Congestion Pricing In Manhattan And How It Affects Our Industry

Reuben Levine
Scientific Fire Prevention

I am a business owner who is going to be greatly affected by the congestion pricing program to the approximate amount of $100,000 a year.  This is the equivalent to 2 full-time employees in our operation.  I have a fleet of some 30 commercial vehicles, and our company, Scientific Fire Prevention and affiliates are in the business of fire safety and ventilation management.  We deliver our services to commercial dining facilities throughout the Tri-State, with a vast majority of our over 4,000 customers concentrated in the Five Burroughs, most significantly Manhattan.  Our services are in large part a direct result of NYFD fire safety, EPA pollution control and OSHA regulations to which our clients must comply.  In my estimation, we are talking about 10,000 restaurants and cafeterias in the “Congestion Zone.”

I have been listening closely to the developments of Mayor Bloomberg’s attempt to advance this cause.  At a recent news conference following his Day 1 meeting with Governor Paterson, Mayor Bloomberg pronounced that the time line is short to take advantage of $350 million in federal grants to New York City. Bloomberg went on to say that without this federal funding several important new MTA projects will be placed on hold, to which these grants and the additional tax revenue are earmarked to fund.

I am confused.  I thought the reason for implementing this tax was to make portions of Manhattan, diagnosed with acute vehicular congestion, a more pleasant place for its residents, workers, commuters, tourists and all in between.  If this was the case, why is this a federal matter?  I suspect it has been packaged by a host of worthy causes that span the environmental, social and safety spectrum.  Then, if so, what are the other important municipal programs, tax incentives or legal construct to ensure this tariff is balanced in pin-pointing each citizen benefiting from curing their congested state?

Why are we and all my follow fleet managers, whose commercial plates roam the city day and night to keep our city the wonderful place that it is, being asked to be the conduit through which this tax is being delivered to all of the city’s inhabitants?  Furthermore, where are the small business representatives and lobbyists hiding on this matter?  If it’s costing me $100,000, the cost my customer is going to hand to his or her customer is not “pocket change” when you add me up with all the other guys.

I heard on a news piece on WCBS radio this week that restaurant owners in NYC are growing concerned of the state of the City’s economy.  During this segment, I heard remarks by restaurant owners that large scale financial sector lay-offs, tighter discretionary spending belts and the high costs of their raw materials (from flour to labor) is translating to less steaks being ordered at the higher-end dining destinations on down to less burgers getting flipped on the fast-food grills.   Just this morning, the restaurant industry reported that a customer’s ability to get a last-minute table at a top Power Lunch destination has become much easier, on account of the slowing economy in the city.

Scientific shows up once a quarter, once a month or in some cases once a week at these facilities to clean and inspect the kitchen exhaust and fire suppression systems that the NYFD has mandated to keep employees, patrons, building tenants and the population at large safe.  These same commercial dining facilities receive daily food, beverage, linen and uniform deliveries.  They play host to business meetings where people gather from inside and outside the “zone.” They have plumbers, electricians and cleaning crews coming in and out to make emergency calls, or “day-time” visits to keep their own overtime pay to a minimum for some manager to watch us work and lock up.  Forget about my specific client base, think of all the overnight parcels that make it in and out of our great city to keep the flow of commerce going.  Does anyone actually think this tax won’t get passed through to the end consumer one way or the other? And boy, will it add up.

If the ultimate goal at a federal level is to push state and city government into an advanced stage of initiatives to protect the environment, as this city’s initiative would in some way yield less pollutants from our “congested zone” tearing holes all over the ozone layer, then where are the more comprehensive programs, incentives and maybe even tax breaks for advancing the proliferation of technologies designed to clean the air or reduce servicing time in congested areas.  For instance, we install air pollution control units to clean greasy and smelly exhaust before is exits the buildings.  It requires limited electricity or power cells, and they are more easily serviced during non-peek hours and take less time to service when done on prescribed frequency.  This is a better alternative to hundreds of feet of expensive duct running through and up the side of buildings, exhausting pollutants toward the heavens.

