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City Steps Up Efforts to Court Bioscience


Photo (cc) Courtney Gross. The new life science center in Manhattan.

Milton Werner loves New York. He worked here for more than a decade, heading up a research laboratory that examined human cancers at Rockefeller University on the East Side.

So when Werner decided it was time to start his own biotechnology company, you'd think he would set up shop in the Big Apple.

But the nationally acclaimed scientist traded apples for peaches.

He opened in Georgia.

"I'm a New Yorker at heart," said Werner, now a resident of Atlanta. "And I love New York. It would be a great place to do this, but the cost of living is astronomical."

To top it off, when Werner launched Inhibikase Therapeutics in 2008, Atlanta sent him a check for $455,000, he said.

Werner is like many other former Big Apple bioentrepreneurs -- they study therapies and technologies at New York City's robust research and medical institutions, but move on to cheaper, more science-friendly hubs to develop their products.

The Bloomberg administration wants to reverse that trend.

Over the last five years, the city has invested at least $25 million to grow the bioscience industry in the five boroughs. It provided seed capital for a newly opened bioscience center on the East River and for the soon to be constructed start-up space at the Brooklyn Army Terminal. The State Legislature passed a biotech tax break last year, proposed by City Council Speaker Christine Quinn, that smaller biotech companies will start to tap into this April.

In the last two weeks, speeches by both Mayor Michael Bloomberg and Deputy Mayor for Economic Development Robert Steel have addressed how to spur the bioscience industry.

While the effort has not gone unnoticed -- in fact most commend it -- some industry experts think New York will struggle to become the next Boston, San Diego or North Carolina research triangle. Bloomberg's investment, they argue, might never quite pay off.

The Science Race

Security and large silver gates guard the entrance to the city's new bioscience center. Outside, the cobblestone driveway is lined with pictorials of scientific leaders, Barbara McClintock and James Watson among them.

Inside, the nearly floor-to-ceiling windows offer an expansive view of the East River. New York University's Medical Center looms in the periphery.

The approximately $250 million, 15-story tower opened last month with much fanfare. Celebrity chef Tom Colicchio's newest restaurant occupies space on the ground floor. Sleek lab space sits empty waiting for occupants on the fourth floor. The top floors house the new research space for an Eli Lilly and Company subsidiary, the New Jersey-headquartered ImClone .

But the facility, developed by Alexandria Real Estate Equities, didn't come without sacrifice.

The state contributed $27 million to the project's construction and another $1 million to entice ImClone as the anchor tenant. The Bloomberg administration gave $13.4 million, and Manhattan Borough President Scott Stringer gave $500,000. All of it was to lure an industry starving for lab space and start-up capital, officials said.

"You look at all the big pharmaceutical companies," said Mayor Michael Bloomberg at the center's opening. "They are over in New Jersey. We want to make sure those jobs stay here."

The city has a lot of catching up to do. Officials admit they have lagged behind other metropolitan areas -- losing bioscience jobs to Boston's reputation and to San Diego's easy-on-the-pocket lab space.

"[The city] has a lot of the ingredients to be the premiere bioscience center," said Seth Pinsky, the chairman of the city's Economic Development Corp. "We just haven't captured as much of the potential as we should."

According to data from the U.S. Bureau of Labor Statistics, between 2007 and 2009 the five boroughs added approximately 266 commercial bioscience jobs -- going from 7,247 jobs to 7,513. Manhattan actually lost jobs in research and development in the biotech sector -- the primary target of the city's efforts. Figures by county for 2010 are not yet available.

The Economic Develop Corp. says the city had 132 bioscience companies as of 2010.

According to the bureau, New York City has approximately the same amount of jobs in bioscience as Boulder, Colo. or Dallas, Texas.

San Diego, though, has four times as many bioscience jobs as the five boroughs.

While New York gained a couple hundred positions, other emerging and established bioscience hubs gained more -- and at a faster rate. Dallas added twice as many jobs as the Big Apple between 2007 and 2009.

Durham County, N.C. -- one piece of the state's research triangle -- gained more than 1,100 jobs in the private sector. Cambridge, Mass. took on more than 2,300 additional jobs and Suffolk County, home to Boston, more than 960.


View Bioscience Boosts in a larger map

For a full look at where jobs in bioscience are going, see our interactive map. The map includes private employment in research and development in physical, engineering and biological sciences as well as employment in the pharmaceutical industry and medical device manufacturing.

