:ilt:::Yt?

Y
-against-

SUPREME COURT OF THE STATE OF NEW YORK

...........x

THE MAYOR OF THE CITY OF NEW YORK, Plaintiff, SUMMONS

Index No.

THE COUNCIL OF THE CITY OF NEW YORK,

Defendant.

TO THE ABOVE.NAMED DEFENDANT: YOU ARE HEREBY SUMMONED and required to serve upon Plaintiffls
attorney an answer to the complaint in this action within twenty days after the service of this summons, exclusive of the day of service, or within thirty days after service is complete if this summons is not personally delivered to you within the State of New York. In case of your

failure to answer, judgment will be taken against you by default for the relief demanded in the complaint.

Plaintifls designation of venue accords with CPLR Dated: New York, New York Iuly 27,2012
MICHAEL A. CARDOZO
Corporation Attorney for

503(a).

of
the

City of New York of the City of Ne wYork

By
sistant 100 Church

on Counsel

New York, New York 10007 212,788.1007

::ili::YYt?Y
-against-

SUPREME COURT OF THE STATE OF NEW YORK

...........x

THE MAYOR OF THE CITY OF NEW YORK,

Plaintiff,

COMPLAINT
Index No.

THE COUNCIL OF THE CITY OF.NEV/ YORK,

Defendant.

The Mayor of the City of New York, Michael R, Bloomberg, by Michael A.

Cardozo, Corporation Counsel of the City of New York, for his complaint against the Council the City of New York, alleges as follows:

of

Preliminary Statement

l.

This action challenges the validity of two local laws purportedly adopted by

the New York City Council ("Council") over the Mayor's veto, Local Law 27 for the Year 2012

("Prevailing Wage Law"), and Local Law 37, also for the Year 2012 ("Living Wage Law")
(together, the "Local Laws"), which seek to require specified developers of real property who receive hnancial assistance from the City and specified lessors who lease offrce space to the

City, as well as any contractors or subcontractors of those developers and lessors, to pay

so-

called "prevailing" andlor "living" wages, as defined by the respective Local Laws, to their
employees who work on the premises.

2.

The two Local Laws are similar in many respects, but they purport to apply to

different groups of employees: only building service workers in the case of the Prevailing Wage Law and all employees other than building service workers and construction workers in the
of the Living Wage Law.
case

3.

The Mayor vetoed these Local Laws because he believes them to be illegal

and because he believes that they

will harm the City's efforts to continue to attract and generate

the business activity that is necessary to support the local economy and the services of New York

City government. He also expressed his view that the Prevailing Wage Law would make the City a less desirable tenant, with detrimental effects especially in areas of the City where the
City's tenancy might be most useful as a spur to economic development.

4.

These Local Laws are invalid for two reasons: first, they are preempted by

State and federal laws; and second, they unlawfully curtail executive powers vested in the Mayor

by the New York City Charter ("Charter") and transfer mayoral powers to the Comptroller.
Under the Charter and the Municipal Home Rule Law ("MHRL"), any changes in the allocation

of powers among the branches and officials of City government are invalid unless approved by
the voters in a referendum, and these Local Laws were not so approved.

Preemption

5.

Both Local Laws are inconsistent with, and preempted by, the State's

minimum wage law, codified as Labor Law Art. 19, $$ 650 et seq., which, under governing
Court of Appeals precedent, preempts all local wage regulation save for narrow exceptions that
are inapplicable to these Local Laws. They are also in violation of MHRL

$ ll(1)(, which

prohibits localities from adopting any local law superseding a State statute if that law "applies to
or affects any provision of . . . the labor

law."

These Local Laws constitute an effort to impose a

regulatory minimum wage upon sectors of the City econofry, a subject matter reserved to the
State under applicable Court of Appeals precedent.

6.

Second, both Local Laws are inconsistent with, and preempted by, the New

York State Industrial Development Agency Act ("IDA Act"), codified as General Municipal

Law ("GML") Art. 18-4, $$ 850 et seq., and particularly by the State law creating the New York

City Industrial Development Agency ("NYCIDA"), codified as GML $ 917, in that they seek to
dictate the specific terms of projects sponsored by NYCIDA, which is a State-created entity, and

interfere with NYCIDA's purpose, stated in the IDA Act, of fostering economic development.

NYCIDA provides eligible

businesses

with exemptions from certain taxes and with favorable

financing based on tax-exempt bonds. The IDA Act expressly supersedes all inconsistent local

laws, and

by its terms as well as impliedly, it

occupies the

field.

These Local Laws

impermissibly encroach on NYCIDA's freedom to exercise the powers conferred on it by the

State Legislature to operate within its sta.rtorily designated area.

7.

Third, the Council, in enacting the Prevailing V/age Law, is unlawfully

setting the terms of affordable housing construction and rehabilitation projects sponsored by the

New York City Department of Housing Preservation and Development ("HPD") pursuant to
State laws that grant the authority

to set terms exclusively to HPD andlor to the

Mayor.

Therefore, the Prevailing Wage Law is inconsistent with, and preempted by, the State statutory
scheme intended

to foster the construction of such housing. That scheme comprises, inter alia,

GML Art. 16 and Public Housing Finance Law ("PHFL") Articles 8-4, 11, 15, and22. Those
State laws give the Council either no role or only minor roles that do not include setting business

terms.

Because the Prevailing Wage Law would raise the costs

of

construction and

rehabilitation, and therefore reduce the amount

because through this Law the Council seeks

of

such housing that can be produced, and

to exceed its role as set forth in the State laws by

dictating the specific terms of affordable housing projects sponsored under those State Laws, the Prevailing Wage Law is preempted,

8.

Fourth, the Local Laws provide that enforcement orders issued by the Mayor

following findings of violations may be filed with one or more county clerks, and that such
orders are to have the

"full force

and effect of a judgment duly docketed in the office of such

clerk," so that they can be entered in the same manner as money judgments under the Civil
Practice Law and Rules. These provisions are outside the constitutional home rule powers of the

City Council, in that they relate to the courts and the filing of local decisions with county clerks,
acting in relation to the court system. N.Y. Const., Art, IX, $3(aX2); MHRL $11(1)(e), For this
reason, provisions

of the City's Charter conferring the effect of court judgments upon specified

administrative determinations have consistently been enacted by the State Legislature. See, e.g.,
Chapter 593 of the Laws

of 1999, now codified as Charter $ 1049-a (expanding jurisdiction of

the Environmental Control Board to landmarks-related violations to permit docketing of

penalties relating to such violations); County Law $ 918 (specifying local entities for which
docketing records are maintained by the county clerks).

