LICP Seeks To Balance Community Growth
Effort Underway To Guide Neighborhood Evolution
The LIC Partnership applied for and recently received a grant to explore approaches through which government and business can work together to develop the LIC neighborhood in a communal way. The press release said the goal was to:
“…bolster economic productivity, help residents overcome barriers to economic opportunities, and strengthen social and physical infrastructure by working with local and regional stakeholders.”
The $100,000 grant was given by the New York Regional Economic Development Council.
The study is designed to address approaches to enabling the measured growth of multiple categories of human endeavor including residential growth, office growth, commercial growth, industrial growth and cultural growth. And based on some of the comments I heard at the LIC Partnership Industrial & Commercial Incentives & Financing Business Breakfast, I believe the plan may also includes attempts to maintain some measure of ethnic and income diversity within the community.
How To Design Incentives Toward The Maintenance Of LIC's Diversified Community
One of the panelists noted that generally what happens in real estate development is that everyone seeks to convert their real estate holdings to the highest price per square foot use. In NYC this currently leads to the conversion to residential housing.
Over time one of the problems that evolves is that the neighborhood loses some of its desirability as residents must start traveling longer and longer distances for basic amenities such as dry cleaning, groceries, recreational shopping and dining - as well as to go to work.
Hence, to that end the LIC Partnership put together some panels and working groups to help those in the industrial and commercial real estate development categories find government sponsored programs and financing designed to incent them to maintain, evolve or create space that supports a diversified mix of real estate capacity within the Long Island City neighborhood.
Click here to read our report on the LIC Partnership Business Breakfast On Industrial & Commercial Incentives and Financing.
WORK IN PROGRESS
LICP Seeks To Balance Community Growth
Effort Underway To Guide Neighborhood Evolution
I trudged my way through the snowy walks of Long Island City, from the Court Square subway station to the Con Ed Learning Center. A relatively light snow had fallen overnight and it was quiet, pleasant but cold outside.
The Con Ed Learning Center is located along the East River, off Vernon Blvd just south of the Queensboro Bridge. It has a beautiful view of the Manhattan skyline, which I went out to enjoy after the program.
Food and coffee were being served in the foyer where the attendees congregated over sips, and nibbles on bagels and baked goods. Inside the auditorium there were tables of literature provided by a few exhibitors including our host, Con Ed, and one of the main sponsors, the Flushing Bank. Representatives of these firms and a few others were on hand to answer questions related to some of the programs that would be discussed this morning.
Elizabeth Lusskin Provides Summary Of LIC Statistics
It wasn’t long before Elizabeth Lusskin, President of the Long Island City Partnership [LICP], rose to the podium and began the session. Elizabeth has been the LICP President for over a year and has been a quick study with respect to taking command of the key metrics of economic activity and development in the LIC area.
Elizabeth began a staccato performance, telling us that there are 363 businesses in the LIC area. There are 29 arts and cultural venues, 150 restaurants and cafes, and 24 hotels with another 17 more hotels in the planning stages. She went on to talk about the transportation available including 13 bus lines, 8 subway lines and two airports in Queens, one of which is only miles away. And since 2007 over 8,000 residential apartment units have been built. She also noted that another 18,000 apartment units are in planning or under construction.
Elizabeth told us that there are about 70,000 residents living in Long Island City. After the program I inquired why this population estimate differs significantly from the 2010 U.S. Census count of about 20,000 residents. A LIC Partnership representative explained that they used the catchment area for the presentation, meaning the surrounding area served by the businesses. The representative also informed me that the U.S. Census was the source for the following information and that it was generally based on the LIC catchment area as shown on the map below.
Elizabeth went on to inform us that there are 6,300 businesses operating in Long Island City and that they employed 93,000 people. Of this total she said that 2,100 were industrial businesses and that they employed 39,500 industrial employees. And she noted that there are about 44,000 students attending two institutions of higher learning.
