly would rather see its study come out before the Council passes any wage bills, and should it indeed recommend against living wage requirements, it would help give the administration leverage in negotiations with the Council. (One of the bills is pushed by SEIU 32BJ and would require prevailing wage for building service workers on subsidized projects; the other would require at least $10 an hour for all workers including retail in buildings receiving subsidy).

In contrast, Mr. Liu and the Council members would probably rather see the bills passed sooner rather than later, particularly if the study will not come out in their favor, but it's tough to stake out a position that is contrary to waiting for better data.

Indeed, the living wage issue is sorely lacking in credible data and information on the economic effects. Both sides--the unions and the pro-business and real estate crowd--routinely make sweeping generalizations that respectively suggest there is a negligible economic effect, or development would come to an absolute halt.

For instance, proponents of a living wage on retail do not show in their promotional materials a single example of a new development receiving subsidies for which there was a living wage requirement for 100 percent of retailers. Indeed, while living wage proponents often point to Los Angeles as a model, the Los Angeles Community Redevelopment Agency said that that there has not been one project that it administers that has gone ahead with a living wage requirement on all retail employees (a few have negotiated that at least 70 percent of the workers receive living wage, while others with broader requirements stalled amid the recession).

This is not to say it is impossible to build large retail developments with wage requirements; the point is that good data--not funded by interested supporters or opponents--is hard to come by. 

ebrown@observer.com

The bill, dubbed the Fair Wages for New Yorkers Act, would force most every development receiving city subsidies of at least $100,000 to require a minimum wage of $11.50 an hour (or $10 and benefits) for anyone working in the development, a mandate that would mostly affect retail jobs (which tend to be low wage).

The Bronx elected officials—led by Bronx Borough President Ruben Diaz Jr.—and the Retail Wholesale and Department Store Union are launching a campaign on the issue (with T-shirts, a logo, a Web site and all), and held a press conference Tuesday at City Hall (one which Mayor Bloomberg walked by with a smirk on his face) to press the issue.

Indeed, the text of the bill certainly displays more effort and some sense of reality than a similar bill introduced by some of the same elected officials last session. That bill called for all developments receiving at least $10,000 of subsidy to mandate the living wage, something that would anger far more subsidy recipients. The new bill also exempts developments used exclusively for affordable housing, and developments that house a cultural institution or social services organization.

Here's a piece of the bill, complete with charged rhetoric:

"It is the policy of the city that jobs supported with financial assistance, whether conferred directly by the city or indirectly by a city economic development entity, should pay wages that allow working New Yorkers to support themselves with dignity.  In furtherance of this policy, covered employers shall pay their employees no less than a living wage."

The wage would also be tied to the CPI, adjusting for inflation (a rational way of doing policy that is often left out of legislation on issues such as, say, legislator pay).

Resistance on the issue comes from the mayor, who says it will slow development, and the real estate industry, which, too, worries it would slow development given the higher costs (and lower rents one could charge) that would come as a result.

ebrown@observer.com

The law of unintended consequences often rears its head when legislation is proposed that does not consider the macro impact on the economy. This is the case with a newly proposed bill, number 18-A, sponsored by 33 members of the New York City Council.

Proposal 18-A is a local law proposed to amend the administrative code of the City of New York in relation to establishing a prevailing wage requirement for building service employees in buildings owned or managed, in whole or in part, by persons receiving financial assistance or rent derived, in whole or in part, from the city treasury.

A "living wage" or a "prevailing wage" is a kind of minimum wage in that it is an intervention by governments to set the price of labor. With the passage of the Fair Labor Standards Act of 1938, national policies affecting labor market pricing began. That act applied federal wage-rate standards to manufacturing employees engaged in interstate commerce or in the production of goods for interstate commerce. Initially set at 25 cents per hour, the federal minimum wage has been raised consistently over the last half-century and now applies to all jobs.