9.

Fifth, by specifying that employers must pay a specified amount toward

employee health insurance or an equal amount

in

cash wages, the Living Wage Law favors

health benefits over other employee benefits and requires employers to tailor their employee

benefit plans to conform to New York City

Employee Retirement Income Security Act
29 U.S.C. $ 11aa(a).

law. It is therefore

preempted by the federal

of 1974 C'ERISA"), 29 U.S.C. $$ 1001 et seq.; see

Curtailment

10.

In requiring that entities that receive City economic development

assistance

in the form of below-market prices for property or

leases must pay specified wages, the

Council's Local Laws seek to set the terms by which the City can sell or lease City property for

ecenomic development. In so doing, the Council violates provisions of the Charter that give the

Mayor alone the power to set the terms for such dispositions, and unlawfully alters the balance
that the Charter creates among the branches of City government. These Charter provisions are part of a statutory scheme, embodied both in the Charter and in State law, that gives the Mayor and his or her appointees the power and responsibility to set the business terms of economic
development projects and to limit the Council's role to consideration of the land use impacts of such projects. See Charter $$ 28(a), 797-c, 197-d, and 384(b); Not-for-Proht Corporation Law

("NPCL") $ 1411.
I

l.

Second, by in effect setting the terms of City leases with private landlords,

the Prevailing Wage Law curtails the Mayor's power to lease ofhce space on behalf of the City.

As with other real property acquisitions and dispositions, the only authority that the Charter
gives to the Council with respect to the leasing of office space is in the area of land use, while the terms of the leases are established by mayoral appointees with mayoral approval. Charter
$$ 824(a), 795,197-c.

12.

Third, the Local Laws, enacted without a referendum, unlawfully curtail the

Mayor's authority by transferring certain mayoral implementation and enforcement powers to

the Comptroller. The Charter neither contemplates nor articulates any role for the Comptroller
as an administrator or enforcer

of these laws. Yet, in precisely the same manner as a prior law

the

that was struck down by the courts, the Local Laws assign investigative duties to

Comptroller, who is then to refer violations to the Mayor for mandatory enforcement action.

Admin. Code $$ 6-130(d)(4), 6-134(gXZ). The Local Laws also unlawfully curtail mayoral
power in mandating that the Mayor and the Comptroller share the power to receive complaints

and conduct investigations based on such complaints.

I

Id.

gg 6-130(eX1), 6-130(e)(2), 6-

3a(g)(6), 6- I 3a(gX8), 6- 134(gxe).

13.

These Local Laws are specifically and narrowly targeted at certain recipients

of City financial assistance and at building owners who do business with the City. They cannot,
therefore, escape preemption on the grounds that they are laws of general applicability that only

incidentally touch on City-subsidized economic development or City leasing; nor can they
escape the mandatory referendum requirement

on the grounds that they are legislative

policymaking that only incidentally infringes on the Mayor's powers. Because these Local Laws
dictate specific terms of City economic development projects and City leases, as well as for all
the other above-stated reasons, they are unlawful and invalid.

of

The Mayor's Veto Messages

14.

In vetoing these Local Laws, the Mayor stated that he believed them to

be

illegal for the reasons set forth in this Complaint, and he articulated the policy problems inherent

in them: that they would "discourage companies from participating in any City programs that involve financial assistance," "threaten some of the City's most innovative and important
economic development projects

the types that have stabilized and revitalized neighborhoods in

all five boroughs," and "hamper our ability to build and preserve affordable housing." Mayor's
Message on Vetoing Int. 251-A

(Living V/age Bill),

at

p. I (May 30,2012); Mayor's Message on

Vetoing Int. l8-A (Prevailing Wage Bill), at p. 1 (April 25,2012),

15.

As the Mayor stated in his veto messages, the City's economic development

programs are aimed at commercial, industrial, and residential projects that are on the margins,

where targeted support induces developers

to

make investments that would otherwise be

frnancially unfeasible. Often, the targeted developments are

in low- and moderate-income

communities or in economically challenged sectors of the economy. The City's support for these
6

projects often means the difference between jobs gained and jobs

lost. While acknowledging

that the Local Laws would result in higher wages for some workers, the Mayor stated his belief

that these increases would come at the cost of job creation and a reduction in the opportunities
open to entry-level workers.

16.

The Mayor expressed his concern that:

Some projects that would create jobs may not move forward at all because they are no longer financially viable without the benefit of

these incentives. This is particularly troubling for industrial companies, which provide good-paying, high-quality jobs for hundreds of thousands of New Yorkers. This bill would make it more difficult for these businesses to stay here and expand at a time when the City should be focused on supporting them.

if the value of these incentives is offset, the increased cost of the projects will be passed along to others - either to taxpayers, in the form of making higher subsidies necessary to incentivize these types of projects, or to the end-user - consumers who will be faced with higher prices for goods and services.
For projects that still do move forward,
Moreover, the penalties included in this legislation - such as recovering financial assistance for non-compliance would complicate potential lenders' ability to quantify the risks associated with a project, which in tum would make it more difficult for projects that are already financially challenging to access f,rnancing, or make financing more costly. This poses significant challenges for companies in planning for the future, and it could dissuade them from expanding and hiring in New York City. Mayor's Message on Vetoing Living V/age Bill, at p 2.

17.

The Mayor observed that these Local Laws may have serious effects on the

costs faced by not-for-profit organizations, which, although themselves exempted from paying

the mandated higher wages, nonetheless "would bear the burdens

of

the additional

costs

imposed on the contractors, vendors and consultants performing work on their premises." Id. at

p. 3.

18.

In describing the bill, the Mayor noted that "[e]mployers would be required

to maintain extensive records and to report on hours, wage and benefit information for all
[affected] employees, involving onerous requirements and potential penalties that will
additionally discourage companies from participating in any City programs that involve financial
assistance." Id. atp.

l.

