Crain's New York Business

POLITICS

BUDGET BLOCK

These are the proposals that could transform New York—if the state budget ever gets passed

BY NICK GARBER

By this time in April, Gov. Kathy Hochul had hoped to be touring the state and touting a transformative, $227 billion budget that would kick start housing growth, rescue the city’s transit system, expand health care coverage and tighten bail laws. Instead, as of press time, Albany was still waiting impatiently as talks dragged on between the governor’s o ce and leaders from the state Senate and Assembly. e stalemate, blamed largely on bail reform, forced the April 1 budget deadline to be pushed until at least April 10, and

likely beyond.

BY THE NUMBERS

In an April 3 statement announcing the extension, Hochul appeared to telegraph her top priorities: changing the bail law, pushing through her “housing compact,” and lifting a cap on charter schools in the city.

$227B

SIZE OF Gov. Kathy Hochul’s proposed budget

“New Yorkers are concerned about public safety, the rising cost of housing, and ensuring high-quality schools for all our kids, and any budget deal must make progress on these core issues,” the governor said.

Other big issues have scarcely gured in so far in the public budget debate, such as

See BUDGET on page 19

With little evidence of credit crunch, small biz still plans for worst

BY KATHERINE DAVIS,

It’s a painful memory: In 2009 the banking crisis and housing recession led to a credit crunch, and business owners suddenly couldn’t access the capital they needed to operate and grow.

e latest banking crisis so far

bears little resemblance to the one that kicked o the Great Recession.

Crain’s reporters in New York, Michigan, Illinois and Ohio set out to understand how the dynamic between small businesses and their bankers are playing out in the

weeks following the banking crisis sparked by the failure of Silicon Valley Bank and Signature Bank. We discovered much concern but little tangible evidence of a credit crunch just yet. In fact, lending has increased since the failures.

But there are signs of worry as small and midsize businesses shore up nances ahead of a potential re-

cession and banks reassess their balance sheets. In western Michigan, community banks say they are doing more diligence on every loan application. In New York City, one accountant’s clients are turning to credit cards as a short-term solution when loans are expensive or slow to close. In Chicago, retail real estate brokers are banking on lon-

ger lead times from their clients opening up new stores and restaurants in the event credit applications take longer. In Oak Park, outside Chicago, a mobile-spa owner has turned to community banks and his credit card processor for funding, noting that the amount of

See CREDIT on page 11

CARA EISENPRESS, NICK MANES, ALLY MAROTTI, JEREMY NOBILE, JOHN PLETZ AND MARK SANCHEZ

FINANCE

BAIL REFORM

Chain of popular Japanese restaurants known for speakeasy vibe to close in Manhattan

Apair of well-regarded Japanese restaurants that helped imbue parts of Midtown East with a Tokyo-style speakeasy vibe is shutting down.

Aburiya Kinnosuke, at 213 E. 45th St., and Soba Totto, at 211 E. 43rd St., will close at the end of June, according to a state layoff notice published Wednesday. Going dark at the same time will be Sarashina Horii, a similar offering at 45 E. 20th St. in the Flatiron neighborhood that just opened two years ago.

All told among the three, 57 peo-

lem.”

One of the eateries, Aburiya Kinnosuke, an intimate restaurant ser ving grilled meats and sushi behind a striped awning near Third Avenue, sits next to a homeless shelter that will soon be razed to make way for a much larger version. But Ryoo said those plans, which will require a couple of years of construction, are not the reason for the closure.

Interest from buyers

One of the shelter’s developers, Project Renewal, had at one point reportedly inquired about buying the 4-story brownstone that houses Aburiya Kinnosuke and folding it into the development site, which currently spans 215 and 217 E. 45th St.

ple will lose their jobs, including six employed by their parent company, Create Restaurants.

“It’s a very unfortunate thing,” said Shannon Ryoo, the controller for Create, whose clientele leaned toward business executives from overseas, who have been slow to return to New York, as well as employees of the United Nations. “But the economy has been a big prob-

But the nonprofit, whose CEO is Eric Rosenbaum, has no plans to pursue the site now, a spokesman said.

Losing the only retail tenant at 213 E. 45th St. comes as a major blow to building owner Dan Lee, especially as he said he now faces the daunting prospect of having to lease a two-level space on the cusp of a major construction project next-door. “It’s going to be very challenging,” he said.

In 2005 a company controlled by

Lee, Siu Chung Property Management, paid $2.9 million for 213 E. 45th, which also contains six apartments, two of which are rent-regulated, Lee said.

COMMERCIAL REAL ESTATE

He added that he might have sold the property if he suspected the restaurant, a nearly two-decade presence, would fold.

“Hindsight is 20-20,” Lee said. ■

Office landlords will have tough times ahead, Morgan Stanley analyst warns

BY C. J. HUGHES

Atop Wall Street analyst is warning that a storm is coming for office buildings that could rival the Great Recession.

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Lisa Shalett, the chief investment officer for Morgan Stanley Wealth Management, said in the bank’s weekly Global Investment Committee note that landlords should expect problems when trying to refinance loans over the next few years.

Lending rates could soar by up to 450 basis points in the next 24 months, Shalett wrote. On top of that, vacancy rates stemming from remote work are expected to remain elevated, depressing the values of office buildings. And regional banks, a reliable source of loan originations for landlords, may suddenly not be such a safe bet after the implosions of Silicon Valley Bank and Signature Bank.

Ripples could be felt far and wide from asset-price declines of as

much as 40%, according to Shalett, “worse than in the Great Financial Crisis.”

“Distress of this type has historically not only hurt the landlords and the bankers who lend to them, but also the interconnected business communities, private-capital funders and owners of any underlying securitized debt,” the note said. “The tech and consumer discretionary sectors will not be immune.”

Renegotiated mortgages

Nationally, more than 50% of the $2.9 trillion in commercial mortgages are apparently coming due within the next 24 months and will need to be renegotiated. Not only will debt, the lifeblood of the real-estate business, be more expensive, it could also be harder to get. Indeed, banks are expected to impose tighter lending standards for owners of commercial real estate.

If there’s a bright side, it might be that private equity firms have $2.3 trillion to possibly invest in lieu of traditional banks. This “dry powder” can “certainly insert itself right

now as an opportunistic provider of capital for new vintage funds.” But Morgan Stanley says that those firms may have their own real-estate investments to shore up first. ■

RESTAURANTS CLOSING Aburiya Kinnosuke, at 213 E. 45th St., and Soba Totto, at 211 E. 43rd St. will shut their doors at the end of June

“IT’S A VERY UNFORTUNATE THING, BUT THE ECONOMY HAS BEEN A BIG pROBlEM”

Claims of ‘chaos’ and corruption engulf Roosevelt Island’s governing body

BY NICK GARBER

Leaders of the state body that controls Roosevelt Island steered public money toward a personal friend, concealed details about a drowning death, then red three employees who raised objections, the ex-employees allege.

e claims are made in a lawsuit led against the Roosevelt Island Operating Corp. by Erica SpencerEl, Amy Smith and Jessica Cerone— all former RIOC employees who were terminated in 2022 after blowing the whistle on what they saw as illegal acts by their supervisors.

e corporation categorically denied the claims, calling them “fabricated” and “a petty money grab.”

“ e three plainti s in this action observed an increasingly reckless pattern of corruption, unethical conduct and dangerous behavior coming from RIOC’s leadership group,” reads the lawsuit against the corporation, which was led in February in state Supreme Court in

Manhattan.

Two events form the core of their complaint: the January 2021 opening of a Covid-19 testing site on the island, and the May 2021 drowning of a 21-year-old man at a public pool owned by the corporation. e misconduct claims are directed at Shelton Haynes, RIOC’s state-appointed president and CEO, and three members of his leadership team.

Haynes chose a personal friend to run the testing site, then took extraordinary steps to fund and sta it despite concerns about its practices, the lawsuit says. Meanwhile, for months after the drowning, RIOC leadership sat on evidence of negligence by its lifeguards, who had abandoned their posts and missed the man’s visible distress, the plainti s allege.

rough an attorney, Haynes and RIOC declined to be interviewed.

eir attorney, Howard Miller, said in a statement that the allegations made against the corporation are

“completely false and fabricated.”

“ e lawsuit itself is a means of exacting a settlement over the severance pay that was o ered to the plainti s,” Miller said in a statement. rough their attorney, Jason Stewart, the plainti s declined to be interviewed.

e corporation has led a mo-

Manhattan, linked to Astoria by a vehicular bridge and connected to Manhattan’s East Side by its famous tram system. Since the 1980s, control over Roosevelt Island’s roads, buildings, police force and transit systems has belonged to RIOC, a state public-bene t corporation akin to the Empire State Development Corp. or the Metropolitan Transportation Authority. e island’s roughly 12,000 residents live under the authority of the unelected body, which is ultimately controlled by the governor.

fensive remarks.”

Rosenthal later sued unsuccessfully, alleging unjust termination.

Haynes, her replacement, previously worked as a housing o cial in Georgia. He took over as interim CEO following Rosenthal’s ring, and was elected permanently by RIOC’s board in March 2021.

tion to dismiss the lawsuit, which remains pending. In mid-March the corporation hit back with its own defamation lawsuit against the three red employees—the latest chapter in years of controversy that have clouded the agency’s work.

Personal business

Considered a part of Manhattan, the 2-mile-long island sits in the East River between Queens and

New York’s quasi-private corporations have long been targets of ethics concerns, and RIOC’s recent history is tarred with scandal.

A 2014 state probe uncovered criminal kickbacks, nepotism and other misconduct by three RIOC executives, leading to a prison sentence for its former vice president. Haynes’ predecessor as CEO, Susan Rosenthal, was red by Gov. Andrew Cuomo in 2020 after being accused of making “racially and sexually of-

Starting in 2020, the new suit alleges, Haynes worked to open a popup Covid-19 testing site in a storefront controlled by RIOC. e chosen vendor was Swift Emergency Care, a little-known enterprise run by Queens doctor Christian Bannerman.

Bannerman, the suit alleges, is a friend of Haynes. Swift had little visible infrastructure: Its website directed visitors to call his personal cell phone number, and the organization’s Instagram account has just three followers—two of whom are Bannerman and Haynes.

Bannerman could not be reached for comment.

THE PLAINTIFFS ALLEGE “AN INCREASINGLY RECKLESS PATTERN OF CORRUPTION”

The community’s leaders concealed details of a drowning death and steered public funds to a friend, ex-employees claim

THE ROOSEVELT ISLAND tram is a popular way to get to the island, located in the East River.

WHO OWNS THE BLOCK

New Turtle Bay homeless shelter may offer blueprint for controversial development

Project Renewal’s plan uses an existing and underbuilt shelter site

BY C. J. HUGHES

Although homelessness in New York may be hitting Great Depression-levels, creating housing for those most in need can still encounter the same old major not-in-my-backyard roadblocks.

That a tall new shelter is set to rise in a high-profile Manhattan neighborhood can seem nothing short of remarkable. Yet the unique circumstances of the 21-story project, which will add shelter space and affordable apartments in Turtle Bay at 225 E. 45th St., may be hard to replicate elsewhere.

“This is not such a traditional residential block, so there aren’t many residents who will be affected,” said Eric Rosenbaum, CEO of Project Renewal, a nonprofit homeless services provider that is co-developing the project with the firm Monadnock Development. “But also we have been here for a long time, and we are a neighbor who people know and respect.”

Indeed, the block, between Second and Third avenues, is checkered with office buildings, hotels and restaurants. Likewise, Project Renewal has operated the two-building site since the 1990s, which offers 130 beds to women with mental illnesses or substance-abuse issues. The new 21-story tower, which would replace the current 4- and 6-story buildings, will contain a 171-bed shelter, plus 130 long-term affordable housing units (79 of which will offer supportive services) for the same population. There will also be a superintendent’s unit.

The $125 million project, which still requires financing and permits, benefits from low overhead: Its land is free, gifted by the city, which has controlled it through the Department of Homeless Services.

The project scored a 20-year property tax break, not a phased-in abatement. Familiarity with Project Renewal may have helped win over Manhattan Community Board 6, whose approval was sought because the project involved transferring public land to a private entity. Based on records, the project, which is expected to open in 2026, faced little pushback.

But in some ways, the approval process was easy, as the East 45th Street site is loaded with unused air rights and already zoned for housing, an advantage that not every shelter-designated property can claim.

Going forward, Project Renewal, which was formed in 1967 with the goal of helping alcoholics on the Bowery, hopes to become the landlord of other city-owned sites it operates, such as 333 Bowery in the East Village.

“These buildings are often competing for capital, struggling with deferred maintenance and really not built to be shelters in the first place,” Rosenbaum said.

