New York Executives Blast State Over Regulatory ‘Black Hole’

At a recent roundtable with New York executives, Heather Briccetti Mulligan remembers the frustration of a businessman who compared trying to file a permit for a $200 million construction project with ordering a pizza.

The pizza could be tracked by phone from the moment it was ordered to its arrival at his door, Mulligan, head of the Business Council of New York State, recalls the executive saying. The permit, on the other hand, “went into a black hole.”

“‘There’s no one I can call,'” she remembered him saying. “‘I don’t know when it’s going to be looked at. I have no idea if there’s anything wrong with it. And there’s no timeline.'”

The anecdote was one of many told to the Business Council as part of a survey of more than 500 business leaders that found a broadly pessimistic outlook on the ability to operate successfully in the Empire State. They cited rising costs, high taxes, increasing regulatory requirements and a shrinking population of workers.

The findings, released Wednesday, come as the business community contends with democratic socialist Zohran Mamdani as the front-runner for mayor of New York City. His agenda, which includes freezing rents and increasing taxes for corporations and the wealthy to pay for free childcare and buses, has spurred concern among politicians and businesspeople that firms and jobs will be driven from New York.

At the same time, the state faces an uncertain economic climate on the back of President Donald Trump’s tariff policy, funding cuts and curbs on immigration.

The survey found businesses are already struggling. Just 3% of business leaders say New York regulators and lawmakers understand or support their industries, and only 2% said they believed Albany lawmakers represent their interests. And more than 70% of those surveyed said they don’t see the current economic conditions in the state as good.

The Business Council, along with the New York State Economic Development Council, convened over 20 meetings over 10 months to ask owners about their experience working with city and state governments and the challenges they face in running their businesses. The names of the businesses and the people surveyed, who represented nine regions across the state, were kept confidential to allow people to speak freely.

Labor Pool

While respondents said they generally were pleased with the quality of the available workforce in the state, they mentioned a worrying long-term trend: New York’s population of working-age people fell over the past decade by 3.8%, US Census data shows. New York ranks 46th among the 50 states in growth of its working age population over the decade, while, states like Utah, Idaho, Texas and Florida saw their pool of potential workers grow by double digit percentages over the same time period.

The competition for talent also comes down to the difficulty in luring workers to the state, as well as retaining them, the participants said. It’s not just the high taxes — participants cited high costs of living and energy as factors driving workers out of state.

Even respondents in New York City, which benefits from a steady pipeline of talent fresh out of college, said they’re often forced to locate mid-career positions elsewhere because so many workers end up leaving due to the extreme cost of living.

It helps explain the surge in popularity for Mamdani, who beat former Governor Andrew Cuomo in the Democratic primary in June on a platform of greater affordability. But his plan hinges on raising the state’s top corporate tax rate to 11.5% from 7.25% and adding a 2% levy on people earning more than $1 million.

Governor Kathy Hochul, who has endorsed Mamdani and would need to sign off on a tax increase, told Bloomberg last week she doesn’t want to raise levies in the state and is “very sensitive” to competitiveness with other states.

Reducing business taxes was cited as the second-most important recommendation from survey participants to improve competitiveness, after reducing state and local government regulation. Participants complained about the costs of insurance, litigation, and the complex, arcane and often-antiquated licensing, permitting and regulatory processes at city and state agencies.

‘Byzantine Bureaucracy’

In a recent interview with Bloomberg, Mamdani promised to help small businesses by cutting fines and fees if he’s elected in November.

“We’ve seen many business owners who have come forward and talked about how the fines that they are faced with have often times little to do with compliance and more to do with punishment,” Mamdani said. “And they often vary in their enforcement and implementation depending on the mood and the person who comes in to survey their business.”

He also pledged to increase funding for specialized teams that service small businesses and to appoint a “mom-and-pop czar,” a new city official who would “assist businesses in navigating through the byzantine bureaucracy of City Hall.”

And he promised to review the city’s web of regulations to determine which are redundant or unjustified.

“We’ve seen how to open a barber shop, you have to fill out 24 forms, go to seven agencies and attend 12 in-person events. I don’t see how that makes any sense or incentivizes the opening of said barber shop,” he said.

Businesses are “getting to the tipping point where they’re investing in different states now as opposed to investing in New York,” said Ryan Silva, executive director of the Economic Development Council.

“Whether it’s regulatory, whether it’s cost, whether it’s access to energy,” Silva said, “companies are either choosing to invest and grow in other areas or they’re very quietly just moving on.”

Top photo: Pedestrians walk along Wall Street near the New York Stock Exchange (NYSE) in New York, U.S., on Monday, October 31, 2016. Photographer: Michael Nagle/Bloomberg