19.

The Mayor also deplored the effects of the Prevailing Wage Bill on the City's

ability to lease offrce space:

The

bill would further require private owners to pay

building

service employees a prevailing wage when the City leases space. Having the City as a tenant can be an important tool for spuning economic development - especially outside Manhattan - but this bill would impose additional costs on these buildings, making the City a less attractive tenant. The cost of the bill would also fall on taxpayers by driving up rents for City-leased space in private buildings, because property owners will pass along the added staff costs mandated by this legislation in the form of higher rents.

Mayor's Message on Vetoing Prevailing Wage Bill, at p. 2,

20.

The Mayor concluded that these bills failed "to strike the appropriate balance

between improving

the employment opportunities of the City's workers and

creating

opportunities for innovative economic development programs," and that "[t]he passage of two

similar bills in a short period of time raises serious concerns about the long-term ability of the City to continue attracting and generating the business activity that is necessary to support both
the local economy and the services of local government." Mayor's Message on Vetoing Living
Wage Bill at pp.3-4.

The Parties

21.

The plaintiff

is the Mayor of the City of New York. The Mayor

is

"responsible for the effectiveness and integrity of city government operations," and, as the chief

executive offrcer of the City, exercises all the powers vested in the City, except as otherwise
8

provided by

law. Charter $$ 3, 8.

The Mayor, directly and through his appointees, has broad

powers, both generally with respect to implementation and enforcement of all local laws and specifically with respect to the fostering of economic development, the provision of affordable
housing, and the leasing of space by the City as lessee.

22.
$$

The Council of the City of New York is the legislative body of the City. Id.

2l

et seq.

The Local Laws

23.

On March 28,2012, the Council passed the Prevailing Wage Law, Intro. 18to

A (now Local Law 27), which the Mayor vetoed on April 25,2012. The Council purported

enact Local Law 27 (as a new Administrative Code $ 130) over the Mayor's veto on May 15,

2012. On April 30, 2012 , the Council passed the Living Wage Law, Intro . 251-A (now Local
Law 37), which the Mayor vetoed on May 30,2012. The Council purported to enact Local Law 37 (as a ne\il Administrative Code $ 6-134 as well as a Charter amendment containing related
reporting requirements) over the Mayor's veto on June 28,2012.

24.

The two Local Laws are broadly similar in many respects. Both provide for

the payment of wages higher than the State-statutorily prescribed minimum wage to employees

of subject entities that receive financial assistance of over one million dollars from the City or

"City economic development entity" (as defined in the Local Laws) and do not fall within
excepted categories, and to successors, contractors, and subcontractors

of such entities. They

have similar,

if

not identical, investigation and enforcement provisions. However, the Local

Laws differ in that they apply to different employees: the Prevailing Wage Law applies only to

building service employees of covered employers, whereas the Living Wage Law applies to all
employees

of covered employers other than building service employees and employees of

construction contractors. They also differ in that the Pievailing Wage Law applies not only to

employees of recipients of City financial assistance, but also to employees of private building owners and their contractors or subcontractors who work in privately-owned buildings in which

more than half, or, in certain areas of the City, more than 80 percent, of the square footage is
rented to the City for office space. As a practical matter, too, the Prevailing Wage Law would

apply to the employees of developers of residential housing who meet the statutory criteria,
whereas the Living Wage Law would rarely apply to such employees, because developers

of

residential properties are unlikely

to have any employees or subcontractors on the

assisted

premises other than building service workers.

A.

The Living Wage Law

25.

The Council named the Living V/age Law the "Fair Wages for New Yorkers

Act." N.Y,C, Admin.

exempted under

Code $ 6-134(a), It requires all "covered employers," other than those

employees.

$ 6-134(d), to pay no less than a "living wage" to their

$6-134(cX1). "Covered employers" include "financial assistance recipients," tenants, or

subtenants

in assisted properties that are owned by financial assistance recipients, recipients'

with recipients to work for

concessionaires at assisted sports facilities, and entities that contract

more than 90 days on the premises of assisted properties. $ 6- 134(bxa)(a)-(d). Any assignee or
successor

in interest of real property improved or developed with financial

assistance is also a

"covered employer." $ 6-134(bX8). The law applies to all employees of covered employers in the City, except that where financial assistance is targeted at particular properties, it applies only

to employees who work on the assisted premises. $ 6-134(bX5). The requirements of the law
extend for the longer of either the term of the financial assistance or ten years

potentially, long

after the role of the City and of the original recipient of City frnancial assistance has ended.
$

6-l3a(c)(3).

10

26.
assistance from the

The Living Wage Law does not apply uniformly to all recipients of financial

City. Many employers

are exempted. Section 6-134(d), titled "Exemptions,"

exempts the following seven categories

of employers from all its requirements save for

the

reporting requirements

of $ 6-13a((2): (l) small businesses; (2) not-for-profit

entities;

(3) manufacturing; (4) certain affordable housing projects; (5) "grocery stores participating in the Food Retail Expansion to Support Health (FRESH) program"; (6) building services contractors
and construction contractors; and

(7)

highly pafcularized exception:

. flnancial assistance recipient who executed a project agreement and any entity with which such financial assistance recipient contracts or subcontracts, occupying or operating on the
Any
premises

of

property improved

or

developed

within

the

geographical delineations described in the definition of 'Zone 3 Adjacent Developments,' without regard to whether or not the applicable project is deemed to be a 'Hudson Yards Commercial Construction Project,' as such terms are dehned in the first amendment to the Third Amended and Restated Uniform Tax Exemption Policy of the New York City Industrial Development Agency, as approved by the board of directors of the city industrial development agency on November 9, 2010, provided, however, that such exemption shall not extend to any such covered employer who receives financial assistance through the purchase of a condominium in the event that the city or city economic development entity grants such covered employer additional financial subsidies in addition to the financial assistance originally granted pursuant to such project agreement thereafter assigned or otherwise made available to such purchaser following such
purchase,

27.
in "supplemental
benef,rts,

The Law defines "living wage" as compensation of $10 per hour, plus $1.50

health benefits" that may be provided

$

in the form of cash wages,

health

or any combination of the two.