Forgetting established bioscience clusters, like California and eastern Massachusetts, experts say Palm Beach, Seattle and much of the Southeast are all competition for a slice of the emerging bioscience market.

"One of the main drivers was our proximity to the new Scripps Research Institute," said Robert Middlebrook, the chief financial officer of Envoy Therapeutics, explaining the company's decision to locate in Palm Beach County in 2009. Several of Envoy's scientists have ties to the city's Rockefeller University.

Bigger and Better Incentives

For the city to get businesses like Envoy to come to New York, it will offer $3 million in tax credits for the first time this year. But many other states and counties have already implemented tax credits and incentives -- and some are hooking biosciencebusiness with a larger worm.

Florida used about $450 million in economic development projects to lure large research organizations, like Scripps.

Maryland has promised to invest $1.1 billion in bioscience over 10 years, including $8 million in a refundable biotechnology tax credit this year. Massachusetts has set aside $500 million over a decade for capital investments in life sciences. The Bay State gave out $25 million in tax credits in 2009.

New York state has some tax incentives geared to companies in emerging technologies, but the state Department of Taxation and Finance does not break out data by region or industry. The department forecasts it will hand out $14 million in 2010 for capital expansion and training for emerging technologies.

To catch up with other areas, the city Economic Development Corp. plans to secure a consultant by the end of the year to study what incentives and initiatives New York City can adopt to bring biotech here. The study, said officials, should be completed by next summer.

Bioscience Throughout the Boroughs

Bloomberg administration officials say we already have the research centers. We just need to turn their expertise into a commercial economic boom for bioscience.

At the offices of Google in Chelsea yesterday, newly minted Deputy Mayor Steel said biotechnology and life sciences are crucial to creating a new "innovation economy" for the city. The city has a "marketing problem and a real estate challenge," Steel said.

Despite the national and international competition to entice bioscience, Steel said -- in typical New York fashion -- the city is ready to best them all.

A decade ago, New York City had one large commercial lab space for startups. It now has three others on the map or in the works -- all have been spearheaded with private and public dollars.

Earlier this year, the administration and SUNY Downstate Medical Center announced the first phase of construction on a 486,000 square foot facility at the Brooklyn Army Terminal in Sunset Park. SUNY Downstate also expanded another incubator space in central Brooklyn, said professor Eva Cramer, vice president for biotechnology and scientific affairs at SUNY Downstate.

The Alexandria Center for Life Science on the East Side of Manhattan plans to add two more towers -- though the commitment comes with a caveat. Joel Marcus, Alexandria's president and chief executive officer, said it would not break ground on the next tower until it had an anchor tenant. There is no telling when that might occur given the tremulous economy, real estate market and the relative trouble the city has had keeping and recruiting companies.

Experts provided some optimism, arguing a major tenant for a second building would be easier to corral since a biotech presence has been established in the complex.

The new Alexandria tower and the Brooklyn Army Terminal space alone will create about 2,000 new bioscience jobs, officials said.

This multi-borough development strategy epitomizes the city's new bioscience mantra -- "if you build it, they will come."

“New York City has always had many of the ingredients that would make it a center for the bioscience industry -- a talented workforce, accessible venture capital and a concentration of leading academic and medical institutions -– but we’ve had a shortage of commercial lab space," said Economic Development Corp. spokesperson David Lombino. "Now, with new lab space open and even more in the pipeline, the city is better poised to capture companies that spin out of our existing institutions, creating good jobs and strengthening our local economy."

Some scientists just starting companies don't see it so simply. Dr. Allan Rubenstein, a pediatrics and neurology professor at New York University, received nearly $1.5 million for his biotech startup, NexGenix Pharmaceuticals, after attending a city-sponsored seminar on grant applications.

He now has eight employees in Manhattan.

But, Rubenstein said, his lab space is in San Francisco.

"Despite the very positive efforts of the Economic Development Corp., I don’t personally think that biotech is going to thrive in Manhattan," said Rubenstein. "It's basically the cost of doing business."

Manhattan's cost of lab space is one thing. Alexandria's Marcus would not disclose specific rental rates at the new life science center, but said they are less than $80 a square foot.

Boston area lab space goes for approximately $50 per square foot, according to the Massachusetts Biotechnology Council.

Lab space coming online in the outer boroughs is more affordable. Rental rates at the Brooklyn Army Terminal project will be about $40 per square foot, according to the Economic Development Corp. An official running the space said scientists aren't lining up to sign leases, but they have had plenty of inquires.

