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City Council to Pass Bill Capping What Food Delivery Apps Can Charge Restaurants, Sponsor Says


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Restaurants are struggling to survive during the lockdown (photo: Benjamin Kanter/Mayor's Office)


As New York City’s mom-and-pop restaurants struggle to survive in lockdown conditions owing to the coronavirus pandemic, the New York City Council appears poised to help them cut costs by passing a bill to cap fees charged by third-party delivery services, which have proliferated in recent years via phone apps.

Small restaurants that cannot afford delivery workers or have recognized the popularity of the apps rely on the third-party services like Grubhub, Seamless (which is owned by Grubhub), DoorDash, and Uber Eats, which charge significant fees that eat into an establishment’s profits. Those fees, hidden from customers who use the services, can include charges for processing, delivery, and commissions, and can end up hurting, rather than helping a food establishment’s business.

A particularly harsh example made waves on social media when a pizza restaurant owner, Giuseppe Badalamenti, in Chicago posted details of a Grubhub invoice on Facebook. Orders that totalled about $1,042 over the month of March only netted him about $376 after Grubhub took its cuts. “Stop believing you are supporting your community by ordering from a 3rd party delivery company,” Badalamenti wrote on Facebook in a post that went viral.

Grubhub defended the fees in a statement to the Chicago Tribune. “Restaurant owners select the services they want and only pay a commission to Grubhub when we help generate sales. Grubhub is happy to work with restaurant partners to help them manage costs and grow their business,” the statement said.

Restaurant owners and trade associations in New York City have been complaining about the fees charged by the app-based delivery companies for some time, with the temperature significantly raised amid the coronavirus shutdown wherein restaurants are only allowed to offer delivery and takeout. “The third-party delivery platform situation was a crisis before we were in this crisis,” said Andrew Rigie, executive director of the NYC Hospitality Alliance, in testimony before a remote Council hearing on the bill on April 29. “What companies like Grubhub and Seamless are doing is using sophisticated techniques to basically extract as much money as possible out of businesses pre- and during this pandemic.”

The bill before the New York City Council, which its lead sponsor says will soon pass, will limit any fees charged by a third-party delivery service at 10% of the total purchase price of an online order.

The bill was introduced by Queens Council Member Francisco Moya in February, well before the coronavirus made it a far more urgent issue, and has since been amended to account for the pandemic. In the case of a declared public emergency, the bill limits delivery fees to 10% and prohibits any other fees. The law would go into effect immediately and carries a hefty $1,000 penalty for each violation. Moya told Gotham Gazette the bill will be voted on and passed at the next full meeting of the City Council, which was originally scheduled for May 5 but has been recheduled for May 13. "Yes," Moya said, when asked if the bill will be voted on and passed by the full Council (it will have to be passed in Council committee first).

A spokesperson for Council Speaker Corey Johnson declined to comment for this article.

When the outbreak began, Moya and others were somewhat optimistic that delivery service companies would come to the aid of small businesses. On March 13, Grubhub had announced that it would temporarily stop collecting commissions of up to $100 million, and set up a charitable fund for drivers and restaurants in several cities, including New York, San Francisco, Boston, Portland and Chicago, where the company was founded and is headquartered.

“Independent restaurants are the lifeblood of our cities and feed our communities. They have been amazing long-term partners for us, and we wanted to help them in their time of need. Our business is their business – so this was an easy decision for us to make,” said Matt Maloney, Grubhub Founder and CEO, in a statement at the time. 

But, as Badalamenti found out the hard way, Grubhub is still making a tidy sum off commission, delivery, and processing fees. His invoice also included charges for promotional services that he chose.

“There’s a word for things that feed off the lifeblood of others and that’s of course is leeches,” Moya said in a phone interview. “Grubhub is still coming after these [restaurants], and they’re gonna suck them dry if we don’t help level the playing field.”

He added of his district that includes Elmhurst, Jackson Heights, and Corona, “I represent an area where it’s a large immigrant community. These are small family-owned restaurants. They can barely afford to keep the doors open, let alone sustain the fees that they're being charged.”

Inquiries to Grubhub went unanswered. Harry Hartield, a spokesperson for Uber Eats said in a statement, “Restaurants have the option to choose different services at different commission levels. With Uber Eats, they can choose to pay a lower commission and pay for full-time delivery people themselves. Many restaurants don’t have the resources to do that and they choose to have Uber Eats cover all the costs and logistics of delivery. This law would simply shift the costs back onto small, local restaurants who can afford it the least.”