6-134(bX9). The wage rate is adjusted annually

.1d. The supplemental health

based on the Consumer Price Index for

All Urban Consumers,

benefits amount is adjusted based on the Consumer Price Index for

All Urban Consumers for

Medical Care. Id.

l1

28.

"Financial assistance" encompasses all assistance "for the improvement or

development of real property, economic development, job retention and growth, or other similar purposes" that is "paid in whole or in part by the city" and that has a total present value of one

million dollars or more.

$ 6-134(bX7).

29.

"Financial assistance" is defined very broadly:

Financial assistance includes, but is not limited to, cash payments or grants, bond financing, tax abatements or exemptions (including, but not limited to, abatements or exemptions from real property, mortgage recording, sales and use taxes, or the difference between any payments in lieu of taxes and the amount of real property or other taxes that would have been due if the property were not exempted from the payment of such taxes), tax increment financing, filing fee waivers, energy cost reductions, environmental remediation costs, write-downs in the market value of building, land, or leases, or the cost of capital improvements undertaken for the benefit of a project subject to a project
agreement.

Id.

30.

"Financial assistance" includes both direct assistance from the City and

assistance provided through

a "city

economic development entity," defined as

"a local

development corporation, not-for-profit corporation, public beneht corporation, or other entity

that provides or administers economic development benefits and with which the department of small business services serves as a liaison pursuant to paragraph b of subdivision one of section
1301 of the New York city charter." $ 6-134(b)(2) and

(bX7). This includes assistance provided

through the New York City Economic Development Corporation ("NYCEDC"). The definition

of "financial assistance"
even though

suggests that

it is intended to encompass entities

such as NYCIDA,

NYCIDA is a State-created public benefit corporation that has little or nothing to do

with the Department of Small Business Services. However, the def,rnition of "financial

l2

assistance" explicitly excludes non-discretionary assistance, i.e., assistance given to all persons

who meet certain criteria. Id.

31,

The obligations of the Living Wage Law fall in the first instance on covered

employers. They are required to pay the living wage, $ 6-13a(c)(1). Beyond that requirement, they are also required to post and distribute to all employees a notice to be prepared by the
Comptroller and distributed by the City setting forth the rights of employees under the Law. $ 6-

134(e)(l). They must maintain payroll records for six years, $ 6-13a(eX2), notify other covered
employers operating on the premises of their obligations, $ 6-134((1), certify annually that they

are

in

compliance with the Law, id., and provide contact information concerning

all

other

covered employers,

id.

Covered employers are also prohibited from retaliating against any

employee who takes any action to enforce rights under the Law. $ 6-l3a(e)(3).

32.

The Law does not apply to f,rnancial assistance provided prior to its of

enactment, or to projects agreed to prior to enactment, but extension, renewal, or amendment

projects agreements that results applicable. $ 6-134(iXl).

in additional

assistance being awarded

will

make the Law

33.

The Living Wage Law assigns monitoring and investigative responsibility to

the Comptroller or, in some provisions, to both the Comptroller and the Mayor. $ 6-13a(g), At

the start of the investigation, the Comptroller may request that the City or City economic
development entity providing

the

assistance withhold such assistance.

6-13a(gXl).

Complaints may be filed either with the Comptroller or the Mayor, and either may investigate.
$

6-l3a(g)(6), (gX8), and (g)(9). The Comptroller is required to report the results of any

investigation to the Mayor or his or her designee.

13

34. In response to the Comptroller's

referral, the Mayor

"shall

where

appropriate issue an order, determination, or other disposition." $ 6-13a(g)(2). The Mayor may

either negotiate a settlement or refer the matter to the Office of Administrative Trials and
Hearings for a hearing and disposition. $ 6-13a(g)(a).

35.

The Living V/age Law provides for penalties for non-compliance, including

back pay with interest at no less than 60/o, a civil penalty of up to 200Yo of the amount found to

be due, and, when a final disposition has been entered in two instances within any six-year
period, ineligibility for further financial assistance, $ 6-l3a(gx2). The Mayor's order may be
docketed with the County Clerk and "shall have the

full force and effect of a judgment duly

docketed in the office of such clerk," $ 6-13a(g)(5), although there is no State authorization for

this. "Upon determining that a covered employer is not in compliance, and where no cure is
effected," the City or City economic development entity may impose sanctions or recover any hnancial assistance previously provided. g 6-l3a(gx7).

36. 37.

The Law also creates a private right of action for damages, punitive damages,

and injunctive relief, to any person aggrieved. $ 6-13a(gX8)

(g)(12).

Finally, the Living Wage Law contains a provision that urges the City and
a

City economic development entities to prefer proposals of parties who commit to payment of

living wage, and to "strive to achieve a living wage for

75Yo or more

of the hourly jobs created

overall." $ 6-134(hxl). It further requires the City and City Economic Development Entities to
submit a report for each economic development agreement they enter into, indicating "whether

its agreement with the economic development subsidy recipient mandated the payment of

living wage for any jobs created by the project." $ 6-134(hX2). The report must state how many
such jobs

will

be created "beyond those jobs for which a

living wage is required pursuant to this

14

section and a description of the applicable penalties

if the wage requirement in the agreement

is

not ultimately fulfilled.

If the agreement

does not include such a mandate, the city or city

economic development entity shall explain why such an agreement could not be reached." Id. The City must also submit to the Council an annual report on the numbers of living wage jobs

and below-living wage jobs created

assistance. $ 6-134(hX3).

in

connection with projects receiving City f,rnancial

B.

