Setting herself apart from other 2013 mayoral contenders and with the current occupant of City Hall, Council Speaker Christine Quinn proposed cracking down on wasteful contracts and city debt in her sixth State of the City address Tuesday.
Before a crowd of at least 500 at the City University of New York's Graduate Center, the speaker hinted at what promises to be a likely 2013 mayoral campaign platform focused on problems both "big and small" -- from avoiding skyrocketing debt to making sure residents do not get unfair parking tickets.
In what could be her most ambitious and challenging proposal, Quinn suggested the city start paying for some of its capital expenditures -- normally financed through issuing bonds -- with cash up front. The process, which has been done before on a smaller scale during Bloomberg's tenure, would reduce the amount of debt while also ensuring the city invests in its infrastructure and creates jobs, Quinn said.
"Under my pay as you go proposal, we can keep these New Yorkers hard at work, while still reducing the debt we leave for future generations," said Quinn, while perched on raised stage with the flags from the five boroughs behind her.
According to a council spokesperson, Quinn hopes to kick off the program in 2013 with a $200 million up front payment for projects. The allocation would increase by $200 million every year thereafter, eventually rising to $1 billion, said the spokesperson.
Quinn's position puts her at odds with Mayor Michael Bloomberg's proposal to trim debt service by simply cutting the capital budget by 20 percent, which he ordered in December.
Quinn said yesterday: "That kind of across the board cut comes with serious consequences -- and I simply cannot support it."
In response to Quinn's proposal, Marc LaVorgna, a Bloomberg spokesperson, said in an e-mailed statement: "We understand the speaker’s position and agree that we need to reduce debt service costs. We work closely with the speaker and council, producing on-time, balanced and responsible budgets every year, and we will be discussing this as a part of the budget process."
The mayor is scheduled to release his preliminary budget on Thursday.
In 2003, the city spent $2.4 billion on debt service to cover capital costs. It is projected to spend nearly $5.1 billion this fiscal year. Costs will climb to nearly $6.7 billion by fiscal year 2014.
Quinn said 12 cents of every tax dollar goes to debt service.
According to budget experts, paying for capital projects up front would also provide a buffer if the economy heads south again. The practice, said Ronnie Lowenstein, the head of the city's Independent Budget Office, is not unusual. But some question whether it is fiscally and politically feasible.
"This is nothing you would want to do in a downturn," said Lowenstein. "The question is are we enough out of the downturn to do it?"
The city faces a $2.4 billion deficit in the upcoming fiscal year. Paying for capital projects up front would force the city to cut back even more on programs.
"It's worthy of discussion," said Public Advocate Bill de Blasio -- also a potential 2013 contender. "It’s a tough environment to have that discussion in. We're about to get hit hard by Washington. We're about to get hit very hard by Albany. We already have our own deficit. It's hard to imagine we can find additional money for pay as you go capital."
The capital budget was not the only fiscal proposal Quinn touted.
Thrusting in the air a 1,500-page contract to clean up snow around bus shelters, the speaker said the city spends more than $10 billion each year on "contractual services." To make sure that money is spent appropriately, Quinn said the council would approve legislation to create a new Web site that would detail financial information in plain language on all of the city's 17,000 contracts. She also said keeping contract costs flat in the next budget year would save the city $100 million.
"I'm happy to hear the speaker talk about the need to rein in out of control contracts," said Comptroller John Liu, who has been criticizing bloated contracts for years. "It's something that the mayor doesn't even talk about."
Liu is another potential mayoral candidate in 2013.
Like the mayor, Quinn also called for pension reform in her address. She said unions and officials have to come to the table to negotiate. Quinn, however, did not offer specific proposals.
Quinn got her start in politics as a housing advocate. In her speech Tuesday, it seemed like she was getting back to her roots.
In addition to the capital budget and contract proposals, Quinn honed in on affordable housing, calling for the repeal of vacancy decontrol in Albany -- a stance she has made clear before.
Quinn said she would streamline the application process for affordable housing by creating one online application. Currently, residents have to apply for an apartment via snail mail developer by developer. Partnering with New York University's Furman Center, the speaker said the council would for the first time track affordable apartments on the brink of going market rate. Knowing where they are and working with advocates in tandem could help keep these units affordable, said Quinn.
Quinn received the loudest round of applause when she said the council would approve a package of legislation to make parking regulations fairer. Part of the proposal would prohibit traffic agents from issuing a ticket if a driver is walking to a muni-meter. Quinn also said the council would reduce the amount of alternate side parking for streets that have had clean ratings for more than two years.
