Crains New York - February 4, 2013 - (Page 11)

The secrets in the guv’s pension plan G ov.Andrew Cuomo has a problem.Upstate cities, counties and school boards are at wit’s end. A declining population,an economy that has been depressed for two decades, a cap on property taxes and rising costs have put upstate’s local governments in severe financial distress. They want help—and they need it now, not in the future, when maybe some of the governor’s economic initiatives will pay off. So the governor says he wants to reduce their pension burden. Sounds simple. It’s not. Mr. Cuomo’s rationale. Last year, the governor forced the Legislature to agree to a new, lower-cost pension plan for new state employees. In about 10 years, this will produce significant savings. The governor says, Why wait? Let’s use some of the savings now to reduce pension contributions for local governments. They can pay more later, presumably when their economies are better. The numbers. The figures are big. Buffalo will save $19 million next year; wealthy Westchester, $40 million. (The change affects every local government outside New York City.) The consequences are significant, too. New York boasted the best-funded pension plan in the country until last year, when it GREG DAVID dropped to No. 5 on the Pew Center on the States survey. That’s still good, but the governor is willing to accept a less well-funded plan that could be only about average. The alternatives. Are there any alternatives? Hard-pressed state and local governments have been clam- STEVE HINDY Don’t ignore need for industrial space I recently got a call from Eric Manigian, a woodworker based in Dumbo, Brooklyn, who made a lovely kitchen table for us a few years ago. Eric makes beautiful furniture out of choice hardwoods like oak, maple and mahogany. I like that it’s “Made in Brooklyn,” too. But the Pratt Institute alumnus did not have good news. He was losing his lease in a mixed-use building, where he has been since the mid-’90s. He asked if I knew of any space in Brooklyn where he could relocate. I referred him to the Brooklyn Navy Yard, which has become a refuge for small businesses of all kinds. More than 300 firms are there, employing more than 6,000 workers. At the moment, though, there is no room for Eric’s firm or 150 others waiting to get in, according to Navy Yard President Andrew Kimball. Eric’s plight should be of concern to the next mayor of New York City. The outer boroughs are teeming with entrepreneurs like Eric, many with interests in the tech world or in food and beverage startups. We hear a lot about the city’s need for affordable housing, but less about its shortage of affordable industrial space. These deficits are, of course, closely related. Industrial jobs, which pay 25% to 40% more than retail jobs, reduce the demand for subsidized housing. Some private developers are trying to address this. The Pfizer project in Bedford-Stuyvesant and Federal Building No. 2 in Sunset Park come to mind.The city needs to encourage projects like these with zoning protections, tax incentives and infrastructure support. It also needs more city-owned industrial enclaves like the Navy Yard. The Bloomberg administration oring for mandate relief, a vague term for requirements imposed by the state without any money to pay for them. The conservative Empire Center and many local officials have been crusading for a push to reform the Triborough Amendment, which keeps labor contracts in place after they expire, tilting all negotiations in favor of public-sector unions. Groups like the Citizens Budget Commission have outlined how to provide significant savings in special education, a crushing burden on many schools, without hurting children. The governor proposed a tweak to the labor arbitration process, but nothing that would amount to much. And, sure, Triborough reform would be difficult. So was getting a property-tax cap and closing a $10 billion budget gap in Mr. Cuomo’s first year without a tax increase. Ditto for special ed. The politics. The key dates here are 2014 and 2016. Although the governor is likely to cruise to a big reelection victory in 2014, he doesn’t want to take any chances. So although he took on the public-sector labor unions in his first two years in office, he wants to make peace. And there is always 2016, if Hillary Clinton decides not to run for president. No Democrat will be nominated in 2016 against the determined opposition of those unions. The bottom line: The pension scheme is a bad idea. It should be rejected, and then Mr. Cuomo can work on something better. did establish Industrial Business Zones, but they have not met the demand for industrial space. The IBZs allow commercial businesses like hotels, banks, supermarkets and short-term storage. These kinds of businesses pay much higher rents than industrial tenants. That makes it difficult for industrial businesses to afford space in the IBZs. The Navy Yard, an industrial enclave dedicated to businesses like Eric’s,is adding 2 million square feet of space, including a new green manufacturing complex, in the next couple of years. But the city needs another industrial park like it, perhaps in the Bronx or Queens. There are plenty of undeveloped brownfields in those boroughs that would be suitable for such a development. Many of the 150 companies on the Navy Yard waiting list are small “creative class” firms like Eric the woodworker’s. But who can say one of them won’t be the next big thing? Caleb Crye, who designs and manufactures bulletproof vests and helmets for the U.S.military,had no experience in the military or in manufacturing, but he saw a need and developed a business. Crye Precision, located in the Navy Yard, today employs more than 100 people. There will be more success stories if the city helps small businesses find affordable space. Steve Hindy is co-founder and president of Brooklyn Brewery. February 4, 2013 | Crain’s New York Business | 11 http://www.crainsnewyork.com/events-GOPrace

Table of Contents for the Digital Edition of Crains New York - February 4, 2013

THE INSIDER
ALAIR TOWNSEND
IN THE BOROUGHS
IN THE MARKETS
BUSINESS PEOPLE
OPINION
GREG DAVID
DIGITAL NY
SMALL BUSINESS
REPORT: HEALTH CARE
THE LIST
CLASSIFIEDS
REAL ESTATE DEALS
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crains New York - February 4, 2013