New York City’s new law mandating a dramatic reduction in carbon emissions coming from buildings leads to a split verdict. The widely touted good news: New York City will be leading the nation and the world in forcing its building owners to comply with extremely ambitious carbon emissions criteria.
The overlooked bad news is that New York City, which has the largest concentration of major buildings in any city in the world, is imposing draconian requirements which are both short sighted and highly destructive to not just the real estate industry in New York but every other major industry that currently forms the economic foundation of this great City.
This legislation is just the latest in a series of anti-business and anti-competitive actions, the cumulative effect of which is rapidly destroying the viability of New York City as a leading global economic center.
There is a real concern that between New York State’s and New York City’s taxing policies, and the anti-business actions taken at both the city and state level by their respective legislatures, New York City is in a serious tailspin which will be extremely difficult if not impossible, to reverse.
Historically, New York City has had its ups and downs over the course of the last 50 years. Not that long ago, New York City was the industrial capital of the country, with industries ranging from machinery, manufactured products, garment manufacturing, commodities processing as well as being the major port for the United States and the headquarters to many of the Fortune 500 companies in the country. That all changed and New York City went into a severe decline, hitting its rock bottom in the late 1970’s.
With great effort and intelligent and inspired leadership from the private sector, New York City though diminished, reemerged and has been able to sustain its position as America’s preeminent city. This was accomplished, in significant part, by not over taxing those existing industries; by not creating a hostile environment between and among various businesses and industries and the city itself; and by politicians who finally realized that they had to have a welcoming environment for business. Notwithstanding all of that, what really allowed New York City to remain relevant was not the most hospitable business environment but rather its ability to provide various white collar industries with an unmatched pool of talented young professionals.
However, increasingly that demographic is being drawn to other parts of the countryThe best and the brightest young professionals are no longer looking at New York City as the most desirable place to start their careers, due to a combination of poor government, over regulation and over taxation. Rather, areas like North Carolina, Florida, Tennessee, and Texas are now magnets for this demographic because of the advantages they offer in tax relief, low cost housing and potential jobs with burgeoning new businesses that don’t particularly need to be located in New York City. It would have been unthinkable even a decade ago that New York City would lose out on a major employer like Amazon to Nashville, Tennessee.
Exacerbating this trend, as the businesses flee New York City, the tax base is being eroded and there will be less economic resources available to support social programs and the public museums, parks and other activities that have historically drawn young people to New York City.
It is in this context that legislation like Local Law 97, as laudable as its goals may be, must be examined. There are several key industries that currently sustain New York City. Among them are the financial industry, which no longer has any particular need to be in New York City; the real estate industry, which is wholly dependent on the economic viability of New York City and which will be severely and negatively affected by Local Law 97; the healthcare industries which likewise will be severely adversely affected by Local Law 97; the burgeoning high tech industries, which will only be sustainable if the pool of bright young professionals can be convinced to stay in New York City; and the institutions of higher learning which will also be adversely affected by Local Law 97. With Local Law 97 imposing draconian penalties on major real estate holdings in New York City the net effect will likely be to accelerate New York City’s economic decline.
Those of us who lived through the decline of New York City in the 1960’s and 1970’s will recall that New York City “came back” through a combination of inspired private sector leadership and lack of alternatives for our financially oriented businesses to relocate elsewhere. We do not have those factors to rescue New York City this time around. Instead, we have a government at the state and local levels which is comprised mainly of individuals who believe that they can continue to over tax and overregulate both businesses and individuals and that no matter what they do, New York City will miraculously bounce back. Similarly, we do not have the Felix Rohatyn’s, John Zuccotti’s, John Whitehead’s and David Rockefeller’s who were all committed New Yorkers and who along with many others, went above and beyond to rescue New York City.
I sincerely hope that my perspective on this situation is incorrect but, unfortunately for the City that I truly love, unless serious and significant changes happen now, this City will quickly and dramatically be permanently diminished and become a mere shadow of its former self.
Michael K. De Chiara is a senior partner at Zetlin & De Chiara LLP, a law firm focused on Construction Law
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