In December 69,000 New Yorkers lived in shelters, a level not seen since the 1930s, the Coalition for the Homeless found. Thousands more are estimated to sleep on the street every night, the group said. ■

The developer Alexico Group completed this 32-story hotel in 2003. But the Alex Hotel, which had kitchens in many rooms to attract business travelers on long-term stays, was a financial failure, forcing Alexico’s president, Izak Senbahar, to surrender his keys to his lender. A Midtown-based limited liability company bought the site for $115 million in 2013, records show, and filed an offering plan a year later to turn most of its units into time-shares. A Delaware-based buyer snapped up those time-shares for $14.6 million in 2016. But when time-sharers aren’t around, studios to two-bedrooms at the building, which is called Club Wyndham Midtown 45, can be rented out by nonmembers. One with a king-size bed cost $469 for a weekday night in April. Ads cite the hotel’s proximity to the United Nations’ headquarters on First Avenue.

215 AND 217 E. 45TH ST. (SOON TO BE 225 E. 45TH ST.)

203

If higher-end Irish bars seem to have the same look and feel, it might not be an accident. The same family, named Reilly, owns several of them, including Midtown’s Connolly’s chain, and this outpost, the Perfect Pint Public House, whose façade features an oversized pint glass of Guinness beer. The Riccio family—11 members of it—sold No. 203, a 4-story, 4,000-square-foot tenement-style structure draped in balconies and fire escapes, to Anne Reilly for $3.4 million in 2008, according to public records. The Reillys borrowed $14.9 million from JPMorgan Chase in 2014 to refinance this bar and others, among them the Perfect Pint at 123 W. 45th St. in Times Square. A Gaelic burger at the Perfect Pint, with Irish bacon, is $16.

The city has owned the 4-story tenement-style building at No. 215 since 2004, public records show. Previously, it belonged to the Institute of the Franciscan Missionaries of Mary, a convent of nuns founded in 1877 in India that has 5,424 locations in 73 countries today. St. Francis Hospital on Long Island, a cardiac-care facility, was founded by the convent. The 21-story mixed-use tower that will replace this building and nextdoor No. 217 would have three entrances, one each for a shelter, a permanent housing section and a public health clinic. The Missionaries of Mary also owned No. 217, a 6-story, 32,200-square-foot structure that connects internally to No. 215. But the floors reportedly don’t line up properly, one of the reasons why Project Renewal, the current nonprofit operator, sought to raze the prewar buildings and put up a modern one. Joining Project Renewal is Monadnock Development, a developer of market-rate and affordable housing.

235 E. 45TH ST.

When this corner of Turtle Bay was synonymous with publishing in the 1920s, the media giant Hearst developed this art deco edifice as the home for a tabloid newspaper, the New York Daily Mirror, which once employed gossip columnist Walter Winchell but folded in 1963 amid a protracted newspaper strike. A few years later, Hearst converted the 16-story building into a traditional office building. Hearst-owned King Features, which syndicates comics such as Beetle Bailey, Blondie and Hagar the Horrible, was an initial tenant. King has since relocated from the 200,000-square-foot building, which is now home to A&E, the 39-year-old cable channel known today for wrestling matches and crime shows.

A striped wall at this 4-story brownstone announces the home of Aburiya Kinnosuke, an 18-year-old Japanese restaurant whose central robata grill and sliding-door dining compartments are authentic to Tokyo, fans say. A company called Siu Chung Property Management paid $2.9 million for the eatery in 2005, when it opened. The 4,500-square-foot property also has six apartments, records show. A studio with inlaid parquet floors rented for $1,795 a month in 2021, according to StreetEasy. The developers behind the new Project Renewal shelter apparently sought to buy this property to create a larger facility, but the owners rebuffed them. City officials, who tend to undervalue properties, say No. 213 is worth $3.2 million, which is down from $3.5 million in 2022 but above its prepandemic 2019 valuation of $2.5 million, tax records show.

228

Another building geared toward publishers, this 16-story structure with a tapered top was developed in the mid1920s at a cost of $375,000 by Samuel Friedenberg, who demolished two five-story structures to build it, according to news reports from the time. Today, the owner of the 208,000-square-foot building is a shell company called Beckrose Estates, which is controlled by the same Manocherian family that owns next-door No. 240. Property records describe the through-block structure as the Printarts Building, and indeed, at least one publishing company, AIE Business Services, which offers copying, binding and graphic design, is a tenant. Others involved in the ink-on-paper trade in Turtle Bay in recent decades included the Daily News, which was based at 220 E. 42nd St. from 1929 to 1995. (The building’s facade stood in for Clark Kent’s employer the Daily Planet in the Christopher Reeve Superman films.)

240

This low-slung yellow-brick commercial building has a single tenant, Amish Market East, a store focused on prepared and to-go foods. But don’t expect to see employees wearing Amish garb. The market, which has a sister outpost on Ninth Avenue in Hell’s Kitchen, is controlled by a Turkish company. The landlord of the store is the Manocherian family, which appears to have owned the 6,300-square-foot building since the 1970s. Its patriarch, Fraydun Manocherain, founded the New York Health and Racquet Club chain of gyms. Recently, the Manocherians made real estate headlines when their 752 Broadway building at Astor Place in NoHo welcomed the city’s first legal pot dispensary, the Housing Works Cannabis Co., which opened at the end of 2022.

205 E. 45TH ST.

213 E. 45TH ST.

E. 45TH ST.

E. 45TH ST.

E. 45TH ST.

JPMorgan decreased its New York footprint by 22% last year, part of a continued of ce tower exodus

JPMorgan Chase shrank its New York o ce footprint last year by 22%, or nearly 2 million square feet, as the bank centralized operations in Midtown ahead of completing its new headquarters tower by the end of 2025. e banking giant joined many other leading companies in New York City that continued to shrink o ce space last year, annual lings show.

Long the city’s biggest commercial tenant, JPMorgan subleased 700,000 square feet at 4 New York Plaza in the Financial District last year. After vacating 3 MetroTech Center in Brooklyn in 2020, last year it sold the 350,000-square-foot building to New York University for $122 million. ose and other moves cut the bank’s real estate footprint in the city to 6.8 million square feet, down from more than 9 million three years ago.

“We remain committed to New York City and are planning for the next 50 years with our new headquarters,” a bank spokesman said.

e tower at 270 Park Ave. is expected to measure 2.5 million

ON POLITICS

square feet.

Many other nancial institutions and large employers continue to shrink their o ce footprints here and nationally.

Wells Fargo rented 100,000 square feet less space last year in New York, to 3.1 million total. Nationally, its footprint shrank by 5%, to 65 million square feet. Bank of America’s Manhattan footprint held steady at 1.8 million square feet, and nationally it declined by 4%, to 64 million square feet.

e banks didn’t immediately return requests for comment.

Demand slows

Financial tenants account for up to 40% of ofce rents, and technology and media tenants, up to 20%, Morgan Stanley said. Small tech and media rms have been “signi cant incremental drivers of space demand,” but in a report last month Morgan Stanley analyst Ronald Kamdem said that may change as nancing conditions continue to tighten, while the market for subletting space in San Francisco and Boston slows.

Shares in SL Green Realty trade

below 2020 lows, and recently S&P Global put the credit ratings of Boston Properties and Vornado Realty Trust on watch for a possible downgrade. In recent weeks o ce landlords seem to have grudgingly accepted that a group of workers simply isn’t returning to the ofce.

“You can assume Friday is dead forever,” Vornado CEO Steven Roth said in February. “Monday is touch and go.”

Meanwhile, major companies continue to ne-tune their space needs in a world of remote work. Rent is typically a company’s largest expense except for labor.

IBM cut its global o ce footprint by 10%, to 47 million square feet, the company said in its annual report. IBM declined to comment.

Midtown-based Interpublic Group of Cos., owner of ad agencies FCB and McCann, shaved 7% o its global o ce footprint last

year, or 500,000 square feet. at drop came after the company eliminated 15% of its o ce footprint in 2020, or 1.7 million square feet.

e latest reductions “further optimize our real estate footprint as a result of a shift in our hybrid model used to deliver and support our services in a post-pandemic economy,” IPG said in a ling.

P zer shrank to 301 owned or

housing

In 2019 Democrats took control of the state Senate for the rst time in a decade, promising a dramatic shift in how Albany functions. On larger policy goals— bail reform, tenant protections, climate change bills—this majority has delivered, partnering with a Democrat-run Assembly to overcome a more conservative executive branch.

In the past few weeks, however, it’s been the executive, Kathy Hochul, taking up the ght for what should be a centerpiece of the progressive agenda: building more housing in the suburbs.

e governor’s plan would mandate downstate counties add 3% to their housing stock every three years. If they fail to reach this goal, the state can step in and override local zoning restrictions. e approach, in the grand scheme of development, is rather modest, and is modeled on what is already being done in California and Maine.

als, Democrats in the Legislature appear ready to bow to the revolt in the suburbs. In large swaths of Long Island and Westchester County, hardly any housing construction happens at all. is has been the status quo since the 1960s, when segregated towns became outposts for the white middle-class families that ed the city. ese days the suburbs have somewhat diversi ed, but the politics are virtually unchanged: Local Democrats and Republicans united, in rm opposition, to new housing that would disrupt the low-density “character” of their towns.

ROSS BARKAN

Rather than implement, with little fuss, Hochul’s housing propos-

Hochul’s push for a zoning override is the only way Nassau, Su olk and Westchester counties will build signi cant amounts of housing. If county executives, mayors and legislators are left to their own devices, nothing will happen. Yes, it was the Senate Republican majority, anchored on Long Island, that represented a half-century-long roadblock to housing—but in the next few days

Democrats run the risk of maintaining that legacy.

e plan is to get housing policy done in the state budget, which was due April 1, but it has run late as Hochul and the two legislative leaders, Carl Heastie and Andrea Stewart-Cousins, try to hash out a variety of thorny policy matters. It’s ne if they take their time, as long as housing is done right. And “right” means with force behind it—any proposal without a legal mandate or ability to override localities is doomed.

Reward for new housing

Incentives won’t work, although Stewart-Cousins seems to believe, naively, they can move suburban politicians. e Legislature has proposed a $500 million fund to reward towns that build more housing. “I think we need to manage it with municipalities,” the majority leader said at a recent Albany press conference. She added that she’s “not opposed to taking more of a stick approach, but I don’t want to start there.”

But suburban mayors have already told New York Focus they would reject cash from the state

government to build more housing in their towns. ey don’t care that younger generations and the working class can’t a ord to own homes or rent comfortably any longer. ey simply perceive any mild amount of urbanization—apartment buildings, legalized accessory units—as an existential threat. No amount of money will convince them otherwise.

Perhaps legislators will get this message soon and act accordingly.

If Lyndon Johnson left it up to Southern mayors, governors and congressmen to wind down Jim Crow, there would have been no civil rights legislation. e pre1960s status quo would have persisted inde nitely, with white Southerners making perpetual excuses about the necessity of local control. If today’s suburbanites

leased properties globally, with about 40 million square feet last year, down from 327 owned or leased properties of about 41 million square feet. e pharma giant recently relocated its headquarters from East 42nd Street to Hudson Yards.

P zer said it reduced o ce space primarily in Latin America and Asia. ■

have any interest in solving the statewide housing emergency— and ensuring not merely incumbent homeowners have a stake in the future of New York—they’ll get out of the way and allow shovels to hit the ground.

Quick takes

● Will the rent rise on rent-stabilized apartments again? Landlords want increases bigger than last year, and the Rent Guidelines Board, appointed by Mayor Eric Adams, is bound to be sympathetic.

● Albany might allow the city to institute neighborhood parking permits. Other cities already have them, and it’s time New York frees up the streets for locals. ■ Ross Barkan is a journalist and author in New York City.

AARON ELSTEIN

HOCHUL’S housing plan calls for building more housing in the suburbs.

State Legislature is about to eviscerate a plan for more

JPMORGAN is preparing to move into a new Midtown headquarters by the end of 2025.

ASKED & ANSWERED

IRA ROBBINS Valley National Bancorp

INTERVIEW BY AARON ELSTEIN

Ira Robbins is chief executive of Valley National Bancorp, a lender with nearly $60 billion in assets. Last month the New Jerseybased institution bid to acquire Silicon Valley Bank before regulators transferred its accounts to another lender. Speaking from his Midtown office, Robbins told Crain’s how regulators must step in to protect small and midsize banks from panic-driven withdrawals. And although he anticipates an economic slowdown, he and his board are buying Valley shares.

I imagine you’re not getting a lot of sleep lately.

It hasn’t been as bad as that. I took my kids to a New Jersey Devils game the day before Silicon Valley Bank failed and was on the phone a lot. One son asked why I wasn’t watching the game, and the other said, ‘If papa isn’t on the phone, we’re not going to have tickets next year.’ I got off the phone for the second and third periods. It was crazy, but nothing like the great financial crisis of 2008.

Is your bank seeing a lot of deposit outflows?

We’ve been good. We haven’t published specific numbers, but we’ve managed risk well and have a very diversified balance sheet. I feel very confident with how we handled this.

Will Signature Bank’s failure affect small businesses here?