Local living wage or prevailing wage ordinances began appearing in the mid-1990s. In 1994, Baltimore was the first city to pass a living-wage ordinance. However, it only applied to companies that provided contracted services for the city. Proponents argued that private companies benefiting from taxpayer-funded contracts should be forced to pay prevailing wages to their employees. In fact, almost all of the more than 100 prevailing-wage ordinances passed by cities and counties in the last 15 years apply only to government contracts with private companies, not to general business or industry-specific companies.

On Feb. 19 of this year, Pittsburgh passed a citywide prevailing-wage ordinance notwithstanding the sharp dissent of Pittsburgh Mayor Luke Ravenstahl. "This bill will all but ensure that projects and companies will look to other geographic areas [in which to do business] without the constraints of wage restrictions," he warned.

Over the past few years, individual projects in cities around the country have required that prevailing wages be paid to construction workers at municipally subsidized developments. However, there was no citywide prevailing-wage policy until the Pittsburgh bill became law.

Prevailing wages can significantly change the feasibility of construction projects based upon increasing costs. Recently, the New York State Economic Development Council retained the Center for Government Research to prepare a study on the impact of prevailing wages on construction costs in New York. They determined that in upstate New York, prevailing wages for construction workers drove construction labor costs up by 57 percent relative to out-of-state costs. More surprisingly, in downstate New York (including New York City), prevailing wages drove labor costs up by 154 percent.

Proponents of prevailing wages achieved a colossal failure at the Kingsbridge Armory site in the Bronx, where 2,200 jobs do not exist today because of a push for prevailing wages that made a proposed retail project infeasible. On the heels of this debacle, the City Council has decided, through its recent bill 18-A, to push and expand the prevailing-wage requirement.

THE BILL, ESSENTIALLY, states that building owners who rent 10,000 square feet or more to a city agency would be required to pay building service workers a prevailing wage. The bill also applies to any entity that receives "financial assistance" of $10,000 or more per year, whether discretionary or as-of-right.

These entities must certify that a prevailing wage will be paid to any service workers in any building in which they operate. In this case, financial assistance is defined as "cash, payments or grants, bond financing, tax abatements or exemptions, including but not limited to abatements or exemptions from real property taxes, mortgage recording taxes, sales taxes, use taxes, tax increment financing by the city, filing fee waivers or energy cost reductions."

Can you imagine how many entities this definition applies to?

As one council member put it, "The City Council must ensure that tax dollars do not fuel the cycle that keeps working families in poverty. This legislation seeks to tie city subsidies to good, quality jobs that will help New York City's families move to the middle class."

While it has a noble intention, this legislation would have profound ramifications. If passed, it would create significant and devastating burdens on both tenants and property owners, particularly in the boroughs, which have a significant percentage of no-profit tenants and tenants receiving some form of subsidy or grant from the city.

Essentially, if a building owner were to rent space to any of those tenants, they would be required to increase their payroll to bring all building service workers up to prevailing-wage levels. The term "building service workers" covers a vast array of employees. Such workers are defined as those who perform work in connection with the care or maintenance of an existing building; such work includes, but is not limited to, that performed by a watchman, a guard, a doorman, a building cleaner, a porter, a handyman, a janitor, a gardener, a groundskeeper, a stationary fireman, an elevator operator and starter, a window cleaner, a garbage collector or a superintendent.

The New York State Association for Affordable Housing estimates that prevailing wages, if required pursuant to proposed Int. No. 18-A, will drive costs up significantly. In New York City, the association estimates the prevailing wage to be about $19.20 per hour, nearly three times the normal minimum wage of $7.25. "New York City has a long desperate struggle to create jobs. Increasing the costs of each slot by legislative strong arm would worsen that challenge."

The affordable-housing association goes on to say that prevailing wages are essentially union wages. Requiring payment of prevailing wages is tantamount to a job killer. "Leave no worker behind, it seems, in terms of pay-even if it means leaving far too many of them behind when it comes to jobs."