The Prevailing Wage Law

38. In contrast to the Living Wage Law workers, see $ 6-134(dX6)

which excludes building

service

the Prevailing V/age Law, N.Y.C. Admin. Code $ 6-130, covers

only such workers. While very similar to the Living V/age Law in most other respects, the
Prevailing Wage Law also differs from the Living V/age Law in that
categories

it

extends to additional
Service

of employers. As indicated by its title - "Prevailing Wage for Building in City

Leased or Financially Assisted Facilities"

Employees

the Law applies to building

service workers who work in buildings owned by f,rnancial assistance recipients and in buildings

in which the City leases more than specified percentages of space, Thus, unlike the Living Wage

Law, the Prevailing V/age Law will frequently extend to developers of financially
residential housing, as well as owners
contractors and subcontractors.

assisted

of commercial office buildings,

and

their

respective

39. In enacting the Prevailing Wage Law, the Council

legislative f,rndings and intent, finding that:

made a declaration of

[T]he City, as a promoter of economic development, commits significant resources . . . for development projects across the city. Further, as a tenant, the City spends millions of tax dollars each year leasing space for City agencies from private landlords. Building service work has traditionally been a gateway to the The Council is middle class for New York City residents . in some cases, those who benefit from concerned, however, that l5

city leases or economic development incentives do not ensure that the building service employees they employ or utilize receive the prevailing wage. This failure has the potential to destabilize neighborhoods and to undermine the City's middle class tax base. The intention of the Council in enacting this section is to ensure that funding provided, in whole or part, by the City is not used to
this effect.

Local Law27 of2012, g l.

40. The Prevailing Wage Law requires "covered lessors" and "covered
developers"

to pay prevailing wages. $ 6-130(b)(1) and (cXl). "Covered lessors" are non-

governmental entities or persons who lease 10,000 square feet or more of offrce space to a "contracting agency," defined as any public entity "the expenses of which are paid in whole or in
part from the city treasury." $ 6-130(aX7), (9), and (l

l).

Under the Law's definition of "lease,"

the prevailing wage requirement applies only to buildings in which the City occupies at least 5l percent of the square footage
and Brooklyn, and

if

located in Manhattan and certain portions of the Bronx, Queens,

in which the City occupies at least 80 percent if located in other portions of

the Bronx, Queens, and Brooklyn, or anywhere

referencing Real Property Tax Law $ 421-a).

in

Staten

Island. $ 6-130(a)(11)

(cross-

41.

In addition to lessors, thJ prevailing wage requirement applies to "covered

developers," deltned as persons "receiving financial assistance in relation to a city development

project, or any assignee or successor

development

in interest of real property that qualifies as a city

project." $ 6-130(a)(8), "Financial assistance" is defined in terms substantially

identical to those of the Living Wage Law. $ 6-130(a)(10). It includes assistance provided both directly by the City and through a"city economic development entity," defined the same way as
in the Living V/age Law. g 6-130(aX5).

42.

"City development project" is defined as "a project undertaken by a eity

agency or a city economic development entity for the purpose of improvement or development

of

l6

real property, economic development, job retention or growth, or other similar purposes where
the project: (a) is expected to be larger than 100,000 square feet, or, in the case of a residential

project, largerthan 100 units; and (b) has received or is expected to receive financial assistance."
$ 6-130(aXa).

43.

The Prevailing Wage Law's definitions

of

"city development project"

and the

"covered developer" provide

for a

number

of exemptions that are incorporated into

definitions of "city development project" and "covered developer." These exemptions partially
overlap those of the Living V/age Law. The defrnition of "city development project" excludes

(1) projects of 100,000 square feet or less, o,

if

residential, 100 units or less; (2) affordable

housing projects, defined, however, more narrowly than

in the Living Wage Law;

and

(3) projects of the Health and Hospitals Corporation. $ 6-130(aX4). The definition of "covered

developer" in the Prevailing V/age Law adds exclusions for (4) not for profit organizations;
(5) business improvement districts; and (6) manufacturing employers. $ 6-130(a)(8).

44. 45.
benefits paid

Like the Living V/age Law, the Prevailing Wage Law does not apply to

existing City development projects or leases. $ 6-130( and (g).

The Law defines "prevailing wage" as the rate of wage and supplemental service workers

to building

in the locality as determined

annually

"by

the

comptroller in accordance with the provisions of section 234 of the New York state labor law."

$ 6-130(a)(13). This is a reference to the fact that, pursuant to Article 9 of the Labor Law,
$$ 230 et seq., the Comptroller already determines annually the prevailing wage

for building
V/age

services workers employed by entities that contract directly with the

City. The Prevailing

Law extends that wage guarantee to building service workers who are only indirectly linked to

t7

the City, in that they are employed either by recipients of City financial assistance or in privately owned buildings in which the City leases specified amounts of space.

46,

The implementation and enforcement provisions of the Prevailing Wage Law

are similar to those of the Living Wage

Law.

Covered lessors and developers are required to

certify annually their compliance with the law. $ 6-130(bX2) and (cX2). They are required to
post notices prepared by the Comptroller, $ 6-130(bX4) and (c)(4), and to keep records, and, in

the case of lessors, to submit certihed copies of those records with each request for payment,
$ 6- 130(bX3) and

(cX3). The Law applies for the term of the lease or, in the case of financial

assistance,

for the longer of the term of the financial assistance or ten years from the date the (cX6). The City is to maintain current lists of covered

assisted project opens. $ 6-130(bX6) and

lessors and developers. $ 6-130(bX7) and

(cX7). It also has rulemaking responsibilities: "No

later than October 1,2012, the mayor or his or her designee shall promulgate implementing rules
and regulations as appropriate and consistent with this section and may delegate such authority to

the comptroller." $ 6-130(dxl). The Comptroller is to submit annual reports on the Law to the

Mayor and the Council.

1d.

47.

As also provided by the Living V/age Law, covered lessors or developers

may not discriminate or retaliate against any employee. $ 6-130(d)(2). The Comptroller is to monitor and investigate alleged violations, and may request that the contracting agency or entity

withhold payments to covered lessors or developers. $ 6-130(dX3). As with the Living Wage
Law, complaints may be filed either with the Mayor or with the Comptroller, and investigations
may be undertaken by either. $$ 6-130(dX8),6-130(eX1) and (e)(2). Here too, the Comptroller

is empowered to report the results of investigations to the Mayor or his or her designee, "who

l8

shall

. after providing the covered lessor or covered developer an opportunity to cure any

violations, where appropriate issue an order, determination, or other disposition." $ 6-130(dX4).

48.

The monetary penalties provided by the Law are similar to those of the

Living Wage Law, except that the maximum civil penalty is lower: 25 percent or 50 percent of
the total amount due, rather than 200 percent.