A DoorDash spokesperson made a similar argument, noting that the company has cut commissions in half for small restaurants as part of a $100 million effort at commission relief and marketing support. “Unfortunately, an arbitrary cap could limit the services we can provide to local restaurants and ultimately hurt couriers who need these work opportunities more than ever,” the spokesperson said.

The bill doesn’t yet make a distinction between those different types of arrangements. For instance, restaurants with their own delivery workers and those that rely on the service’s delivery workers would be subject to the same cap. Moya did say, however, that final negotiations about the bill are ongoing before it is passed, and that it could be tweaked to separate caps on delivery fees from caps on commission and processing fees. The bill has 14 co-sponsors so far in the 51-seat Council.

Moya’s bill is also part of a larger package of regulations regarding third-party food delivery services that were the subject of the remote hearing on April 29, held jointly by the Committee on Consumer Affairs and Business Licensing, Committee on Small Business, and Committee on Housing and Buildings. Other proposed measures include requirements for disclosure to consumers of the fees and commissions charged to restaurants as well as requiring a license from the Department of Consumer and Worker Protection, among other bills.

Bronx Council Member Ritchie Torres said on Twitter the bills aim to “protect struggling restaurants from outrageous fees from food delivery apps & to ensure delivery workers receive their well-earned tips in full. We must protect restaurants so they’re able to return & thrive."

In the virtual hearing, Amy Healy, a Grubhub representative, called the bills an example of “government overreach.” Brooklyn Council Member Justin Brannan pushed the company to voluntarily commit to a fee cap, but the company said that would force it to operate with losses. “Restaurants may have been deemed ’essential’ during #COVID19 but it ain't peaches & cream. They are all struggling to make ends meet with take-out & delivery as their only means of staying afloat. NYC must institute an emergency 10% cap on all delivery apps,” Brannan tweeted.

Other proposed measures include requirements for disclosure to consumers of the fees and commissions charged to restaurants as well as requiring a license from the Department of Consumer and Worker Protection, among other bills.

“[M]y agency and administration, generally we agree with the issues that the Council is trying to address with these bills,” said DCWP Commissioner Lorelei Salas, a de Blasio appointee, at the hearing. “Given the ongoing emergency and fiscal situation, it would be challenging for us to contemplate taking on a broad area of new regulation. With that said, we want to work with the Council to figure out the best pathway forward and what we can do to help small businesses that most need this help right now.”

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by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.

Note - this article has been updated to note that the next full Council meeting has been rescheduled for May 13. 

City Registers Nearly 30,000 Teens to Vote During 2020 Civics Week


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 Students participating in Civics Week (Mayor's Office)


In March, before the coronavirus pandemic hit, New York City held its second annual “Civics Week,” which sought to pre-register and register high school and college students to vote.

Given the law passed last year by the State Legislature and signed by Governor Andrew Cuomo, 16- and 17-year-olds are now allowed to pre-register to vote, with their registration kicking in as soon as they turn the voting age of 18 and making high schools more ripe for registration efforts.

Gotham Gazette reported on this year’s efforts at the time, but the city had yet to tabulate all the registration information from the many participating schools, and the coronavirus outbreak then complicated everything. But the city has now shared that during its 2020 Civics Week, 29,642 students were registered or pre-registered to vote. In 2019, 18,233 students were registered, making for a 60% increase this year.

According to the city, hundreds of volunteers from city agencies, community groups and nonprofits, and the offices of more than 40 elected officials were out in hundreds of high school and college classrooms helping students register.

Civics Week was introduced by Mayor Bill de Blasio as a collaboration among his new DemocracyNYC initiative, the mayor’s Public Engagement Unit, and the Department of Education, among others, according to Lindsay Acker, Field Director for DemocracyNYC and the Public Engagement Unit. The week is “dedicated to giving our students the tools they need to be active, productive participants not just in our economy, but in our democracy,” according to the city website.

“Civic engagement is important now more than ever. I was proud to help pass New York State's law allowing 16- and 17-year-olds to pre-register to vote because we must empower and encourage our youth to register to vote and be active in our democracy,” said Brooklyn Assembly Member Joe Lentol, in a statement to Gotham Gazette. “Their voices will determine the laws of tomorrow. The success of the student voter registration drive highlights the importance of this program and that of participation in our democracy."