Lab space in and around San Diego goes for about $36 a square foot, according to California based BIOCOM.

Companies in California tend to get larger spaces -- approximately 10,000 to 15,000 square feet, said a San Diego expert. In wall-to-wall Manhattan, lab spaces can only have so much legroom.

Werner in Atlanta said no startup biotech could really afford more than $20 a square foot.

"I looked at Atlanta as not being so different from New York, but at a much smaller cost," said Werner.

Scientists at New York City startups must also contend with a higher cost of living -- from rent to a gallon of milk.

Back at Google, Steel recognizes this.

"The price is always going to be a challenge," the deputy mayor said. "We are in New York. It's not the same price as other places, but there are other advantages too."

Why Bring Bioscience, Anyway?

In making their argument for investing in bioscience, city officials say bioscience clusters coagulate around medical centers and universities.

The city, they point out, has nine.

The five boroughs receive approximately $1.3 billion in National Institutes of Health funding every year, said officials. Its institutions create at least 20 spinoff bioscience companies a year, they contend.

"Our belief was you had to have meaningful presence in New York City because this is where the science is interesting," said Maria Gotsch, the president and chief executive officer of the New York City Investment Fund, which is sending at least $20 million to start-up biotech companies in the city. "The efforts are less about attracting California companies. It's about keeping what is ours."

But critics mention the bioscience industry made a profit for the first time only last year. It's uncertain whether surpluses will become the norm and how many jobs within the five boroughs can actually be created.

Despite the obvious challenges, New York City is a contender.

"It took 30 years in Massachusetts to grow this industry, and in the early years it was pretty humble," said Peter Abair, director of economic development at the Massachusetts Biotechnology Council. "Other regions of the world that are seeking to focus on this industry, they have to be ready for a long term growth."

Senate Gamble Could Send Horseracing into its Final Lap


When the doors to the three remaining city OTB parlors shut for the final time Monday night, few New Yorkers probably noticed. The parlors seem like a remnant of a forgotten age -- dank, poorly furnished caves where old men waste away their days laying down their remaining dollars on that horse, the one they have that feeling about.

But the closings represented much more than that. For about 1,000 workers it meant the loss of their jobs. While OTB will remain open in the rest of the state, the shutdown in the city brings great uncertainty. Beyond that, the move could deal a death blow to thoroughbred racing across the state.

The city OTB owes the New York Racing Association around $25 million. About half of the purse money that the racing authority pays out comes from the city OTB, which handles about $750 million in wagers a year.

"A thousand New Yorkers are out of work and the whole thoroughbred racing system in New York is in danger," said Sen. Diane Savino, who presided over the State Senate session at which a bill that would have rescued New York City OTB from bankruptcy failed, by a vote of 29-21. "Like John Sabini [chairman of the State Racing and Wagering Board] said, it wasn't like ripples in a pond from a stone; it was like throwing a boulder in there."

The End of OTB?

The city OTB has long been plagued by financial problems. Former Mayor Rudy Giuliani famously described it as "the only bookie joint in the city to lose money." Mayor Michael Bloomberg, though, said that it wasn’t OTB's fault.

"OTB did make money," Bloomberg told John Gambling on his radio show, "but they (the state) demanded 120 percent of it go to support the racing industry."

The institution has been on the verge of bankruptcy many times. Bloomberg had the state step in to take over the betting franchise from the city in June 2008 after he threatened to shut it down. “One of the great transactions in history was New York City pushing OTB into the state's lap, Bloomberg told Gambling, "because it isn't that OTB didn't have more revenue than expenses, it is that the state, by law, took … 120 percent of the profits."

Now it seems the parlors will stay closed for good.

Closing the OTB parlors is expected to cost the state $20 million, and the move will leave the state -- i.e. the taxpayers -- with $600 million worth of the OTBs liabilities including the money it owes creditors as well as employee pension and health costs.

Experts say the closure of the city OTB and the loss of the $750 million in annual wagers it brought it in could jeopardize the entire racing industry. Track operators will have less money to keep their doors open, pay jockeys and manage expenses. Sabini has said that he expects the number of race days to decline and possibly to see race tracks close.