Id. Like the Living Wage Law, and also without

State authorization, the Prevailing Wage Law provides that the Mayor's order may be docketed

with the County Clerk and "shall have the full force and effect of a judgment."

$ 6-130(dX7).

The Prevailing Wage Law also creates a private right of action similar to that of the Living Wage

Law,

$ 6-130(e).

The Effects of the Local Laws

49.

The Local Laws would have significant, adverse effects on important

programmatic and administrative functions of City, City-related, and State-created entities, As

described below, these include economic development projects administered by NYCEDC and

NYCIDA, affordable housing development projects supported by HPD, and the City's leasing of
space from private landlords,

A.

Effects on NYCEDC's Economic Development Projects

50.

NYCEDC is a local development corporation whose goals include creating

jobs, generating revenue for the City, and diversifying the City's economy, and particularly its
industrial sector, including warehousing and distribution. See NPCL $ 1411(a) (stating purposes

of local development corporations). In furtherance of these goals, NYCEDC acquires land from
the City and then disposes of it by sale or lease to industrial companies, frequently at less than

fair market value.l

' NYCBDC is in the process of restructuring. As part of the restructuring, two separate entities have been formed. Once the restructuring is complete, one entity, a local development

l9

51.
seeks

NYCEDC's industrial offerings are often for vacant land where the City

to encourage the construction of new industrial and manufacturing facilities. Because the

economics

of such ventures are challenging, the projects that NYCEDC

pursues frequently

require subsidized rents or sale prices in order to be successful.

52.

The Local Laws exempt manufacturing projects but not those involving other

industrial uses such as warehousing and distribution. Warehousing and distribution often employ significant numbers

of

entry-level employees. For this reason, the retention and

expansion of these facilities would be especially affected by these Laws.

53.

The Local Laws would hinder NYCEDC's efforts to foster industry and,

consequently, job creation in the

City. The wage requirements of the Laws would increase the

cost of any project subject to them, making even more difficult the economic circumstances that already render many projects unfeasible without govemment assistance. Some projects may not
be

viable. Others will only be feasible with increased assistance from NYCEDC in the form of

lower sale prices for property, in turn reducing the resources NYCEDC has to pursue other
economic development projects and reducing any proceeds to the City receives from the sale of
the property.

B.

Effects on NYCIDA's Economic Development Projects

54.

NYCIDA is a State-created public authority, created by GML $ 917 pursuant

to the IDA Act, GML Art. 18-4, which authorizes the creation of local industrial development
corporation, will continue to acquire property directly from the City. The other will be a not-forprofit corporation into which NYCEDC will be merged. The local development corporation will acquire property from the City and will sell the property to the not-for-profit corporation, which will be authorized to dispose of the property in accordance with requirements contained in a Mayoral approval of the sale of City property. This restructuring will not change the impact of the Local Laws on the City's economic development programs.

20

authorities throughout the State. Consistent with its statutory purpose, NYCIDA's mission is to encourage economic development throughout the

five boroughs and to assist in both

the

retention of existing jobs and the creation and attraction of new ones.

55.

To carry out its mission, NYCIDA is legally empowered to provide avarieTy

of financial benehts including (i) tax-exempt bond financing; (ii) sales and use tax exemptions;

(iii) mortgage recording tax exemptions;

and (iv) real estate tax exemptions.

56.

Pursuant to the U. S. Internal Revenue Code, interest paid on certain bonds

issued by NYCIDA is exempt from federal taxation.

In addition, pursuant to GML $

874,

interest paid on bonds issued by NYCIDA is exempt from state and local income taxation,
Because of the exemptions from taxation, purchasers of the bonds are willing to accept a lower rate of interest than they would

if the interest paid on the bonds

were taxable, The proceeds

of

these bonds are paid to private parties to use for acquisition and/or construction of facilities, and

the private parties in turn pay NYCIDA the amounts NYCIDA needs to pay the principal and the

lower cost interest on the bonds. The result is that companies can borrow at lower cost than if
they had to issue taxable bonds,

57.

NYCIDA also has the authority to exempt eligible projects from various

taxes and to collect payments in lieu of taxes (known as "PILOTs") that are equal to or less than

the amounts of the taxes that would otherwise be applicable. NYCIDA can exempt sales tax on
purchases of machinery, equipment, and construction materials and can replace real estate taxes

with a stable level of PILOTs over a long period, thus helping reduce a company's operating
costs. NYCIDA can also help reduce closing costs by exempting a company from the payment of all or part of the mortgage recording tax or defening the payment obligation. It may require
a

company to pay PILOTs that are less than the full tax amount. By exercising these powers,

2l

NYCIDA can help companies overcome the high tax environment of the City and New York
State, which presents one
presence in the City.

of the major

challenges these companies face

in expanding their

58,

For the 13 projects that closed in Fiscal 2012, NYCIDA agreed to provide

financial assistance totaling $56,531,592, At the time of their respective project closings, the
recipients of the assistance employed 792 peopla With the assistance furnished by NYCIDA,

they are expected to create 750 additional jobs. In addition to these closings, NYCIDA's board of directors has approved "inducement resolutions" for 14 other projects, acknowledging that the

provision of financial assistance would be appropriate and that without the provision of such
assistance the projects would

(i) not move forward, or (ii) would only move forward on a

significantly smaller scale, or (iii) would take place outside of New York State. These projects
continue to move forward in Fiscal 2013. For these 14 "induced" projects, NYCIDA is planning

to provide financial

assistance totaling $181,392,459

to companies employing a total of over

3,248 people. 'With the assistance furnished by NYCIDA, these companies are expected to
create over 3,672 additional jobs.

59.

NYCIDA supports projects that it believes would not occur, or would

be

significantly smaller or delayed, but for the benefits it provides. The wage requirements in the

Local Laws will create a direct impediment to NYCIDA's efforts to promote job growth by
increasing the cost of development projects and therefore reducing the effectiveness of the tax benefits offered by

NYCIDA. In order to induce any given project, NYCIDA will be forced to

offer greater benefits than it would have absent the wage requirements. As a result of the Local
Laws, NYCIDA will be able to pursue fewer projects, or projects of lesser scale.

22

C.