It’s going to be much harder for a small business to access credit and more expensive. Others will try to fill the void, but it’s going to take time. Signature provided access to capital for a large segment of New York.

Maybe you’ll pick up some of Signature’s bankers. There’s going to be opportunity, whether it be clients or some of the people who worked there.

DOSSIER

WHO HE IS CEO, Valley National Bank HOMETOWN Annapolis, Maryland RESIDES Morris County, New Jersey

EDUCATION Bachelor’s in finance and economics, Susquehanna University; MBA, Pace University

VENTURE-MINDED Valley National Bank had $58 billion in assets and $48 billion in deposits as of Dec. 31. It was interested in Silicon Valley Bank because Valley began serving venturefunded startups with the acquisition of Israel-based Bank Leumi’s U.S. subsidiary two years ago.

REGULATOR PRAISE In 2019

the federal government rated the bank’s services for low- and moderate-income borrowers to be “outstanding.” Regulators praised the bank for working with organizations including New Jersey Citizen Action and Association for Neighborhood Housing Development to create residential mortgage products responsive to first-time home buyers.

What can regulators do to prevent last month’s panic from happening again?

They need to level the playing field. The biggest banks are too big to fail, and that means their deposits have an implicit guarantee even when they exceed FDIC insurance limits. Smaller banks

don’t have that implicit guarantee. If we don’t change what’s happening, [deposit outflows] are going to continue the next time there’s a crisis of confidence. We need temporary deposit insurance for accounts above $250,000 to restore confidence until we figure out a longer-term solution. Maybe that means private insurance of large deposits down the road. There are lots of alternatives.

Maybe the problem is the market won’t support small banks anymore.

Small and midsize banks are incubators of businesses. The large banks serve mature companies. If we just have large banks, we’ll have a handful deciding who gets credit and who doesn’t, and that’s not a good idea.

What’s your outlook for the economy?

It’s beginning to slow. Loan demand is beginning to contract because our clients don’t feel comfortable going into projects. It will take a couple of quarters to push through, but economic growth is absolutely going to slow down. I would add that most of our clients’ balance sheets are still very strong.

Commercial real estate is 63% of your loan book. How does that sector look to you? Our portfolio is so diverse. Offices in Manhattan are $260 million of the portfolio, that’s it, and the average loan is about $1 million. We modified just $44 million worth of loans under the Cares Act during the worst of Covid, and the stress we’re seeing now is nothing like the stress clients saw at the beginning of Covid.

Your bank’s stock is down about 20% in the past few weeks. Are investors calling to complain?

Myself and 11 of my directors bought stock the week after SVB failed. A Wall Street analyst said it was the highest level of insider buying at any midsize or small

[Editor’s note: Valley insiders acquired 260,000 shares, the analyst report showed, more than twice as much as the next

An exclusive club battles an elite hotel on Central Park

BY C. J. HUGHES

Ablue-blood bastion is lashing out at a black-tie mainstay on the Upper East Side.

The Metropolitan Club, a members-only retreat founded by the Morgans, Whitneys and Vanderbilts, has sued the next-door Pierre Hotel, well known for its debutante balls, over some long-running and allegedly sloppy construction work.

The problem apparently stems from ongoing repairs to the facade of the 44-story Pierre, a 1930 landmark at Fifth Avenue and East 61st Street. The work, which began almost a decade ago, has showered the much smaller Metropolitan Club with chunks of concrete and wood, the lawsuit claims, which have punctured roofs, destroyed ducts and even injured an employee. The club is seeking at least $450,000 to fix what’s broken.

“The Pierre has intentionally, recklessly and/or negligently engaged in acts causing the Metropolitan Club annoyance, inconvenience and discomfort,” says the suit, which was filed in Manhattan’s Supreme Court.

And because of the rain of debris,

the members-only club, which appears to focus mostly these days on hosting fundraisers, galas and weddings, “has been unable to secure the private enjoyment of its property and lost the enjoyment of its guests.”

Featuring 75 co-op apartments in addition to its 150-room hotel, the Pierre, which operates under the Taj brand, had not yet filed a legal response to the suit as of press time, based on court records. And an email sent to a spokesperson for the Indian Hotels Co., the global firm that owns the Taj brand, was not returned by press time.

But according to court documents, the construction work at the heart of the dispute began back in 2015, when the Pierre began to inspect its facade to make sure nothing was at risk of crumbling apart and falling

The inspections, part of compliance with what’s commonly called Local Law 11, apparently discovered several problematic sections of the prewar tower, prompting repairs that have continued on and off ever since. But debris specifically began peppering the Metropolitan Club in 2019, the suit says.

That debris has allegedly popped holes in roofs, producing leaks; clogged ventilation ducts; and shredded pigeon netting. And “despite repeated requests, the Pierre failed to remediate the netting and bird waste damage,” the club claims.

But the suit’s most alarming accusation might be that pieces of the Pierre on several occasions in April 2022 struck the club’s engineering director on his arms, legs and head, even though he was reportedly wearing a hard hat.

In 2005 the Indian Hotels Co. took over management of the Pierre, which is at 2 E. 61st St., from Four

Seasons Hotels and Resorts, and followed the acquisition with a $100 million renovation. Among New York’s most storied accommodations and a magnet for fashion executives, business leaders and Hollywood bigwigs, the hotel remains one of the city’s priciest. Recently a room with Central Park views, a king-size bed and the requisite monogrammed bathrobes and slippers was listed for $1,008 per night. Meanwhile, the co-op portion, which uses the address 795 Fifth Ave., is spread across the Pierre’s uppermost floors. A two-bedroom unit there is currently listed for

$11.3 million.

Through the years apartment owners and regular hotel guests have included designer Yves Saint Laurent, actress Elizabeth Taylor and shipping tycoon Aristotle Onassis.

Meanwhile, the Metropolitan Club, whose oldest section, designed by McKim, Mead and White, dates to 1893, is also preserved as a landmark. Located at 1 E. 60th St., the 6-story club requires a dress code and bans phones and laptops in most rooms. A club manager said he could not comment on a pending case. ■

HIGH-END HUBBUB: The Metropolitan Club (left) has sued the next-door neighbor Pier re Hotel (right).

New York City must clean up its act to rid its reputation for trash and rats

Comedian David Letterman famously pilloried the city for its piles of trash and cat-size rats for much of his late-night run through the 1980s and 1990s, before the city made strides to clean up its image in the 2000s.

Sadly, a lot of the lth is back.

e city feels dirtier post-pandemic, as rats traipse across sidewalks piled high with garbage bags leaking mystery liquids.

Frustrated building and business owners have taken notice, speaking up in community meetings and prodding elected o cials, including Mayor Eric Adams, to act. is month the city launched new rules that limit how long trash can fester into a rodent

but the city must go further: Trash should be picked up more frequently, and all of the refuse should go into covered bins, not loose bags that can be clawed open by resourceful rodents. is is a quality-of-life issue that matters to business owners and their customers: Let’s take pride and recognize a big city does not have to mean a dirty city.

City inspectors recorded roughly 60,000 instances of rat activity across the ve boroughs in 2022, according to Department of Health data. at’s double what they logged in 2021. Garbage is the root of the problem, the mayor said in announcing the new collection rules late last year.

bu et on city sidewalks and expanded its special rat-mitigation zones.

e changes are a good start,

LETTERS TO THE EDITOR

Residential buildings and businesses must now put out bagged trash no earlier than 8 p.m. ey can put their garbage out as early as 6 p.m. if they have the good sense (and neighborly manners) to put their refuse in 55-gallon bins with lids. Hint, hint. After a one-month grace period, the rst ne for noncompliance will be $50, the second

will be $100, and successive violations will be $200 each.

In the meantime, the city has added Harlem to three existing rat-mitigation zones—Chinatown, the Lower East Side and Greenwich Village in Manhattan; Bushwick, Bedford-Stuyvesant and Prospect Heights in Brooklyn; and the Grand Concourse area in the Bronx. ose lucky neighborhoods get stepped-up enforcement on properties that fail multiple rodent inspections, case

managers for owners of ratinfested buildings, and educational walkthroughs and “rat academies” for businesses and residents.

e program should expand across the city as rats are loath to respect neighborhood boundaries. Better mitigation, coupled with fewer easy meals and higher levels of human foot tra c on sidewalks as the city recovers, should repel a reprise of our rat reputation. ■

State needs to act to attract home health care workers

A RECENT PIECE in Crain’s Health

Plus (“Report: NY could be nearly 1.5 million home health care workers short of serving state’s aging population”) pointed to a critical study by the Fiscal Policy Institute that, once again, cites the severe gravity of the growing health care worker shortage in the state that’s only going to get worse unless the state leaders who set and control industry wage ceilings for paraprofessionals take major steps to address pay inequities.

Home health care workers are often at the bottom rung of health care pay scales but provide the most important level of service to seniors and the most needy in our society when it comes to allowing them to receive care at home versus being institutionalized in costly nursing or long-term-care facilities.

Home care workers make 40%

less than their peers in nursing care facilities. ey make 25% less than school bus drivers, a part-time job. ey could earn more working for Amazon, but they choose to help some of society’s neediest. As a result of the economics, fewer individuals are entering the home health care workforce, and the turnover rate is enormous.

We desperately need a career ladder for these vital workers so that working in home care can be a path toward something like a nursing degree. Providing a goal would greatly help stabilize our sector and, ideally, create more nurses, which are always in need. Since 2001, the number of New Yorkers over 65 has grown from 2.3 million to 3.5 million. e

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Policy Institute estimates that 932,000 New Yorkers will require home care by 2035, up from 760,000 today. e current home care worker shortage will grow exponentially.

You can’t build a nursing home bed for every one of them, so it’s vital to better enable seniors to age gracefully in their own home, with the support of home health services. If state leaders want retirees to remain here, instead of migrating out of state, they need to act.

Most baby boomers—people born between 1946 and 1964— will be seniors. By many accounts, our state and nation are simply not prepared to handle the largest generation of elderly adults in history. Action is necessary now. is can’t wait.

JOSEPH PECORA President Home Health Care Workers of America

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CITY INSPECTORS RECORDED ROUGHLY 60,000 INSTANCES OF RAT ACTIVITY ACROSS THE FIVE BOROUGHS IN 2022

ISTOCK

ISTOCK

What’s the solution to the preschool teacher shortage? A pipeline of known, trusted applicants

BY CARMELO PIAZZA

According to data from the National Association of Educators of Young Children, 80% of child care centers are understaffed. As preschools around the city tr y out different solutions to their staffing issues, I’ve been working on mine for years: Hire my former students.

I know that I can trust them because I’ve known them since they were children. When I hire them, I know that they’ll be ready from day one to teach using the playful, inquiry-based approach that makes Brooklyn Preschool of Science spe-

Hayat Dhobany, when they were kindergartners and I was their science teacher. I got to know them not only as students but as people. As I do with so many of the hundreds of children who start at BPOS each fall, I made a point of keeping up with them over the years. Because we had kept in touch, when Hayat was 16 and needed a summer job, I hired her as a counselor at the science camp I ran as “Carmelo the Science Fellow.”

Teaching for the long term

As any good human relations manager will tell you, smart hires are not just a matter of who but a matter of when.

teaching for the long term. Maybe someday she’ll be ready, but I’d rather wait until she’s sure before I put her in a classroom full of rowdy 4-year-olds.

cial—because they learned it directly from me.

The first step for any school to use this long-term hiring strategy is forming long-lasting relationships with your students. I met two of my current teachers, Paul Choe and

The day Hayat received her early childhood education degree from Brooklyn College, I called her and said, “Are you ready to work at the school?”

She was, and she has been an excellent teacher ever since. On the other hand, I recently interviewed a former student whom I decided not to hire because she wasn’t convinced that she wanted to go into

Which brings me to another lesson I’ve learned over the years: If potential hires have the confident, funny and nurturing personality that I look for in my teachers, they don’t necessarily need teaching experience or even an education major. Paul, for example, majored in criminal justice and has been a dedicated and popular teacher for years.

Finally, hiring is much easier when you can retain your best employees. For me, the key to keeping creative, engaging teachers in the classroom has been simple: Once I hire them, I have the confidence to

allow them to be artists in their own classrooms. I give them the freedom to design their own rooms. I give them flexibility within the curriculum to teach lessons in a way that’s customized for each year’s students and reflects their own changing interests.

There is no quick fix to the preschool teacher shortage. As with any type of hiring, the most effec-

tive solution is to build a pipeline of potential applicants you know and trust and who know and trust you. If they happen to know your teaching philosophy from personal experience (and if you happen to know their mother), all the better. ■

Carmelo Piazza is executive director–educational director of Brooklyn Preschool of Science.

Giving the city Department of Buildings more authority on inspections is a bad idea

BY OREN BARZILAY AND DARRYL CHALMERS

March marked the somber anniversary of two fatal gas explosions that rocked the city—in Harlem (March 12, 2014) and in the East Village (March 26, 2015). Both led to stringent reforms regarding the installation of gas plumbing lines within hundreds of thousands of buildings in the city.