Laura Wood, Senior Advisor and General Counsel for DemocracyNYC, called the Civics Week student voter registration drive “a great opportunity to empower youth” and credited the big jump in registrations through a “tremendous city-wide coordination and outreach effort” with partnership among City Hall, the DOE, elected officials, community-based organizations, and also the city’s Campaign Finance Board, which runs a robust voter outreach effort called NYC Votes.

For those eligible to vote this year, their registration comes just in time to participate in the 2020 presidential election, as well as other general election races for Congress and the State Legislature happening this fall. And many may be eligible to vote in party primaries set for June, depending on their party registration and relevant races in their home districts.

According to the state bill that made 16- and 17-year-old pre-registration law, “age 16 is a sensible time for the DMV and high schools to collect information for voter pre-registration, as it is the time when a significant amount of people have their first interaction with the DMV, and it is an age where school is still compulsory in New York. Pre-registration allows this information to be collected at a convenient time for the individual rather than making them return to the boards of elections or a state agency when they reach eligible voting age.”

“It cannot be overstated how vital it is to our democracy that young New Yorkers make their voices heard,” said Manhattan City Council Member Helen Rosenthal, in a statement to Gotham Gazette. “Five years ago, my office launched Student Voter Registration Day, and thanks to Mayor de Blasio’s DemocracyNYC initiative, opportunities for youth civic engagement only continue to grow.”

The COVID-19 pandemic has changed the way New Yorkers are participating in democracy. Several elections, including the state’s presidential primary, were originally postponed from April to June, then canceled, while many elections remain on the ballot, including congressional and state legislative primaries, as well as a primary for Queens Borough President and a vacant City Council District 37 seat in Brooklyn.

The Democratic presidential primary was controversially canceled after all candidates conceded to former Vice President Joe Biden and state lawmakers included language in a state budget bill allowing the Board of Elections to cancel it, citing the pandemic, though the decision is being challenged in court. The Republican presidential primary had already been canceled after no challengers to President Donald Trump made the New York ballot.

Governor Cuomo has now ordered that all eligible voters be offered the chance to vote absentee in the June primaries, while poll sites will be open in some capacity. Other changes are being debated.

“The coronavirus pandemic has transformed every facet of American life,” said Wood. “The 2020 elections are no exception - from registering to vote to election day. The crisis means that moving to an online voter registration system is sensible and timely, and we hope that the city Board of Elections moves quickly to adopt the Campaign Finance Board's system.”

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by Katie Kirker, Gotham Gazette

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Jails, Affordable Housing and Other Capital Projects Delayed as City Grapples with Cash Crunch


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New York City building projects are on the chopping block (photo: Michael Appleton/Mayor's Office)


The coronavirus fallout has created a severe cash crunch for New York City, forcing Mayor Bill de Blasio to slash his proposed operating budget for the next fiscal year by $6 billion, with more cuts likely before adoption. At the same time, the city’s cash flow problems mean that its capital plan, a four-year, $67.2 billion agenda that pays for crucial, long-term infrastructure like schools and roads, will also need modification and could mean some major changes to how the city will build for its needs over the next several years.

Over this and next fiscal years, the city intends to spend far fewer funds – about $3.1 billion in fiscal year 2020 and $1 billion in fiscal year 2021 – on building new schools, replacing Rikers Island facilities with borough-based jails, affordable housing preservation and development, new police facilities and equipment, and energy efficiency infrastructure. These cuts to planned spending change the timelines for major infrastructure projects, meaning additional leeway for de Blasio’s successor to shape the city’s capital plan when a new mayor takes office in 2022. 

There are several aspects to the complicated capital budgeting process, including the ten-year capital strategy that assesses infrastructure needs for the next decade; the capital budget itself, which includes funding that cannot be exceeded for the coming fiscal year and the three years after it; and the capital commitment plan, which details the actual amount that will be spent on agency projects. Updated commitment plans are released with each iteration of the mayor’s budget.

Most capital spending is financed with long-term borrowing through the sale of bonds, which requires regular payment of debt service (paying back the borrowing and interest incurred), which is included in the annual expense budget. The city’s debt service for the current fiscal year was roughly 11.5% of annual revenue, which is well below the 15% limit that fiscal watchdogs and the comptroller believe should not be exceeded in any given year.