This legislation will place undue burden on both the owner of the property and the tenant, as "[e]ach lessor will be required to submit copies of records, certified under penalty of perjury to be true and accurate, for the building services employees performing services in the building or buildings, to each contracting agency with every request for payment under the lease." This can be interpreted to mean that with every monthly invoice, sent to every tenant in the building, a breakdown of wages paid to all building service employees would have to accompany the rent bill.

Furthermore, there is a burden on the tenants that as a condition of receiving their financial assistance from the city, they have to provide a statement to the city agency or entity providing their assistance certifying that all building service employees providing services in any building or facility in which they operate within the city shall be paid the prevailing wage. To the extent that they do not comply, their city funding will be terminated.

Strangely, as the proposed bill reads, it appears that the comptroller of the city becomes the judge and jury with respect to any disputes over this legislation.

SO WHAT ARE the ramifications for our marketplace if this legislation passes?

1. This legislation would, essentially, serve as another tax on the real estate industry, which already contributes nearly 50 percent of all tax revenues to the City of New York.

2. It would drive capital investment dollars out of the boroughs and, particularly, out of the most blighted areas that need those dollars the most. Rents achievable in many of these areas do not justify paying above market wages. Why would a building owner rent to a tenant that receives financial assistance when the burdens of doing so are so onerous? Not only would there be an increased cost, but there would be increased administrative requirements and fees for dealing with this provision in the bill as proposed.

3. The bill will actually drive costs up for tenants receiving assistance from the city. Private property owners, who have cost structures below prevailing-wage levels, will simply not rent space to these tenants, thereby causing them to fight over a constrained supply of available space. As supply goes down, cost goes up. Most buildings that pay prevailing, i.e. union, wages to building service workers are located in Manhattan, where rents are the highest in the city. Could nonprofits and organizations receiving government assistance afford to rent space in Manhattan when they have historically been in the boroughs?

4. This legislation would hinder the city's ability to compete for tenants by forcing owners to raise rents to cover the additional costs incurred in the operation of properties with city agency tenants or tenants receiving assistance. Our tax structure already puts us at a significant disadvantage relative to other locations. This legislation would create yet another disincentive for businesses to move here or stay here.

The bill, as proposed, is also very vague. Its definition of "financial assistance recipient" could be interpreted to include any residential tenant who receives pension payments from the city. This could include hundreds of thousands of people affecting tens of thousands of buildings in the city.

The city does need quality, good-paying jobs that pay good wages to New Yorkers. Attracting businesses that can create and afford to support those needed jobs is essential. Soaking the real estate industry, yet again, in order to artificially create those jobs is not good policy for New York City.

rknakal@masseyknakal.com 

Robert Knakal is the chairman and founding partner of Massey Knakal Realty Services and has brokered the sale of more than 1,050 properties in his career.

In recent days, the city's Economic Development Corporation has begun reaching out to various organizations that would sit on the task force, including Good Jobs New York, the building service workers' union SEIU 32BJ, the Center for an Urban Future and the Partnership for New York City.

The administration expects to issue a request for proposals next month, seeking a private consultant to help create a policy report examining living/prevailing wages and the economic effects such policies might have on the city, according to a person familiar with the effort.

The effort seems to be a response to the unions and other groups, which have been pressing for higher mandated wages throughout the city, although particularly on developments that involve city subsidies or land-use approvals. Most recently, the Bloomberg administration suffered a humiliating defeat when its plans for a mall at the Kingsbridge Armory in the Bronx were defeated after a group of local elected officials demanded that all retail tenants pay at least $10 an hour ($11.50 without benefits), a new precedent in the city. The Bloomberg administration and the private developer building the mall refused, leading to the project's defeat at the hands of the City Council.