The two institutions of higher learning, which Elizabeth referenced in her speech, were the CUNY Law School next to Citicorp, and LaGuardia Community College just off the Queensboro Bridge. The CUNY Law School is a three-year program wherein about 150 students enroll each year – thus there are between 400 and 500 full time law students in Long Island City. And in the 2013 – 2014 school year, LaGuardia Community College enrolled 19,770 full-time students and 63,696 people had enrolled in one or more classes. Thus it appears the 44,000 figure quoted above was an effort to create a measure of equivalent full time enrollment.
Elizabeth wrapped up her speech with a brief summary of why Long Island City is doing so well. There are a number of construction companies based in LIC, so building skills and materials are readily available. There’s good transportation with multiple subway and bus lines and airports. The geographical location of the neighborhood is desirable. And over the long haul, the Cornell Technion education facility on Roosevelt Island should prove beneficial. She ended by noting the development trends in the area which included the transformation of industrial real estate to commercial real estate, and commercial to residential, as owners sought to maximize the return on their investment by obtaining zoning for the highest price per square foot.
And with that as the background, we began to hear from the panel of speakers. The map above right was provided by the LIC Partnership representative.
Panel Speakers: LICP Industrial & Commercial Incentives & Financing Breakfast
First to speak was Adam Friedman, Director of the Pratt Center for Community Development. Adam’s specialty is sustainable communities including urban manufacturing and sustainable business development. He is working to help retain manufacturing jobs in NYC.
Adam started by telling us that it’s been his experience that generally government officials will opt for housing today versus jobs tomorrow. He told us that the reality of real estate economics is that the high rent uses will push out the low rent uses. Hence manufacturing generally gets pushed out of high value urban neighborhoods as they become gentrified and with it, the attendant middle and low income jobs.
After the meeting I did a bit of follow up research. A New York Government websites provided the following context. Manufacturing jobs on average pay $51,000 – while service sector jobs pay about half that. And manufacturing jobs constitute between 10% and 14% of New York jobs [the percents reflect different estimates of the websites]. In any case, manufacturing jobs are a significant portion of the NYC economy and provide good income. One of the sites noted that they also represent an avenue of upward mobility into the middle class.
Adam went on to say that the sources of employment need to be factored into developing communities. And he ended by noting there are signs of light in this direction as a recent NYC Council zoning platform / resolution announced in November 2014 called for ‘real’ mixed use zoning, the protection of industrial zoning, and the initiation of zoning for the creative economy. The creative economy was described as technology, media arts and design.
NYC's Value Proposition: High Real Estate Prices Offset By Skilled Labor Pool, Advanced Production Techniques & Financial Incentives
The next panelist to speak was Kyle Kimball, President of the New York Economic Development Corporation [NYEDC]. He started by telling us that the goal is to keep companies in the city and encourage the creation and growth of new ones.
Kyle noted that New York City loses industrial and manufacturing companies to nearby states like New Jersey and Pennsylvania because of the high price of NYC real estate. He said that NYC can compete by maintaining its overall value proposition for new and growing companies.
The overall value proposition includes not just the cost of real estate, but also access to skilled labor and the use of advanced manufacturing techniques. Advanced manufacturing techniques can reduce the amount of space required to produce something. While New York City cannot match the price of real estate in surrounding states, it can compete effectively on providing access to a highly skilled labor pool and provide economic incentives for the acquisition of advanced manufacturing techniques. He went on to give examples in the jewelry making business in Brooklyn and Queens.
Kyle concluded by saying that currently the real estate math favors residential buildings. But the government can balance this growth with the maintenance or construction of commercial and / or industrial space, by providing economic incentives. The latter two categories provide jobs which the residents need to earn a living. If the commercial and industrial companies exit, the new residents will have bought into a neighborhood with deteriorating job prospects, which will eventually lead to the necessity of longer commutes for jobs and amenities, and hence to a lower quality of life.
NYC's Challenge: Maintaining Its Ethnic & Income Diversity
Seth Pinsky, Executive Vice President of RXR Realty, said that the real estate crisis currently faced by New York City is because the city is doing well. People and companies are coming to New York again because they want to be here.
I looked up the historical NYC population estimates on Wikipedia to see how the well the city is doing, using population growth as the metric.