By taking up politically sensitive issues like affordable housing and alternate side parking, some observers said Quinn doesn't have 2011 in mind, but 2013.
'"It speaks to a constituency she needs to run for mayor," said Democratic political consultant Hank Sheinkopf of the speaker's address. "She has to impress outer borough people that she’s serious about this. … The things she is talking about are post-Bloomberg."
It was a relatively quiet morning in front of Atlantic Center -- the usually buzzing Brooklyn shopping complex kitty-corner to the site of Atlantic Yards.
Mikey Richardson, 29, had a Target bag in one hand and a cigarette in the other. Richardson comes to Target -- the anchor store in the center -- once or twice a month for the occasional household item.
Last week it was a power tool set.
The 29-year-old Crown Heights resident has no problem unloading his wallet at this particular national retailer, which boasts more than 1,700 stores throughout the country.
But Richardson changed his tune when it came to its competitor, the world's number one retailer: Wal-Mart.
"It would hurt these small businesses, so I am going to say 'No,'" Richardson said of supporting a Big Apple Wal-Mart.
For the second time in a decade, Wal-Mart, which boasted $408.2 billion in revenue in its last fiscal year, is exploring a New York City location. In 2005, the corporation attempted to settle in Rego Park, but was driven away by a cacophony of community opposition.
This time around Wal-Mart is trying to appeal directly to New Yorkers. It has stuffed flyers into mailboxes and flooded the airwaves with calls for support. Wal-Mart plans on circumventing the City Council by landing a location that could be developed "as of right" -- with no need to go through the land use process.
It may have set its sights on Brooklyn.
Wal-Mart argues New York already has chain stores and national retailers. The skyline is dotted with Best Buy, Target, Bed Bath and Beyond and more.
So, why not Wal-Mart?
Earlier this month, more than two dozen members of the City Council hosted a standing room only crowd in Lower Manhattan.
The topic: What effect Wal-Mart could have on the Big Apple's economy? Wal-Mart did not attend the hearing. By focusing exclusively on Wal-Mart, its executives argued, the meeting was unfairly targeting the company.
Council officials, however, say it should.
"Wal-Mart is in a category by itself," said Councilmember Karen Koslowitz, the chair of the council's Consumer Affairs Committee, at the hearing. "Wal-Mart's main competitors are Costco, Target, Sears and Kmart. Wal-Mart by itself exceeds the number of stores, employees, annual revenue and profits earned from each of these companies combined. Clearly Wal-Mart is different."
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Every one of those competitors -- and then some -- have New York City locations.
Target has seven. Costco has a location in every borough. There are at least five Kmarts in the Big Apple.
"The competitors do lower wages in order to compete when Wal-Mart comes in," said Ken Jacobs, the chair of UC Berkeley's Labor Center. "Target and Best Buy just aren’t big enough to have the same kind of effect."
In addition to the size of the company, Wal-Mart opponents cite the mega-corporation's so-called poor labor practices, including low wages and a failure to provide health care benefits.
But when it comes to average wages, Wal-Mart does not differ from other big box stores already rooted in New York City.
According to data provided by IBISWorld, an independent market research group, sales associates or cashiers at Target, Kmart, Barnes and Noble, Kohl's and BJ's Wholesale Club all make less on average than a Wal-Mart associate. At Target, according to IBISWorld, a cashier makes $7.96 an hour on average, while a Kmart cashier makes $7.59.
On average, a Wal-Mart associate, according to IBISWorld, makes $8.81 an hour. (Wal-Mart's New York City Web site contends a full-time associate makes $13.09 per hour).
The Wal-Mart wage is far less than what a cashier would make at Costco, which IBISWorld estimates pays an average of $15.50 per hour.
According to an analysis by the Fiscal Policy Institute, the average wage for a unionized retail employee in New York City is about $13.33 an hour.
At Costco, 90 percent of employees are covered by health insurance, according to IBIS. Kmart, Home Depot, Lowe's and Target also offer health insurance, but details of their plans were not made available. Target refused to answer questions from Gotham Gazette for this story.
Industry experts said all of these companies require employees to contribute to these health plans. Given their wages, Wal-Mart opponents said, many could not afford to participate.