Effects on HPD's Affordable Housing Programs

60.

The Prevailing 'Wage Law would adversely impact the development and

rehabilitation of affordable housing under programs administered by

HPD. Although

some

affordable housing projects would be exempted from the Law's prevailing wage requirement,
others, comprising thousands of units of affordable housing, would

not. The wage requirement

applies and thus

increases the operating costs

for any

development project

to which it

undermines the purpose of programs created by State law that are intended to maximize the
creation of affordable housing through private investment.

6L

These State statutes, including GML Article 16 and PHFL Articles 8-a, 11,

15, and 22,vest administrative authority over the programs, and in particular the setting of the
business terms of urban development projects, in HPD, and provide for only a limited role by the

Council.

D.

Effects on City Leasing from Private Landlords

62. In requiring that certain lessors of office space to the City, and their
contractors, pay a prevailing wage

to the building service employees who work in

certain

buildings in which the City is a tenant, the Prevailing V/age Law will have a significant impact
both on the City's ability to lease offrce space and its costs in so doing.

63.

The Charter empowers the Commissioner of the Department of Citywide

Administrative Services ("DCAS") to lease private property for City use, subject to various
approvals as detailed below. Charter $ 82a(a). The City currently has at least 58 leases, for a

total of 7.3 million square feet

space leased by the City

- well over half of the total of 12.6 million square feet of offlrce

in buildings that would be subject to the Prevailing Wage Law, On

information and belief, upon renewal of these existing leases, the Prevailing 'Wage Law will

require wage increases for building service workers at no fewer than 42, and as many as 52, of the 58 leased properties, covering a total of up to 6.1 million square feet.

64.

Where wages must be increased to comply with the Prevailing Wage Law,

landlords' building maintenance costs will increase. In these cases, the landlords may refuse to
lease to the

City or to renew the City's leases. The leases affected are mostly in areas outside of

Manhattan where

it is already diffrcult to f,rnd space for City agencies. Alternatively, they may
in turn increasing the cost of

pass the increased costs on to the City in the form of higher rents,

the City's leases, which are paid for by taxpayer dollars. Landlords may also pass some of the cost on to tenants other than the City, driving up rents for private enterprises because they
happen to lease space in a building where the City is also a tenant.

FIRST CAUSE OF ACTION (Preemption by the State Minimum Wage Law)

65. 66.

As and for a first cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this paragraph.

Under directly applicable Court of Appeals precedent, the New York State

Minimum Wage Law, codified as Labor Law Art. 19, $$ 650 et seq., occupies the f,reld of wage

regulation. Wholesale Laundry Board of Trade, Inc. v. City of New York, 17 A.D. 2d 327 (lst
Dept. 1962), aff'd on op. below,12 N.Y.2d 998 (1963) (Wholesale Laundry.f (invalidating City law that sought to set minimum wages for all employees in the City); Wholesale Laundry Board

of Trade, Inc. v. City of New York,43 Misc. 2d 816 (Sup. Ct. N.Y. Co. 1964), aff'd,22 A.D.2d
762 (lstDept. 1964), a,ff'd, l5 N.Y.2d 604 (1964) (Wholesale Laundry
1,1)

(same). Therefore,

local laws regulating wages are preempted unless they fit within some exception to preemption.

67.

In McMillen v. Browne, 14 N,Y.2d 326 (1964), the Court of Appeals carved

out two narrow exceptions to preemption, neither of which are applicable here. First, the Court

24

held that a local law that applied only to City contractors and subcontractors who furnished
"supplies, material or equipment . . . or . . . work, labor or services" to the City was not subject to preemption

if the City was acting in its proprietary capacity.

This exception has been greatly

narrowed by subsequent Court of Appeals decisions.

68.

Under current law, a state or municipality, even when acting as a purchaser

of

goods, labor, or services, is not acting

in a proprietary capacity, and is therefore subject to

preemption, when it uses its power as a purchaser to advance policy goals. The Local Laws are
preempted because they are explicitly intended to assist in the maintenance or creation of middle
class jobs in the

City. This is a regulatory and a policy goal, not a proprietary McMillen's second exception

one.

69.

to

preemption was based

on home

rule

provisions in the State constitution and Municipal Home Rule Law that specifically permit
localities to regulate wages of their contractors and subcontractors so long as such regulations are

not inconsistent with State law. N.Y. Const. Art. IX, $ 2(c); MHRL $ 10(lXiixa)(l0). These provisions apply only

to City

contractors and subcontractors who perform "work, labor or

services" for the locality, i.e., to procurement contractors and subcontractors, and not to the
persons or entities to which these Local Laws

apply, Moreover, more recent

cases regarding

procurement contracts have held that local laws that impose policy-related conditions on
procurement contracts are, in fact, inconsistent with State law, and therefore invalid, conditions elevate costs and reduce competition.

if

those

70.
space leases

The Local Laws seek to leverage certain development programs and offlice
is

in order to impose a minimum wage upon portions of the private sector that

higher than the State-specified minimum wage. Their purpose, means, and intended effect all

infringe upon the subject matter and substance of Article 19 of the Labor Law. Further, the

25

Local laws do not fit within any exception to preemption, Therefore, they are preempted by the New York State Minimum'Wage Law.

71.

It would be unlawful for the Mayor or mayoral appointees to seek to enforce

the Local Laws against employers purportedly covered by the Local Laws.

SECOND CAUSE OF ACTION (Violation of Municipal Home Rule Law gg 11(1Xf)) and 22(2))

72. 73.

As and for a second cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this paragraph.

Municipal Home Rule Law $

ll,

entitled "Restrictions on the adoption of

local laws," provides, in relevant part:

1. Notwithstanding any provision of this chapter, the legislative body shall not be deemed authorized by this chapter to adopt a local law which supersedes a state statute, if such local law: ****
f.
MHRL $11(1).
Applies to or affects any provision of . . . the labor law.

74. 75.

Because the Local Laws "apply

to or affect" the New York State Minimum

V/age Law, Labor Law $$ 650 et seq., they are unauthorized and invalid.

Similarly, Municipal Home Rule Law 22(2) provides that, "No local law

shall supersede any provision of a state statute except as authorized by the constitution, this
chapter or any other state statute." Because the Local Laws are not authorizedto supersede the
State

Minimum Wage Law, they are invalid.