In 2016 the City Council enacted reforms amending the New York City Construction Codes to provide for greater regulation of hazardous fuel gas work. Local Law No. 150 added Article 423 to the licensing code, establishing a strict new “qualification for gas work,” effec-

throwing caution to the wind in favor of noncomplying bad actors.

The law unambiguously states that it “shall be unlawful to perform gas work” without a Buildings Department-issued gas qualification, ensuring that the pool of welders who perform this work will be the most experienced, skilled and highly trained welders.

Plumbers Union Local 1 recently filed a lawsuit that alleges gas piping installations in city buildings are often performed by unlicensed or improperly qualified workers, whose poor workmanship on critical welds routinely goes uninspected and ignored by the Buildings Department. This is in direct conflict with the city’s laws.

tive Jan. 1, 2020, which severely restricts who can perform such hazardous work.

Yet recent litigation shows that the city’s Department of Buildings, its historically most troubled agency, is defying these relatively recent laws,

The lawsuit in state Supreme Court seeks to require the Buildings Department and City Hall to adhere to laws and regulations enacted following those tragic gas explosions. The filing offers countless examples of Buildings Department approval of illegal gas work. In just two weeks in November, the Buildings Department was found to have approved 460 projects with defective gas welding documents.

Ill-equipped

If that is not horrific enough, the Buildings Department now wants to take over fire safety inspections of buildings from the city Fire Department. This would put the critical task of physical inspections— walking the halls, rooftops, basements and alleyways of every single commercial, residential and industrial building—into the hands of an agency that, over countless decades, has consistently proved itself to be ill-equipped to perform such tasks. As the gas plumbing litigation alleges, the Buildings De-

partment barely enforces the inspections and oversight already under its control.

If an agency is already not adhering to new city laws governing gas piping safety, and not enforcing mandated licensing requirements, how can that same agency be expected or trusted to take over the Fire Department’s inspections of buildings for fire safety?

The short answer is, it can’t.

We understand that Mayor Eric Adams wishes to expedite construction to make way for 500,000 housing units, but “relaxing” key safety

laws is not the way to go about it.

According to a recent report by city Comptroller Brad Lander, the Buildings Department is the largest city agency with a vacancy rate above 20%. Of the 500 budgeted positions devoted to inspections, the comptroller found only 355 were filled, leaving a 29% vacancy among those who would specifically be tasked with handling these new inspection and oversight powers.

It is sad but necessary to note that time after time the state attorney general’s office and district attorneys across the city have been forced to investigate bad actors in the Buildings Department, in addition to contractors that take illegal and unsafe shortcuts that threaten life and safety.

The bottom line is that there is no room for compromise regarding the integrity of building safety, and regulatory enforcement is essential for public safety. In our haste to meet the housing demand, let’s not give a city agency more responsibility than it can handle. ■

Oren Barzilay is president of FDNY Local 2507, representing the city’s uniformed EMTs, paramedics and fire inspectors. Darryl Chalmers is an FDNY deputy chief fire inspector and executive board member of FDNY Local 2507.

THERE IS NO rOOM FOr COMPROMISE REGARDING THE INTEGRITY OF BUilDiNG SAFETY

THE CITY IS considering transferring building inspections away from the FDNY. BUCK ENNIS

Manhattan of ces hurting after a tough winter

Warmer weather probably won’t do much to improve the dispositions of some commercial landlords.

O ces in Manhattan are still about as empty as they were during the worst of the pandemic, according to a new report from the brokerage Colliers.

In the rst quarter, which ended Friday, the availability rate for Manhattan was 17.1%, a slight increase from the 16.9% rate set in the fourth quarter and a hair below the 17.3%

per square foot annually, down from $75 at the end of the last year, Colliers said.

“Supply is still outpacing demand, which creates opportunities for value-seeking tenants,” said Franklin Wallach, the managing director at the rm who handles research. “However, until leasing volume returns to levels that we had pre-2020, any feeling of a full recovery will not be felt throughout the market.”

While letting employees go...

Contributing to the high vacancy levels this winter were o ces being added to the market in the form of sublets, at a time when tenants like tech rms have been shedding thousands of employees while still being on the hook for rent.

Brook eld Properties; 1440 Broadway, a CIM Group and QSuper building; and 1633 Broadway, from Paramount Group.

pandemic-era record from the rst quarter of 2022. e availability rate, a term preferred by brokers, refers to empty o ces as well as those about to hit the market.

And all that extra space may be putting downward pressure on prices. e rst quarter’s average asking rent in Manhattan was $74

About 1.6 million square feet of sublet space poured into the market in Manhattan in the rst quarter, for a total of 22.1 million square feet, which surpassed the pandemic peak of 21.2 million from summer 2021.

Among the high-rises o ering blocks of sublet space this winter were 5 Manhattan West, owned by

Other employers might be nally conceding that they don’t need as many boardrooms and desks as employees seem determined to continue to work remotely. Toward the end of March, o ces in Manhattan on weekdays were at 47% of their capacity, according to Kastle Systems, a building security company, a level that has been consistent for months. Where there was leasing activity this winter, it tended to be driven by some megadeals. In Midtown, for instance, demand increased 86% from the fourth quarter of 2022. But two companies accounted for about half of that spike. Fox News and News Corp. extended their leases for a total of 1.2 million

square feet at 1211 Sixth Ave., and the hedge fund Citadel inked deals for 978,000 square feet, in the form of renewals and new leases, at two locations, 350 Park Ave. and 40 E. 52nd St.

New spaces

Also fueling the oversupply were new spaces coming online, includ-

ing Brook eld’s refurbished 660 Fifth Ave., a 1.5 million-square-foot tower.

Still, conversions of underused o ce space into housing and shelters could cut into the overhang going forward, improving conditions, Wallach added. “But how much will this create supply relief? at remains to be seen,” he said. ■

“SUPPLY IS STILL OUTPACING DEMAND, WHICH CREATES OPPORTUNITIES FOR VALUESEEKING TENANTS”

capital available is shrinking.

“I don’t know of anybody that’s directly said, ‘Our loan got killed. We were in the approval process, and they killed it.’ I think that’s coming,” said Chris Irwin, senior vice president of retail sales at the real estate brokerage Colliers in the greater Chicago area. “[The banks] are going to get conservative, and they’re just going to pause.”

Expensive money

The rumblings ahead of the latest crisis began last year, when the Federal Reserve started increasing the federal funds rate in an attempt to combat inflation. Things came to a head in early March, when depositors of Silicon Valley Bank and Signature Bank discovered that their banks had unsustainable balance sheets. SVB would have had to sell long-term bonds at a big loss to meet depositors’ requests for liquidity. Within days the Federal Deposit Insurance Corp. stepped in to backstop the banks; depositors at the failed banks and at similar regional institutions will be made whole while shareholders are wiped out.

Lending actually increased in the weeks following those events, according to the most recent data from the Federal Reserve Bank of St. Louis, which tracks business credit.

The weeks of March 8 and March 15, lending among all commercial U.S. banks expanded from $17.5 trillion to a record $17.6 trillion. Smaller banks saw more deposits than larger ones the week ending March 22, data show.

Below the surface, bankers and business owners are grappling with the potential for more regulation on small banks, the question of how much interest rates will go up and a wholesale rethinking of the nature of banking relationships.

“The combination of further Fed actions increasing rates and credit tightening that is happening in some sectors could have a detrimental effect on the economy and small business,” said Carlos Naudon, CEO of Ponce Bank in New York City, which makes loans mostly in the $10 million to $50 million range, often to real estate companies.

That is also the point of the Fed’s efforts: Credit tightening is one of the desired effects of inflation-fighting monetary policy. If tightening does occur, “that means that monetary policy may have less work to do,” Federal Reserve Chair Jerome Powell explained at a late March news conference. If credit doesn’t tighten, he implied, the Fed might have to keep raising interest rates.

The upshot: Any business with a loan renewing soon should try to get favorable terms soon, advised Mike Tierney, president and CEO of the Community Bankers Association of Michigan.

P.J. Harris, who runs Spa in Your Space, a mobile-spa business in Oak Park, wants to borrow $30,000 to invest in new equipment and advertisements. Harris works with his wife and is a subprime borrower. He

has a line of credit from a community-based group, rather than a traditional bank. He also looks for loans from alternative providers, such as his credit-card processor, Square.

“There’s money out there,” he said. “It’s hard to get, but it’s doable.”

The 20-year-old company, which primarily serves businesses and corporate events, has been bouncing back from the pandemic in part by seeking financing. Terms have changed recently, though.

“They’re not as generous as they were before Covid,” he said of the loan offers from Square and others.

Businesses need money to grow, and it’s not new that not all of them can land the dollars they seek at the price they prefer. The federal funds rate—the rate at which banks borrow from the Federal Reserve—has gone from near zero percent at the beginning of 2022 to 4.6% in February of this year. Rates for customers tend to be higher.

As an example, interest on a 10year Small Business Administration 504 loan, available to companies with an average net income of less than $5 million that plan to use the money for growth, was 6.78% on March 30, nearly double the 3.82% rate from a year ago.

“Everything has gotten more expensive,” said Ted Macke, an accountant at Fingerman & Macke who works with small and medium-size businesses in the New York City metropolitan area.

Capital is even more expensive for companies that cannot get loans. For companies that end up in need of cash for unexpected expenses or working capital, the last-ditch options aren’t great.

director at the Chatham Business Association, which coaches and assists business owners on the South Side of Chicago. The tightness has increased in line with rising interest rates in the past eight months, Adkins said.

“With 650, there are more fees. If there’s one … past-due [bill] in your file, they want a letter of explanation,” Adkins said. “They’re really scrutinizing more things. It’s very challenging. Credit cards aren’t going to help you. What people really need is a line of credit. The products just aren’t out there.”

That banks are scrutinizing their customers is hardly new.

“This is a structural problem that has existed for a long time,” said Daniel Marsh, president of the Brooklyn-based National Development Council, which provides affordable loans to small businesses across the country. “Over the years larger banks have changed their lending profile to do larger loans with customers with higher balances, higher revenue and more of a business relationship for that bank.”

The reasons are different now. On the one hand, banks can earn relatively high interest rates on their own cash and may want to be clear about the risks of new loans. On the other hand, they may feel the pressure of duration risk—loans already on their books that are losing value. This was the source of SVB’s problems.

“A bank that has earnings pressure has capital pressure, and that will make them less likely to lend,” said Thomas Wells, CEO of First American Bank in Elk Grove Village.

credit standards, maybe not doing bigger deals and [have] less appetite for new business.”

Changing relationships

One lesson of the Silicon Valley Bank collapse: Don’t keep all your money in one place. As a result, some small firms are developing relationships with more than one banker, a possible upside for times when they need access to cash.

The “new standard” for companies will be to expand their banking relationships, agreed Chris Rizik, CEO and fund manager of Renaissance Venture Capital, an Ann Arbor, Michigan–based fund of funds that invests in other venture capital funds as opposed to directly into startups.

Gone will be the days of a company putting all of its $10 million capital raise into one bank, Rizik said.

“We’re going to see that startup companies are going to have two banking relationships, and the lion’s share of big fundraises will go into larger banking relationships,” Rizik said. “In part because they’re worried about going through what they went through two weeks ago.”

neur, you have to be resourceful and more creative. I tell myself, ‘You made it through Covid. You can do this too.’ ”

Those forging first-time relationships with funders could feel the worst of it. Julie Roth Novack, founder of Chicago startup PartySlate, had just raised $4 million and deposited it in Silicon Valley Bank when the run on the bank began. After the Federal Reserve stepped in, she was able to move her money to new accounts at JPMorgan Chase and Chicago-based Wintrust. That raise was already in a hard environment. Venture funding dropped 31% nationwide last year and 61% in the fourth quarter from a year earlier, according to PitchBook data. Things appear to be worse already.

“I’m hearing from founder friends who are having trouble raising their commitments [to invest] because of the SVB issues,” Roth Novack said. “I think it created some waves in the industry that [are] hurting founders even more. There’s a general sense that any increase in risk isn’t good for venture funding. It’s another ripple.”

“A lot of businesses are using credit cards for cash flow,” Macke said. “They even carry balances.”

An increasing number have turned to merchant cash advances, which provide money upfront to less-qualified borrowers but at terms that translate to triple-digit interest rates.

Even New York state is feeling the pinch. The governor’s office said the state would pay cash toward its incentive deal to build a new Buffalo Bills stadium, thanks to the higher cost of issuing long-term bonds, The Buffalo News reported. The state needs to pay $182 million of its $600 million commitment this year. Leaders have issued long-term bonds in the past for similar large capital projects.

Close examination

Businesses say that their banks are doing extra diligence on loan applications.

