By Sabina Mollot
On Monday, the City Council chamber was packed with small business advocates, real estate professionals and others with an interest in the first step taken to move the now 32-year-old Small Business Jobs Survival Act in nearly a decade.
At a lengthy hearing, those in support of the bill, aimed at getting businesses an automatic 10-year lease renewal, through mediation and binding arbitration if necessary, carried signs that said things like “Pass Intact SBJSA Now” and “Evict REBNY.” Those against it wore blue caps that read, “Vote no commercial rent control.”
The hearing followed a rally in support of the SBJSA led by David Eisenbach, a Columbia professor who heads a group called the Friends of the SBJSA.
Eisenbach compared the fight for the bill’s passage to “a battle for the soul of New York. Will it be a New York of chains or a New York of Chinatown? It’s David against Goliath.”
In this case, Goliath would be the Real Estate Board of New York, whose president, John Banks, warned that if New Yorkers thought there were too many chains or vacant storefronts already, they’d be horrified if the bill gets passed.
“The misperception that our members hold out for the chain tenant will become a self-fulfilling prophesy,” Banks said. “If our members know that they will be locked into a lease agreement in perpetuity, they will wait for someone whose idea is proven, and can pay, and will not be a nuisance to their residential tenants. In the interim, more storefronts will remain or become vacant.”
Banks also said the bill could harm co-op building owners who rely on revenue from retail spaces to offset maintenance costs, and he cited a recent report by the NY Bar Association that said the Council has no legal authority to pass the bill that was described as a form of rent control.
But numerous times throughout the hearing, the bill’s current prime sponsor, Council Member Ydanis Rodriguez, insisted the bill was not a form of rent control and accused the real estate industry of trying to spread misinformation.
James Klein of the group Friends of SBJSA also objected to it being described that way.
“There’s nothing in this bill that says the government creates the amount of rent for commercial spaces,” he said. “This bill is not rent control, and no one says this is a big silver bullet.”
The last statement was in response to critics of the bill, including City Council Speaker Corey Johnson, who had previously said the bill was not a silver bullet to the city’s small business crisis.
Johnson, meanwhile, stressed he still had concerns, the main one being cited by opponents to the bill, which is that it has legal issues.
“I don’t believe the New York Bar Association would put out a junk paper for political reasons,” the speaker said. “I don’t think it is commercial rent control, but I do think there are folks that have concerns, and we have to work with them and those concerns.”
Klein actually agreed to that much, saying, “It’s not that the Bar Association was disingenuous. It’s that people are using that as a way to shut down discussions.”
Taking part in those discussions was the bill’s original sponsor, former Council Member Ruth Messinger, who told the crowd she has been contacted by the media far more over this bill than anything she had actually managed to pass during her years in office.
She argued that the SBJSA was necessary because often, when commercial tenants approach landlords months before their leases are up, “to say, ‘Can we talk?’, they get no answers,” she said. “They do not respond. Or it’s a 350 percent increase and it’s being offered for a very short (lease) length. There is no power for the small business person.”
The City Council, she added, should consider, “What neighborhood needs a large drugstore or a bank on every corner? What are these banks doing when nearly everybody’s banking online these days? They’re using the space to advertise. It is long past due for the city to recognize the scope of the problem.”
The hearing was led by Mark Gjonaj, the Council’s small business chair who also has a background in real estate and mentioned to the crowd he was also once a small business owner.
He is opposed to the bill in its current form and argued that when he was an entrepreneur, “Rent was a concern, but not my only concern.”
Another argument against the bill by Johnson and Manhattan Borough President Gale Brewer is that despite the name of the legislation, it extends the same protections for corporate offices as it does for mom-and-pops.
At one point, Johnson said, “If you’re Goldman Sachs, you get treated the same as a bodega.”
When at the podium, Klein said, “We didn’t want the discussion to focus on one class of businesses.”
Another argument against the bill, made by Gjonaj, is that it puts the onus on the tenant to engage in arbitration that may not even result in the tenant’s favor.
“Small business owners don’t have the time,” he said. “They have to be very careful and they don’t have the ability to have arbitration going on for weeks and weeks and weeks.”
Eisenbach, however, countered, “If your landlord is asking for a 300 percent increase, he’s going to take all the time it takes to go through an arbitration process. You think he’s not going to make the time and effort?”
Assembly Member Dick Gottfried, who represents much of midtown Manhattan, said the time for talk about tweaks to the bill should come once it’s been heard in council committee or moved forward in some other way. “Or in 20-30 years, we’ll be in the same place… We have to get this bill on the floor.”
Another critic was the city commissioner of Small Business Services, Gregg Bishop, who said the SBS is already offering workshops to business owners to help them obtain and renew leases.
“A lot of our services are focused on addressing those issues,” Bishop said.
In response to this, Council Member Keith Powers told him, “The program you’re doing is good, but it’s not saving our storefronts.”
He also asked Bishop, who’d cited legal concerns about the bill, to say what they were, but Bishop would only say that the city’s law department would follow up with the Council’s attorneys on the legal aspects of the bill.
Bishop added he had concerns “that the legislation may do more harm than good,” as the arbitrative process “often favors the person who is able to provide more resources, so the landlords and the corporations will likely have the upper hand. The renewal process could be more costly for tenants since they will share the cost of arbitration.”
Bishop also stated that in some neighborhoods, community residents prefer mom-and-pops, while in others, they’d prefer a chain.
This prompted Council Member Mark Levine to tell him, “I don’t know of any neighborhood that would prefer a chain.”
According to Bishop, along with helping small businesses, the goal of the SBS is to “focus on a healthy retail base… Most of our workshops are based on how to adapt and change,” he said.
More than once, Bishop mentioned wanting to work with the City Council on creating a storefront registry or some sort of penalty for owners who leave storefronts vacant for a long time. “We share the same goals,” he said.
The city also got some criticism on the issue by Council Member Andrew Cohen of the Bronx. “I’m not a sponsor, but I am becoming more sympathetic as I go through my district and it has many vacant spaces,” said Cohen. “I’m a big fan of this administration, but I do not think there is leadership on this process.”
The hearing was dubbed a sham ahead of time by another pro-SBJSA group, the Small Business Congress, who encouraged the bill’s supporters to boycott it. The group’s leader, Sung Soo Kim, has previously stated he believed the bill would be watered down in Council. However, approximately 150 people, both sign carrying and hat wearing, did attend the hearing.
Klein at one point slammed the blue cap crowd.
“In New York, if there’s one thing we’ve learned in the past couple of years, it’s that when a mob shows up in colored hats, New Yorkers lose,” he said. “The hats represent a lack of understanding of this issue.
Meanwhile, despite all the back and forth in the City Council chamber, Rodriguez said early on that he was confident the SBJSA would get passed this year.
“In this room, I feel like there is a lot of positive energy,” he said.
There is not yet a set date for another hearing or a vote, but a spokesperson for Rodriguez later said the next steps are to do research to answer some of the questions asked at the hearing.