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Eric Adams set out to be tech's ally, but regulations and a lawsuit leave some skeptical


Mayor Eric Adams isn’t known as one to skip a party. But he was conspicuously absent last month from Google’s ribbon-cutting for its new Hudson Square location.

The tech giant’s $2.1 billion office, known as St. John’s Terminal, is the most recent example of the sector’s investment in New York. The company in 2018 pledged to double the number of “Googlers” in New York in 10 years, and it met the goal in half the time. The firm’s local staff now numbers 14,000.

Adams instead spent the day, Feb. 21, in St. Louis, touring a technology services company called WWT that holds the city’s largest minority- and women-owned business enterprise contract. Later in the day he accepted an award at a gala in support of jazz music, according to his public schedule. He didn’t send anyone else from City Hall to the Google event, either.

The choice struck some in the industry as questionable, especially for a mayor who has branded himself as a technophile and cheerleader for the industry. During his mayoral campaign, Adams promised to strive not just to modernize government by boldly experimenting with new technology, but to turbo-charge the industry itself by working closely with the largely West Coast-based giants who had set up shop in New York, assuring executives they would soon have an ally in City Hall.

At the start of his mayoralty, Adams took his paychecks in crypto and vied with Miami Mayor Francis Suarez over who could be more welcoming to the tech industry. But two years into his term, Adams’ relationship with the local industry has grown tenuous. A spate of regulations threatens the sector’s growth, the city all but shut down Airbnb, and Adams in recent weeks has taken aim at social media, comparing the platforms to cigarette companies. Leaders of some of the city’s biggest tech employers feel they have been misled by Adams about how open the city is to their input on rulemaking, according to conversations with several industry leaders familiar with City Hall negotiations, some of whom were granted anonymity to speak candidly.

“There is overall a good vibe around the receptiveness of this administration to new ideas and improving technology in different ways,” said Michael Woloz, president and CEO of CMW Strategies, a top-10 city lobbying firm that works with tech clients. “Whether a lot of that was just talk or is in process, that’s still TBD. The jury is still out.”

City Hall spokeswoman Kayla Mamelak defended Adams’ track record working with the technology industry.

“As mayor of the city with one of the largest technology ecosystems on the globe, Mayor Adams has championed innovation and fostered an environment where the tech industry can grow and create good jobs for New Yorkers — and they have,” she said, noting that companies like Amazon, IBM and Google are expanding their footprints in Manhattan.

City Hall did not address a specific question about why Adams did not attend the Google event.

The Adams administration in the last year dropped the hammer on three significant sectors of the tech business.

The once-thriving short-term rental economy built by Airbnb essentially collapsed after the city imposed a strict regulatory framework endorsed by the mayor (and supported by the city’s powerful real estate and hotel industries). In August 2023, one month before new rules took effect, there were 22,247 short-term rentals in the city, according to data from research firm AirDNA. This January, AirDNA said, there were just 3,011.

Adams’ spokeswoman noted that the goal of the legislation, to return units to the housing market and decrease housing costs, is being achieved. But the numbers paint a more nuanced picture; rent gains have leveled off following a post-pandemic bounce but have not dropped. Median rent in Manhattan, for instance, has increased by 1.3% since January 2023, according to a January report from real estate firm Douglas Elliman, and vacancy rates are up by just 0.7%. Prices are flat in Brooklyn, and inventory has decreased by 9.9%. In Northwest Queens, prices have fallen by 5%, and the vacancy rate has dropped by 11.2%

Airbnb’s demise has served a revenue feast to hotel owners, helping propel overnight rates to new heights. The average daily rate for city hotels was $301.12 in 2023, according to research group CoStar, the most expensive rate yet, and is forecasted to reach $310.23 in 2024. That’s up from $277.65 in 2022.

Elsewhere in tech, app-based food-delivery platforms like DoorDash and Uber Eats are struggling to comply with a host of new regulations — from minimum wages, to tipping, to marketing fees. Some of those were in the works before Adams took office, and in each case the City Council passed legislation, but Adams has not used his veto authority or pushed back publicly. In January, the Adams administration announced support for a new council bill that would force delivery services to provide workers with e-bikes to fend off a slew of fires caused by faulty batteries.