If our Mayor’s goal is to reduce congestion, why is he not incorporating quid-pro-quo incentives into the federal grant’s debit-side of the equation?  How about modifications to the commercial vehicle law, limiting two passengers per vehicle?  Why not allow us to add a bench to the back of the vans so that we can get more workers in and out of the “congestion-free zone” per vehicle?  Right now, if I attempt to bring in to the zone more than two workers, I need to send two vehicles when I’d like to ideally send one.  It would reduce our cost of additional tolls and gas I am already passing through to each menu.  It’s called an offset, to us business people…

Additionally, why are we being triple taxed?  Currently, in our pre-congestion pricing era, we pay federal and local income tax on the aforementioned $100,000 at risk.  When and if congestion pricing goes into effect, I will channel money away from Uncle Sam and pass roughly three times this amount to Uncle Michael and Aunt MTA.  Should we not get a tax credit of some sort so we pass less onto the consuming public?  Would we still get the federal grant?  At least this way we would get the Federal grant with less pass-through to the little guy (of which we are many).

I think this whole program should not be allowed to come to fruition in isolation.  If we fleet owners have to pay our part, by all means we should be prepared to “get in the boat and row.”  However, do not ask us to curtail our already-congested business models, and assume the job of toll-taker through which this tax is distributed among the Manhattan population.  Even if this program does succeed in bringing the MTA necessary funding and tax revenue to fund new programs, will this be at all like the recent fair hikes we learned just yesterday are not going to be given back to the commuter as originally planned, due to shortfalls in revenue forecasts and lackluster economic indicators?

If the plan is designed to make the city a more pleasant place to get around, and decongest the lives of this city’s inhabitants, wait until our local economy suffers the indigestion of this tax getting passed through to the consumer on every menu, hotel bill, Broadway ticket and paper clip purchased in the “zone.”

Mayor Bloomberg, I am personally impressed by the leadership you have displayed while running our great city.  What you have done in revamping our educational system, curtailing the administrative redundancy within our city-sponsored social services, and reducing crime in our midst is fantastic.  They all resulted from comprehensive and intertwined initiatives that reduced burn-rate, spurred better productivity and gave this city a real ROI.  However, the very narrow approach toward bringing congestion under control in our city, all to gain a one-time wad of cash to spend on I’m not sure exactly what, is contrary to the way you have operated until now.

I recall several years ago hearing then CEO Michael Bloomberg as the key-note speaker at an investment conference in Manhattan.  He shared his views on the looming internet bubble (before it burst).  When asked by the audience his views on Greenspan’s famous “irrational exuberance” characterization of internet company market capitalizations at the time.   He proceeded to describe in his puzzlement what he termed the Mona Lisa theory, as he likened the whole concept of Internet company valuations to the economic analysis one would exercise on a piece of art.  He argued that the canvass and oil colors had virtually no real book value and that the frame was worth more than the picture itself, concluding that the investing public applied the art collector’s logic to the whole investment strategy.  He won me over then as a future voter, and I still believe he has term left to bring about more great change and sustainability hereto and forward.

I think the congestion pricing program we are embarking upon should not be an end in it of itself.  It must be a subset of other programs that also relates to the rationale for the federal grant proceeds in its spirited incarnation.  We should exercise caution when we assess a tax, ensuring that it is at least worth the paper it is written on and the ink it is written with.  

My $100,000 is not the solution.  Although disguised as a tax, it’s part of a really big home equity loan.  This program leverages up several square-miles of our city to receive a grant from the federal government, and we need to be extremely mindful of the additional liabilities it places on our city’s citizens.  The home equity exposure in our country is already at a daunting $1.1 trillion.  Are we sure the “ratios” and our collective incomes, including my customers and yours, can support the debt burden? 

The congestion pricing program will fetch a greater share of our waning disposable incomes, and translate to fewer jobs, less taxable commerce and more money at the meters.  Say good-bye to the Happy Meal and the $5 Foot-Long Sub.  Say hello to our “Decongested State of Mind.”