Living wage opponents to bark back ... debate over wage regulation in New York City

After long silence, small business owners, real estate developers and others form a broad coalition to fight proposed bill to mandate living wages; education and PR campaigns planned.

In recent months, proponents of a bill to mandate so-called living wages at city-subsidized projects have attended rallies, delivered sermons and sent postcards to elected officials in support of the measure. Meanwhile, little has been heard from opponents of the measure. But that is about to change.

With a City Council hearing on the bill set for Thursday, and officials from the city's Economic Development Corp. preparing to brief stakeholders next week on the results of its $1 million study on the feasibility of wage mandates, opposition to the measure is mounting.

More than a dozen groups—ranging from small business owners and supermarket operators to major real estate developers and builders of affordable housing—have formed a coalition to press for the bill's defeat.

They plan to use Putting New Yorkers to Work, a nonprofit registered late last year by the Real Estate Board of New York, to educate the public about the bill's potential impact via advertisements, mailers and other methods. And they have hired the public relations firm The Marino Organization to get their message out.

Groups that have joined the coalition against the bill—which would require employers at projects that receive $100,000 or more in subsidies to pay $10 an hour plus benefits, or $11.50 without benefits—include REBNY, the International Council of Shopping Centers, the Five Boro Chamber Alliance and the Food Industry Alliance of New York State.

City Councilman Oliver Koppell, the bill's prime sponsor, said that recent amendments to the bill were designed to ensure affordable housing, nonprofits, and small businesses are not adversely affected. “These amendments are the direct result of conversations with top stakeholders who represent those interests,” he said.

Affordable housing developers are worried, despite an amendment to the bill that would exempt most projects in which 75% of the residential units are affordable for families earning less than 125% of the area median income. Coalition insiders say that the city's Department of Housing Preservation and Development will come out against the bill, but a spokesman for the agency declined to comment.

Affordable housing developers are concerned because most large affordable residential developments include ground floor retail that helps reduce the subsidy needed to finance the affordable units. Increased wage requirements would reduce the value of the retail space, which would then necessitate adding more government subsidy and/or a reduction in the number of affordable units that could be built.

“We're trying to bring retail into underserved neighborhoods like [Brooklyn's] East New York and Brownsville,” said one affordable housing developer in the city. “We have a hard enough time getting retail to locate in these areas and getting rents low enough to attract people, but with this bill any project we're working on, we'd have to get rid of non-residential space.”

Opposition also extends to officials representing other types of housing. The Council of Cooperatives and Condominiums is against the bill, according to Arthur Weinstein, a vice president and member of the board of the association. He said it would “wreak havoc” on buildings that received J-51 tax abatements to make improvements.

“It would place an unbearable burden on co-ops and condos that use a myriad of contractors to check on the wages of every worker,” he said. “To be faced with tracking down wages paid by contractors to every single employee is absolutely outrageous.”

Supermarket owners are also up in arms, said Pat Brodhagen, vice president of the Food Industry Alliance of New York State, who contends the bill would mean the end of the FRESH program, which the City Council, industry and labor designed to bring grocery stores to underserved neighborhoods. She plans to testify against the bill at the Council hearing next week.

“Supermarket careers are good careers long term, but the entry wage is not going to hit this level,” she said. “What will happen, as a store does its pro forma and looks at the numbers, it will no longer be a project they're willing to enter into. It will undo the whole purpose of the benefits under FRESH.”

Tenants at the Brooklyn Navy Yard have also joined the coalition, arguing the bill would hurt the competitiveness of their businesses. Joal Savino, executive vice president at Mercedes Distribution Center, which fulfills orders for e-commerce sites, said the bill would force him to relocate to Pennsylvania.

“It puts me out of business here,” he said. “And that's not just affecting workers making minimum wage. It's affecting everybody. I have IT guys making $120,000 a year, warehouse managers earning $65,000 with full family medical coverage.”

Small businesses, via the Five Boro Chamber Alliance, have also expressed opposition. Firms with less than $1 million in revenue are exempted, but Nancy Ploeger, president of the Manhattan Chamber of Commerce, said that doesn't go far enough. And even though nonprofits are exempted, coalition members said some of them remain opposed because the bill would impact their subcontractors or tenants.

The Retail, Wholesale and Department Store Union has led the charge for the bill, which has 29 sponsors, five shy of the supermajority needed to override a likely veto from Mayor Michael Bloomberg, whose administration has consistently opposed wage mandates. Mr. Koppell said he would continue to listen to and address opponents' concerns.

“We should all be able to agree that taxpayers deserve the highest possible return on their investment in economic development and job creation,” he said. “This pragmatic bill stands up for the interests of all taxpayers and will actually help many businesses by strengthening the work force in fast-growing sectors like retail.”