Steve Restivo, Wal-Mart's director of community affairs, said 53 percent of Wal-Mart associates are enrolled in their health care plan, and many others are covered by their spouses or are first time employees still using their parents' insurance. Restivo said the company's lowest cost plan is $11 per pay period for an associate and $33 for a family.
While improvements in its health coverage have been recognized, Wal-Mart still makes appearances on lists of employers with large numbers of employees receiving state-subsidized health care.
On top of wages and benefits, criticism of Walmart has centered on the size of the corporation and its proven ability to shut down small businesses and competitors. Advocates and storeowners oppose a Big Apple store in hopes of holding onto New York's mom and pop shop character.
"Wal-Mart has more revenue than Austria's economy, sells more guns than anyone on the planet, and has lifetime history of pushing out mom and pop shops -- there is no comparison between Wal-Mart and anyone else. No matter how many times they use glitzy expensive PR campaigns to remake their image the truth always stays: Wal-Mart eliminates jobs, destroys small business and ruins neighborhoods," said Stephanie Yazgi, director of Walmart Free NYC.
When bashing Wal-Mart, officials also point to a 10-year-old gender discrimination lawsuit making its way to the Supreme Court, which accuses the corporation of failing to promote and provide equal wages to at least 500,000 women.
The City Council is holding an oversight hearing on Thursday on the lawsuit and the corporation's labor practices.
Both Target and Home Depot have had discrimination suits filed against them -- though not on the scale of Wal-Mart's. Home Depot has 21 stores in the five boroughs, according to a spokesperson.
To some, it appears there are more similarities than differences between these big box retailers.
"They all follow basically the same business model, which is based on preying on small businesses, paying low wages, squeezing suppliers, relying on overseas labor that is often exploited by building huge stores," said Stacy Mitchell, the senior researcher for the Institute for Local Self Reliance. "Target's marketing is we're hip, we’re urban. … It's worth looking at that with a skeptical eye and not assuming the companies are that different because Wal-Mart has a red state, country image."
Restivo treads carefully when asked about Wal-Mart's plans in the five boroughs.
The corporation is reportedly eyeing a site in East New York -- part of a Related development called Gateway II. ShopRite, which is unionized, is also vying to locate there. In an interview with Gotham Gazette, Restivo would not name a single site Wal-Mart is seriously interested in.
"It's no secret we want to open stores in New York City," he said. "We are evaluating lots and lots of opportunities."
In contrast to its pursuit of New York City space in 2005, Wal-Mart is exploring a number of different size stores -- better suited for an urban setting, Restivo said. The typical Wal-Mart is about 80,000 square feet. It also has mid-sized stores, between 30,000 and 60,000 square feet, and plans on pilot testing smaller spaces under 30,000 square feet.
"We have made a lot of changes as a company. Quite frankly, we are a better company than we were five or six years ago," Restivo said. "In the last year especially we have gotten more flexible in our approach."
Wal-Mart isn't just looking at New York City, but it plans on opening stores in cities across the country. One of its first urban stores was built in Chicago in 2006. That location has 150,000 square feet. Restivo said Wal-Mart would eventually have dozens of stores in the Windy City.
He said Wal-Mart had no set number of stores they hoped to have in the five boroughs.
"Just because you live in a big city, it doesn’t mean you have to pay more for products, especially groceries," said Restivo. According to industry experts, Wal-Mart provides 25 percent of all the groceries in the country.
During this month's hearing, not a single council member expressed support for a New York City Wal-Mart. Wal-Mart is currently making its rounds with council members in an attempt to plead its case.
Although the company's support in the city's legislature is frigid, there are plenty of people in the five boroughs who want to see the corporation break ground. The city's construction unions struck a five-year deal with Wal-Mart earlier this month, guaranteeing any new construction or rehabilitation would be done by union workers.
Some residents want to see Wal-Mart because of low prices and the promise of jobs.
Back at Target, Joseph Quinlivan, a 50-year resident of Sheepshead Bay in Brooklyn, had no qualms about a Wal-Mart in his borough.
"Well, I think Wal-Mart should come," the 85-year-old said. "Their prices are cheaper, and it brings jobs."
Even Richardson, the 29-year-old Brooklynite who doesn't support Wal-Mart in his borough, said he would probably shop there if the corporation were successful.
"It's cheaper," he said.
When first published, this story incorrectly said the average Wal-Mart store is 800,000 square feet. An average store is 80,000 square feet. The story has been changed to reflect the correction.