OTB chairman Larry Schwartz who is also Paterson's top adviser told a morning radio show, "This is going to have a tremendous impact on the racing industry. I believe upstate tracks will close. Horse farms will shut down, breeders will be moving out of state. Many small businesses that support racing will have to lay off people or shut down their operations. With a 9 percent unemployment rate in the state of New York, the Senate had a chance not to add to those figures by passing a restructuring plan that the Assembly approved."

The Senate's Fumble

Beyond those effects, the shuttering of the city OTBs represents another colossal failure by the New York State Senate to function as a legislative body when it is most needed. With the city OTB facing $67 million in debt, Gov. David Paterson put forward a bill that would have given its creditors, including the racing authority and Yonkers race track, use of telephone and internet betting, which are thought to be worth millions, in exchange for forgiving OTB's debt. The bill also would have exempted the city OTBs from provisions believed to be a strain on them. Other regional OTBs would have continued to operate under those provisions.

Republicans opposed Paterson’s bill, because they wanted to extend those breaks to OTB throughout the entire state. Democrats said that they needed to deal with the city OTB first, because it was on the verge of bankruptcy. They also noted that the city OTB already had done a large amount of restructuring and made concessions that showed it was working in good faith to improve.

"Regional OTBs have their own problems," said Savino, "but they are not facing imminent disaster -- bankruptcy -- and they have not made the concessions the city OTB has. They have not made any concessions. This was not the time to address them. We could have done it next year, but now the entire system is in jeopardy."

Republicans fault Democrats for failing to negotiate, particularly since they did not have enough Democratic votes on hand to pass the bill alone.

"By insisting on a take-it-or-leave-it approach, Senate Democrats voted to close NYC OTB and put people out of work –– plain and simple," said Republican spokesman Scot Reif. "Their bill was brought to the floor even though it didn’t have the votes and despite the fact we had offered a compromise bill that would have passed."

The Senate failed to vote on the OTB bailout when Paterson called them to a special session in late November. The Assembly passed the bill. Facing pressure to act the Democrats called the follow-up session last week. Several Democrats then missed the vote.

Senate President Malcolm Smith was in China, and Sen. Kevin Parker was on the way back from hearing the verdict in his felony assault trial. Sens. Ruben Diaz and Pedro Espada, who lost his bid for re-election, skipped the session. Sen. Liz Krueger was reportedly in the building but only willing to vote on the bill if her vote would put Democrats over the top.

"If the Senate Democrats want someone to blame, they should look in the mirror,"Reif said.

Democrats in turn say that Republicans who had agreed to vote for the bill backed out. The most striking example is Sen. Hugh Farley, whose district includes Saratoga, a town that benefits greatly from the racetrack there. Farley had even voted the bill out of committee and said he intended to vote yes. He explained that he was caught up in a conversation with Senate Minority Leader Dean Skelos and missed his name during the roll call vote.

Farley's absence proved crucial, according to Austin Shafran, spokesman for the Senate Democrats. "Had Farley kept his promise we could have delayed the vote procedurally," giving missing Democrats a chance to get to the Senate chamber and vote. Shafran said Parker, for example arrived half an hour later.

Savino said that Republicans could have indicated to her that Farley was delayed and she would have waited for him. But she thinks the Republicans really wanted to kill the bill. "This was them deciding that they wanted to manipulate this to their favor to benefit regional OTBs, and instead it failed," Savino said.

"There are 1,000 people out of work because of the cowardice of senate Republicans," Shafran continued. "Seventeen thousand New Yorkers could possibly be out of work statewide," Shafran said, if the OTB closure leads to the downfall of the racing system across the state.

The Next Move

Members of the state's racing industry do not actually support the Republican legislation. They were in favor of saving the city OTB and say that the Republican bill would have given the racing authority $11 million less in payments a year from regional OTB's on top of millions less from the city OTB. "The consequence of the legislation being advocated by the regional OTBs is that NYRA would be forced to close," Charles Hayward, president and CEO of NYRA, told The Saratogian.

Republicans, including Farley and Skelos, continue to insist that negotiations over a broader OTB rescue package continue, but Senate Democrats and Paterson’s office disagree.

"People have talked a lot lately about negotiations," said Savino. "Well, if anyone is negotiating they are negotiating with themselves, because Schwartz would have to reopen this, and so far I don’t think anyone is talking to him."

Paterson told a morning talk show host last week, "The reality is we’re not negotiating." Paterson spokeswoman Jessica Bassett confirmed on Monday that nothing has changed since then.

