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Brewer: Why the SBJSA Can’t Pass

By Gale Brewer

Published May 13, 2015 at 9:58 am (Updated May 13, 2015)

Three decades ago, our city faced a growing crisis: mom-and-pop stores were being driven out by skyrocketing commercial rents. During that era, when I served as a city council staffer, a piece of legislation emerged that has languished in the council ever since. Perpetually reintroduced and now called the “Small Business Jobs Survival Act” (SBJSA), this legislation has been spinning its wheels for more than 30 years, even as the mom-and-pop crisis has intensified with a fury.

When I became a council member, I helped pass zoning protection for storefront businesses in my West Side district as new construction and the expansion of national chains—particularly banks and drugstores—conspired to dominate many consecutive blocks of streetscape along Broadway, Amsterdam Avenue, and Columbus Avenue.

As Manhattan Borough President, my passion to help small businesses has only intensified with the position’s expanded constituency.

Small businesses can provide a good living not only for immigrants who are willing to work hard for a better life but also for any New Yorker with a unique, marketable idea and the perseverance to pull it off. Street-level spaces provide neighborhood necessities—dry cleaners, shoe repair shops, small restaurants—in addition to more one-of-a-kind shops providing the diversity that helps make New York City the tourist magnet that it is. By drawing like-minded customers from all over, unique stores often prove that a market exists and can be rolled out onto a larger regional or national stage. No tourist needs—or wants—to travel to New York City to see a chain store he or she could patronize at home.

Last year, I directed my staff to conduct a study of what we can do right now to help small businesses with street-level locations (we call them “storefronters”). That study formed the basis of a report issued this past March— ”Small Business, Big Impact.”

Among the many recommendations is an outline of an innovative bill (which I will introduce in the City Council soon in cooperation with Brooklyn Councilmember Robert Cornegy) that would require landlords and small commercial tenants to come to the negotiating table earlier (with a mediator if desired); if no agreement can be reached, an automatic one-year lease extension at a 15% higher rent would be imposed, giving tenants more time—longer than the typical 30 days’ notice of lease expiration—to find a new location. This safety valve would promote marketplace fairness, predictability, and stability for small stores whose economics can rarely support the kinds of five- and ten-fold rent increases now being demanded.

My proposal has drawn criticism from some advocates for doing too little when compared to SBJSA. But a bill that hasn’t passed for decades does no good for anyone. And let me be blunt: SBJSA cannot pass, for several reasons:

* It raises serious constitutional issues about contract and property rights.

* SBJSA’s “mandatory” arbitration system applies only to landlords via a right-of-first-refusal for existing tenants. If an arbitrator doesn’t construct lease terms to a tenant’s liking, the tenant can reject the arbitration and suffer no consequences—they stay in the storefront until and unless a new potential tenant can negotiate terms that the current tenant then refuses to meet! This mechanism is wildly inefficient, and will have the additional result of tightening the market for newer small businesses seeking space.

* SBJSA applies to all business tenants, not just the “small” businesses in its title. So a large bank could object to lease terms and stay in its current premises—along with the local bagel shop.§

I’m proposing achievable, practical steps on lease renewals that will help change the nature of commercial lease negotiations without unduly burdening basic property rights.

The crisis of New York small businesses will continue until the forces of reform can unite behind a common vehicle—as well as our common goal—that can pass the City Council and be signed into law.

Gale Brewer is the Manhattan Borough President