• 1970 the city had a population of 7.9 million
• 1980 (-.8) the population had declined to 7.1 million possibly due to NYC civil unrest and NYC financial problems, and a stagflated national economy
• 1990 (+.2) the city had started growing again to 7.3 million
• 2000 (+.7) NYC population had grown to 8 million likely due in part to a strong national economy and significant reduction in city crime
• 2010 (+.2) the city had grown to just 8.2 million, possibly impacted by 911 and the 2008 financial crisis
• 2013 (+.2) the population of NYC was estimated to be 8.4 million
Seth told us that because of the increased demand and prices for space, certain commercial / industrial sectors of the economy and the associated demographic employment populations are being impacted in ‘real’ ways. As prices rise, the lowest profit performing businesses and the least skilled laborers get squeezed the most [eg. priced out of the market].
He noted that the focus has to be in those places where the problem is most acute. He said that:
“… economic stratification and ethnic diversity are our strength and we need to preserve them …”
Seth suggested several approaches which I understand to be under discussion by city and state government officials. The first is Land Use.
He noted that it’s important for government to strengthen the protections for the Industrial Business Zones [IBZ] so that these areas are not converted to hotels and residences. He told us that numerous callers have told him that they want to convert their zoning from industrial to residential so they can close their businesses and become landlords or just cash out. He said this reduces the job availability in NYC neighborhoods.
NYC's Challenge: Middle Income Jobs & Affordable Housing
Seth noted that affordable housing is a real challenge in New York City with real estate prices being what they are relative to incomes. Truly affordable housing is not supported by the market dynamics, but everyone recognizes it serves a public good by enabling low and middle income workers to live within reasonable commuting distance of their work and to be members of the communities they serve.
I understand that the categories of low and middle income workers are defined as including wide swaths of the population including teachers, firemen, construction workers, restaurant dishwashers and cooks, artists, maintenance people, retail service people, manufacturing employees, policemen, office workers, transit workers – to name just a few.
Seth went on to say that the market dynamics also did not support the preservation of lower and middle-income jobs. He cited a case where the NYS government stepped into make the economics work. The case he cited was Fresh Direct, where the NYS Governor provided the company with $127 million in tax breaks to keep Fresh Direct in NYC and to help them expand their headquarters and operations in Harlem River Yards in the Bronx. He said the deal kept 2,000 jobs in the city and paved the way for the growth of another 1,000 jobs over time. Many of these would be lower and middle income jobs.
NYS Regional Councils Support Training & Infrastructure
The next panelist was Joseph Tazwell is the Regional Director of NYC Empire State Development [NYCESD]. He started by telling us that the NYS Regional Council was created in 2011 by outlining 30 development zones in New York State. These development zones are part of an effort to move from top down planning, to a bottom up approach. Carol Conslato, Director of Public Affairs for Con Edison and Queens Borough President Melinda Katz are two representatives for the Queens development zone on the NYS Regional Council.
NYC Empire State Development [NYCESD] is looking to provide residents with upward mobility by providing training for technology and 21st century jobs. Joseph talked about an NYC Regional Council deal done with Per Scholas and Doran Jones. Per Scholas is a training company and Doran Jones is a software consulting company. They are expected to create 450 new jobs in the Port Morris area of the South Bronx by Per Scholas training applicants from lower income neighborhoods, who upon graduation, will then be hired for technology consulting jobs by Doran Jones. Joseph also talked about linking CUNY technology programs to employers seeking tech workers.
Joseph told us that one of the challenges for NYC is its aging infrastructure. To that end there are $2.7 billion in infrastructure projects either underway or in planning. Among them is something to do with JFK Airport cargo as well as another to do with the Brooklyn Navy Yards. They also helped Steinway & Sons in Queens by providing grant funds for a new product line for them. And they are working on something to help with a Queens technology incubator / start ups.
He concluded by saying that New York State is working to help New York City.
LIC Industrial & Commercial Real Estate: Financing & Incentives
Elizabeth Lusskin started the discussion segment of the panel by talking about the retention of a Brooks Brothers facility in LIC. Brook Brothers staying in LIC means the area retained 200 jobs. She said that the intention wasn’t just to start companies here but to keep them here as they grow. She noted that obtaining zoning changes can take a long time.
