Red light on a major traffic change spares NYC restaurants from more cost pressure

Government Watch: New York Gov. Kathy Hochul has indefinitely suspended congestion pricing, shielding the local industry from a crimp in its supply chain. The development was one of several breaks this week in the business' favor.
Distribution trucks can deliver in the city without paying a congestion pricing fee. | Photo: Shutterstock

Government Watch

Welcome to the inaugural edition of Government Watch, a new Restaurant Business column focused on regulatory, legislative and other governmental issues of relevance to the restaurant industry. This week: New York City restaurateurs dodge a bullet they might not have known was whistling toward them, plus new developments in the ongoing fight over the tip credit.

NYC restaurants are spared more pressure on food costs

The Tooth Fairy couldn’t have delivered a more pleasant surprise than the one that was sprung on New York City restaurants Wednesday—by their state government, no less, the source of considerable past woes.

Although the issue had not yet become a flashpoint for the local industry, Big Apple operators were facing a bump in food costs from a move that sounded too ambitious to be real: Cut traffic, pollution and mass-transit deficits by charging most vehicles for entering downtown Manhattan, the heart of the city. The trucks supplying the slew of restaurants in the area would have been charged an extra $24 to $36 per trip, depending on the vehicle’s size and point of origin.

Is there any doubt the fee would have been passed along to the restaurants receiving the goods?

The double whammy is that passenger cars would have been assessed $15 for driving in the area, from 5 a.m. to 9 p.m. on weeknights and from 9 a.m. to 9 p.m. on weekends. Contrary to what’s suggested on “Seinfeld,” residents of Manhattan don’t hop in a car for the jaunt to a local restaurant or a movie. They’ll take a cab, walk or use public transportation. But it’s a different story for the hordes who descend on the city on weekends from Long Island, Westchester or the other surrounding burbs. Suddenly, that trek becomes a lot more expensive.

No other city in the nation has ever tried what’s known as congestion pricing, for obvious logistical and economic reasons. New York City officials have been trying to implement it for decades, only to be thwarted by political pushback. This time, however, the adoption went as far as setting up devices to scan licenses plates and automatically charge drivers. All systems were “go” for a June 30 launch.

With two weeks to go, Gov. Kathy Hochul stunned stakeholders with an announcement Wednesday that she was delaying adoption of congestion pricing indefinitely.

“After careful consideration, I have come to the difficult decision that implementing the planned congestion pricing system risks too many unintended consequences for New Yorkers at this time,” the Democrat said.

Tip credit stays alive in Michigan and Illinois

Full-service restaurants also got a reprieve of sorts in two states where unions likely keep a case of Champagne on ice for celebrating victory after victory.

Indeed, after One Fair Wage succeeded in outlawing Chicago’s tip credit, passage of a statewide discontinuation seemed like a strong possibility. Yet the Illinois legislature recessed last week with a state version of the Chicago law failing to advance.  The lack of action brought redemption to the Illinois Restaurant Association, which caught hell last year from the industry when it dropped opposition to the phase-out in Chicago, ensuring a ban would pass. This time around, the group’s battlefront efforts earned strong praise.

The Supreme Court of Michigan was the hero in the latest skirmish there over the tip credit. A union-backed group called Raise the Wage had petitioned the court to put an initiative on the November general-election ballot to phase out the credit. The labor group was looking for its own redemption after essentially tripping over its hubris. Raise the Wage had won approval from the Board of State Canvassers of the language it wanted on the ballot to explain what voters were deciding. But then it changed the lead-in before seeking enough signatures to get the measure before voters, prompting the Board to re-vote. The panel’s members couldn’t agree on what to do, prompting Raise the Wage to ask that the court intervene.

It refused.

Hot political waters

With those two un-successes, One Fair Wage and its benefactor, the Service Employees International Union, are intensifying their struggles in New York and Massachusetts to scuttle the credit. Representatives argued in a New York press event this week that disallowing the tip credit is the sort of issue that will draw young voters out of their apathy and to the polls. Hence, they suggested, office seekers might want to make that a campaign focus, since the youth vote is likely to be crucial to victory in November.

Again because of hubris, the union put another round into its own foot in Massachusetts. A representative told the Boston Globe that the labor group had been given $2 million by an anonymous donor to lobby for a credit-killing ballot initiative there. Campaign contributions from anonymous donors aren’t allowed under election regulations, prompting an employer group to call for an investigation of One Fair Wage.

Separate investigations have been requested in the U.S. Congress and Michigan for other alleged rule violations.


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