But the City Council is considered more liberal than it was just last year—a new progressive caucus was just formed this week—so the Bloomberg administration could also be seeking to grasp control of the issue itself before it is brought to the mayor's desk on the Council's terms. (For instance, there is a 32BJ-endorsed bill in the Council that currently has a majority of members signed on as co-sponsors, requiring that buildings getting certain city subsidies and incentives pay a prevailing wage to building service workers.) The Bloomberg administration is clearly reticent to add such requirements on developers, and particularly retailers, although it has agreed to living-wage provisions on specific developments in the past.

While there is substantial data and research on the living-wage issue nationally, there does not seem to be all that much catered to New York, and thus one could see a benefit from a thorough study.

"I think we have to start dealing with these issues outside of a project-by-project basis," said Kathryn Wylde, president of the Partnership for New York City. "As a city we really have to think through these issues and make decisions based on factual evidence."

ebrown@observer.com

The Council voted on Monday afternoon, 48-1, to override the mayor's veto, as the body, and particularly most of the Bronx delegation, had become insistent that all retailers inside the mall pay a living wage to their employees, which would have been a new standard in the city.

The developer, the Related Companies, has shown no interest in sticking around for another go at the project, likely leaving the Amory empty for years to come, or at least until the real estate market booms once again. (Already, without living wage, the city was effectively giving away the giant armory to Related, determining that the company needed $13 million in tax breaks to make the project work, and that it would only pay $5 million for the property.)

The vote is a victory for living wage advocates, led by Retail, Wholesale, and Department Store Union president Stuart Appelbaum, and a major defeat for the Bloomberg administration (which never before suffered such a defeat on a land use issue from the Council) and other unions that backed the project, such as the Building Trades.

Already, the RWDSU is looking to expand the fight, as the union trekked to a mall in Queens to demand that retailers raise their wages.

ebrown@observer.com

The City Council had just voted, 45-1, to block a planned new mall at the Bronx’s Kingsbridge Armory, as the developer, the Related Companies, balked at requiring its retail tenants to pay wages of at least $10 an hour—$11.50 without benefits—a so-called living wage. And while the elected officials on hand gave a disclaimer that the event was not actually a “victory”—there now will be no wages of any sort at the armory, after all—they repeatedly boasted of a job well done, with the crowd of union members and activists erupting in cheers and applause as they pumped signs reading “We want living wages.”

“We can no longer support development that only ensures profits for barons while perpetuating poverty for people of the Bronx,” Ruben Diaz Jr., the Bronx borough president who led the fight for a mandatory living wage, bellowed. “That notion of any job is better than no job no longer applies.”

The bar for development in New York City just got higher.

With a resounding triumph behind them, the union that drove much of the living-wage push, the Retail, Wholesale and Department Store Union, and elected officials are already casting their eyes further out on the horizon. From the ashes of Kingsbridge, they now expect that the living-wage matter will rise up to appear in future individual developments as they come before the Council, and they will press for a citywide law requiring a living wage for most any project that receives city subsidy.

“As far as we’re concerned, the battle for middle-class jobs for New Yorkers has only just begun,” Stuart Appelbaum, president of the RWDSU, said.

This new terrain—and the extremely rare defeat of a development project—points to the rising influence of labor in the City Council, as city and state politics are reshaped with a louder, union-backed voice coming from elected officials. On top of the push for retail workers’ wages, the powerful building service workers union, SEIU 32BJ, is pushing a bill that would grant similarly high “prevailing” wages to building employees in subsidized projects citywide. And on the state level, a recent draft of a bill from Governor Paterson’s office called for wages of $19 an hour for any development receiving subsidies through certain state authorities, a measure viewed as a demonstration of support for labor.

The justification for living wages, by the telling of union leaders and elected officials, runs like this: If a developer is receiving public-sector subsidies, it should pay forward to the workers some of the government’s goodwill. And thanks to the Kingsbridge fight, numerous council members are now on the record demanding that a developer receiving city subsidies—Related, in this case—has the obligation to require living wages at its development. Given that the Council voted Related down because it did not meet that demand, how does it now turn to other developers and allow them to build without the same mandate?