The snow and sleet that began blanketing Albany on Tuesday at the start of a pair of major storms were well matched to the main theme of Gov. Andrew Cuomo's first budget address. It seemed like he was saying, "Albany is in a financial hell that is about to freeze over."
"New York is functionally bankrupt," he declared as the same words appeared on the screen behind him as part of his Power Point presentation.
Cuomo's address was nothing if not doom and gloom. Before introducing Cuomo, Lt. Gov. Robert Duffy told the crowd that New York's business climate ranks number 50 among all states, dead last. Warning that the state is "bleeding people and jobs," Duffy added, "All I can say is it stops today."
"The lobbyists are going to be running around the hallways like their hair is on fire," Cuomo said, directly addressing legislators. "They are gonna be all over you, they are gonna be complaining. I understand that that is hard to take. I also understand this: The people get it, and the people are with you, and at the end of the day it is about the people. At the end of the day it is not about this town and this building; it is about the people that elected you."
True to Cuomo's predictions, many groups did begin assailing the spending plans even before the governor had finished speaking. Health care and educations advocates, as well as those representing the poor, said Cuomo's budget, if enacted, would exact huge human costs -- particularly in New York City. While conceding the state needs to address its fiscal problems, many criticized Cuomo for not looking at ways to increase taxes and for his plan to do away with a tax on the wealthiest New Yorkers.
Many in the business community and even the Tea Party applauded Cuomo. However painful, some said New York needed to cut spending so the state could attract the businesses and jobs it needs to return to economic health.
Cuomo's strategy in presenting the budget was clear. In addition to the warning of doomsday, he launched an attack on the state budget process, particularly on the formulas for education and Medicaid, which he said built in substantial spending increases year after year. While the governor's claim that this shocked him did not convince many, the issue did underscore his argument that the state could no longer afford those automatic spending increases and so would change its ways.
"What the governor did today," said Sen. Diane Savino, "is expose that the way the state funds education makes no sense. The way the state funds health care makes no sense."
The governor's $132.9 billion budget would be the first budget in nearly a decade to actually reduce spending. It would reduce half of the projected $10 billion deficit by chopping $2.85 billion each in planned spending from both school aid and Medicaid.
The plan has few new revenue generators but does include $456 million in expected income from changes to gambling and gaming laws as well as better enforcement of tax laws. The customary $85 million in pork barrel money legislators get to dole out is gone from the budget. Cuomo claims he wants to completely do away with these projects. Not only would Cuomo let the tax on the wealthy expire but he wants a property tax cap. Critics say Cuomo is both cutting income and expenses, and the situation will become untenable for schools and other service providers.
All of this leaves the city facing major cuts; Cuomo proposes slashing $918.4 million in aid to the city. Half of that aid would have gone to schools. Funding to CUNY would be cut by by nearly $1 million.
Mayor Michael Bloomberg issued a statement sympathizing with Cuomo's budget troubles and agreeing with Cuomo's message of "shared sacrifice." But he said the city is being asked to bear an undue burden of cuts.
"Unfortunately, the budget does not treat New York City equitably; it eliminates 100 percent of New York City’s revenue sharing aid -- more than $300 million -- while cutting other localities by just 2 percent. The residents of our five counties pay a disproportionate amount of state taxes, and they deserve the same level of support," said Bloomberg in his statement.
Bloomberg also complained that the budget does not offer the city any relief on pensions, procurement, education and other issues. Bloomberg had, for example, wanted Cuomo, in the budget speech, to propose ending the requirement that the most recently hired teachers be laid off first. Cuomo did not mention that, or any of the changes in pension requirements Bloomberg wants.
In other areas, such as special education, the state expects the city to maintain the same level of services it has provided while drastically lowering the aid it contributes to help pay for them.
"We can’t only look at one side of the equation," said Bloomberg. "We need relief from unfunded state mandates, as well as changes in state law that would allow us to save money, particularly where we can find ways to save money that would not cost the state a dime. Without those changes, we will be looking at thousands of layoffs in our schools and across city agencies."
Bloomberg expressed hope that he still could get those changes. "This is just the beginning of the process," he said. "The governor will have another opportunity within 30 days to propose cost savings that will save thousands of city jobs and other reforms, and we look forward to working with him in the weeks ahead."
Other city officials focused more on the cuts themselves.
The City Council's Progressive Caucus released a statement warning the reductions could create "far more serious problems than the budget itself."
