DMI Blog

John Petro

NYC’s Economic Development Policies: Keeping People in Poverty

When city tax dollars are used to subsidize a private developer, community residents should benefit from the deal. That is the principle behind the fight to bring living wage jobs to the Kingsbridge Armory in the Bronx. Community leaders are prepared to stop the redevelopment of the historic structure into a mall--unless the developer agrees to require new retail tenants to pay a living wage.

The effort to redevelop the Armory goes back ten years to the Giuliani administration. Last year, the City chose Related Companies as the developer of the project, which will convert the building's 575,000 square feet into retail space. The City will subsidize the project, providing Related Companies with $40 million in tax breaks and city-funded repairs on the structure.

But even though Related is getting public dollars for the project, it refuses to provide the public benefit of living wage jobs. Jesse Masyr, spokesperson for Related, said last April that the developer would not be able to promise that its retail tenants would pay a living wage. As reported in the Norwood News:

"I can't ask tenants to have a [higher] wage package than they have just two miles down the road," Masyr said. He added that other people in the industry think Related is "crazy" for even attempting to proceed on this retail-heavy project, given the state of the economy. "Retail is dead," Masyr said.
But tenants "two miles down the road" aren't in a space that is receiving public subsidy. If Related wants our tax dollars, it should be prepared to give something back to the community.

My guess is that even with a living wage requirement, retail tenants in the space will do very well, as will the profits of Related Companies. It only takes one trip to the Target at Atlantic Terminal in Brooklyn, rumored to be the busiest in the country, to see that national retailers do very well in the city. Plus, with city subsidies to sweeten the pot, Related Companies is getting a good deal.

But the real issue is: should the city be subsidizing projects like this in the first place? Does using city money to create poverty-level jobs make any sense?

The answer is no. Economic development subsidies are intended to create new jobs in the city by helping businesses relocate or expand their operations here. But job quality matters just as much as the number of jobs created. When the city subsidizes poverty-level wages, it pays twice. First, taxpayer dollars are first diverted from schools, infrastructure, and other city needs. Then taxpayer dollars must go towards programs such as Medicaid, food stamps, housing assistance, and other social services that are needed by the workers in city subsidized jobs who still cannot make ends meet.

Stuart Appelbaum, the president of the Retail Wholesale and Department Store Union, made this clear in a press release about the Armory, "Economic development that creates jobs that keep people in poverty accomplishes nothing. We expect and demand that the Kingsbridge Armory be developed in a way that strengthens the community, and not just enriches the developer."

Other cities have taken steps to ensure that economic development also brings economic opportunity. Minneapolis requires that subsidy recipients create a certain number of living wage jobs. If those jobs aren't created, the recipient must pay the money back with penalty. The law has changed the way the city makes economic development deals. Businesses in Minneapolis know that they are expected to create good jobs, and the city knows that economic subsidies must create real employment opportunities for its residents.

If Related Companies does not agree to require living wages from its retail tenants, the project might very well be scuttled. Bronx residents know that poverty-level jobs are not going to help them put food on the table or to move up the economic ladder. If Bronx Borough President Ruben Diaz does not approve the developer's application for a land-use change, it would seriously damage the project's chance of moving through the city's ULURP process.

But the creation of living wage jobs must be part of the city's economic development strategy moving forward. We need to follow the lead of Minneapolis and change our economic development policy to require the creation of living wage jobs. Without a living wage, all we're doing is subsidizing the cycle of poverty.

John Petro: Author Bio | Other Posts
Posted at 12:21 PM, Aug 27, 2009 in Economic Opportunity | Urban Affairs
Permalink | Email to Friend