Garodnick: Commercial Rent Tax bill would hardly cost city anything

Council Member Dan Garodnick, pictured with Borough President Gale Brewer and local business owners outside Whisk in Flatiron (Photos by Sabina Mollot)

By Sabina Mollot

A day after Mayor de Blasio released his executive budget, a handful of local elected officials took the opportunity to push for legislation that would eliminate the Commercial Rent Tax for about 3,400 small business owners in Manhattan.

The bill, which is sponsored by Council Members Dan Garodnick and Helen Rosenthal, was first announced in 2015, and at this point has 35 co-sponsors in the Council.

If passed it would raise the threshold of rent retailers who must pay the tax from those paying $250,000 a year to $500,000 year. The tax, which was first implemented in 1963, only applies to Manhattan businesses between Chambers Street and 96th Street. Garodnick has said raising the rent threshold would help 40 percent of the businesses owners now paying the tax while only costing the city six percent of the revenue the tax brings in, about $4.5 million.

Natasha Amott, the owner of Whisk, a kitchen related goods shop in Flatiron, where the announcement on the bill was made last Thursday, said her CRT costs her $15,000 a year. This is on top of the $315,000 she pays in rent each year and another standard corporate tax.

“We’re already being penalized by paying high rent,” said Amott. “And the city says since you pay this high rent I want you to pay this tax as well.”

The money, she said, she wishes could be used on paying employees more and helping pay off the debt she accrued when opening her business in 2012. She also said she would like to invest more in her website to be able to sell more online and fend off competition from online retail giants like Amazon.

Amott said she was unaware of the tax when she first signed a lease, “so I couldn’t even use it as leverage,” she added. The attorney she’d hired to help her negotiate her lease apparently had no idea about it either.

While the high rent she pays presents a much bigger challenge than the tax, she still called the CRT one of her “top three” problems, and called the legislation an easy fix.

Garodnick, when discussing the bill, called out de Blasio for not including any small business relief in his executive budget.

“Mr. Mayor, you cannot forget about the city’s small businesses,” said Garodnick, who’s been rumored to be interested in running for mayor himself.

Council Member Dan Garodnick with Natasha Amott at her Flatiron kitchen supply shop Whisk

He added that the CRT only exists in one other municipality outside Manhattan, and that’s in Florida.

“It is so bizarre and so unfair to subdivide the city in Manhattan,” said Garodnick. “If we were to implement a tax (today) on one part of the city, no one would believe it and no one would stand for it.”

He added that the number of businesses impacted has grown significantly since the year 2000, giving the example of how rents have tripled in the SoHo neighborhood since then and doubled in midtown.

“Manhattan businesses are evaporating before our eyes,” he said. “Businesses are voting with their feet.”

Asked if there were other ways the Council could help small businesses, when the biggest obstacles are high rent and competition from Amazon, Rosenthal admitted, “There is no easy fix.”

She added, “We have to come at it multiple ways. This is one way.”

She also referred to legislation passed in the Council a day earlier by Small Business Committee Chair Robert Cornegy that would give businesses a heads up if someone has made a 311 complaint. “Then they can fix it right away,” said Rosenthal. “So when it gets to the agency that might inspect it, they’ve fixed it already.”

Rosenthal said she also supports the Small Business Jobs Survival Act, which is aimed at getting businesses an automatic ten-year lease renewal, although she acknowledged that it’s been going nowhere fast in the Council. Rosenthal is a co-sponsor of the bill, which critics, such as the Real Estate Board of New York, have called unconstitutional. As for the bill’s current status, Rosenthal said it is currently being examined by counsel.

“My understanding is there’s a hiccup lawyers are trying to work out,” she said.

As for how other business related legislation is doing, Manhattan Borough President Gale Brewer, who was also at the press conference, and a couple of years ago announced separate legislation aimed at helping mom-and-pops, admitted that particular bill is dead. The legislation was introduced with Cornegy, but never drafted, due to it being too similar to another bill.

The goal of it was to give retailers more negotiating power by making it mandatory for property owners to at least go through mediation with a storefront business when a lease is up. If the owner and tenant still can’t come to an agreement there would be arbitration although the arbitration wouldn’t be binding. If no deal is reached after that, the tenant would be given one additional year past the lease’s end with a 15 percent increase to give the tenant time to find a new space. Brewer created the bill after saying she didn’t believe the SBJSA will ever get passed.

Now instead of working on that legislation, Brewer said she’s going to try to find a way to get long-vacant storefronts occupied again. She noted how owners of businesses surrounding vacant storefronts have told her their own businesses suffer due to the appearance of blight.

Town & Village reached out to the mayor’s office for comment on the Garodnick/Rosenthal legislation, but did not hear back.

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5 thoughts on “Garodnick: Commercial Rent Tax bill would hardly cost city anything

  1. Here we go again, a story about Dan pushing the REBNY tax. Hey Dan, what good is this tax if there are no small businesses left?

  2. Dan, what is the number one problem facing our city’s small businesses? I will give you a hint because you are the only lawmaker in Manhattan not supporting the solution to save businesses. It is what every business owner pays each month to his greedy landlord. It is what is out of control and destroying our businesses because of lawmakers like you who think more about their political careers than of the good of the public you are suppose to serve. Mom and Pop are being destroyed because of lawmakers like you who refuse to give them any rights when their leases expire to fight to survive in business.

    • I don’t think it could have been said any better!

      Dan Garodnick is completely destroying small business in not only this district, but the entire city. Next time a small business has to shut its doors, send Dan a big thank you.

  3. Instead of doing this tax reduction by increasing the amount paid on the leasehold, it should be based on each proprietor’s, LLC member’s, partner’s, or S Corp shareholder’s distributive share of rent expense. Why should the sole proprietor paying $300,000 in rent be exempt from the CROT when the competing store down the block with two partners which pays $600,000 (i.e., $300,000 each from each partner) be exempt?

    As for the cost of commercial space:

    1. The city needs to adopt formula business zoning, so that each zoning tract has a limit on the number of “formula” businesses, such as franchised or “chain” businesses. This stops the streetscape from becoming repetitive, with Starbucks, Duane Reade, The GAP, McDonald’s, CitiBank, CVS, etc. occupying every available storefront in a neighborhood and destroying the neighborhood character. It leaves room for small, independent, businesses, where management is also the “owner(s)”, who tend to keep up the property and be more involved in the community than the salaried branch manager who gets paid the same, “whether I march or fight”.

    2. We will never be able to maintain grocery stores with competitive pricing at street level, not with drug retailers, financial services firms, and restaurants that operate on much higher margins competing for street level retail space.

    The city should offer tax and other incentives to build cart escalators that move shopping carts from one flight to a lower flight so that grocery shopping and payment processing and bagging can be done on two separate levels with a much smaller street-level retail space foot-print.

    You see these shopping cart escalators already in some retail stores (Home Depot stores and a few others have them.) Regular escalators are built right next to them.

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