For 16 years, members of the Galati family practiced their trade side by side in their very own shop. The Color Wheel Glass Studio, which had a showroom as well as a shop where they designed and made gifts and custom stained-glass windows, flourished on 86th Street.
Until it didn’t. The changing neighborhood demographics translated to old customers who stopped coming in and new ones who never started. Their landlord was sympathetic, co-owner Georgia Landrum says, and rents remained reasonable, but the rising costs of taxes, fees and utilities ate away at their profits until there weren’t any left.
“People would come in and say, ‘Oh my God, what a beautiful store. Everything’s made here!’ A lot of these gift shops order from China or Mexico. We had a workshop in the store. Everything was made there,” Landrum recalls. “But by the time you paid your income taxes and your sales taxes, there was no money left, sadly.”
Landrum’s father was trained in making glass and stained glass, and the whole family knew how to do it. She and her brother had always dreamed of running their own stained-glass and gift store, and in 1990 they took the plunge, renting a storefront on 86th Street and setting up shop.
“You pay a premium for being on 86th Street, of course,” says Landrum, who worked there with her mother, Mary Galati, and her brother, Glen Galati. “But we had a great landlord. He was such a fair man. He was probably the best landlord a business could have.”
But as the years passed, the family had more and more trouble making a profit. The costs of utilities rose; so did the taxes. Their customer base diminished—in part, Landrum believes, because of the changing neighborhood and in part because of what seemed like hypervigilant enforcement of traffic violations. Enforcement agents would hover around cars, waiting until the meter ran out so they could write tickets, she says.
“A lot of people would see the store, because we had a very colorful window. My lights were left on at night so you could see the stained glass. I felt people passing by would have wanted to stop in, but the parking was horrendous,” Landrum says. “The meter agents were around constantly. They would wait. If you had a minute left on your meter, they would actually stand there waiting for it to expire. If you come by to buy a gift and end up with a $65 ticket, I don’t think you’re going to come again. That was a big issue, and I think that the city could have done more to help that
Four years ago, she says, they had to close their doors.
“We weren’t making money,” she recalls. “It didn’t pay to keep the store open. You’re working all week, and you’re going home with nothing. After you pay your rent, your yellow-pages ad, the electric, there just wasn’t enough profit.” In general, experts say, the odds are stacked against the small-business owner.
“The problem isn’t just that chains are coming in. Competition is part of doing business. But I think that in so many ways, small businesses are disadvantaged, and the cost of doing business is so high here, the profit margins are so small, and yet it seems a lot of small businesses aren’t getting the assistance they need to become more competitive, to become more efficient,” the Center for an Urban Future’s Bowles says.
The agency that is now the Department of Small Business Services didn’t even have the word small in its name until 2002, when Bloomberg became mayor and hired Robert Walsh, a native Brooklynite who headed the Union Square Partnership from 1989 to 1997.
Under Bloomberg, Walsh made the formation and strengthening of local business owners’ groups—including BIDs, local development corporations and merchants’ associations—one of its earliest priorities. Since 2001, the number of BIDs in the city has grown from 44 to 64, 18 of those new organizations outside Manhattan. The thinking, Walsh says, is that businesses working together can do a better job promoting themselves than the city can.
“We provide oversight, but we’re not so overbearing that they can’t do their jobs to market their neighborhoods [with] a certain creativity and flair,” he says.
Another major goal for the department is what Walsh calls “reducing the barriers” to small-business ownership. Through its Business Solutions Centers, it helps owners who are looking for loans find financing, provides them with access to a pool of trained or qualified workers and helps them navigate the city’s red tape. Streamlining the city’s dealings with small businesses has “probably been the biggest and most monumental impact that we’ve had,” Walsh says.
“There are a lot of agencies, 20 or so, that are involved—and that’s aside from the state and federal government. I have a staff here that works into the night trying to just figure out how to untangle a lot of this stuff. If you think about it, it’s been years and years of coming up with processes, procedures, rules and regulations, and it’s almost like piling on, and we’re trying to get to the bottom of the pile,” Walsh says.
The department has now created a Web page, nyc.gov/businessexpress, that for the first time streamlines the regulatory process and offers one-stop shopping for those who want to open businesses. The goal is to further reduce the bureaucracy by decreasing the number of hurdles, Walsh says.
Business owners on 86th Street say there have been some improvements, but they still face abundant obstacles. Logue says his restaurant and ice cream parlor requires him to maintain 17 licenses, regulating everything from his illuminated sign to his rooftop air conditioner to his ice cream operation.
His stack of regulation and tax forms is “this thick,” he says, holding his thumb and forefinger about as far apart as the slices of bread on one of Hinsch’s famous liverwurst sandwiches.
“You add it all up and it boggles the mind,” Logue says.
