Does NYC Industrial Zoning Policy Preserve Local Manufacturing?

Brad Lander, Director of the Pratt Center for Community Development

Brad Lander, Director of the Pratt Center for Community Development, discusses the pros & cons of the Mayor’s Industrial Business Zone plan.

In January 2005, New York City Mayor Michael R. Bloomberg announced the creation of the Mayor’s Office of Industrial and Manufacturing Businesses (OIMB), formed specifically to support the city’s ailing industrial sector.

Along with this new office, the Mayor established what are known as Industrial Business Zones (IBZs) – specific areas of land already used by the industrial sector that the Mayor committed to preserving for industrial purposes (as opposed to commercial and residential development). Companies within these IBZs, or companies that relocate to them, are eligible for tax credits, enhanced sanitation services and employee training programs (see IBZ map).

While the Mayor’s industrial policy aims to preserve New York City’s industrial base, concern remains that the city’s manufacturing land isn’t being protected at all. In fact, recent data shows that it is shrinking.

A report released in August 2008 by the Pratt Center for Community Development, called, Protecting New York’s Threatened Manufacturing Space (.pdf), found:

When Mayor Bloomberg came into office in 2002, New York City had 12,542 acres of land where manufacturing businesses could legally operate. Today, thanks to zoning changes, it has fewer than 10,746, and another 1,800 acres would be converted to other uses under additional rezonings proposed by the Bloomberg administration.

Shortly after the Pratt report came out, spoke to Brad Lander, Director of the Pratt Center for Community Development (pictured above). In the Q&A session, which you can listen to at the top of this post or read in the transcript below, Mr. Lander answers questions about how the Mayor’s IBZ plan has changed the city’s industrial landscape.

Q: Can you describe what an industrial business zone is and how it differs from M-zoned land?

A: The industrial business zones are a designation that was developed by the Bloomberg administration, put forward as part of their plan for manufacturing. I think at least in the report broadly accepting the idea that while obviously manufacturing has declined a lot since the heyday in New York City, there’s still a lot of that kind of high value manufacturing that we want to keep in New York City. And that land is one of the key barriers to doing that. That niche business — manufacturing businesses that make sense here — make sense given high labor costs and other things. But they need space, and land is a real challenge and problem. So at the same time they obviously have had a long announced plan and they have been putting in place since they have been in office of rezoning manufacturing areas from manufacturing to primarily residential and some commercial office buildings. And I think partly they recognize that that sent a whole open season signal: that there’s no manufacturing space that we would not be happy with condos, and that that was really putting manufactures in kind of jeopardy and uncertainty. So they established these Industrial Business Zones which said here’s some areas where we, number one, promise that we won’t propose rezonings. And more we won’t support rezoning proposed by individual landowners from manufacturing to residential and commercial. And number two, we will work with the state to provide a modest tax benefit for manufacturing businesses that relocate into those areas. And three, we will provide some money to provide support in those areas to non-profits to help think through how to support manufactures in them, and in some cases some infrastructure investment to make the streets and other infrastructure work to support manufacturing. So all the other M-zones in the city, of which there’s much more M-zoned land outside of Industrial Business Zones than inside Industrial Business Zones, we don’t have the commitment from the Bloomberg administration not to rezone. Some are what are called these Ombudsman Areas. So they do get a little staff support. They don’t have the tax credit. And quite a lot of the manufacturing zoned land outside these have been rezoned or proposed for rezoning away from manufacturing to residential or commercial.

One problem with the manufacturing zones we have in New York City, and this is true for IBZs and outside IBZs, is that you are allowed as of right in most cases without any special permission to build a hotel, to build a big box store, to build an office building. In many cases those uses pay better to landowners than manufacturing. And in some cases, like hotels, they create kind of a quasi residential use which starts mitigating against manufacturing because people complain and there’s conflict, and that can take an area down the road to where it becomes less useful to manufacturing. So what The New York Industrial Retention Network and the Pratt Center and others have called for is for either IBZs to be modified or for what we had called them before they came up with this IBZ term: “Industrial Employment Districts.” In some ways it is modeled on Chicago’s Planned Manufacturing Districts, where in addition to commitments not to rezone, to tax breaks and staffing, all of which are good, you would not be able to site as a right a hotel, a big box retail store, or a big office building, or other uses which would detract from manufacturing.

Q: Do you know how land is chosen for IBZs?

