The Small Business Jobs Protection Act Received a Hearing, What Next?

Apoorva Tadepalli Oct 31, 2018

There was something very odd about sitting in the public hearing for the Small Business Jobs Survival Act (SBJSA) on Oct. 22, listening to all the testimonies and discussions about the implications of the bill. One can only listen to city officials repeat that they “fully share the goals” of SBJSA but raise concerns about its “unintended consequences” so many times before going numb.

There were many bizarre things about the hearing, beginning with the numerous gentlemen in blue hats that began crowding the front steps of City Hall just before the hearing was about to start. “VOTE NO TO RENT CONTROL,” the caps read, sitting atop the bald heads of men in suits, or dressed in casual clothes but important shoes.

“Would you like one?” James Wacht, a commercial real estate developer, asked me, pointing to his cap.

“I’m okay, thank you,” I replied.

“I have a feeling we’re not on the same side,” he said.

“Well, your hat is literally wrong,” I replied.

‘This is the biggest David and Goliath story since Jane Jacobs took on Robert Moses.’

Whatever critics and champions of the legislation may say of its merits or lack thereof, SBJSA is not commercial rent control. Essentially a bill of rights for New York’s small businesses, it imposes a limit on security deposits, mandates arbitration in lease disputes and sets a ten year minimum for leases. Claims that SBJSA is rent control cast doubt over its legality, since lawmakers in Albany, not City Hall, set rent regulations — presenting an easy out for councilmembers who want to appear to support small businesses but don’t want to irk the powerful Real Estate Board of New York (REBNY).  

New York City actually had commercial rent control from 1945 until it was allowed to expire in 1963. It withstood numerous legal challenges then and even if SBJSA were commercial rent control many small business advocates say that wouldn’t be such a bad thing.

“We keep talking about how this bill is not rent control,” Lena Afridi, policy coordinator at the Association for Neighborhood and Housing Development testified during the hearing. “Well, why not rent control?”

To say that New York’s small businesses are beleaguered is to put it mildly. What began as a crisis is rapidly becoming a tragedy. Approximately 20 percent of retail space in Manhattan is vacant today, according to a recent survey conducted by the real estate agency Douglas Elliman, up from 7 percent in 2016. Perhaps only a hurricane could do so much damage.

The crisis isn’t just impacting Manhattan’s posh neighborhoods, where landlords frequently leave storefronts vacant hoping to attract deep-pocketed national chains but is spreading through major immigrant thoroughfares in Brooklyn, Queens and the Bronx — part of a tide of gentrification stripping New York of its New Yorkness. Citywide, there are nearly 500 evictions a month and the Small Business Congress estimates that another 500 to 700 businesses close up shop monthly without eviction proceedings occurring.

Inside the City Council chambers, REBNY President John Banks blamed paid sick days, raises to the minimum wage, the city’s bureaucracy and higher utility fees for the decline of the city’s small businesses, adding that the city did not have the authority to pass the legislation.

Gregg Bishop, Commissioner of the city’s Department of Small Business Services (SBS), mouthed the “unintended consequences” lament and seemed to parrot REBNY’s legal objections, though neither of the pair would go into specifics.

“Let me be clear: SBS is supportive of helping commercial tenants during the lease renewal process,” said Bishop, a mayoral appointee. “However, we are concerned about the potential unintended consequences of the proposed legislation that could make it harder for all commercial tenants. We have been advised by the law department that this bill may have several legal issues.”

He’s “been coached,” Kirsten Theodos of TakeBackNYC remarked to me.

The city’s law department declared SBJSA constitutional two years after it was originally introduced in 1986. Vague concerns over its “legal issues” are a relatively new phenomena. But the expression must have sounded familiar to observers on hand in 2009, the last time SBJSA received a hearing from the council when the exact same stock phrase was used by REBNY. Though the bill had the full-throated support of the majority of the council at the time, then-Speaker Christine Quinn adopted REBNY’s legal line and blocked the legislation from coming up for a vote.  

Pressed for clarity from Councilmember Keith Powers of Midtown on Oct. 22 as to what precisely was legally wrong with the legislation, Bishop declined to elaborate.

For his part, Mark Gjonaj (pronounced joe-nye), chair of the Small Business Committee and the only councilmember on the committee who is not a sponsor of the bill, adopted a different approach to shooting the legislation down. Appointed to his post by Speaker Cory Johnson in January — who like the committee chair received tens of thousands of dollars from the real estate board — Gjonaj claimed that it is “regulations not rent,” that are causing mom-and-pops to shutter at alarming rates. (He also claimed that the Douglas Elliman survey “does not exist” because he has not seen it.)