“What you could do with a [credit score] of 650, now it’s 680,” said Jennipher Adkins, interim executive

There are also rumblings that more intense diligence could become a requirement, experts say.

Currently banks with more than $100 billion in total assets have stringent requirements about how much capital they keep on hand. So far smaller banks are exempt.

It’s possible that the regulations could change. In the wake of the recent bank collapses, examiners could look to strengthen bank capital requirements to promote security in the financial system.

“That could be a concern,” said Michael Adelman, president and CEO of the Ohio Bankers League. “But it’s not something that we’re seeing today.”

Banks could make their own push to have more cash on hand, said Brian Calley, a former business banker who is now president and CEO of the Small Business Association of Michigan.

“I think, in the short term, this will result in banks being less aggressive in offering credit,” Calley said. “So [they will be] tightening up

Larger banks are appealing for their stability, but smaller banks are the ones that approve more loans for most companies. Of small businesses that sought traditional loans at smaller banks in 2022, 82% were at least partially approved, according to the Fed Small Business 2023 Report on Employer Firms. At larger banks, the figure was 68%.

The relationship business goes both ways. Naudon, president of Ponce, said companies that would normally be too large to apply for loans at his bank had come calling in recent months. Because of federal funding for Community Development Financial Institutions, including Ponce, some are flush with cash and ready to lend to inbound customers.

The key for business owners is to capitalize on their existing relationships with their bankers, said Calley of the Small Business Association of Michigan. Those with a fairly new banking relationship could struggle.

Harris, the mobile spa owner, worked with a small-business development center at the Chicagoland Chamber of Commerce, which introduced him to a traditional bank.

“For me, it’s finding the happy balance of fintechs, like Square and PayPal, and finding a banker to work with,” he said. “As an entrepre-

Putting growth on ice Companies in doubt about future funding are slowing their planned growth.

Irwin, the Chicago Realtor, said that for clients, the process of opening a new storefront is already the slowest he has seen, mostly due to residual delays from the past two years of supply-chain issues and soaring demand. He expects it to get even slower if and when banks become more conservative in their commercial lending practices. It is taking at least six months and up to a year to open a 2,000-square-foot restaurant, he said. Such long lead times mean lost revenue for the incoming business and the landlord.

Illinois-based Craveworthy Brands, owner of restaurant chains such as Budlong and Krafted Burger + Tap, hasn’t changed its plan to open more locations in the next several months.

But because of the banking turmoil, it will be much more cautious about which financing partners it chooses, said Larry Swets, an adviser to various Chicago companies, including Craveworthy.

“The banks may be less willing to work with you because they’re under more scrutiny [and] more pressure,” Swets said. ■

“A BANK THAT HAS EArNiNGS prESSUrE HAS CAPITAL PRESSURE, AND THAT WILL MAKE THEM lESS liKElY TO lEND”

COMPANIES that would normally be too large to work with Ponce Bank have come calling in the wake of the crisis.

THE FAILURE OF Silicon Valley Bank on March 10 sent small businesses across the country scrambling.

BLOOMBERG

THE LIST

LARGEST RESIDENTIAL SALES

City deals between Q2 2022 and Q1 2023, ranked by price

The listincludes residential sales in the fiveboroughsofNewYorkCity taking place between Q2 2022 andQ1 2023.Thereis noguaranteethatthe list is complete. n/d-Not disclosed. Source:Brown Harris Stevens(bhsusa.com)with additional research by Amanda Glodowski. 1

Spencer-El, one of the plaintiffs, was serving as RIOC’s communications director and said in the suit that she grew alarmed by the process that led to the site’s opening.

Haynes and his team chose Swift using an “emergency” exception to normal procurement rules, bypassed review by RIOC’s board and funded it through budget line items meant for other recipients, like a public library branch, the suit alleges.

Haynes directed RIOC staff to help promote the site and find federal funding for it, fueling a feeling that RIOC was “running the site as if it were a personal business,” the suit says. By April 2021, RIOC was paying Swift a $68,120 monthly fee, on top of $319,750 it had already paid the company, the website Roosevelt Island Daily reported at the time.

For weeks the Swift site offered free rapid tests using state-provided kits, according to the suit, but later it began charging a $200 fee for uninsured patients—far costlier than other testing options nearby, the suit says.

Smith, a fellow plaintiff who worked under Spencer-El as public information officer, said in the complaint that she expressed concerns that the Swift site was reporting inaccurate testing data. By March 2021, as Roosevelt Island Daily and fellow blog Roosevelt Islander raised questions about the site’s funding and cost, Haynes summoned Smith for a meeting and asked whether the site was under investigation, Smith alleges in the suit

Smith denied any knowledge. That same month, however, Spencer-El submitted whistleblower complaints to the state comptroller’s and state inspector general’s offices, laying out concerns about the testing site. (The site ultimately closed in June 2021.)

Spencer-El attests in the suit that she was interviewed by the inspector general’s office and that a probe is ongoing. Neither office would confirm whether it is investigating RIOC.

‘Frantic, unorganized’

On May 16, 2021, 21-year-old Mohammed Shakib Chowdury drowned while swimming in the

pool at Sportspark, an athletic complex run by RIOC. In September of that year, the city’s medical examiner determined that Chowdury had suffered a heart arrhythmia and listed that as the cause of his drowning.

The day of the drowning, Smith said, she drafted a public statement, but then RIOC’s executive team stripped it of “numerous relevant facts.” Roosevelt Island residents inquired for weeks about the drowning, but Smith said her superiors withheld knowledge of the medical examiner’s findings until nearly a year later.

Meanwhile, weeks after Chowdury’s death, Smith said, she watched video footage showing that the pool’s lifeguards had not been at their assigned posts, the victim had been in distress “for an incredibly long time” and members of the public, rather than RIOC’s lifeguards, found him at the bottom of the pool and performed CPR.

“RIOC lifeguards appeared frantic, unorganized, unskilled and untrained for the moment,” the suit reads.

Smith, who thought the video showed “clear negligence,” soon felt constrained, because RIOC’s executives had ordered her to put “nothing about the incident in writing” and were pushing to reopen the pool without changing safety protocols, the suit alleges. Smith opted to submit her own report to the state’s inspector general about RIOC’s handling of the testing site and the drowning.

Chowdury’s family filed a lawsuit against RIOC in January, making similar claims of negligence. The suit remains pending.

Although Smith submitted her report anonymously to state investigators, Spencer-El’s had her name attached. Both say their treatment by Haynes and his team became hostile in the ensuing months—including Haynes’ asking Spencer-El point-blank about the inspector general’s investigation in April 2021, she alleges.

Miller, the attorney for RIOC and Haynes, offered a different timeline, saying RIOC received notice in March 2022 of the allegations that later made up the lawsuit. At that point, RIOC followed state requirements by reporting them to the inspector general’s and comptroller’s offices—and also hiring an outside law firm to conduct an independent review, he said.

By early 2022, the plaintiffs say,

RIOC executives told Smith and Spencer-El that their department would be “restructured”—a move that amounted to “management by chaos,” the plaintiffs allege, which reshuffled titles, roles and responsibilities with little explanation. That March, an open letter written by unnamed RIOC employees was posted online and sent to local elected officials, making many of the claims that would ultimately form the basis of the lawsuit. (An attorney for the three plaintiffs would not say whether they had written the letter.)

Though the management shakeup was soon reversed, both Smith and Spencer-El were terminated between March and April 2022. Smith’s firing was attributed only to “restructuring,” while Spencer-El’s was chalked up to a purported discrepancy on the résumé she used to apply for a promotion, the suit alleges.

Cerone, the third plaintiff, worked under Spencer-El in communications and community affairs. In the suit, she says she too made internal complaints about the drowning investigation and the testing site, and contributed to Spencer-El’s formal complaints sent to state authorities.

Cerone also filed her own separate complaint to the Occupational

Safety and Health Administration about the storefront that housed the testing site, which was then haphazardly converted into offices for RIOC, the suit says. Among other issues, her complaint described mold problems, a missing emergency exit and insufficient restrooms.

Cerone said she was also marginalized in the ensuing months, before finally being terminated without explanation in August 2022. Retaliation?

The plaintiffs say their firings, which came after they made complaints internally and with state authorities, amount to retaliation against whistleblowing—a protected right under state law. The suit seeks at least $1 million in damages for each plaintiff.

RIOC has countered in court that the plaintiffs failed to prove that Haynes or his team were aware of the whistleblowing in the period being alleged. Plus, the defendants say, too many months passed between the complaints being filed and the plaintiffs’ firings for them to prove retaliation.

“RIOC has made a conscious decision not to take the easy way out and pay off the plaintiffs to simply make this matter go away. To the contrary, RIOC has been defamed

by the plaintiffs,” Miller, the RIOC attorney, said in an emailed statement.

“Because of the gravity of the false statements, which have hurt the entire Roosevelt Island community, RIOC is taking the unusual step of bringing its own suit against the plaintiffs to vindicate its own rights and clear the good name of Roosevelt Island from what amounts to a petty money-grab. The community deserves to have any taint caused by the plaintiffs to be removed.”

Spencer-El, Smith and Cerone are not the only ex-employees suing RIOC. Arthur Eliav, a former inhouse counsel, filed a federal suit against the corporation in November, alleging that he faced workplace discrimination due to his race and religion. RIOC has moved to dismiss that case as well.

Gov. Kathy Hochul’s office declined to comment on the latest lawsuit. But Assembly member Rebecca Seawright, who represents Roosevelt Island, said in a statement that “the dysfunction and veil of secrecy cited throughout the pending lawsuit is distressing and unacceptable.”

Seawright is among the elected officials who received a copy of the anonymous open letter in March 2022, and she said recently that she referred the complaint to the inspector general’s office. A frequent critic of RIOC’s operations, Seawright introduced bills last year requiring RIOC’s CEO and most of its board members to live on the island—responding to reports that one member had continued to serve long after moving away.

The bills passed the Legislature, but Hochul vetoed them in December, saying they could deter qualified candidates and create too many board vacancies.

“Constituents consistently report that the Roosevelt Island Operating Corp. has been unresponsive in the day-to-day operations of the agency,” Seawright said. “I will continue fighting to ensure RIOC is held accountable and that the people of Roosevelt Island receive the services and attention they most assuredly deserve.” ■

HAYNES, (third from left) RIOC’s CEO, appeared at the Swift testing center to announce its opening.

THE MAIN STREET OFFICE (left) that was former ly home to the Swift Emergency Care Covid-19 testing site has been converted into offices for RIOC. (Right) Mohammed Shakib Chowdury, 21, drowned at the Sportspark athletic complex in May 2021.

City planning to give these rat- lled neighborhoods special attention in battle against infestations

BY NICK GARBER

Residents of bustling neighborhoods such as Hell’s Kitchen and the West Village complain plenty about rats swarming their streets, but they won’t get any extra attention as part of the city’s latest rat- ghting initiative.

Instead, it’s four areas in Brooklyn, the Bronx, Upper Manhattan and the Lower East Side that have been designated “rat mitigation zones,” the city’s Department of Health and Mental Hygiene revealed in a notice posted last week.

e latest designations stem from a law signed by Mayor Eric Adams in November, although the city has been targeting certain ratprone areas in a similar fashion since 2017. e new designees will bene t from “proactive and enhanced attention from the city” on rat-related issues, a department representative said, including stepping up enforcement on properties that fail multiple inspections; providing case managers to building owners, businesses and residents; and o ering educational walkthroughs and “rat academies.”

ree of the new zones were already getting a similar level of rodent scrutiny as part of the 2017 law: Chinatown, the Lower East Side and Greenwich Village in Manhattan; Bushwick, Bedford-Stuyvesant and Prospect Heights in Brooklyn; and the Grand Concourse area in the Bronx.

e new addition is Harlem, whose three community districts now form one giant rat mitigation zone. Business and community groups have long complained about sanitation issues uptown, especially during the pandemic.

Taking action

e neighborhoods were selected based on a set of criteria that included their number of rat-related cleanup orders issued over the previous year, summonses issued for rat activity, rat-baiting visits by the Health Department, rat-related 311 complaints and Parks Department–owned properties considered susceptible to infestations.

Adams has fashioned himself as a rodent- ghting mayor, planning to appoint a designated “rat czar”

WAR ON RODENTS

and changing garbage pickup times in hopes of giving rats fewer opportunities to nibble on trash. e mayor has faced nes, however, for an infestation at his own Brooklyn townhouse.

“When rats appear, New York City takes action to send them packing,” a Health Department representative said.

“Focusing on rat mitigation zones is one aggressive strategy we employ, using a set of criteria to launch a multiagency e ort aimed at kicking

rats out of our neighborhoods.”