The cost of fees and licenses is, of course, just the beginning. Not only is the MTA’s new payroll tax—part of the package to save the cash-strapped agency from making draconian cuts to transit—an added expense, but it also requires Logue to fill out a new form. It rankles him further that as the new tax was added, the MTA cut the express and Third Avenue buses that once brought customers to the neighborhood.
The real estate taxes on Logue’s building are $8,000 a month. His Con Ed bill last month was $4,156. His water bill alone is $1,000 a month—three times what it was a decade ago.
“That’s a lot of hamburgers,” Logue says.
Business leaders say their costs are only rising. The recently passed state budget includes new fees and reduced tax credits for businesses, as well as an end to the sales tax exemption on clothing.
“They don’t really think out, when it comes to small businesses, what it’s going to cost when they pass more taxes and fees,” says State Senator Martin Golden, a former president of the Fifth Avenue Board of Trade, as he sits at a booth at Hinsch’s eating a liverwurst sandwich.
Taxes and fees are not the only way government squeezes small businesses for revenue. Fines and violations have become an increasing cost of doing business. In recent years, owners say, regulations have grown more stringent, inspections more frequent and fines more expensive. Even well-meaning regulations aimed at safety can create more bureaucracy, costs and headaches for business owners. For example, the requirement that stores selling cigarettes display posters about their ill effects may be good for public health, advocates say, but they hurt the stores.
“They’re operating against this hostile regulatory environment,” says Richard Lipsky, a lobbyist who has represented several small-business coalitions. “I don’t know if there’s anything you can do to stop chain stores from coming into neighborhoods, but you can make the environment less onerous for everybody, and that’s just the right thing to do. One way to do this would be to have a comprehensive regulatory reform. “
The city’s revenue from fines has risen more than 66 percent over the past eight years, from $478 million in 2002 to $798 million in 2009, according to figures from the Independent Budget Office. In 2009, the city’s revenues from fines decreased 3 percent, from a 2008 high of $825 million. The city has projected that it will collect $848 million in fines and forfeitures in 2011, an estimated 2 percent increase from 2010, city budget figures show.
“There’s a recent proliferation of violations,” says Vicki Weiner, director of planning and preservation for the Pratt Center for Community Development, “everything from a security gate to a frame sign, just ticketing them over and over again, and it’s really compromising their ability to survive in this tough economic climate.”
Small Business Services offers courses a government navigation course through its Business Solutions Centers, which highlights the most common types of violations and how to avoid them. It also helps business owners prevent fines and resolve violations, a spokeswoman for the agency says.
Earlier this year, a joint panel by the mayor’s office and the City Council recommended 14 measures to make it easier for small-business owners to comply with city regulations, including one that would enable a business owner to quickly correct a nonserious violation to avoid paying a fee, but most of the recommendations have yet to be implemented.
Some are calling for more ambitious policies to save small business in New York.
Since independent stores face so many obstacles when they try to compete against chains, many experts believe it is the role of government to step in and even the odds. Several advocates for small businesses say the city’s best tools to save the mom-and-pops are a combination of zoning restrictions and tax incentives.
Two years ago, San Francisco passed a sweeping law to sharply limit the number of what that city calls formula retail opening up in its neighborhoods. San Francisco uses a neighborhood-based approach, with two communities enacting an outright ban on all formula retail stores. The planning commission must individually consider and vote on each national store that proposes opening in the city, and as a result, the city has seen only a limited number of new chain store openings.
In New York, experts say, which is far larger than San Francisco and where some neighborhoods still lack sufficient retail, a targeted approach would be more appropriate.
“I think it’s really a matter of approach and using lots of different tools at your disposal,” says Vicki Weiner, of the Pratt Center. “It really requires some kind of interagency interdisciplinary thinking community by community, and I would love to see a more active and robust task force or interagency group … [to consider] how do we really solve and address their problems?”
Landlords could receive tax breaks for renting to independent stores at affordable prices. Zoning rules could be tailored to each neighborhood, requiring, for instance, a certain number of storefronts that don’t exceed a certain square footage to ensure that not every store is big enough for a chain and thus too expensive for an independent.
One feature of a recent controversial rezoning on 125th Street in Harlem limited bank branch floor space to the second floors of buildings, with entries on the ground floor, in order to increase the variety of ground-level shops.
“We’ll see how that goes,” says Walsh. Efforts like the one in San Francisco are intriguing, he says, but probably not appropriate for New York.
“There’s a lot of neighborhoods that still don’t have the white-tablecloth restaurant, and they still don’t have the drugstore and are still underbanked. And sometimes we have folks in the administration who want to put limits on Duane Reade or Rite Aid … but there’s still many places that don’t have banks. There’s still many places that don’t have a pharmacy,” Walsh says. “So I worry about putting on limitations. … I get concerned about how much government should put limits on investments in some of these areas.”