Adams in February announced the city is joining a lawsuit that seeks to hold five social media companies that have a presence in New York — Facebook, Instagram, Snapchat, TikTok and Google-owned YouTube — accountable for what it described as a youth mental health crisis. The move follows the launch in January of a campaign from Adams and Department of Health and Mental Hygiene Commissioner Ashwin Vasan that officially designates social media as an environmental toxin.

Adams said the platforms create a “24/7 digital dystopia” for kids and are responsible for tearing society apart in pursuit of revenue, equating the harm to that caused by tobacco and guns.

“These companies have been a partner here in New York City, but friends need to be honest with one another,” Adams said in announcing the lawsuit. “This is a city built on innovation and technology, a place where we celebrate progress and look to the future. But… there have been unforeseen consequences and new dangers, especially when it comes to social media’s effect on the mental health of our young people.”

Industry insiders found the mayor’s rhetoric unfriendly. “It was just like, let me shit all over the fastest-growing segment in my economy,” one top executive told Crain’s.

The mayor seemed to ignore that social media is more than a morass of memes and cyberbullying; at its best it can be a way to connect and share important information. Indeed, Adams’ own office publicized its campaign on the same social platforms it is now suing.

The mayor’s lawsuit puzzled some political experts. One speculated that he could be trying to salvage his low approval ratings. Taking aim at social media companies may be a winning, if unproven, bid to appeal to voters.

Another said Adams could be showing support for Vasan, whose background is in mental health.

Julie Samuels, president and executive director of Tech:NYC, a nonprofit that advocates for the local tech industry, acknowledged that there have been growing pains with the mayor’s approach to the tech industry.

“There have definitely been some bumps,” said Samuels, who praised the mayor for his entrepreneurial instincts and said the tech industry has an ally at City Hall. “I think the way the social media situation has been handled has not been ideal.”

Asked about the social media lawsuit at a recent Crain’s event, Kathryn Wylde, president and CEO of Partnership for New York City, said Mayor Adams may be traveling outside of his lane.

“We don’t think New York City or New York State should be acting like they’re a regulator of the world,” she said.

An entrepreneur in City Hall

Adams’ spokeswoman said the city is in “constant communication” with partners in the tech industry, adding that in two years, the mayor appointed the city’s first-ever citywide chief technology officer, Matt Fraser, and opened Civic Hall in Union Square to create new jobs. The center is a startup incubator and education resource. On Feb. 28, City Hall launched a Green Economy Action Plan including a $100 million climate innovation hub in Sunset Park.

Andrew Rasiej, founder and CEO of Civic Hall, said the city’s investment in building an inclusive talent pipeline “helps the tech industry deliver on its own promise and creates a better economic future for the city itself.”

Rasiej also gave Adams credit for the strides he has made given that he inherited antiquated systems and a frayed relationship with the business community.

“He was basically handed a 1995 Camry from de Blasio, who received a 1986 Pontiac from Bloomberg,” said Rasiej, who also chairs the membership organization NY Tech Alliance. “Everyone expects this mayor to be driving a Tesla today.”

Some in the venture capital and startup community say they appreciate Adams’ approach. He seems like a kindred spirit in his openness to trying new things, even if many of them lead to failure.

“If we, as a society, believe in innovation, accepting failure comes with the territory,” said Jenny Fielding, co-founder and managing partner at Everywhere Ventures and former managing director of Techstars, a pre-seed investor. “I take risks. I know 90% of the things I invest in are not going to work out, that 10% is the outlier.”

Adams has also expressed skepticism about technology, emphasizing for instance that AI must be adopted equitably.

“We need to disband the Robert Moses-type information highway that passes by communities and we must create entry ramps to allow the entire city to prosper from AI,” Adams said at a McKinsey-hosted Future of New York event in early March. “Too many communities, particularly those of color, are not participating in this AI revolution.”