Any New Yorkers who feel their neighborhoods are infested enough to qualify as a rat mitigation zone

can make their voices heard during a May 4 public hearing that the city has scheduled foe a discussion of the policy. ■

Rat mitigation zone

Community district ISTOCK

Pfizer opens global headquarters in Hudson Yards as empty offices reach pandemic levels

BY AMANDA D’AMBROSIO

As offices across the city face vacancy rates similar to those during the pandemic, pharmaceutical giant Pfizer officially opened its new global headquarters in Hudson Yards last week, renting 800,000 square feet from Tishman Speyer at the Spiral at 66 E. Hudson Blvd.

The pharmaceutical company has been based in Midtown at 235 E. 42nd St. since 1961. Pfizer sold its old office building in 2018, and

the new space, and executives were joined by Mayor Eric Adams and Rob Speyer, CEO of Tishman Speyer.

“At a time when a lot of companies are leaving New York, we made the decision that we can’t afford to leave because New York is in our DNA,” Albert Bourla, CEO of Pfizer, told Crain’s, noting that Pfizer was founded in the city 74 years ago.

Pfizer’s decision to open a global headquarters comes at a time of struggle for office real estate in the city. A new report from brokerage Colliers shows that the Manhattan availability rate— which refers to the proportion of empty office buildings or those about to hit the market—was 17.1%, barely lower than during the worst of the pandemic.

fice work.

Pfizer has a flexible working policy, and it requires employees to come into the office two or three days a week, Bourla said.

15 locations in the U.S. The headquarters does not have lab space. The closest Pfizer lab is in Pearl River.

Symbolic location

Basing the headquarters in Hudson Yards is symbolic for Pfizer’s future, Bourla said. “As we are moving to a new decade for Pfizer, we are moving to a new neighborhood of New York that is growing very fast as Pfizer will grow during this decade,” he said.

since then it has been leasing the space from the buyer, the company said.

The office opened its doors to its 2,400 New York-based employees and contractors in December 2022.

Pfizer held a ribbon-cutting ceremony on April 3 to commemorate

Office occupancy rates in the city only cracked 50% as of January, according to a survey from the Partnership for New York City. Bourla, who was recently named co-chair of the board of directors at the partnership, said approximately half of Pfizer ’s staff has returned to in-of-

Pfizer declined to share the terms of the lease. According to Colliers, the average asking rent per square foot in Midtown South (which includes Hudson Yards, by Colliers’ definition) was $80.33 in the first quarter of this year, bringing Pfizer’s estimated annual lease to about $64 million.

Q&A: Pfizer CEO Albert Bourla on new HQ and bringing employees back to the office

INTERVIEW BY AMANDA D’AMBROSIO

Last week, Pfizer officially launched its 800,000-square-foot headquarters in Hudson Yards’ The Spiral. Pfizer CEO Albert Bourla spoke to Crain’s about the new space, the importance of getting people back into the office and strategies to support the life science industry in New York City.

Why did Pfizer move its headquarters to Hudson Yards?

We are a New York company. You can’t find a more New York company—actually, maybe you can. But we are among the very few. At the time that a lot of companies are leaving New York, we made the decision that we can’t afford to leave because New York is in our DNA.

innovation can be created.

What aspects of the office support that innovation?

It’s the openness. When people came into the office in the past, they were going into their own offices, so it was like working from home. But now they see people all the time.

Right now, we are at half of what we used to be in the past. We have a flexible working policy. We are asking people to come to the office two to three days a week. We don’t say which days, so they can choose. But there is a concentration in the middle of the week—Tuesday, Wednesday, Thursday—that people are coming to the office. I want to see more people coming, but gradually it’s increasing.

What’s the importance of in-office work for Pfizer?

As the old headquarters became outdated, Pfizer executives took the opportunity to move to an entirely new space rather than renovate the existing one, Bourla said.

“It is much easier to form it and shape it the way you want,” Bourla said. The company designed its headquarters to have an open floor plan, encouraging in-person collaboration for teams ranging from oncology to marketing.

The new headquarters is the only Pfizer location in the city and one of

The Spiral, which spans a city block, has 66 floors; Pfizer occupies 11 of them, which include four coffee shops, a 2-story fitness center, a wellness studio and a 9,000-squarefoot outdoor terrace. Other building tenants include HSBC Bank USA, law firm Debevoise & Plimpton, New York-Presbyterian and Turner Construction.

The new headquarters is also home to the Pfizer School of Science—a program that brings middle schoolers in the city’s public schools into the office to learn about Pfizer and the life sciences industry. The program has welcomed 250 students since opening on March 9, the company said. ■

Our building was getting older, so we decided that instead of trying to renovate the building, we would move to a totally new space. It is much easier to form it and shape it the way you want. So this headquarters that really reflects the dynamics of Pfizer, the openness of Pfizer, it’s a space that can be very inspirational. It’s a space where

It’s very clear to us, this is the atmosphere that we want to create in the working environment. We don’t have assigned seats, but we are recommending that people in oncology, for example, all sit together. It’s irrelevant if they are people working in chemistry or in medical or in marketing, they are sitting together. That creates a very good team spirit.

How often do you think your workforce will come into the office?

It gives a common identity, a sense of belonging, and marches people even more toward a common goal. The common goal, the common purpose for us is to make breakthroughs that save patients’ lives. When people can come together, they can always feel closer to this purpose.

Pfizer’s sales skyrocketed last year, with the company bringing in $100 billion in revenue. What growth tactics are you thinking about post-Covid? Science, and being able to produce credible solutions for unmet medical needs. It’s not only cancer, but cancer is clearly an area where we are putting a lot of investments and effort right now. Investments are necessary, because unfortunately goodwill will not

find the cancer cure. It is, of course, the dedicated people but also a lot of capital from investors who are willing to put all their money in 100 projects before they see one becoming successful, because that’s more or less the rate of success.

And that is not the only area. Right now, we are working on many new vaccines to protect people against infectious diseases, and many new antivirals. We are working on internal medicine tools and obesity, which is one of the biggest epidemics in the world. We’re working on immunoinflammatory diseases like rheumatoid arthritis and atopic dermatitis diseases. So it’s a very big group of therapeutic areas of needs, but the world is looking for medical solutions. Our ability to deliver those

services will give us growth.

Life sciences is an emerging sector in New York City. What do you think is needed to encourage growth in the industry?

I have to say it is becoming my personal dream to be able to build here in New York a life sciences hub that would be equivalent to those that exist in Boston or in San Francisco or in other parts of the world. And New York has all of the elements to be able to become a life sciences hub. We need all to work together to create the incentives and resolve some of the issues that could exist like space, etc. There’s so much space in New York, I don’t think it’s an issue. It’s a question of planning, and being well orchestrated in building this hub. ■

TISHMAN SPEYER

“THE pHArMACEUTiCAl COMpANY HAS BEEN BASED IN MIDTOWN AT 235 E. 42ND ST. SiNCE 1961.”

THE SPIRAL AT 66 E. HUDSON BLVD.

“WE CAN’T AFFORD TO LEAVE BECAUSE NEW YOrK IS IN OUR DNA.”

BOURLA

Mayor Eric Adams’ latest cost-cutting mandate is met with anger, praise and puzzlement

BY NICK GARBER

Mayor Eric Adams’ latest cost-cutting mandate for city agencies has been met with outrage from lawmakers, praise from fiscal watchdogs, and puzzlement from some observers who say the policy is based on a faulty premise.

City Hall announced in a letter to agency heads last week that they would need to cut their respective budgets by 4%—on top of the series of reductions rolled out last year that included a 3% cut and an additional elimination of vacant positions. Those vacancies have been widely blamed for worsening city services in recent months, such as administering fewer childhood immunizations, preparing fewer in-home meals for the elderly and failing to process food-stamp applications.

The migrant crisis, which the Adams administration says will cost the city $4.3 billion through the next fiscal year, is being blamed largely for the latest so-called Program to Eliminate the Gap, first reported by the Daily News. In the letter Budget Director Jacques Jiha also pointed to the February contract deal with the DC37 municipal union, and linger-

ing uncertainty over whether the still-pending state budget will bail the city out or impose new costs.

Agencies have until April 14 to submit their cost-cutting plans, which will take effect in the next fiscal year that starts in July. The cuts cannot include layoffs and should avoid affecting services “whenever possible,” Jiha wrote.

“We must act now,” Jiha wrote, citing slowing tax revenue growth and an upcoming recession. “We have less than a month to identify the resources needed to reduce the strain on our budget, decrease outyear gaps, and avoid disruption to programs and services that keep our city clean, safe and healthy.”

But City Council leaders, already battling the mayor over cuts the administration proposed in the upcoming city budget, came out strongly against the new cuts. In a statement, Speaker Adrienne Adams and finance Chair Justin Brannan, called the PEG “a demonstration in excess that risks taking the city down a harmful, destabilizing path.”

“In hearing after hearing, city agencies continued to identify staffing challenges as the biggest impediment to fulfilling their duty to New Yorkers,” they said. “Addi-

CORPORATE SUBSCRIPTION

tional PEGs will paralyze agencies, harm New Yorkers, and make it even more difficult for the city to successfully recover.”

Council and mayor at odds

They also questioned City Hall’s estimates for asylum-seeker costs, saying the administration “continues to rhetorically convey ever-changing costs for supporting asylum seekers, despite never providing the council with any substantive response to our repeated requests for evidence of these costs.”

The DC37 labor deal is estimated to cost the city $16 billion through 2027, since it will set a pattern for other municipal contracts that the city has yet to make final. Jiha, though, said in February that the administration had “been planning for this all along,” adding that the city was “well prepared for this settlement.”

The apparent contradiction led Ben Max, executive editor of the online publication Gotham Gazette, to suggest that the new PEG might be an effort by City Hall to influence state budget talks in Albany, which city officials desperately hope will result in aid for asylum-seeker costs. It could also serve as a counter, Max noted, to the

THE COMPETITIVE EDGE

council’s official city budget response released yesterday, which used a more optimistic financial forecast as a basis for reversing the mayor’s planned cuts to libraries, education and other services.

The Citizens Budget Commission was quick to praise the new PEG, which President Andrew Rein called “timely, if not overdue.” The city’s budget gaps may exceed $14 billion by fiscal 2027, Rein noted, saying the city should focus on improving “operational efficiency” to avoid a deeper dropoff in services.

All agencies are subject to the 4% cut except the Department of Education and the City University of New York, which are being held to 3%. It’s also not guaranteed that every agency will meet the 4% goal.

Logan Clark, an assistant director of budget review at the Independent Budget Office, noted that the council and the mayor were operating on different timelines, with lawmakers pointing to ample cash in the next year while City Hall fears deficits further ahead.

“We’ve got calm seas right now in the near years, but uncertainty in the outs,” Clark said. He added that the apparently sudden directive was a consequence of the state’s overdue

budget, whose April 1 deadline is intended to give the city enough time to get its own affairs in order.

“It’s a little bit late in the game to tell all of your agency heads, ‘Find 4% of your budget to cut,’” Clark said.

Comptroller Brad Lander, who supported last year’s 3% PEG, also took issue with the new cut, which he called “a blunt approach that cuts arbitrarily rather than plans strategically for the future.”

Christine Quinn, the former council speaker who now heads the shelter provider Win, said a 4% slash to social service agencies would “result in more families living in shelter for longer.”

But Jonah Allon, a mayoral representative, said officials “cannot sugarcoat the reality of the fiscal and economic challenges we are facing.”

He added: “While we continue to have positive conversations with our partners in Albany, we face a perfect storm of factors — including near historic levels of spending as a result of billions of dollars in costs related to asylum seekers and the need to fund labor deals that are years overdue. Ignoring these realities would be irresponsible and would cost New Yorkers more in the end.” ■

how much money to send the city for asylum-seeker care (Hochul proposed about $1 billion; the Senate is open to more), or whether to repeal controversial tax breaks for entities like Madison Square Garden (the Senate is on board; Hochul may not be).

Crain’s took a look at the sticking points and examined the most consequential policies that could emerge from budget negotiations–those that could most directly hit New Yorkers’ wallets, alter their commutes and reshape their neighborhoods.

Bail reform

e biggest roadblock, multiple legislators have said publicly, has been Hochul’s determination to roll back part of the 2019 bail reform laws. As described by the governor, her desired change is removing a requirement that judges use the “least restrictive” means of ensuring that defendants return to court. at would give judges more leeway in whether to set bail.

e rollback would only apply to “serious crimes” that remain eligible for bail. Hochul’s administration has argued it would not increase rates of pretrial incarceration or undermine the 2019 reforms, intended to prevent people from wasting away in jails simply because they lacked enough money to post bail.

Hochul’s o ce says her tweak would “make it crystal clear that judges do, in fact, have the discretion necessary to protect the safety of New Yorkers.” No doubt, she is also mindful of her narrow re-election victory last fall over Republi-

reports that Assembly Speaker Carl Heastie was willing to remove the “least restrictive” standard, lawmakers have since insisted that they are holding rm.

