A red light during a major traffic change saves restaurants in New York from even more cost pressure

Distribution trucks can deliver in the city without paying a congestion charge. | Photo: Shutterstock

Government Guard

Welcome to the first edition of Government Watch, a new Restaurant Business column focused on regulatory, legislative and other government issues relevant to the restaurant industry. This week: New York City restaurateurs dodge a bullet they may not have known was whistling their way, plus new developments in the ongoing battle over the tip credit.

New York restaurants are spared from greater pressure on food costs

The Tooth Fairy couldn’t have provided a more pleasant surprise than the one offered Wednesday in New York City restaurants — by their state government, no less, the source of significant past woes.

Although the issue had not yet become a flashpoint for the local industry, Big Apple operators were faced with a rise in food costs due to a measure that sounded too ambitious to be true: reducing traffic, pollution and shortages to public transportation by charging most vehicles for entering downtown Manhattan, the heart of the city. The trucks that supplied the many restaurants in the area would have charged an additional $24 to $36 per trip, depending on the size of the vehicle and the place of origin.

Is there any doubt that the fee would have been passed on to the restaurants that received the goods?

The double whammy is that passenger cars would have to pay $15 to drive in the area, from 5 a.m. to 9 p.m. on weekday evenings and from 9 a.m. to 9 p.m. on weekends. Contrary to what is suggested on “Seinfeld,” Manhattanites don’t hop in the car for a trip to a local restaurant or a movie. They take a taxi, walk or use public transport. But it’s a different story for the hordes who flock to town on weekends from Long Island, Westchester or the other surrounding burbs. Suddenly that trip becomes a lot more expensive.

No other city in the country has ever tried what is known as congestion pricing, for obvious logistical and economic reasons. New York City officials have been trying to implement it for decades but have been stymied by political opposition. This time, however, the adoption went so far as to set up devices to scan license 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 indefinitely delaying the implementation of congestion pricing.

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

The tip credit remains in place in Michigan and Illinois

Full-service restaurants also got a reprieve of sorts in two states where unions are likely keeping a case of champagne on ice to celebrate victory after victory.

After One Fair Wage succeeded in banning Chicago’s tip credit, a statewide shutdown seemed a strong possibility. Still, the Illinois Legislature backtracked last week as a state version of Chicago’s law failed to move forward. The lack of action brought relief for the Illinois Restaurant Association, which ran into trouble last year when the industry dropped its opposition to the phase-out in Chicago that would have passed a ban. This time, the group’s efforts at the front received high praise.

The Michigan Supreme Court was the hero in the latest skirmish there over the tip credit. A union-backed group called Raise the Wage had asked the court to move to phase out the credit in November’s general election. The workers’ group was seeking its own redemption after essentially stumbling over its pride. Raise the Wage had received approval from the Board of State Canvassers for the language it wanted on the ballot to explain what voters decided. But then it changed the preamble before collecting enough signatures to get the measure to voters’ attention, prompting the Council to vote again. The panel members could not agree on what to do, prompting Raise the Wage to ask the court to intervene.

It refused.

Hot political waters

With these two failures, One Fair Wage and its benefactor, the Service Employees International Union, are intensifying their fight in New York and Massachusetts to destroy credit. Representatives argued at a press event in New York this week that denying tips is the kind of issue that will draw young voters out of apathy and to the polls. Therefore, they suggested, office seekers may want to make that a campaign focus as the youth vote is likely to be crucial to victory in November.

Once again due to hubris, the Massachusetts union struck another blow in its own foot. A representative told the Boston Globe that the union had received $2 million from an anonymous donor to lobby for a credit-wrecking ballot initiative there. Campaign contributions from anonymous donors are not allowed under election rules, prompting an employer group to call for an investigation into One Fair Wage.

Separate investigations into other alleged rule violations have been requested in Congress and Michigan.

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