Other than San Francisco, few cities have taken substantial steps toward keeping independent retailers from disappearing, though experts say solutions do exist. One intriguing option, Stacy Mitchell says, is a community land trust model, in which a trust purchases key retail spaces and maintains them at an affordable rent. Long used to preserve open spaces, the model has recently been applied to affordable housing, though never to commercial real estate.
Commercial rent control, which was suggested two years ago by State Assemblyman Richard Gottfried, among others, remains highly controversial. Some considered Jackson’s Small Business Survival Act a form of commercial rent control, though Jackson’s staff disputes that description. The real estate industry is strenuously opposed to any form of regulation of commercial rents, and many advocates instead recommend more voluntary measures, like tax incentives for landlords who choose to keep rents low.
“Commercial rent control—the administration’s been opposed to that,” Walsh says.
In some cases, Walsh argues, a large retailer can even help a small one. For example, he says, the Fairway in Red Hook, which many in the community opposed, has probably helped the small businesses along Van Brunt Street by bringing cars and customers to the isolated neighborhood.
“I think good planning sometimes can allow them to coexist, though there’s always the exception to that, where something has come in and basically bulldozed a beloved shop in the neighborhood, and I could tell you I’ve seen it firsthand myself,” he says.
Though the Bloomberg administration has indicated that it is sympathetic to the plight of the small businesses and that it is interested in helping them, Vicki Weiner says she has yet to see an organized, intensive effort to really do so.
“I don’t see the leadership, and I do think that is a problem, but I do think the mayor has spoken very eloquently on the importance of small businesses throughout the city,” she says. “I do think the typical economic development approach of the city for decades has been about large-scale development. It has not been about commercial activity, and it’s been overlooked as an economic engine, and it truly is one. I feel that the city understands that it truly is one.”
Councilman Brad Lander, formerly the director of the Pratt Center for Community Development, says grassroots advocacy needs to demand more action to save neighborhood retail.
“There’s a lot of things we can do, and we’re not doing enough of them. I think we pay lip service to local small businesses but don’t pay enough real policy attention,” he says. “It’s one of the issues we hear about very regularly, but transforming that into the kind of advocacy pressure that changes policy is hard work and something we need to keep pushing on.”
Others charge that the city has not just failed to sufficiently help small businesses but has actively hurt them with a battery of ambitious, large-scale projects. The pending $3 billion plan to redevelop Willets Point will displace the existing businesses—largely junkyards—and along with the Flushing Commons redevelopment planned nearby, merchants fear it could hurt stores in Flushing too. The Bronx Terminal Market, which once housed fruit and vegetable vendors, was razed four years ago to make way for the Gateway Center at Bronx Terminal Market, an enormous mall full of big-box and chain stores. Elsewhere, the city has drawn fire for its use of eminent domain to seize land for the Atlantic Yards project in Brooklyn as well as the Columbia University expansion in Upper Manhattan, a process in which small businesses often become collateral damage.
“When you look at a development policy that is to create as many auto-dependent malls as possible, what you have is a scorched-earth policy against small business,” says Lipsky, who represents a coalition of small businesses in Flushing.
Walsh says he “gets his back up” when he hears criticism that the Bloomberg administration cares only about large real estate interests.
“I’ve been at this for eight years. I’ve been out in neighborhoods. A lot of my work and passion in this agency has been those commercial corridors, which, when strengthened, can make a heck of a difference,” he says, pointing to Myrtle Avenue in Brooklyn and Forest Avenue in Staten Island as strips that have really blossomed in recent years. “There are so many different places, and I think we have set the tone. One, we’re accessible. Two, we will provide all the technical support we could possibly do to help you. We have more organizations than ever before that we’re working with.”
As for the major developments, he says, “You have to have big projects. I think the New York State economy has for the longest time relied so much on the financial sector of Wall Street. … But if you look around the city, if you look at places throughout the city that have gotten better and improved through some of these short strokes,” you’ll see a compelling renewal, he says. Bedford-Stuyvesant, for example, now has an active BID that includes a bed-and-breakfast, a coffee shop, a bakery and yoga studios.
“We’re still exporting dollars outside those neighborhoods,” he says. “We still have work to do as far as providing a diversity of retail opportunities.”
But if opportunities for small businesses on Myrtle Avenue and elsewhere have exploded, on 86th Street, they’ve all but withered away.
Four years after the Color Wheel closed, Landrum lives in Staten Island and works in education. Her mother is retired, and her brother, a college student when they owned the Color Wheel, has become a lawyer. She takes a pragmatic view of the enterprise—”That’s life. Things change,” she says—but she wishes it could have lasted.
“I loved it. It was great. Working with my family was the best part of it. It was so nice to have your own business and work with family,” Landrum says. “But the bottom line is that if you can’t pay your bills, you can’t have a business.”