Wednesday, September 20, 2006

Why New York City Needs Industry

[I presented the following testimony at the City Council on September 18 in support of Resolution 141, which would create a new zoning category, Industrial Employment Districts, to protect New York's remaining 230,000 industrial jobs. While the specific zoning changes are somewhat technical, the testimony focuses on the larger issue of why the City needs to do more to preserve industry. I'm posting it here to help explain why the WFP takes industrial retention throughout the state so seriously, and point out some of the specific problems facing industry in New York City.]

Chairman Avella, Councilmember Katz, other distinguished members of the Council. Thank you for allowing the Working Families Party to offer our testimony in support of Resolution 141.

I am the Policy Director of the Working Families Party, a community-labor political party that has been active in New York City for the past eight years. All of you know the WFP; most of you have run on our ballot line. And you know that our core commitment is to good jobs for New York’s working families.

In our opinion, Res. 141 is an important step forward in preserving and creating good industrial jobs here in New York City. It is supported by many of the unions and community groups affiliated with the WFP. We urge you to pass it promptly.

Industrial retention is a long-standing concern for us in the WFP. We were here in April 2005 to urge a vote against the proposed rezoning of industrial areas in Greenpoint-Williamsburg. Before that, we were here to testify in support of Intro. 242, which would create a Business Relocation Fund to discourage irresponsible conversion of industrial buildings to residential use and offset the costs of relocation for industrial businesses. We opposed the rezoning in Hunters Point, and supported giving the Council power to review decisions by the BSA to grant variances in industrial zones. Those of you who have sought the WFP endorsement may recall questions from us on many of these issues.

So preserving New York City’s industry has long been important to the Working Families Party, and it will continue to be a central issue for us in the future. There are several reasons for this.

  • Industry is important to our affiliates. Several of our affiliated unions – most notably UNITE HERE – represent large numbers of industrial workers. We stand with them 100 percent in their fight to protect their members’ jobs. And for community groups, especially those representing immigrants, industrial jobs are often their members’ best chance to enter the middle class.
  • Industry is a powerful engine of job creation. True, industry represents a relatively small fraction of the city’s employment today. But according to the New York State Department of Labor, manufacturing has an employment multiplier of 3.04, meaning that for every manufacturing job created, two additional jobs are created in other sectors.[1] Similarly, every manufacturing job lost costs us two additional jobs. By contrast, leisure and hospitality – to pick one example – has a multiplier of only 1.5, meaning that each job creates only half a job in other sectors. Clearly, an economic development strategy that focuses on tourism will deliver less bang for the buck than one that also addresses the needs of industry.
  • Industry is important to a robust city economy. In recent years, New York has become highly dependent on a handful of sectors, especially finance, insurance and real estate, or FIRE. This has left us vulnerable to the ups and downs in the stock market. Just a few years ago, with the end of the dot-com bubble, we saw how easily an economic monoculture goes from boom to bust. A more diverse economic base will help us better weather the next financial downturn.

But without action to preserve our dwindling stock of industrial space, New York will continue losing industrial jobs. During the 1990s, the United States as a whole saw manufacturing employment decline by 3 percent, but New York City lost a full third – 33 percent – of its manufacturing jobs. Over the same period, national employment in wholesale trade, another key industrial sector, increased by 13 percent in the nation as a whole, but declined by 15 percent in New York City. These losses were not inevitable. Those industrial businesses that could easily relocate, or that had no compelling reason to be in New York City, have already left. Those who remain can succeed here, and want to be here. The problem is a lack of stable industrial space.

Rezoning of industrial areas for commercial and residential uses, with the accompanying increased rents and real-estate speculation, has been a, perhaps the, major contributor to the decline of industry in New York City. Yet to the extent the City has attempted to preserve industrial jobs, its tools of choice have been tax incentives and subsidies. Most manufacturers and industrial-retention advocates agree that these approaches cannot be effective in the face of an absolute shortage of suitable industrial space. If the City does not simultaneously take steps to preserve industrial zoning in areas of major industrial employment, subsidies to industrial employers simply contribute to the increase in rents and do nothing to preserve jobs.

