Small Business Owners Bearing Brunt

Lorcan Otway recently questioned if New York wasn’t losing its soul. As the owner and operator of Theater 80, a small but cherished off-Broadway gem on St. Marks Place, Otway is on the front lines of the battle to save small business in New York.

“All the businesses in this room depend on small theaters,” said Otway to his fellow small business owners — proprietors of local bakeries, cafes and wine bars — at a recent roundtable organized by Manhattan Borough President Gale Brewer. “The small theater business is dying. There’s no other way to say it.”

He spoke of disarming thugs in the dope days of the 1980s and the challenges and joys of growing a small business in the big city. A recent run-in with cellphone bandits notwithstanding, Otway and his theater face a much more dangerous foe these days: rising rents in the area, skyrocketing taxes and zero leverage when it comes to renewing a lease.

“Once we lose the theaters in New York, we lose New York,” Otway said. “We don’t become Las Vegas, we become Flint, Michigan.”

The irony? Things were easier back when he was fending off strung out junkies and armed hustlers, he said. For example, he said, his taxes have jumped from $56,000 to $146,000 in four years.

What happens is that the city’s Finance Department conducts property assessments every year, which in rapidly gentrifying neighborhoods can result in sudden tax bill increases. The problem for small business owners is that those tax bills can be passed along to them by the building owner via their lease.

All of this is done legally, according to Brewer, and is a “major problem” for small business owners in the borough and across New York City.

Jesse Ballan, who owns Café Mocha on East Second Street, faces a similar problem. He recently received a tax bill for $30,000 from the owner of his building, and the end of his lease is in sight.

“In three years my lease is up,” said Ballan, who recently received a commendation from Mayor Bill de Blasio for opening his café as a staging ground for first responders in the aftermath of the East Village blast that killed two people in March. “I don’t know if I’m going to survive,” he added.

Barbara Feinman of Barbara Feinman Millinery on E. Seventh Street has a different problem. Her building was recently sold to a developer, and she has about five years left on her lease. There’s no guarantee, she said, that her new landlord will renew her lease at a reasonable rate.

“None of these other issues matter if we don’t get to renew our lease,” she said. “After five years, I don’t know what I’m going to do.”

Brewer announced in March her office was working on an initiative to bolster small businesses’ standing during lease renewal negotiations. According to a broad outline of the proposal, landlords would be required to give small business tenants 180 days’ notice of their intention to terminate a lease, followed by a negotiation period in which either party can request nonbinding mediation to assist with negotiations. The legislation would also provide the option of a one-year lease extension with no more than a 15 percent rent increase to give businesses time to move when necessary.

Ahmed Tigani, an urban planner in Brewer’s office, said her team is currently working with the chairman of the city council’s small business committee, Robert Cornegy, to draft and introduce the legislation. Barring that, they’ll seek to influence an existing piece of legislation to give more power to small business owners during lease negotiations.

Lucien Reynolds, also an urban planner in Brewer’s office, said the forthcoming legislation is meant to ensure property owners have a conversation about lease renewal with their commercial tenants, as opposed to ending the lease with little notice and jacking up the rent to an unrealistic level.

One thing Brewer is not investing time and energy in is passing the Small Business Jobs Survival Act, which would require building owners to provide small businesses with a minimum 10-year lease, and provide small business owners with recourse to binding arbitration if fair lease renewal terms cannot be reached.

Brewer helped write the legislation in the mid-1980s with then city council-member Ruth Messinger, and said the bill has languished for decades and will never pass. “We don’t want to come up with something we’re going to be talking about for the next 30 years,” she said, in reaffirming her belief the legislation is dead.

During her time in the city council representing the Upper West Side, Brewer worked to pass a law that prevents street-level storefronts from being longer than 40 feet across and limits the frontage of banks on the Upper West Side to a maximum of 25 feet across.

“That’s the only thing I’ve been able to do in terms of helping small businesses,” she said. “It’s not easy,” she added, to pass laws that help small businesses in New York.

And there are other less consequential challenges that are frustrating to small business owners.

Several business owners expressed frustration at the amount of paperwork it takes to operate their stores, and urged city agencies – several of which were represented at the roundtable – to embrace new technologies that would make record keeping less burdensome.

Anthony Aiden, of Anthony Aiden Opticians, said he’s being targeted by sanitation workers who seem to follow garbage trucks around waiting for items to fall off so they can write tickets. (In New York, businesses are charged with keeping the sidewalk in front of their establishment clean and unobstructed, and can be fined if they fail to do so.)

“It’s an epidemic,” Aiden said. “It’s almost like they’re trying to generate money.”

Officials at several city agencies also gave advice to those small business owners present.

A Department of Small Business Services representative said there’s a multi-agency study currently underway to examine ways to decrease bureaucratic gridlock. And an official from the Department of Buildings said the agency holds informational sessions Tuesdays from 4 p.m. to 7 p.m. with business owners on DIB requirements for building and renovating a storefront. An official from the Department of Mental Health and Hygiene said in advance of a real inspection, the agency is available for “pre-inspections” where potential violations will be pointed out but not penalized.

Brewer touted a study by her office that looked further at the challenges and potential solutions to sustaining small businesses in New York. The report, “Big Impact: Expanding opportunities for Manhattan’s storefronters,” is available for download at www.manhattanbp.nyc.gov.