Kyle said that mixed use zones frequently don’t achieve the objective of being mixed, because all of the real estate owners want to zone / build to the highest priced use per square foot. He opined that the Industrial Business Zones were likely the key to containing this move, but rhetorically asked how the two zoning uses could be reconciled. He also noted that the political and economic pressures right now all point toward more affordable housing.
Kyle went on to talk about two different classes of industrial use. These included the creative class like those in new media and the traditional manufacturers. He said the real estate would likely go toward the creatives because those are likely higher income and future jobs. He noted that the market fails when it comes to diversification and preservation. Hence the question becomes how does one preserve and modernize real estate while accommodating big changes. One of the ways he told us would be for manufacturers to begin designing their processes for vertical, rather than horizontal structures.
Universal Broadband & Universal Pre K: Good For Queens Business
Elizabeth said that something that’s good for all industries would be to provide broadband internet access in the Industrial Business Zones.
Adam said that over the long haul Universal Pre-K is going to be good for business. It will improve the city’s competitiveness by providing a higher skilled labor force. He referenced the growth of incubators at MIT in Boston. He said that the research and development groups were near craving to have easy access to manufacturing people as the lines between pure research and production are blurring.
He talked about an artisan who made custom aesthetic lamps. And how the skills used to design and produce such lamps were of high value.
NYC Mixed Use Zoning: Doesn't Stay Mixed
Seth said that Mixed Use zoning is a good concept but that over time it kind of doesn’t work because the market gravitates toward the highest per square foot use. This makes staying in NYC a challenge to the industrial sector which has larger space needs and lower per square foot profit margins. But he noted, it’s good for the community to have industrial capacity within the city as it facilitates other economies. He gave the example of the concrete makers in Long Island City. He said this is good for builders because of the proximity. There’s a ripple effect through the local economy.
Affordable Housing In NYC - Lower Manhattan In The 1980's
As for affordable housing, he noted that back in the 1980’s there was a severe shortage of affordable housing and a glut of old office space in Lower Manhattan. The government put in place incentives to convert the space from office to residential and [I’m not sure I have this right but …] I believe he said that some 15 million square feet were converted from office to residential since then, and now there’s a shortage of office space in Lower Manhattan.
Elizabeth said that there was a 25% office vacancy rate back then which is what the policy was designed to address. And she also said that the residential conversions accelerated after 911. What needs to be included with the implementing of these policies is the monitoring of them because things change.
New York City & State: Regional Real Estate Development
Joseph said that people need to look at things from a broader perspective – like regionally. He told us that the Brooklyn Brewery now produces a fair amount of their product for export. Hence the Brooklyn Brewery was looking into the possibility of setting up a facility in Staten Island because of its proximity to the shipping ports. He also included references to the Hudson Valley and Long Island.
Kyle said his office currently has money to invest and encouraged the audience to contact his office. He said the biggest challenge facing his office is getting in contact with those who could use their help.
NYC & NYS Business Development Financing & Incentives
Robert S. Altman, an attorney and Principal of a firm bearing his name, took the podium to briefly describe some of the government sponsored and private financial assistance programs available to business owners / entrepreneurs. They included:
- Iindustrial and commercial tax abatements
- Commercial expansions
- Commercial tenants renewals or expansions
- Energy conservation
- Re-location tax credits
- Industrial Business Zone Tax Credits
- Training grants
- Financing for offices
- Biotech and film tax credits
- NYS payroll and benefit tax credits
- NYSERDA and Con Edison energy programs and incentives
Lastly he said the federal government is also interested in helping NYC businesses via loan programs, accelerated depreciation and incentives to hire disadvantaged workers.
We then broke out into workshop sessions, at which point I departed - my head swimming with information.
Many thanks to the LIC Partnership for organizing this event and to the Con Edison Learning Center in LIC for hosting it. And to the Flushing Bank for providing literature about some of the programs discussed at the meeting, in which they participate.
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