“I think we fundamentally have di erent approaches and opinions on the issue,” one cynical-sounding Assembly member told Crain’s on Wednesday. “So I don’t know how that will be resolved.”

e stando is reminiscent of last year’s budget, which was delayed for days as Hochul pushed through changes to the 2019 bail law. ose changes included allowing judges to consider more factors, like a defendant’s prior o enses or a history of gun use, when setting bail.

Housing

e governor’s push to build 800,000 homes in New York over the next decade is a potentially legacy-de ning initiative, but several key aspects of her plan have faced intense opposition from the Legislature during the budget ght.

One major component of Hochul’s plan, which she announced in February, is requiring all downstate communities, speci cally the city’s suburbs, to increase their housing stock by 3% every three years. Towns with Metro-North stations would also need to rezone the areas near those stations to permit more housing, and the state would have the authority to step in if towns were not hitting these numbers.

is plan was eviscerated in the one-house budget bills passed in mid-March by the state Senate and Assembly. e Legislature removed the growth mandates and the state’s ability to override local zoning laws. Instead, legislators would aim to encourage suburban housing production through incentives— namely a $500 million fund that would pay localities for submitting a housing growth plan and for meeting targets.

Hochul has notably steered clear of proposing any income tax hikes. But both the state Senate and Assembly called for raising income taxes from 10.3% to 10.8% for people earning between $5 million and $25 million, and from 10.9% to 11.4% for those making at least $25 million.

e prospect of raising taxes on the wealthy has been the subject of raucous rallies at the state Capitol in recent weeks, and advocates tout a statewide poll from late March showing that three-quarters of New Yorkers supporting the Legislature’s proposal.

Hochul has cited a looming recession as a reason to avoid raising taxes this year. at stance has won praise from the scally conservative Citizens Budget Commission, whose experts have warned against imposing new taxes that could drive wealthy people and businesses out of New York. e left-leaning Fiscal Policy Institute, meanwhile, is supporting a tax hike, which it says would generate more than $700 million annually.

Hochul did, however, propose a three-year extension of a corporate tax increase that was rst implemented in 2021. e tax applies a 7.25% levy to businesses making at least $5 million in pro ts per year.

MTA funding

Another looming issue is how to fund the Metropolitan Transportation Authority. Budget negotiations are expected to plug the gaping chasm in the MTA’s operating budget. e authority needs $600 million this year, and nearly $3 billion annually by the time emergency federal relief runs dry in 2025. Without aid, o cials have warned of steep fare increases and service cuts.

which combination of mechanisms.

“Sometimes in a budget you get the sense that you’re far apart philosophically—I don’t get that sense with the MTA,” Zebrowski told Crain’s. “People do have strong opinions but I do feel everybody’s at the table with an understanding of where we need to go.”

Minimum wage

Both Hochul and lawmakers want to guarantee future increases in the state’s minimum wage by tying it to the rate of in ation.

But a key di erence separates their plans: the Legislature wants to rst raise the wage, then peg it to in ation in the ensuing years. Hochul’s proposal includes no such increase, meaning the current minimum wage would be the basis for future in ation-adjusted raises.

( e minimum wage is $15 in New York City and its surrounding suburbs, while the rest of the state is scheduled to hit $15 in the coming years.)

workers.

Hochul has proposed increasing the Medicaid reimbursement rate for hospitals, nursing homes and assisted living providers by 5%. Providers have objected, saying that the increase is not nearly enough to help them meet rising costs. ey want an increase of 10% to 20%. Both the state Senate and Assembly included a 10% Medicaid rate bump in their one-house budget bills.

New York’s Medicaid pharmacy bene t transitioned on April 1 from managed care to fee-for-service at the governor’s direction. Known as the 340B carve-out, providers oppose the plan, stating that it will result in a loss in revenues that will a ect their ability to care for underserved patients. Meanwhile, pharmacists support the proposal, saying it will help them recoup revenues and give patients better access to medication.

can Lee Zeldin, who constantly blamed bail reform for New York’s crime uptick.

But advocates for criminal justice reform say Hochul’s proposal would in fact go far beyond the 2019 law, removing a cornerstone of the state’s criminal procedure that has long limited judges’ discretion in setting bail, as New York Focus has reported. Some experts say that judges already have enough discretion, and that removing the “least restrictive” language would drive up detention rates without improving public safety.

“ e governor has decided to delay vital funding for New York’s working families in a cynical attempt to bully the legislature into accepting draconian, far-right changes to the bail law,” said Phara Sou rant Forrest, a Brooklyn Assembly member, in an April 3 statement. “Racist pre-trial detention policies will not keep New Yorkers safe; what will keep New Yorkers safe is a budget that meets the pressing needs of this moment.”

e Legislature has shown little appetite to undo a law the legislators themselves enacted less than four years ago. And despite initial

e Legislature also omitted several tax incentives Hochul proposed to encourage more housing production, including exemptions for accessory dwelling units and, in the Assembly’s proposal, o ce-to-residential conversions.

ey also axed a four-year extension to complete projects using New York’s contentious and expired 421-a a ordable housing program.

State Senator and Finance Committee Chair Liz Krueger previously told Crain’s that the governor’s housing plan was too ambitious and complex to deal with in the budget process. She suggested holding a housing “summit” later on in Albany’s legislative session. However, it is unclear how much support this has in the legislature and whether Hochul would agree to it.

e governor has more negotiating power for her agenda when it’s included in a budget that must be passed, otherwise state operations could shut down.

Income taxes

e prospect of raising personal income taxes is another sticking point between Hochul and the Legislature.

Hochul, who often refers to the MTA as the “lifeblood” of the region, put forward a contentious rescue plan: an increase in the payroll mobility tax, from 0.34% to 0.5%, for businesses in the counties served by the MTA. e governor’s o ce has estimated this would raise $800 million annually.

e MTA would also receive a share of the $1.5 billion in expected licensing fees for up to three yet-tobe-built casinos under Hochul’s proposal, and $300 million in onetime emergency aid from the state.

Perhaps most controversially, Hochul called on the city to kick in an extra $500 million in annual contributions to the authority; Mayor Eric Adams has atly rejected the idea as “something that we cannot take on at this time.”

In their one-house budgets, the Senate and Assembly rejected much of Hochul’s rescue package in favor of other options such as an increase to the business income tax, fees from a city parking permit program and cutting the tax exemption held by Madison Square Garden.

Assembly member Kenneth Zebrowski, who chairs a committee overseeing the MTA, said as budget talks continue it’s less a question of whether the MTA will receive funds—rather, it’s about through

Progressives say Hochul’s plan would do workers a disservice. e city’s minimum wage has not risen since 2018, despite the in ation that has occurred in that span— meaning the governor’s proposal would essentially bake in the loss in “real wages” that workers have suffered in recent years, critics say.

By 2026, New York’s minimum wage would stand at $16.30 under Hochul’s plan—but its value will have fallen to just $12.48 in 2018 dollars, the Fiscal Policy Institute found.

Instead, progressives have rallied around a bill by state Sen. Jessica Ramos of Queens that would raise New York City’s minimum wage each year to as high as $21.25 by 2026, then tie it to in ation starting in 2027. e Legislature’s onehouse budgets did not back that plan explicitly, saying only that they wanted an increase followed by an in ation indexing.

Business leaders are generally skeptical of a wage increase— though advocates have countered with their own group of business groups that support it.

Health care

Health care providers are anticipating a decision on Medicaid reimbursement rate increases for hospitals and nursing homes. Other big decisions include whether there will be a carve-out for the federal drug program 340B, new mental health funding, the inclusion of undocumented immigrants in the state’s low-income insurance plan, and better wages for home care

e state Senate and Assembly both rejected the carve-out in their responses to Hochul’s budget, signifying it could be a sticking point in nal negotiations.

Legislators are still considering whether to make undocumented immigrants eligible for health coverage under the state’s Essential Plan, a basic insurance plan for people who do not qualify for Medicaid and make up to 200% of the federal poverty threshold.

Mental health providers have also been watching for additional funding in the nal budget, a continuation of Hochul’s $1 billion commitment earlier this year that focuses on expanding inpatient psychiatric bed availability, creating supportive housing and increasing outpatient treatment options.

Lawmakers and advocates have also called for increased wages for home care workers, up to 150% of the regional minimum wage. Last year, state o cials won a $3 increase over the regional minimum wage for home care workers, to be implemented over the course of two years. But in the scal 2024 budget proposal, Hochul reversed those changes, proposing to cap pay for home workers at $18 an hour until the regional minimum wage increased—e ectively returning home care pay to minimum wage.

Both the Senate and the Assembly rejected Hochul’s proposal to cap home care wages in their onehouse budget bills. ■

Amanda

D’Ambrosio, Jacqueline Neber, Eddie Small and Caroline Spivack contributed.

MIKE GROLL/OFFICE OF GOVERNOR KATHY HOCHUL

“I THINK WE FUNDAMENTALLY HAVE DIFFERENT APPROACHES AND OPINIONS ON THE ISSUE”

A STALEMATE on budget negotiations, blamed largely on bail reform, forced the April 1 deadline to be pushed until at least April 10.

Notice of Formation of Stella Henson LLC. Arts of Org filed with Secy. of State of NY (SSNY) on 2/10/23. Office Location: NY County. SSNY designated as agent upon who process may be served and shall mail copy of process against LLC to R/A Republic Registerd Agent Services Inc., 600 Broadway, Ste 200, ALbany, NY 12207. Purpose: any lawful ac.

Notice of Qualification of 182 SCHERMERHORN STREET PROPERTIES, LLC

Appl. for Auth. filed with Secy. of State of NY (SSNY) on 03/10/23.

Office location: NY County. LLC formed in Delaware (DE) on 03/09/23. SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to c/o Edison Properties, LLC, 110 Edison Pl., Ste. 300, Newark, NJ 07102. DE addr. of LLC: c/o Corporation Service Co., 251 Little Falls Dr., Wilmington, DE 19808. Cert. of Form. filed with DE Secy. of State, Div. of Corps., John G. Townsend Bldg., 401 Federal St. - Ste. 4, Dover, DE 19901. Purpose: Any lawful activity.

Notice of Qualification of 45 WEST 27TH STREET PROPERTIES, LLC

Appl. for Auth. filed with Secy. of State of NY (SSNY) on 03/10/23. Office location: NY County. LLC formed in Delaware (DE) on 03/09/23. SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to c/o Edison Properties, LLC, 110 Edison Pl., Ste. 300, Newark, NJ 07102. DE addr. of LLC: c/o Corporation Service Co., 251 Little Falls Dr., Wilmington, DE 19808. Cert. of Form. filed with DE Secy. of State, Div. of Corps., John G. Townsend Bldg., 401 Federal St. - Ste. 4, Dover, DE 19901. Purpose: Any lawful activity.

PUBLIC & LEGAL NOTICES

Notice of Qualification of HYDRO ALUMINUM METALS USA, LLC

Appl. for Auth. filed with Secy. of State of NY (SSNY) on 02/24/23. Office location: NY County. LLC formed in Delaware (DE) on 12/24/12. SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to Corporation Service Co., 80 State St., Albany, NY 12207-2543. DE addr. of LLC: 251 Little Falls Dr., Wilmington, DE 19808. Cert. of Form. filed with Secy. of State, John G. Townsend Bldg., 401 Federal St., Ste. 4, Dover, DE 19901. Purpose: Any lawful activity.

Notice of Formation of XN CAPITAL PARTNERS LLC.

Articles of Organization filed with the Secretary of State of NY (SSNY) on 3/6/23. Office Location: New York County. SSNY has been designated as agent up who process against it may be served. The Post Office address to which the SSNY shall mail a copy of any process against the LLC served up him/her is: 1 Union Square, South 210, New York, New York 10003. The principal business address of the LLC is 1 Union Square, South 210, New York, New York 10003. Purpose: any lawful act or activity.

Notice of Formation of LAUREL BRAND LLC

Arts. of Org. filed with the SSNY on 1/17/23.Office location: NY County. SSNY has been designated as agent upon whom process against it may be served. The Post Office address to which the SSNY shall mail a copy of any process against the LLC: 17350 State Hwy 249, Ste 220 Houston, TX, 77064, USA. The principal business address of the LLC is 234 E 7th ST Apt 5FW, New York, NY, 10009, USA. Purpose: any lawful act or activity.

NOTICE OF FORMATION OF Hunkinsworks, LLC. Articles of Organization filed with the Secretary of State of NY (SSNY) on 2/23/2023. Office location: NEW YORK County. SSNY has been designated as agent upon whom process against it may be served. The Post Office address to which the SSNY shall mail a copy of any process against the LLC served upon him/her is: 50-52 Metro Way, Secaucus, NJ 07094.The principal business address of the LLC is: 547 West 47th Street # 908, New York, NY 10036. Purpose: any lawful act or activity

Advertising Section

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PUBLIC & LEGAL NOTICES

Notice of Formation of OPSO LLC

Notice of formation of Digital Asset Research Group LLC. Articles of organization filed with the Secretary of State of NY (SSNY) on 01/26/2023. Office location: New York County. SSNY has been designated as agent upon whom process against it may be served. The Post Office address to which the SSNY shall mail a copy of any process against the LLC served upon him/her is 56 E 130TH ST., APT. BF, NY, NY, 10037, USA. The principal business address of the LLC is 1755 BROADWAY FRONT 3 #1040, NY, NY, 10019, USA.