In de Blasio’s executive budget proposal released earlier this month, the administration did not make significant reductions in capital commitments for the current and next fiscal year. Mostly, the administration moved several capital projects into the out-years of the ten-year capital program, between fiscal years 2024 and 2029. 

Some of the changes follow the general pattern of capital budget planning. The city will often move funds to subsequent years if a project does not get off the ground as intended. The city also had a habit of front-loading projects into the first two years of the capital program even though most took several more years to complete, something the City Council pushed back against, achieving some adjustments in this year’s versions. 

Nonetheless, there were some notable changes to capital spending in the executive budget such as on affordable housing, as first reported by Politico New York, and changes to expected spending on the borough-based jails plan. 

Planned capital spending was reduced for the Department of Correction, which was intended to be used for the construction of four new borough-based jails facilities to replace Rikers Island jails. The $140 million budgeted in the current fiscal year was zeroed out, and in the next fiscal year (FY21), the city expects to spend only $196 million, as opposed to $392 million that was allocated earlier. 

The capital budget for the Department of Housing Preservation and Development (HPD) -- which runs the city’s housing programs, including the mayor’s 12-year, 300,000-unit affordable housing program -- was shrunk from $1.48 billion to $902 million in the current fiscal year (FY20) and from $1.19 billion to $741 million next fiscal year. This funding goes toward subsidizing affordable housing, both newly-built and preservation of rent-regulated deals that are close to expiring, as well as supportive housing and more.

On Tuesday de Blasio called the changes to the housing plan “sad” and “horrible” but necessary, and promised that the housing plan would still be completed down the road. 

The Department of Environmental Protection capital budget is seeing some fluctuation, but an overall increase in the short-term, falling from $2.3 billion to $2.27 billion in the current fiscal year and increasing from $2.37 billion to $2.72 billion in the 2021 fiscal year. The Department of Sanitation saw a drop from $463 million to $264 million in its capital budget for the current fiscal year, but will see its FY21 allocation increase from $522 million to $690 million.

The Department of Education will also see a substantial cut this year and next, from about $4.4 billion to $3.9 billion in the current fiscal and then again from $3.6 billion to $3.22 billion in the next fiscal year. Among the things on the chopping block was planned building of new schools, which reduced from $683 million to $458 million in FY20 and $1.28 billion to $1.05 billion in FY21; spending on “rehabilitation of school components” was also reduced from $926 million to $751 million in FY20 and from $510 million to $379 million in FY21. 

Even the NYPD, which has never struggled for funds under the mayor, was not spared. Its FY20 capital spending projection fell from $540 million to $264 million, while its FY21 spending increased from $339 million to $420 million. The shifts include less planned spending on facilities and vehicles.

One of the bigger capital plan cuts is in planned courts spending. The city will only spend $18.2 million this fiscal year, a drastic cut from the $288 million it had planned largely to reconstruct and renovate court facilities. In FY21, spending is also slated to decrease from $539 million in the preliminary budget to $406 million in the executive budget.

Under Speaker Corey Johnson, the Council has taken a particular interest in the capital budget and has pushed the administration to make more realistic projections for the actual amounts of money that will go into projects each year. Johnson created a subcommittee dedicated to the capital budget, which is chaired by Council Member Vanessa Gibson of the Bronx.

“Due to the COVID pandemic, the current priority is to provide support for New Yorkers and continue city services as millions are now relying on social safety net programs to support themselves and their families during the COVID crisis,” Gibson said in a statement. “The capital process will be delayed to focus on health and safety projects to provide relief for residents, but I will be working with Speaker Corey Johnson and Finance Chair, Daniel Dromm to monitor the situation and ensure that our City Council priority capital projects remain at the forefront of our negotiations.”

That also echoes budget experts from the Citizens Budget Commission and the Manhattan Institute who have repeatedly urged the mayor to streamline and reform the capital budgeting process. There has been some progress over the last few years but not nearly enough, they say. 

“CBC has been saying for a while that the capital budget is too large, and the timing of it is unrealistic, and we've urged them to make sure that it's better targeted,” said Sean Campion, senior research associate at Citizens Budget Commission. 

Part of the issues around capital investments currently stem from uncertainty that the coronavirus has caused in the construction industry and for interest rates for government bonds. The city also has no clarity on whether it will be able to meet its debt service obligations – debt incurred by issuing bonds that is paid on the operating budget side of the ledger – as the federal tax deadline was pushed and revenues coming into the city are delayed. Officials in the city and state are waiting with bated breath (and aggressive advocacy) for the next round of federal stimulus funds that they hope will replace many billions in lost revenue. 

