TOWN and VILLAGE
Opinion: ‘Unconstitutional’ claims about SBJSA are real estate propaganda
By Sung Soo Kim, President, Small Business Congress
Lawmakers claim proposed legislation will save mom and pop businesses. Small business advocates claim it’s a “Trojan Horse” created by the real estate lobby to keep status quo. Who is right?
For over 30 years I have pleaded with local government to pass legislation protecting our hard working small business owners from profiteers, unscrupulous landlords and greedy speculators. The past decades’ over-speculation in commercial real estate, bidding wars by franchises and banks and manipulation by warehousing storefronts, has wreaked havoc on the commercial rental market. Guided by big real estate campaign contributions, their friends at City Hall have remained silent and done nothing as the American Dream of our small business owners is being destroyed.
At first I was pleased to hear the commitments of Manhattan Borough President Brewer and Council Member Cornegy, to listen to the business owners and to pass legislation to save our businesses. Brewer said, “The mom-and-pop crisis has intensified with a fury.” CM Cornegy acknowledged numerous small and locally-owned businesses that many would describe as New York City institutions were forced to close or relocate as a result of exorbitant rent increases. Both lawmakers’ words sounded very encouraging and offered hope to small business owners who had become indentured servants to their landlords.
But upon analyzing their proposed solution to end this crisis and stop the closing of long established businesses, I have become saddened for the future of our struggling business owners. Their proposal is an insult to the desperate business owners whose survival depends upon fair and just treatment from government’s offering a real solution to end the crisis. The Brewer/Cornegy proposal is no solution in any way and would not save a single small business if passed into law. In fact, their proposal to extend the lease period for one year at 15 percent rent increase, allowing the business more time to find a new location, would, instead, actually help landlords and make the crisis much worse. Rent gouging and oppressive lease abuses are the root of this crisis and their solution addresses neither.
The rent gouging and oppressive lease abuses have been going on for many decades. Many business owners have already been forced to move several times. This gentrification tornado of greed has cut swaths of destruction across many neighborhoods and in every borough. There are no more “safe” locations to move to in NYC, because our government has done nothing to regulate the out of control rents. If a storefront is vacant on a busy main street, it’s because the long established business was forced to close when the landlord refused to accept a fair rent which would have allowed a reasonable profit for the business. I predict that if this weak Brewer/Cornegy proposal is passed, should a business want to stay in their neighborhood, the only choice is to go to another landlord and bid against other local businesses, making the crisis worse.
In my thirty years of advocating for small businesses, and dealing daily with their problems, I can state with confidence this reality: the absolutely essential component of any law to stop the closing of businesses is to give the tenant the “right to renewal of their lease,” without which all proposals will fail and all independent owners in New York City will eventually be forced to close. If the Brewer/Cornegy bill passes into law, giving no rights to small business owners, and keeping all of the power with the landlords, it will be the end of independent small businesses in NYC.
Myself and other small business advocates support the Small Business Jobs Survival Act (SBJSA) because it gives the right to renewal to the business owners as well as equal rights to negotiate fair lease terms. If the parties fail to reach agreement on a new lease, they then go before an arbitrator for final settlement. By giving the tenant equal rights, this law not only stops rent gouging but stops the illegal extortion of mostly immigrant owners by unscrupulous landlords, stops the short term leases which stops all growth and job creation, and stops the ever increasing landlords’ property taxes which the tenants now pay. What rational reason could a so-called progressive and small business friendly lawmaker give for not supporting this bill?
The two main excuses lawmakers hide behind are: the SBJSA is “unconstitutional” and that the bill has collected dust for over 30 years and cannot pass. The claim that the bill is “unconstitutional” is simply false. The SBJSA is the most legally scrutinized legislation in City Council history. The claim made by City Council’s legal counsel challenging the legality of the SBJSA was conclusively resolved two decades ago and again in 2010 by a special legal review panel of the bill, sponsored by Bronx Borough President Ruben Diaz Jr.