A: Well it was a process of negotiation. The Bloomberg administration’s Office of Industrial Manufacturing Businesses under its previous director, Carl Humm, who is now the head of the Brooklyn Chamber of Commerce, put forward maps, and in a sense what they did was look for those areas that were more like industrial parks, that had dense clusters of development. And also what I think the Bloomberg administration didn’t have plans to rezone otherwise. Because it is a very logical IBZ if you didn’t already anticipate that you were going to propose it for residential. So I think it was where there are clusters of dense industrial uses that the Bloomberg administration didn’t already have other plans for. Then there was our negotiation process. And a meaningful chunk of land that had originally been mapped, for example, in East Williamsburg, was removed from the Industrial Business Zone because some folks there pushed for it to not be included, precisely because either the individual landowners or other folks nearby wanted to see it turned into housing or other non-manufacturing uses. I don’t know if you have our report in front of you. Like on our map in Brooklyn, if you go to that East Williamsburg part, there is bunch of orange right below the green. Much of was in the original proposal for the East Williamsburg IBZ and the boundaries were kind of cut back to leave more land outside. Again, especially in places like that it was kind of like declaring open season on that land. Like saying, “Hey, this would be a good place to rezone for residential.”

Q: Why are big box stores like Costco and Ikea in IBZs. They don’t produce anything.

A: Yeah. You can sort of understand for noxious non-manufacturing infrastructure uses like waste transfer and things like that. They are not producing anything, but they are not easy to site anywhere. You don’t want to put them in residential areas, but for big box stores and hotels, for sure, and really for offices too. Obviously, you allow ancillary office use for a plant, of course. But those are all non-manufacturing uses and they all in different ways jeopardize the manufacturing use. Partly they are old rules, right? These rules were passed in 1961 when we had a very different city. And there were a million manufacturing jobs, lots of people walked to work, lots of mix-used neighborhoods were more common. There weren’t big box stores. They weren’t a prevalent use, they weren’t an auto-dependent use at the time. Most of the neighborhood retail shopping strips — there weren’t really a significant number of strip malls, certainly not in the city in 1961. And I don’t think there were almost any hotels in the outer boroughs. No one could imagine what sprung up in Gowanus, Dutch Kills, or Long Island City. And similarly, I don’t think it would have occurred to anybody to build a big office building in the East Williamsburg industrial park. So why they were included, exactly, I am not sure. I think partly in a lot of these cases the sort of thinking was, “If you aren’t going to be harmful…” It was a separation of uses idea. That was the idea behind the East Williamsburg rezonings. So you were sort of separating residential from manufacturing in these districts. I think they thought if it wasn’t going to be harmful, if it doesn’t need to be separated, if you can imagine it be okay adjacent, you live with it. But the realities have just changed so much with the way retail goes and auto-dependent retail and big box stores, with the prevalence of hotels. So much has changed in the last few years that have turned these once more harmless features really into loopholes that developers are riding cement trucks through.

Q: There is no guarantee that an IBZ will remain an IBZ in the future. Is that true?

A: Well, they exist in two different ways. One of the ways is the tax credit that exists, as I understand it, in state law. Like the tax benefit is not just a whim of the Bloomberg administration. The tax benefits that you get from moving into them, there is a boundary commission and the state legislation, and changing that would take a legislative process. But yes, the commitment not to rezone is just a public statement of the Bloomberg administration. There is nothing legal that would prevent the next administration from taking one of the existing IBZs and proposing it for residential and commercial development. To be fair on this one, they are all zoned manufacturing. So changing that takes a land-use action. And even if we got what I want — one of these Industrial Employment Districts — the next administration could always propose to change it. That’s the nature of democracy. Even if it had been mapped an Industrial Employment District, a subsequent administration could propose through the land-use procedure to change it, and if it got passed by the city council and signed by the mayor it would change.

Q: So aside from the tax credit, how can a business feel safe moving in if a couple of years down the line they might be rezoned?

A: Yeah. This is the big problem. This is why we think a firmer commitment in the form of an Industrial Employment District and just a more solid commitment from the city to manufacturing businesses in general is necessary. On one level, zoning could always be changed, and so there’s always going to be some level of uncertainty, but right now manufacturers are definitely feeling like it is not at all clear how strong the city’s commitment is. That increases their appetite for thinking about looking somewhere else. That’s definitely part of the problem.

Q: Explain the Industrial Employment District.

A: We kind needed it before they came up with IBZs. The core difference, as I said, is I guess a couple of things. First: it would exist in zoning, which IBZs don’t. We propose them being zoned on the zoning maps, so changing them would take a public land use action. So they would be firmer. And then two, and more importantly, they would not allow as of right these other uses, like big box stores, hotels, large office buildings. It wouldn’t allow those things. It wouldn’t allow them at least without some kind of special permit or process. So they would really genuinely be manufacturing areas and not areas that often can be dominated by these other uses.

Q: There are a lot of empty industrial sites and factories that are unused, particularly in the Red Hook area, and one thing that the city has been doing is converting them into residences, but I wonder why those aren’t given the same sort of IBZ protection and incentives?