 

Growing pains

The technology industry is a roaring economic engine for the city. It currently makes up about 5% of city employment and 10% of wages and salary income, according to an October report from the comptroller’s office. The sector’s average wage, which sat just above $123,000 at the end of 2023, has leaped by 47% since 2008, according to the BLS Occupational Employment & Wage Statistics, and the number of jobs in tech skyrocketed by 365% since 1990, according to the comptroller’s report. By 2019, the sector employed more New Yorkers than Wall Street. New York’s tech job growth rate over the past 15 years is second only to San Francisco.

Tech companies also take up a lot of real estate. Meta, which owns Instagram and Facebook, both named in the mayor’s social media lawsuit, occupies around 2 million square feet of office space in the city. TikTok, another defendant, signed a 230,000-square-foot lease in Times Square in May 2020, when many companies were fleeing the five boroughs.

One key area the industry is seeing growing pains is regulation. Multiple sources involved in negotiations with the city, Airbnb and the delivery companies shared with Crain’s that there was no shortage of meetings with the administration. However, the resulting regulations didn’t reflect tech companies’ perspectives, a result they blamed on disorganization, even chaos, in the administration moreso than an anti-tech sentiment.

For example, the city had numerous meetings with delivery services to discuss the compensation pricing structure, originally set at $23.82 per hour. That included a $19.86 minimum wage, a $1.70 compensation component and an expense component of $2.26, according to court documents and public notices. Delivery services expressed that the rates should be lower to account for the flexibility enjoyed by delivery workers. While the mayor eventually did reduce the pay floor to $19.96, it was still higher than delivery companies had hoped.

Additionally, delivery companies took issue with omitting other third-party delivery services, like Amazon and Instacart, from the new pay laws. Both deliver groceries. A lawsuit filed by DoorDash and GrubHub in July 2023 called the standards “arbitrary.”

It was also not uncommon, sources said, for a high-ranking Adams official such as Ingrid Lewis-Martin, the mayor’s closest advisor, or Frank Carone, former chief of staff, to call and reassure tech leaders that they were being heard, adding to the sense of disappointment among those involved in negotiations.

“They would call and say something like ‘We can’t promise you it’s going to be perfect, but we are going to address this.’ And then it would be like the meeting never happened,” one source with first-hand knowledge said. “And that is frustrating to people.”

City Hall did not respond to a request from Crain’s to explain its approach to tech regulation.

Established industries hold sway

When he was running for mayor, Adams would “tell everyone in every meeting, every founder, every employer and every advocate” about his fondness for tech, according to one person familiar with the regulatory landscape.

That may have led to a false sense of optimism that the upstart, disruptive tech industry had an ally strong enough to repeat the once-unthinkable coup Uber pulled off when it edged out the powerful taxi industry in 2014. The industry’s regulator, the Taxi and Limousine Commission, allowed Uber drivers to operate in the city without a medallion, a requirement for yellow cab drivers. The decision flooded the market with Ubers that could bypass the costly barrier; the permits at one time sold for more than $1 million. Now, the average price hovers around $100,000. Meanwhile, Uber’s stock hit an all-time high this month.

Working out deals with such companies can be complex because their business models are at odds with powerful industries long embedded in the local economy.

“The way that some companies would like to position it is that the mayor is backtracking on being a tech person, but I’m seeing these as more unique situations,” said Woloz. He added that while Airbnb is a tech company, it also inherently conflicts with the influential hotel and real estate industries. Similarly, social media sites may run counter to the mayor’s established policies around mental health.

It may also be that Adams, like his predecessors, is inclined toward supporting some tech firms while holding a more cautious outlook on others. 

While Google executives celebrated their ribbon cutting with Gov. Kathy Hochul and other dignitaries, Adams was in St. Louis visiting with WWT, a 34-year-old IT service provider the administration has awarded two contracts worth nearly $400 million for “system integration” and IT purchasing, the largest deal of its kind for an MWBE firm. The firm was selected via a sealed bidding process and the specifics of the services provided are unclear, as are the number of people needed to carry out the work.
 
“It goes to show you all the aspects of the services we need,” Adams said at a February event to mark the WWT deal. “We are a technology administration, everything from using drones to AI, all those things you can think about, and this contract is representative of that.”
 

 





Amanda Glodowski , 2024-03-13 17:29:51

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