When de Blasio was asked by a reporter on Tuesday specifically about the cuts to HPD, he insisted as much. “This is about slowing down some investments and postponing some things,” he said at his daily coronavirus briefing. 

He added, “[W]hen you think about the budget dynamics, we were dealing with suddenly a massive budget gap. We were dealing with a cash flow crisis on top of that. Anytime that you book a capital project, it has ramifications for the budget. Obviously for the expense side of the budget too because of debt service. We had to slow down a lot of capital investments just to be able to make sure we could pay the bills now. And it's really a horrible situation, but that's what we had to do. But the plan is intact and it will be implemented in the future.”

The federal stimulus, he said, would determine the city’s fiscal future. “There'll be tough choices any way you slice it, but the stimulus, if it actually takes into account what has happened here, all the costs, human and otherwise that have been inflicted on New York City and all that's been lost – and including first and foremost the human loss but then, of course, the horrible impact on the budget that's used to provide services to people – if it's really, really heard and understood and acted on, that stimulus could be a lifesaver for us. And if it's not, we're going to be in an even tougher situation, but that's going to then really govern everything else we have to decide in June.”

Campion and Nicole Gelinas, senior fellow at the Manhattan Institute, said the city needs to focus on routine maintenance work, ensuring that the infrastructure that undergirds the city – its bridges, tunnels, streets, and sewers – do not degrade. They also noted that the city is not close to its debt limit yet, so it should be able to cover capital costs through borrowing. “There's no immediate crunch,” Campion said. 

“It could present an opportunity to focus on priority investments, things that need to get done in the short-term, before focusing on longer term resiliency or rebuilding,” he added.

Gelinas said the city’s debt could rise out of control in the out-years if interest rates on long-term bonds go up, though the rates are in flux as the Federal Reserve announced that it is buying up to $500 billion in municipal bonds. Nevertheless, Gelinas said the situation should prompt some introspection from the administration about whether there are more cost-effective options for big infrastructure investments.

For instance, on the jails plan, with its cost reaching as high as $889 million in fiscal year 2022 and $2.1 billion in 2023. “I think they're really going to have to rethink whether they can do this or whether they're going to have to build new jails more cheaply at Rikers Island,” she said. “At least compare the costs of the two and then decide.”

“As we go into deeper rounds of cuts, we just have to protect core tax-generating infrastructure,” she insisted, pointing to the rebuilding of the Brooklyn-Queens Expressway (BQE) as a project that shouldn’t be abandoned. The city will have to push non-essential projects to later years, she said, holding out hope on a federal infrastructure package that could come to the rescue and spur job creation and economic growth. 

Council Member Brad Lander, a Democrat who is running for comptroller in 2021, took that point further, saying the city should take advantage of the fact that it can receive federal stimulus money and should make sure key capital investments are not reduced, particularly if they can boost jobs in the short-term. “When you're doing that, you are investing in the future. You are saying, ‘In order to make investments that are critical at this moment, we're going to incur debt that will have to be paid back in the future,’” he said. If the city commits to investing in affordable housing, it would also build confidence in the market, Lander said.  

Lander insisted that what the city should not do is borrow funds to balance the operational budget, which would require permission from the state Legislature. The mayor has suggested that measure as a last resort. “That's like taking out a loan to buy your groceries,” said Lander. “It's not good to take out a loan to buy your groceries because you’re still going to need to buy groceries next month or next year, and then you're going to be paying for your groceries twice.”

Council Member Helen Rosenthal, a Manhattan Democrat and also a comptroller candidate, expressed a different opinion. Rosenthal said the city should be seeking that borrowing authority from Albany right now. “The fundamental problem right now is we don't have any cash,” she said. “The right thing to do is to borrow money and continue to push Congress and the federal government to get local aid.”

As someone who previously worked at the city’s budget office, Rosenthal noted that the changes to the capital budget are simply routine, with lump sum funding being shifted from one fiscal year to the next, and that it’s too soon to tell if specific projects are going to be left on the cutting floor, and said that’s not really what the focus should be right now.

“If we can’t feed people today, we should be borrowing money to make sure we’re feeding people,” she said.

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by Samar Khurshid, senior reporter, Gotham Gazette
     

Read more by this writer.



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