Arts. of Org. filed with Secy. of State of NY (SSNY) on 01/09/23. Office location: NY County. Princ. office of LLC: 447 Broadway, 2nd Floor Suite #1591, New York, New York 10013. SSNY designated as agent of LLC upon whom process agains it may be served. SSNY shall mail process to Firstbase Agent LLC 447 Broadway 2nd FL #187 NY, NY 10013. Purpose: Any lawful activity.

Formation of Edward Tricomi LLC filed with the Secy. of State of NY (SSNY) on 3/17/2023. Office loc.: NY County. SSNY designated as agent of LLC upon whom process against it may be served.

Notice of Formation of WUMBO DESIGNS LLC

Arts. Of Org. filed with the SSNY on 12/15/22. Office location: NY County. SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to the LLC at the princ. office of the LLC. c/o 225 Cherry St, Apt 43D, NY, NY 10002

Purpose: Any lawful activity.

Notice of Formation of NN BLOOMING STORES LLC

Arts. of Org. filed with Secy. of State of NY (SSNY) on 12/22/2022. Office location: NY County. Princ. office of LLC: 447 Broadway, 2nd Floor Suite #1535, New York, New York 10013. SSNY designated as agent of LLC upon whom process agains it may be served. SSNY shall mail process to Firstbase Agent LLC 447 Broadway 2nd FL #187 NY, NY 10013.

Purpose: Any lawful activity.

The address SSNY shall mail process to 325 W. 52nd St., New York, NY 10019. Purpose: Any lawful activity

Notice of Formation of Student Forever One LLC

Arts. of Org. filed with Secy. of State of NY (SSNY) on 02/14/2023. Office location: NY County. Princ. office of LLC: 447 Broadway, 2nd Floor Suite #1682, New York, New York 10013. SSNY designated as agent of LLC upon whom process agains it may be served. SSNY shall mail process to Firstbase Agent LLC 447 Broadway 2nd FL #187 NY, NY 10013. Purpose: Any lawful activity.

NOTICE OF FORMATION OF ZE3NO LLC Arts of Org filed with Secty of State of N.Y. (SSNY) on 1/6/23. Office location: NY County. SSNY desginated as agent upon whom process may be served and shall mail copy of process against LLC c/o Martin S. Rapaport, P.C., 18 East 48th St., 6th FL. New York, N.Y. 10017. Purpose: any lawful act.

Notice of Formation of A16 STORES, LLC. Arts of Org filed with the SSNY on 1/29/23. Office: NY County. SSNY designated as agent upon whom process against it may be served.

SSNY shall mail process to LLC, 2265 2nd Ave, #1, New York, NY 10035. Purpose: any lawful act.

UBERMENSCH LLC, Arts of Org filed with SSNY on 12/20/21. Off Loc: New York County, SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail a copy of process to: The LLC,401 1st Ave Apt #19F, New York NY 10010. Purpose: to engage in any lawful act.

Rupish Transport, LLC. Art. Of Org. filed with the SSNY on 2/8/2023. Office: New York County. SSNY designated as agent of the LLC upon whom process against it may be served. SSNY shall mail copy of process to the LLC, 769 Broadway, #1158, New York, NY 10003.

Purpose: Any lawful purpose.

Notice of formation of Immescherable Consulting LLC. Arts of Org filed with Secy. Of State of NY (SSNY) on 1/24/23. Office location: NY County. SSNY designated as agent upon whom process may be served and shall mail copy of process against LLC to 149 E 23rd St, #186, NY, NY 10159. P/B/A: 280 Park Ave S, #9M, NY, NY 10010.

Purpose: any lawful act.

NICOLA ANTONAZZO PHOTOGRAPHY LLC

Arts of Org filed with the SSNY on 01/23/23 .Office: NY County. SSNY designated as agent upon whom process against it may be served. The SSNY shall mail a copy of any process against the LLC: 9900 Spectrum DR., Austin, TX, 78717, USA. The principal business address of the LLC is 228 Park Ave S #494670, NY, NY, 10003, USA. Purpose: any lawful act or activity.

These are the richest people in New York, according to Forbes

BY JACK GRIEVE MICHAEL

Michael Bloomberg is still the richest person in New York, and it isn’t particularly close. With a net worth of $94.5 billion, Bloomberg ranked No. 7 on Forbes’ 2023 “World’s Billionaire List,” released last week. at’s up ve spots from last year’s rankings, when his net worth was listed at $82 billion. Bloomberg is among the names on the list that saw the most growth in wealth. Meanwhile, nearly half of the world’s billionaires on this year’s list are worth less than they were a year ago, according to Forbes.

Another New York name

Jim Simons, founder of Renaissance Technologies, is another New York name on the list. Simons’ net worth of $28.1 billion put him at No. 49, down one slot from last year. He’s the second wealthiest hedge fund manager on the list.

Stephen Schwarzman, CEO of Blackstone Group, sits just behind Simons with a net worth of $27.8 billion—a $7 billion drop from last year.

at’s followed by Leonard Lauder of Estée Lauder at No. 77 with $21 billion and Ray Dalio of Bridgewater Associates at No. 83

Drivers owe city more than $1B in unpaid parking and speeding tickets

BY CAROLINE SPIVACK

BLOOMBERG ranked No. 7 on the Forbes list, with a net worth of $94.5 billion.

with $19.1 billion.

In the sports world, Mets owner Steve Cohen clocked in at No. 94 with $17.5 billion, while Yankees owners Hal Steinbrenner, Jennifer Steinbrenner Swindal and Jessica Steinbrenner each have a net worth of $1.3 billion, making them tied in the No. 2,133 slot. Jets owner Robert “Woody” Johnson ranked No. 852 with $3.2 billion.

The Murdoch family, which was lumped into the same entity, just broke the top 100, cinching the 99th slot despite a net worth drop of $3.7 billion over the last year.

Not surprisingly, Sam Bankman-Fried was nowhere to be seen on this year’s list. He ranked No. 60 last year before FTX Trading collapsed in November.

On the other end, fashion designer Tom Ford is among the fresh faces on the list after selling his namesake business to Estée Lauder in November. ■

Blame sco aw drivers for the city’s belt-tightening.

A new analysis from the city’s Independent Budget O ce found that New York is owed more than $1 billion in parking violations and camera-generated nes accrued from 2017 through 2022. e tally includes fees owed for drivers running red lights as well as for clogging the city’s bus lanes.

A whopping $5.8 billion in such nes have been issued since 2017, with $4.78 billion paid to the city as of early last month. e percentage of unpaid tra c nes has crept up in the past six years. About 10% of the nes issued in each of the years 2017, 2018 and 2019 haven’t been paid. at share rose to 14% in 2020, spiked to 24% in 2021 and hit 29% last year.

e tra c charges are part of $2.1 billion in arrears owed to the city, the IBO found. Also part of that total are $940 million in penalties from a variety of quality-of-life nes issued by the O ce of Administrative Trials and Hearings, and $150 million in unpaid property taxes and construction o enses.

IBO Director Louisa Chafee stressed in a letter released with the analysis that the fees are “likely an undercount of the total amount of debt that the city is owed.”

e analysis, unveiled last week, comes as Mayor Eric Adams ordered city agencies this week to tighten their budgets by 4%—on top of the series of cutbacks rolled out last year.

e Adams administration has largely blamed mounting costs from the migrant crisis for the action.

Analysis on uncollected nes

City Council member Gale Brewer, who requested the IBO analysis on uncollected nes, called on the city to “unearth every available dime before telling agencies to make cuts.”

“An extra $2.1 billion would go a long way toward funding legal service providers, keeping libraries open, and baselining critical positions at oversight agencies,” Brewer said in a statement.

e city pointed to disruptions caused by Covid-19 for the jump in owed parking tickets and camera violations. Collection e orts were “adversely impacted by the pandemic due to lower issuance and suspension of penalty assessments, ling of judgments, and booting operations during this time,” Jonah Allon, an Adams administration representative, said in a statement.

e city has since resumed those enforcement e orts. ■

BLOOMBERG

Saying goodbye to single-use plastics in medicine

BY AMANDA D’AMBROSIO

Most medical supplies, whether it be masks, rubber gloves or syringes, are disposable—thrown away after a single use. But a company based in Williamsburg is trying to take pill bottles out of that category.

Cabinet Health is a sustainable health company that sells common medicines in reusable glass bottles to individuals and retailers. It ships non-prescription drugs including acetaminophen and allergy-relief medications—which it sources from three FDA-approved manufacturers in India—in compostable packaging in an e ort to reduce the pharmaceutical industry’s carbon footprint.

Co-founders Russell Gong, president, and Achal Patel, CEO, said they are tackling the pill bottle as a rst step toward eliminating single-use plastics in medicine.

“If you ask any friend or family member what their medicine cabinet looks like, it’s probably plastic,” Patel said. “A lot of times these things are thrown away before they are even fully used.”

Gong and Patel founded Cabinet Health in 2018, after working together in consulting at Deloitte. e co-founders worked on a team that invested in mission-driven small businesses across the globe, including those that worked on environmental sustainability and community development.

Patel’s family has worked in the pharmaceutical industry for three generations, and he recognized the bulk of plastic waste creat-

ed by the sector. e co-founders combined their desire to foster sustainability in health care with that industry knowledge to create Cabinet Health.

In the ve years since it was founded, Cabinet Health has raised around $23 million, and about 700,000 people buy medicines on the website, or through retailers such as Grove Collective and Amazon.

Over-the-counter

A starter pack of over-the-counter medicines, including a re llable glass bottle and an initial pack of pills, costs between $10 and $14 on the company’s website. Cabinet o ers a membership model, which gives customers access to better pricing and exclusive deals, but a membership is not necessary to purchase its products. e company does not yet take insurance.

Cabinet Health sells 15 over-the-counter medicines for illnesses such as colds, u, allergies and digestive conditions. e company also sells some supplements, and will o er some prescription medications in July.

Patel’s background in the pharmaceutical industry helped the founders select drug manufacturers to source its medicines. After the drugs are imported to New York, they are tested for contamination such as carcinogens, toxic metals and allergens, in a lab outside of Yale University. e medicines are then packaged at a facility in Long Island, and shipped to customers or retailers from the warehouse.

Other sustainable movements, such as the

switch to glass water bottles from single-use plastics, have made progress in reducing waste, but health care remains stagnant, Gong said.

ere are 190 billion plastic medicine bottles produced every year—and only 3% to 5% get recycled, Gong said. A majority of those plastics end up in oceans, land lls and communities, and can have negative e ects on health. People consume a credit card-size amount of plastic every week, he said.

“ e health care system really hasn’t made signi cant progress,” Gong said. “ e health care industry that is meant to make us feel better is actually making us sicker.”

Single-use plastics are just one way that the health system contributes to climate change—the sector accounts for 8.5% of greenhouse gas emissions in the U.S., and 4.5% globally.

Gong said the company views its user base as a metric of environmental success, as each customer equates to at least one fewer plastic pill bottle being diverted into the environment, Gong said—and one fewer piece of medical waste ending up in land lls.

Additionally, Cabinet Health is a certi ed B corporation, meaning it has to meet higher standards of social and environmental performance.

In December Cabinet Health raised a $17 million funding round, which it used to get its products in more retailers and scale the company’s prescription drug capabilities. Additionally, the company was featured on Shark Tank earlier this year. Gong and Patel plan to

CABINET HEALTH Gong and Patel are looking to reduce the pharmaceutical industry’s carbon footprint

FOCAL POINTS

FOUNDED 2018

EMPLOYEES 14 full time, 10 part-time

CO-FOUNDERS Achal Patel, CEO, and Russell Gong, president SALES STRATEGY Cabinet Health sells on its website, and in retailers including Amazon and Grove Collective, an e-commerce retailer that sells natural hygiene and household products. The company is planning to sell its products in additional retailers later this year.

CUSTOMERS 700,000 customers PRICE POINT A starter pack of over-the-counter medicines, including a re llable glass bottle and a pack of pills, costs between $10 and $14.

FUNDING Since it launched, the company has raised about $23 million.

INVESTORS Global Impact Fund, Natureza, Unreasonable Group, TechStars, Sogal Ventures, Gaingels and Pixel Perfect Ventures WEBSITE cabinethealth.com

sell Cabinet’s products in additional large retailers in the coming months.

e co-founders hope their company brings sustainable medicine to the forefront of health care leaders’ minds.

“Plastic waste is a really big issue,” Gong said. “But changing industries that say they can’t change is possible.” ■

Cabinet Health sells OTC drugs, supplements in reusable pill bottles and compostable drug packaging