The New York City Planning Commissioner, another appointee of Mayor Bill de Blasio’s, said that the bill would result in “market distortions” while Gail Brewer, Manhattan Borough President, said she favors reducing the burdens placed on small businesses with “tax reforms and incentives.”

Jessica Walker, CEO of the Manhattan Chamber of Commerce, suggested the city could aid small businesses by helping them “compete through better marketing” and enhancing their “capability to compete online.” Like Banks, she blamed the decline of New York’s small businesses on raises to the minimum wage.

Hours earlier, outside of City Hall activists gathered to decry the buck-passing and equivocation that later proceeded just as they predicted it would.

“The real estate lobby are a villain,” said Marni Halasa, who operates a coffee shop in Chelsea and ran against Johnson for his seat last year on the Green Party ticket. “I don’t expect the real estate lobby to work for the people of the City of New York. City Council works for the City of New York.” Or it should anyway, said Halasa, who says the councilmembers have betrayed New Yorkers by failing to pass the bill for the past 32 years.

The Small Business Congress, whose co-founder, Sung Soo Kim, helped draft SBJSA and worked on its many amendments over the years, decided to boycott the hearing outright. Inside, however, other supporters of the measure took the microphone.

“This is the biggest David and Goliath story since Jane Jacobs took on Robert Moses,” said David Eisenbach, of the Friends of SBJSA, adding that the need for the bill is more urgent now than ever.

Jeremiah Moss a psychiatrist and author of the book and blog Vanishing New York, called the situation facing New York’s small businesses a public health crisis.

“The stress of losing a space is bad for mental stability,” he softly implored. “When older people lose their businesses, they often die soon after. […] Cities that are more unequal have more mental health problems. People who live on streets full of chain stores often live shorter lives.”

Unlike Gjonaj, Johnson acknowledged that rent is a business tenant’s biggest problem and it is only going to get worse. “What is the solution now for businesses whose rent has doubled, tripled, quadrupled?” he wondered aloud.

As of now, SBJSA has garnered 25 sponsors, nine shy of the majority needed to ensure its passage and override a likely veto from the mayor. Many SBJSA supporters are confident the bill will achieve the votes it needs, but their concern is that it will get watered down into a less effective version of itself.

“We agree that changes can and will be made to this bill,” Corey Johnson said, claiming that it was unreasonable to expect there to be no changes to it at all. “The bill has to age.”

“But the bill has aged,” TakeBackNYC’s Kirsten Theodos countered at the hearing. “It’s thirty years old! It’s had seven iterations!”

Adjustments could take the form of applying SBJSA only to storefront retail outlets, which would eliminate about 70 percent of the small businesses currently qualified to benefit from the bill or to legacy businesses only. The 10-year mandated lease length — which many public officials complained is too long, arguing that it would prevent the city from adapting to change — might also get the ax, though the bill’s supporters argue it is necessary to provide businesses with an opportunity to recoup startup costs and grow.

One aspect of SBJSA, some supporters and councilmembers agree might need to be rethought is that the bill applies too broadly to all commercial tenants.

A representative of the Small Business Congress disagreed.

“You’re never going to have a stable rent until the big businesses receive reasonable rents,” he said. “If you ask a small business owner, you’d know that you want the banks and the Duane Reades to pay reasonable rents because they set the standard for mom-and-pops,” he said. “One of the problems is that the banks and chains on every corner have been bidding against each other, and the mom-and-pops are victims because [the banks and chains] created this crazy market.”

Objections to helping larger businesses are a distraction, he said: “They say this will help Goldman Sachs. Goldman Sachs doesn’t care about this bill. Goldman doesn’t need help. It’s a red herring.”

“The reality is that there are a lot more barber shops than there are Goldman Sachs outlets,” Theodos concurred. “The good of this will outweigh the bad.”

“If anyone has a better idea, please come forward,” remarked Councilmember Ydanis Rodriguez who is responsible for reintroducing SBJSA.

The mayor does not support the bill. Instead, de Blasio favors leveling a fine or a tax on storefronts left vacant. The Small Business Congress warns that this will simply encourage landlords to put existing tenants on monthly leases until wealthier tenants express interest in their property.

SBJSA’s supporters will need 34 votes to override a de Blasio veto before the council’s current session ends in December.  

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Photo: Councilmember Ydanis Rodriguez during the City Council’s Small Business Committee hearing on SBJSA. Credit: Emil Cohen.