I am an eyewitness to the special hearing held in City Council in October, 1988, prior to a vote in committee, on the original version of the SBJSA. This hearing was held exclusively to determine the legality of the bill. Though both former Mayor Koch and Speaker Vallone were strongly opposed to the bill, the city’s own corporate counsel testified that the city had home rule to pass the bill and that the bill was fully constitutional.
Several legal experts testified and reviewed the extensive case law decisions, many from the highest State Court of Appeals, rendered over the 18 years of court challenges to a NYS Commercial Rent Control Law. The real estate lobby challenged this law for over 18 years and lost every single case.
At the June 29, 2009 public hearing on the bill before the Small Business Committee, no real estate lobby attorney ever testified to any legal issues with the bill, nor were any written challenges to the bill submitted for the record. What is now most upsetting, are those current City Council members who are attorneys that know they are hiding behind an unsubstantiated legality claim to justify their inaction. These attorneys can easily do their jobs and simply make specific recommendations to the bill to satisfy their legal concerns. Instead, they choose to turn their backs on our struggling business owners and, worse, the will of their communities and constituents.
What is so shameful about the second claim, the false statement that the bill has been collecting dust for 30 years, is that an undisputed public record shows the exact opposite to be true. In 2009, the SBJSA had 32 sponsors; it would have passed unanimously in Committee and easily passed a vote in full council. But, when the committee scheduled a vote on the bill, it was stopped by the Speaker’s office who made the legal roadblock claim that the bill had legal concerns. The only thing collecting dust is democracy at City Hall after the real estate lobby bought off career bureaucrats with high salaried private jobs and career politicians with huge campaign contributions.
If knowledge is the foundation of Democracy, then, regrettably, the de Blasio administration and the City Council leadership have completely failed to inform their public of the unintended consequences of allowing this crisis to continue and, worse still, that a solution exists to end it.
The crisis of long established small businesses closing and the struggle to survive is being denied an honest debate by our government. This is due to the power and influence of the real estate lobby at City Hall. The real estate lobby’s control of corrupt and unethical politicians is really what is behind the “rigging of our political system” as well as the creation of these Trojan Horses which promise help and hope but really have the goal of keeping the status quo and of protecting the windfall profits of the one percent.
Sung Soo Kim is the founder of the oldest small business service center in NYC, the Korean American Small Business Service Center. He co-founded the New York City Small Business Congress and the Coalition to Save New York City Small Businesses and was chairman of the Mayor’s First Small Business Advisory Board, appointed by Mayors Dinkins and Giuliani.
Month after month, year after year, local media stories appear highlighting the closing of long established small businesses loved by their communities. The focus is usually human interest in nature and reads more like an obituary filled with woeful lamentation and the cause of death listed as exorbitant rent increase. And yet, for all these stories few journalists take the time to ask, “Is there a solution?” If they had, they would have found the answer to be yes, there is a solution our elected officials aren't making the public aware of.
This solution to end this crisis is called the Small Business Jobs Survival Act (SBJSA), a law which gives rights to commercial tenants to renew their leases when expired, and equal rights with their landlords to negotiate new fair lease terms. If the parties can’t reach mutual agreement, then the process goes to an Arbitrator for a final decision.
As this crisis worsens and spreads to every neighborhood in the city, the SBJSA has been bottled up in the NYC Council Committee on Small Business by the real estate lobby and their friends at City Hall. While the de Blasio administration and the City Council leadership sit on their hands, they have failed to give the public a chance to debate the SBJSA in a public hearing which must be granted before the bill comes for a vote. The reality is, the ever-increasing closings of successful long-established small businesses and the solution to save them is being denied an honest debate by our government, making it more apparent than ever that money trumps the public good. The sheer audacity that the Chairman of the Committee on Small Business, Robert Cornegy, won’t give the SBJSA a public hearing even though 27 of the 51 NYC Council Members and the majority of his Small Business Committee sponsored the bill, points to the power and influence of the real estate lobby at City Hall.