Council Finance Chair Domenic Recchia voiced some support for Cuomo's plan, but is concerned about what the cuts will mean to the city, particularly to its schools. "Our classrooms are already overcrowded and under funded," he said, "That being said, I believe this is a starting point."
Cuomo's education cuts were particularly stinging to some advocates because the state has not made good on court ordered school aid increases to underprivileged school districts.
"New York still has a two-tier public education system that does not provide adequate resources for our neediest students to receive a quality education," said Gerry Palast, executive director of the Campaign for Fiscal Equity.
Despite that, she said, the state has not come through on the funds for needy students and now wants to cut education spending. As a result, she said, "another generation of school children will see their education sacrificed again on the altar of fiscal discipline when tax cuts to the wealthiest New Yorkers are on the table."
Cuomo did not announce specific reductions to Medicaid spending, as a taskforce he created has until next month to come up with a plan for the reductions. But the health care lobby is not happy.
Health care providers and workers say that planned state spending increases to Medicaid were based on more people signing up for the health program for low-income people. The Greater New York Hospital Association and SEIU 1199 issued a joint statement saying, "If levied across the board, the cuts would be the staggering equivalent of a 10 percent decrease in Medicaid payments to hospitals, nursing homes, and home care." According to the statement, the cuts would trigger a loss of $3 billion in federal funds for health care in resulting in a total loss for New Yorkers of $5.9 billion in Medicaid funding."
Cuomo has created another task force, this one to deal with the issue of underutilized prisons and which ones to close. To make the plan more palatable to legislators from the rural upstate districts where most of the prisons are located, he announced that the state would provides a fund of $100 million to cities where prisons are closed to help with job losses.
The budget also calls for cutting almost 400 beds from the state's juvenile detention system. In addition, it includes a 49 percent cut in state reimbursements to localities that run their own juvenile detention facilities. Although Bloomberg did not address this in his statement, this could irk him as well. The mayor has pressed the state to allow localities to oversee their own programs; the cut in funding will likely make that more difficult.
Opposition to Cuomo's budget came swiftly, with critics charging that Cuomo is ignoring the human consequences of his proposed cuts.
A number of groups say Cuomo should renew the millionaire’s tax, which is set to expire, to lessen cuts to Medicaid and education.
"The only way New York can recover is to ask everyone to pay their fair share," said Robert Tolbert, a Bronx resident and board member of Voices of Community Activists and Leaders. "By not extending the millionaire's tax, Gov. Cuomo is giving up one of the best tools we have to fix our state's long-term revenue crisis." Tolbert accused the governor of protecting real estate, financial and other corporate interests -- despite his "rhetoric of shared sacrifice."
"The budget reflects policy choices. Cuomo is asking lawmakers to put the needs of Wall Street and the wealthy ahead of the needs of our students, the poor and the middle class," said Mark Dunlea of Hunger Action New York.
Both state comptroller Tom DiNapoli and city controller John Liu issued supportive statements that said they plan to further review the budget's details. Liu called Cuomo's budget "game changing." DiNapoli was a bit more cautious, saying, "There are two main concerns: achieving budget balance while continuing to provide essential services that millions of New Yorkers rely on.”
The New York State Tea Party is particularly fond of the plan; they issued a statement on Monday calling for all New Yorker's to back the plan.
But the most supportive statements came pouring in from the business community.
Heather Briccetti of the Business Council of New York State said, "Gov. Cuomo is proposing a budget that finally addresses the need to reduce government spending and put New York on the road to recovery. This budget proposal ends the business as usual in Albany that has led to a loss of jobs and population in our state."
The Partnership for New York agreed: "The executive budget released today by Gov. Cuomo is true to his campaign promises. He has made the tough choices that will insure that New York State once again can lead the nation in job creation and business investment. He has challenged Albany's tax and spend habits, reversing a pattern that has made New York unaffordable for residents and businesses alike."
The battle lines seem pretty clearly drawn. The New York Senate, led by Republicans and with the four Democrats who broke from the Democratic conference to form the Independent Democratic Caucus, will probably support much of the proposed budget, with the backing of the business community.
The Assembly, led by Speaker Sheldon Silver, is likely to fight to restore cuts, with the support of labor, health care and education interests. Meanwhile, Bloomberg and his staff will be lobbying Silver, who is from Manhattan, and the Senate Republicans, who have received significant donations from Bloomberg.
With Cuomo's popularity high, they may face a difficult task. As one legislator put it, "This is a different year, this is a different governor. I don't think Cuomo is going to cave."