'Living Wage' Would Hurt Young, Unskilled


Photo by Chris Devers

New York City, which faces a predicted budget gap of $3.3 billion this fiscal year, is considering an expansion of the reach of "living wage" legislation that would make the deficit worse, drive jobs out of the city and raise unemployment among low-skill workers.

The bill pending in the City Council (Intro 0251) would extend New York City’s requirement for payment of a 'living wage," defined by the Merriam-Webster dictionary as "a wage sufficient to provide the necessities and comforts essential to an acceptable standard of living." The new wage would apply to jobs connected with any new development projects that benefit from city subsidies greater than $100,000, both construction work and continuing employment thereafter.

Under present law, the "living wage" applies to contractors doing business with the city in a variety of areas, including food service homecare for seniors and daycare.

The pending bill has nothing to do with alleviating poverty in New York. Without the legislation, the vast majority of people in New York and elsewhere already make more than $11.50 an hour.

Rather, the bill would hurt the young and the low-skilled, people whose skills and productivity are worth less than $11.50 an hour. Forcing employers to pay them that much would prevent them from getting hired and getting their foot on the first rung of the career ladder. Without the bill, most of those making less $11.50 an hour will be paid more after a reasonable time on the job as they acquire experience and do their jobs more efficiently.

Behind the Bill

Under the proposed law, qualifying projects that receive direct subsidies or tax breaks would be required to pay workers $11.50 an hour or $10 an hour plus health benefits.

 

City Council members Oliver Koppell and Annabel Palma introduced the legislation, and Bronx Borough President Ruben Diaz Jr. supports it.

One force behind the bill is the Retail, Wholesale and Department Store Union, whose members would be beneficiaries of the proposed law. The bill has 28 sponsors, and needs 26 votes for a majority on the 51-member council. The council would need 34 votes to override an expected veto by Mayor Michael Bloomberg.

Bloomberg has criticized the plan, saying, "It's a nice idea, but is poorly thought out and will not work."

Hurting the Poor

How would the new law operate? It would require firms that accept $100,000 in city subsidies to pay higher wages for some jobs than they pay now, or risk losing the subsidy money.

Not only would the construction contractors be required to pay the "living wage," but later any employees in the development itself. So cashiers and retail workers at a shopping mall would also be paid "living wages."

The prospect of higher construction and operating costs likely would stifle development.

This misnamed variant on the minimum wage would be particularly detrimental to low-skill workers, because the gap between their wages and the "living wage" is greatest. Employers would have an incentive to lay off low-skill workers and replace them with more experienced and skilled hands.

According to University of California (Irvine) economics professor David Neumark, "the adverse effects of living wages fall more heavily on the least-skilled individuals, who are least likely to be employable after a mandated wage increase is enacted." In other words, because a "living wage' is essentially a tax on low-skill labor, less of it is hired.

The truly insidious aspect of the "living wage" movement is that the purported beneficiaries are the losers. The people primarily harmed by the legislation are the poor and the young, those who would otherwise willingly work for less than $11.50 an hour because it is better than the alternative: earning nothing at all.

Job markets are dynamic, and workers earn more with greater experience. Take away initial job opportunities and the "living wage" movement condemns millions of young Americans to unemployment, a loss of opportunity and a lesser future. Young Americans living under the "living wage" movement face horrible choices: accept unemployment and limited opportunities; work illegally and risk getting caught; or move to a more enlightened community.

Admittedly, most cities now face financial shortfalls, but the “living wage” contributes to their dismal fiscal situations by raising the cost of employment for municipal employees and contractors. Just three examples: Boston, which has a "living wage" of $12.79 an hour, has a budget shortfall of $42 million. San Francisco, with a "living wage: of $11.54 or $12.33 an hour, has a gap of $483 million. Chicago, with a "living wage" of $11.03 per hour, has a gap of almost $655 million.

Paying contractors a "living wage" adds to cities’ budget pressure, because they can no longer save money by contracting out jobs and relying on more-efficient private firms. Expanding such a requirement, hence raising employment costs, would increase the deficit and raise New York's unemployment, now at 8.3 percent statewide and 9.2 percent in the New York metro area.

New York has stood up to terrorists, looked them in the eye and proclaimed that it will not be defeated. The city should have little trouble standing up to bullies who would make life harder for young and unskilled workers. It is time for New York to stand tall again and defeat further "living wage" legislation.

Diana Furchtgott-Roth, an adjunct fellow at the Manhattan Institute, is former chief economist of the U.S. Department of Labor.



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