Living Wage Exemptions Abound For Nonprofits

Living Wage Exemptions Abound For Nonprofits

June 24, 2015

Nine months after New York City Mayor Bill de Blasio signed an executive order broadening the scope of the living wage law, some are suggesting he revisit exemptions written into the legislation.

The nudge comes after City & State compiled data showing 76 percent of projects administered by the New York City Economic Development Corporation since de Blasio took office have been exempt from the living wage law. The law requires projects receiving $1 million or more in city subsidies to pay a living wage; the majority of the organizations excused from those wage stipulations were exempt because they are nonprofits.

City Council Economic Development Chairman Daniel Garodnick said the statistics show it is time to examine the law’s efficacy. 

“Some limited exemptions from our wage laws may make sense, but it is troubling if they are being invoked to the point that the laws appear largely ineffectual,” Garodnick said in a statement. “This deserves a deeper look, particularly since we know from previous deals—like the parking deal at Yankee Stadium—the term ‘nonprofit’ can be applied to all kinds of things.”

It is difficult to suss out how political ideology may have impacted the policy. Many of the Economic Development Corporation deals closed under de Blasio were initially taken up under then-Mayor Michael Bloomberg. The data examined by City & State includes initiatives pushed by both administrations under various renditions of the legislation. Accurate analysis is further complicated by Bloomberg's opposition to the measure; his administration did not require the city Department of Housing Preservation and Development—the other city organization with projects under the law's purview—to enforce it (though HPD is currently developing a compliance regimen, according to de Blasio's office). 

De Blasio heralded his expansion of the living wage law as offering thousands of breadwinners a better shot at supporting their families. His order built on the 2012 Fair Wages for New Yorkers Act, requiring projects receiving $1 million or more in city subsidies to pay $13.13 an hour or $11.50 an hour plus benefits, with raises indexed to changes in the consumer price index. The initial legislation did not cover nonprofits, small businesses, affordable housing, manufacturers, supermarkets operating in food deserts or organizations taking advantage of benefits extended to all qualified applicants, such as property tax abatements. Once in office, de Blasio dropped Bloomberg’s legal challenge to the measure and extended the law to include future developments in the Hudson Yards area and commercial tenants in subsidized sites.

When asked which city agencies’ work falls under the law, the de Blasio administration said those “most likely” to administer benefits tied to living wage mandates included the Brooklyn Navy Yard Development Corporation, the Department of Housing Preservation and Development, and the New York City Economic Development Corporation. But the Navy Yard said it has not overseen any deals that would trigger the measure. And HPD is in the process of gathering documents that must be made available to the public under the law, de Blasio spokesman Wiley Norvell said.

The Economic Development Corporation, however, has adhered to public disclosure provisions and collected annual certificates showing which projects are complying with the living wage law and which are exempt. An analysis of certificates for Economic Development Corporation projects signed off on from January 2014 to mid-May 2015 shows that 34 of 45 projects—or 76 percent—were not subject to living wage rules. This amounts to $1.04 billion of $1.29 billion associated with the initiatives falling outside the mandate. (Assessing the actual value of city benefits is not possible, but City & State followed fiscal experts’ advice to count bonds issued with the city’s support, payments made in lieu of property taxes and mortgage, sales and other tax waivers toward an estimate of the finances at stake.) Of the 34 exempted projects, 23—or 68 percent—were excluded from the wage requirements because they involved nonprofits.

Although Garodnick called for an examination of exemptions, others went further. James Parrott, chief economist at the Fiscal Policy Institute, said the Economic Development Corporation’s work has not historically been geared toward small organizations, and those sophisticated enough to successfully navigate the corporation’s application process should be able to pay a living wage. 

“There should be no exemptions,” Parrott said. “The idea is that companies that voluntarily enter into subsidy agreements with the city—so the city is providing some benefit to them—it seems to me that they should be paying their workers the living wage levels that the city requires, which after all are pretty minimal. It’s like $13.13.”

The Federation of Protestant Welfare Agencies, Inc., for example, a nonprofit that received tax-free bonds for office space in downtown Manhattan, intended to pay personnel as little as $9 an hour, according to the Economic Development Corporation’s cost-benefit analysis. The Hebrew Home for the Aged, a nursing home in the Riverdale section of the Bronx, which secured tax-free bonds to refinance loans, noted it intended to give its lowest-compensated employees $8.03 an hour.

The de Blasio administration did not respond to a request for comment.

Parrott noted that the exemption applied carte blanche to all nonprofit organizations, from groups whose sole revenue source was city contracts to prep schools, such as Packer Collegiate Institute in Brooklyn Heights.

“This is an organization where tuition is probably $30,000 to $40,000 a year. Very wealthy people send their kids there,” Parrott said. “The city is making a subsidy to those entities because it’s losing taxes on the tax-free bonds. I think it’s problematic that you have a lot of prep schools that are pretty well off financially being subsidized by the city.”

Many such exempt prep schools indicated they planned to pay more than $13.13. The Economic Development Corporation issued or refinanced tax-exempt bonds for Packer Collegiate Institute, which planned to give its lowest-paid personnel $17 an hour; Horace Mann School, a Bronx prep school that envisioned paying its lowest-compensated employees $19.54 an hour; Trinity Episcopal School Corporation, a Manhattan institution that anticipated giving some personnel $16.20 an hour; the Birch Wathen Lenox School, a Manhattan prep school which expected its lowest full-time salary to be $45,000; and the Berkeley Carroll School, a Brooklyn private school which anticipated its lowest-paid full-time personnel making $32,000 annually, according to cost-benefit analyses by the Economic Development Corporation. 

The Economic Development Corporation said it would be difficult to craft guidelines specifying which classes of nonprofits had the means to pay a living wage and could be mandated to do so. The corporation oversees two organizations that administer benefits: the New York City Industrial Development Agency, which focuses on creating and retaining jobs in the city through a variety of initiatives, and Build NYC Resource Corporation, which serves as a conduit to both tax-free and taxable bonds for nonprofits. Build NYC underwrites bonds for all qualified nonprofits that seek its assistance, so applicants are not vying for a finite amount of financing, the Economic Development Corporation said.

Under this setup, several parochial schools have accessed tax-free bonds by agreeing not to use the financing for construction or renovation of spaces that will be used for religious purposes, including Bais Ruchel High School, a Brooklyn yeshiva that intended to pay its lowest-paid full-time employees $20,000 annually; Congregation Yeshiva Beis Chaya Mushka, which operates a Jewish school in Brooklyn and did not have wage info in the cost-benefit analysis; and Yeshiva Beth Hillel of Krasna and Zichron Moshe, which sought to open a new yeshiva building in Borough Park and said it planned to pay all full-time employees at least $35,000 annually.

Although all nonprofits working with Build NYC are technically exempt from the living wage law, the Economic Development Corporation said it has done its due diligence to urge them to pay parallel wages.

The corporation said the de Blasio administration’s move to mandate living wage in buildings constructed in the Far West Side dwarfed the number of jobs involved in Build NYC and Industrial Development Agency projects. In April the city announced Brookfield Property Partners’ new office building would generate more than 10,000 jobs subject to the living wage law. Two more towers slated to finalize plans in the next year and a half will also bolster the ranks of those earning living wage, the corporation said.

Sarina Trangle