In case you missed the last week of DeBlasio press conferences, the first had a group made up of his main cabinet members. There was not a single businessman or real estate professional in the group. There was nobody with any senior management experience at all, including the mayor. Not a single one has ever run a complex group. The largest management task DeBlasio ever had was managing the ombudsman office of 40 people with no real role in government. One of the cabinet members bragged of his union background. They all are openly left wing.

This then got followed by another news conference where the mayor had the leader of every major city union on stage with him. He used this press conference to claim he was demanding along with the unions, that personal income taxes must be raised by $560 million a year for five years-that is $2.65 billion of higher taxes. Then there is the issue of retroactive pay for the unions standing on stage with him. That totals another $2.5 billion. Without these added costs the budget is already $2.5 billion or so in deficit.

DeBlasio has also stated that he intends to require all New York city employees of private companies to get paid sick leave and a higher minimum wage. Then any New York property which has any sort of tax break or subsidy from the city has to pay a living wage.

Then there was the election of a new speaker. She is a Puerto Rican woman who sometimes led protests on the steps of city hall while she was a councilman, and she brags that she has strong positions left of DeBlasio. In her acceptance speech she emphasized raising wages and benefits.

The new schools chancellor is a 70 year old retired teacher and principal who is happy to acknowledge her days as a union teacher. She, like the mayor is negative about charter schools and pro union. So much for the hard won progress Bloomberg made to try to improve education in the city for the minority kids who need it most.

These are just the start. The mayor and speaker have a whole agenda which is going to materially raise operating costs for property owners, restrict development and raise the cost of development. All of that leaves aside deteriorating safety and crime numbers, lower performance in schools, and over time, a reluctance of new companies to move into Manhattan due to all the higher costs and regulations.

There will be a run of regulations, higher costs and other anti successful rules and laws which over time will hamper making proper returns on investment in New York. Success is now considered bad officially and they talk about two cities, the need to redistribute wealth- that is you in case you missed it- and an end to luxury housing development in favor of affordable housing. The only good news is Cuomo is running on a platform of lower taxes and any tax increase must be approved by the state so maybe higher income taxes will not happen. It will be hard for Cuomo to push his agenda of making New York a welcome place for business if New York City is so anti business. The rest of the state does not count.

Not only are cap rates in Manhattan at levels that discourage investing, but when you add all of the DeBlasio issues, you need to step back and wait to see where all this goes.

Just be aware that only 16.5% of registered voters, actually voted for him and that is just 9% of the city population, so it is not clear if all of what he and the Speaker plan will happen, but enough will to make a serious problem for the next four years for any real estate owner investor.

Instant Insights /

New York And The Increase In Operating Costs

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