Res. 141 will help resolve this dilemma by creating a new zoning category of Industrial Employment Districts. These districts will strengthen and clarify the rules for existing industrial-zoned areas where there are high concentrations of jobs, giving businesses the security they need to invest and expand. And they will reduce the temptation for property owners to jack up rents, sign short leases, or hold property vacant, in the hopes of converting to a non-industrial use. By encouraging investment by industrial businesses, it will help create good jobs for New York’s working families.

I am not going to go into the details of the bill, except on one point. We believe it should be amended to map those areas currently included in Industrial Business Zones. Other than that, I’ll leave the details to other speakers, who are better versed on the specifics. Suffice to say, we at the Working Families party have given Re. 141 careful consideration and support its prompt passage.

[1] New York State Department of Labor, “Understanding the Multiplier Effect,” Employment in New York State, April 2005


Daniel Millstone said...

As I see it, one of the key pressures on industry in NYC is that people keep moving into neighborhoods which are zoned for industrial uses. They do this because housing is less expensive in industrial zones. From this I conclude and suggest that if we want to keep any industry in NYC, we need built a lot more housing affordable for people with low or moderate income.

Without affordable housing in residential zones, all industrial zones will be surrounded by people in lofts and apartments. Soho, Tribeca, Greenpoint, Williamsberg, Hunts' Point are all formerly industiral neighborhoods in which residential uses increase every day. If we want industry, we've got to produce housing.

industrialist said...

Well-put Daniel. That's why this proposal would allow residential development to go ahead in other areas, thus making the real estate market more predictable for the residential and industrial side alike.

Scott T. said...

Ah, yes, but if more residential development is going to happen in already residential areas that means, by definition, existing neighborhoods must be knocked down and built up to greater density. Given the opposition Atlantic Yards is receiving (which is development that is only partially replacing existing buildings, and partially building on the rail yards), I just don't think this is a viable option.

So long as the cost of shipping stuff into the city is smaller than the increased space+labor cost of producing it here, industry will choose to locate outside of the city. I'm not convinced zoning is the issue -- it might keep some space cheaper for industry (since it'll not be allowed for other uses) but all that does is make the remaining residential space even more expensive ... so is even higher housing prices worth subsidizing NYC industry through policy? I'm not convinced.

Scott T. said...

I will agree that the speculative real estate practices hurt everyone except investors and policy that counteracts that to some degree might be helpful. I'm not sure this is it.

JW Mason said...

Daniel, you're right that residential conversions, often illegal, are a big problem for industry in New York, but that's not what this bill addresses. (I should have been clearer in the post.) What it does is create new Industrial Employment Zones in certain areas already zoned industrial. This has two effects: first, it bans certain uses that are currently allowed in industrial zones -- big-box stores, hotels, and certain office buildings -- and second, it limits future changes to non-industrial uses. So in this case, the tradeoff is not between industry and housing. And of course plenty of industrial land is being rezoned residential. The goal here is just to preserve industrial zoning where there are the msot successful firms and industrial jobs. (The vacancy rate in these areas designated for IEDs is very low -- below 5%, I believe.)

Scott T., I agree that there is a much larger set of questions about how to increase New York's supply of affordable housing, but it's hard to argue that the city's relatively small remaining industrial areas are the main obstacle. Increasing density in existing residential neighborhoods is certainly not always a bad thing -- New York's high density, after all, is one of the main things that makes it such a great city. The larger problems, IMHO, include income inequality and the speculative real estate market, both national problems that are particularly extreme in NYC.

I'm delighted to see such thoughtful comments here. I'm going to start posting on the WFP's positions on various issues regularly, so check back!

Bosank said...

I noticed over at Zoning for Jobs that Waste Transfer Stations would also be listed as an "imcompatible use" in these sectors. Does anyone know why? Without seeing a map of where these zones would be, the cynic in me thinks this might be some elaborate scheme for the UES to try and stave off the waste transfer station that they've been fighting tooth and nail.

Perhaps my cynicism is baseless though. Anyone got a link to a map of the proposed areas?

JW Mason said...

Bosank, the intention is for the Industrial Employment Zones will be applied to areas already designated as Industrial Business Zones. The Mayor's office has a schematic map here; I have a more detailed map that I will upload if I can figure out how. As you can see, there are no zones on the Upper East Side.

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