In remarks at the vote, multiple council members used rhetoric to suggest such actions would continue. Charles Barron said he hoped the vote would be “precedent-setting,” and John Liu, the city comptroller–elect, said it “set a standard for accountability.”

Taking this to a citywide level, last week a bill was introduced by Bronx Councilman Oliver Koppell that would require living wages for workers in nearly every development that receives city subsidy or tax breaks (anything over $10,000). Although the bill expires at the end of the year, Mr. Koppel said he would reintroduce it next year, and expected to press the issue.

“The Council as a whole has a lot of sympathy to the idea of subsidized projects producing better jobs,” Mr. Koppell said Monday. “It makes more sense to do it on a broader level.”

All of this raises the question of whether living-wage requirements would have their desired effect—expanding wages in new developments—or whether they would simply mean far fewer jobs.

The real estate and business communities oppose the requirements and warn in particular that they would effectively halt any new large-scale retail development. “This is a matter where this is the complete triumph of ideology over practical common sense,” said Kathryn Wylde, president of the Partnership for New York City, a leading business group. “It’s not like there’s a lot of money for employers to spread around, and it’s very subject to economic cycles,” she said of retail.

This was Related’s position throughout the Kingsbridge fight—the company said it would not be able to get financing or tenants—and Related’s attorney, Jesse Masyr, said the principle would apply in other projects.

“I don’t see it,” he said of a broad living-wage requirement. “In the economic realities of today, I don’t see how you can put up this barrier and think people aren’t going to run around it.”

OF COURSE, NEW YORK would hardly be the first to put living-wage requirements on subsidized projects or government contracts. More than 100 cities nationwide have passed some sort of living-wage requirement, part of a larger movement throughout the country in the past 15 years. Retail, which generally pays low wages, is not included in the vast majority of these laws, though the trend seems to be going in that direction.

“There has been a general trend toward broader coverage of economic development projects under local wage laws,” said Paul Sonn, legal co-director at the National Employment Law Project and a drafter of numerous living-wage bills. “The early living-wage laws were focused on city contracting, but there has been a gradual expansion of them.”

A bill in Pittsburgh that would require living wages for subsidized developments in numerous sectors—in grocery stores; for hotel workers—has the support of most of the City Council there. Oakland has a law requiring living wages on subsidized retail developments; and Los Angeles has such a law for projects on city-owned land. (Ironically, Related is the designated developer on one of these projects, and it did not use the same arguments against the requirement as it did at Kingsbridge. That said, the developer cannot secure financing, and the project is not proceeding.)

It’s no certainty that the New York City Council will now feel compelled to demand that every development project offer a living wage. Those on the losing side of the Kingsbridge fight view it as something of an anomalous political situation in which the borough president had unusual influence (the local councilwoman, Maria Baez, lost her bid for reelection), a situation unlikely to be repeated.

Further, unions do not have a great track record at presenting a unified front when pushing for issues such as this, with pressure easing on legislators once one or two unions have their individual demands satisfied. In Kingsbridge, for instance, the Building Trades coalition of unions splintered off from RWDSU and other labor groups once it felt the project was actually threatened, and Related had been negotiating with 32BJ late last week on a separate deal.

And should Mr. Koppell’s legislation advance, it would presumably have to withstand a fight from the mayor. The Bloomberg administration was involved in days of negotiations in Kingsbridge and consistently pushed back against a living-wage requirement. The mayor has said he is against such a mandate on principle.

“It’s not the public sector’s role to try to set private-sector wages,” said Andrew Brent, a spokesman for the mayor. “The notion of introducing artificial wage requirements for an individual project when across the street there are none is not a realistic answer, would make the city less competitive and would result in less development and fewer jobs.”

ebrown@observer.com