A: Well it’s a bad chicken and the egg problem. Part of the reason they are being vacant is they are being warehoused by developers who correctly gambled that they will be allowed to turn them into residential and make a lot of money doing so. For the same reason the folks in East Williamsburg fought to be outside of the IBZs — they wanted the right to be residential, because if you could do so your land is more valuable. Any place where somebody wants manufacturing businesses they are 100% full, or 99% full. It is not as if there aren’t manufacturing users who want to use those buildings. In many cases, owners who believe that they would make more money if they could convert to residential can basically warehouse their buildings. Either raise the rents much higher than what manufacturers can pay, or just didn’t look very hard and were able to turn around and say, “Look! Our building is vacant, we need to convert it to residential.” And in a lot of cases were granted either variances or rezonings. Yeah, I mean this is what the boundary drawing process was about – was: where are we going to manufacture, where are we going to yield to the owners’ interests and potentially being able to get more money by changing the land use rules?

Q: So now going to the report you released: why has the city lost 1,800 acres of M-zoned land since Bloomberg took office?

A: Largely because the administration came into office with a desire to promote new residential and office development and saw manufacturing space as the appropriate place to do so. And I think everybody agrees that some of that made a lot of sense. Take West Midtown. While it has a manufacturing history, it makes a fair amount of sense for commercial development and some residential development. So there was more support for that. That appetite to convert manufacturing space into commercial development — it is an administration with a strong commercial development agenda. There are some quotes from Deputy Mayor Doctoroff saying the core development is – I’m paraphrasing — but the core economic development inside the Bloomberg administration is shifting from an industrial city to a post-industrial city. That’s kind of a lot of what was behind the Olympics plan and that’s characterized what they have done. And again, in a good number of locations that makes sense. But when you have had it up in aggregate, it has really shrunk manufacturing. I think the other thing they would say is, “Look, in 1961 the city had a million manufacturing jobs, or 1950 a million manufacturing jobs. We’ve lost a lot of those jobs overseas as a result of lower wages. It makes sense to use the space. We don’t need as much land zoned for manufacturing in 2008 as we needed in 1961.” And fair enough. But then you get past a point where you are really pushing manufacturing jobs out, not that you are aligning the space for manufacturing with the interests of the city. You are taking those who would like to be in the city and pushing them out as a result of there not being enough space for them. And Willetts Point is obviously the current big example. If you are not development-oriented to begin with, you probably wouldn’t have thought of Willetts Point as the place for a big new development. It is not the first thing that jumps out when you go there. You would think, “Gee, this is a vibrant place with a lot of jobs, a lot of manufacturing. We could invest a little in the infrastructure and kind of keep this going strong, and help people keep the 1,500 jobs that are here. And there is a lot of local food production, construction, etc. etc. How do we make that better?” And they came in and said, “Hey, this is a place where we could do a big development project with 5,000 units of housing and a convention center.” So that’s 200-odd businesses with 1,500 jobs that now will be displaced. And maybe they will find someplace to go, but in all likelihood most of those businesses will not be able to find a relocation place.

Q: The New York Daily News reported last month that $26 million of the $522 million tax incentives allocated for businesses have actually gone to industrial firms while $274 million have gone to commercial projects. Why is that happening? Why aren’t more incentive dollars going toward industrial business?

A: Well this is the choice that the Bloomberg administration has made. Despite many quotes from the mayor that it doesn’t make sense to look to incentives and tax breaks in terms of where you are going to locate an office building, they have given out lots and lots of tax breaks for both office buildings and chain retail. I would rather us be using those subsidies for diversifying our economy for manufacturing businesses and some other things, certain kinds of retailers like grocery stores in low income neighborhoods. But most of the people that come in asking and most of what they have done is for these big office developments. I am not sure I understand the rationale for using so much of our subsidy dollars to build big Manhattan office buildings. But that’s the kind of choice of the New York City Economic Development Corp. and Industrial Development Agency.

Q: What do you think will happen to New York manufacturing in the future? Is the IBZ protection system sustainable when there are so many developers clambering to build condos and other buildings?

A: That’s the $64,000 question. Do elected officials place enough value both in the vibrancy of manufacturing businesses bring and the kind of blue collar jobs that they provide that they will be willing to protect them over time from the developers eager to make more money through condos or office buildings? If things continue to go the way that they have been going, manufacturing space will continue to shrink dramatically every time a developer comes up with a new scheme. But I hope that the next administration will firmly recognize the importance of manufacturing to the economy — certainly there’s a lot of talk these days the importance of a diverse economy — and make a stronger commitment to the preservation of manufacturing.

Brad Lander directs the Pratt Center for Community Development, which works for a more just, equitable, and sustainable city for all New Yorkers by empowering communities to plan and realize their futures.

You can read more about New York City’s industrial policy in a report released by the Mayor’s Office of Industrial and Manufacturing Businesses: Protecting and Growing NYC’s Industrial Job Base (.pdf).