Department of Small Business Services Commissioner Jonnel Doris testifying at the hearing Image Credit: City Council
Small Business hearings takes dire tone. On August 13, 2020, the City Council Committee on Small Business held a remote public hearing, on three bills that would cumulatively limit third-party food delivery services and require the Department of Small Business Services to create reports on COVID-19 related small business grants and loans. Beyond the three bills, the hearing also delved into the state of small business in the City and potential action to alleviate stresses on the small business community. The three bills are detailed below:
Reporting Bill
Intro 1958, sponsored by Council Member Donovan Richards, would require the Department of Small Business Services to prepare a report detailing which business have received a grant of loan from the New York City Employee Retention Program or the New York City Small Business Continuity Loan Fund. Both programs were created to help small businesses affected by the COVID-19 pandemic. The report would include the name, location and amount of the grant or loan and made publicly available on the Small Business Services Website.
Ultimately, the bill is intended to provide transparency in government allocation of funding. As stated by the Committee Report, the Council seeks to gain a better understanding of why SBS failed to distribute loan and grant money equitably across the City. According to a July 2020 Comptroller Report, a disproportionate amount of City loans and grants were applied for and not awarded to minority or women owned businesses. In addition, the committee report starts that Manhattan received the largest percentage of loans and grants distributed. This passage of this bill would hopefully illuminate those disparities.
Third-Party Delivery Restriction Amendments
Intro 1938, a preconsidered bill by Council Members Francisco P. Moya and Mark Gjonaj, amends Local Law 52 of 2020. Local Law 52 of 2020 provides that a third-party food delivery service cannot charge more than 15 percent per order for delivery and more than 5 percent per order for all other fees while on-premises dining is prohibited. The bill originally provided that the restriction would last 90 days past the declared state of emergency— defining the state of emergency as the time where restaurants were prohibited from providing food for “consumption on premises.” For the purposes of the law, there was no declared state of emergency starting on June 22, 2020 when restaurants opened for outdoor dining. The amendment ultimately provides that the restriction would last 90 days from the date food service establishments are operating at maximum indoor capacity.
Intro 1939, a preconsidred bill by Council Member Gjonaj, similarly amends Local Law 51 of 2020. Local Law 51 of 2020 provides that third-party food delivery services cannot charge restaurants for telephone orders that do not result in a transaction. Like, preconsidered Intro 1938, the restriction on third-party delivery service companies would be extended 90 days from the time food service establishments can operate at full capacity.
The preconsidered bills are expected to be introduced at the August 27, 2020 stated meeting.
Commentary
Christian Klossner, Executive Director of the Mayor’s Office of Special Enforcement testified that he was “pleased to report that for the most part, it appears there has been universal compliance with the cap on fees relating to delivery services, and we have not heard of any instances where restaurants have been illegally charged for phone calls not resulting in an order.” On the preconsidered bills, Klossner stated that they were “welcome clarifications.”
Jonnel Doris, Commissioner of the Department of Small Business Services testified that as of the August 13, 2020 hearing “SBS has approved financial assistance totaling more than $24.9 million [through the NYC Employee Retention Grant] and $22.3 million through the NYC Business Continuity Loan Fund.” Doris acknowledged that access capital remains a major challenge for the small business community but stated that SBS is committed to help businesses reopen and provide the necessary guidance and support. For access to Small Business Service’s array of educational materials, services and general information, click here.
Council Members used the remainder of hearing time to express concerns over the state of small business in New York City. Believing that no aid is set to come from the federal government, many council members urged the Department of Small Business Services to provide more financial aid and seek out avenues to address winter dining. Chair Mark Gjonaj pointed out that under the City’s current fire code, space heaters must be natural gas and are subject to a multitude of regulations. Council members also spoke about bludgeoning commercial rents, expiring legislation preventing personal guarantees in commercial leases and a regulatory environment that was working against restaurants. Council Member Keith Powers specifically cited the State Liquor Authority for threats to revoke liquor licenses from already debilitated businesses.
Submitted Testimony
Andrew Rigie, Executive Director of the New York Hospitality Alliance, supported the bills stating “New York City’s restaurants are facing unprecedented challenges and we need to support our small business owners and their employees. The fee cap and prohibiting bogus fee are laws that were passing in May and have proven to be of the utmost importance to the survival of our local restaurants.”
Tom Grech, President and CEO of the Queens Chamber of Commerce testified in support of the bills. He strongly stated that “we cannot allow well-funded corporations to use their market share to exploit small businesses.”
Third-party delivery companies and services re-iterated their May testimony, that the solution to the problem is not government regulation. Amy P. Healy of Grubhub stated that “Marketing rate caps depress order growth for small independent restaurants relative to chain restaurants,” adding, “fee caps also result in increased diner fees – the impact of which is fewer orders.”
In addition to this coverage, CityLand will continue its coverage of the COVID-19 impact on New York City and its related government entities. For New York City-specific COVID-19 updates, the City established an information site with updates from all major administrative agencies. Agencies include the Department of Buildings, City Planning, Citywide Administrative Services, the Department of Finance and the Department of Transportation among others. You can find that page here.
UPDATE: The City Council approved these bills on August 27, 2020
By: Jason Rogovich (Jason Rogovich is the CityLaw Fellow and New York Law School Graduate, Class of 2019)