76.

It would be unlawful for the Mayor or mayoral appointees to seek to enforce

the Local Laws against employers purportedly covered by the Local Laws.

26

THIRD CAUSE OF ACTION (Preemption by the State IDA Law)

77. 78.

As and for a third cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this paragraph.

The Local Laws are also preempted insofar as they seek to regulate the

activities of NYCIDA, a public benefit corporation established under the New York State IDA

Act, GML $$ 850 et seq., and specifically by GML $ 917,

79. As the New York State Attomey General has opined, "only the State
Legislature [is] empowered to legislate regarding the powers and functions" of an Industrial
Development Agency. 1976 N.Y. Op. (Inf.)

Att'y Gen.250, 1976 N.Y. AG LEXIS

148,*5

(Aug. 3I,1976). A county's IDA "is not a part of the county govemment; the IDA's powers are
derived directly from the State, not from or through the county. The county's relationship with

the . . . County IDA is determined not by home rule but by the Legislature." 1981 N.Y. Op. (Inf,) Att'y Gen.272, 1981 N,Y. AG LEXIS 27, *3 (Oct. 19, 1981).

80.

In enacting the IDA Act and the statute creating NYCIDA, the Legislature

expressly occupied the

field. GML $ 888. This provision is virtually identical to a provision in

another State law previously found to be preemptive, New York City HHC v. Council of the City of New York,303 A.D.2d 69,77 (1st Dept. 2003).

81.
$

The comprehensive provisions of GML Article 18-4, $$ 850 et seq., and

917 (creating NYCIDA) also evidence the Legislature's intent to occupy the

field.

The

purpose of an IDA is:

to promote, develop, encourage and assist in the

acquiring,

and furnishing industrial, manufacturing, warehousing, commercial, research and recreation facilities , and thereby advance the job opportunities, health, general prosperity and economic welfare of the people of the state of New York and to
27

constructing, reconstructing, improving, maintaining, equipping

improve their recreation opportunities, prosperity and standard living.

of

GML $ 858.

82.

To accomplish these ends, the Legislature granted IDAs, including NYCIDA,

particular powers, including but not limited to the following:

(a) To acquire by purchase, grant, lease, gift, pursuant to the

provisions of the eminent domain procedure law, or otherwise and to use, real property or rights or easements therein necessary for its corporate purposes in compliance with the local zoning and planning regulations , and to sell, convey, mortgage, lease, pledge, exchange or otherwise dispose of any such property in such manner as the agency shall determine.
*F{<rl(

(9) To make contracts and leases, and to execute all instruments necessary or convenient to or with any person, firm, partnership or corporation, either public or private; provided, however, that any extension of an existing contract, lease or other agreement entered into by an agency with respect to a project shall be guided by the provisions of this article;
(10) To acquire, construct, reconstruct, lease, improve, maintain, equip or furnish one or more projects;
enter into contracts or other transactions with, the United States and the state or any agency of either of them, any municipality, any public or private corporation or any other legal entity, and to use any such

(l l) To accept gifts, grants, loans, or contributions from, and

gifts, grants, loans or contributions for any of its corporate

purposes;

(12) To borrow money and to issue bonds and to provide for the rights of the holders thereof;

(13)To grant options to renew any lease with respect to any project or projects and to grant options to buy any project at such price as the agency may deem desirable;
d(

r! tl. *

(17) To do all things necessary or convenient to carry out its purposes and exercise the powers expressly given in this title.

GML $ 8s8
28

83.

The Local Laws dictate wage terms to recipients of financial assistance from

NYCIDA who meet the criteria set forth in those Laws. In so doing, they specifically target NYCIDA, along with NYCEDC, mandating an important condition for providing
assistance to

NYCIDA projects, and thus interfering with NYCIDA in the exercise of the above core powers
conferred upon it by the State Legislature.

84. 85.

Because the Local Laws are in conflict with, and inconsistent with, State law,

they are preempted.

It would be unlawful for the Mayor or mayoral appointees to seek to enforce

the Local Laws against employers purportedly covered by the Local Laws by virtue of receiving

NYCIDA assistance. FOURTH CAUSE OF'ACTION (Municipal Home Rule Law S 10(5))

86. 87. 88. 89. 90.

dictate to

As and for a fourth cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this paragraph.

Municipal Home Rule Law $ 10(5) provides that"a local government shall

not have power to adopt local laws which impair the powers of any other public corporation." The General Construction Law defines "public corporation" to include public

benefit corporations. GCL $ 66(1).

Pursuant to the IDA Act, all local IDAs, of which NYCIDA is one, are public

benefit corporations. GML $ 856(2).

As alleged above, the Local Laws, which specifically target NYCIDA

and

it an important term of its projects,

interfere with NYCIDA in the exercise of core

powers conferred upon it by the State Legislature. They therefore violate Municipal Home Rule

Law $ 10(5), and it would be unlawful for the Mayor or mayoral appointees to seek to enforce
29

the Local Laws against entities purportedly covered by the Local Laws by virtue of receiving

NYCIDA

assistance.

F'IFTH CAUSE OF ACTION (Preemption of the Prevailing Wage Law by State Affordable Housing Statutes)

91. 92,

As and for a fifth cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this paragraph.

The Prevailing Wage Law is preempted by the statutory scheme of the

General Municipal Law and Private Housing Finance Law, which authorizes the City to provide

financial assistance to private developers and others for the construction and rehabilitation of
affordable housing. This assistance can take the form, first, of real property sales for less than
market value, without public auction or sealed bids pursuant to GML Article 16 or PHFL Article

11, and second,

of

loans

to finance construction and building rehabilitation in urban areas

pursuant to PHFL Articles 8-a, 15, and22.

93.

Each of these statutes empowers HPD to administer the incentive programs

and, conversely, strictly limits or altogether precludes involvement by the Council. In this
manner, the statutes neither contemplate nor countenance intrusion by the Council in the form
a blanket wage requirement that

of

inhibits the efficacy of the statutory incentive programs.

94.

GML Article 16, for example, authorizes HPD, subject to the Mayor's

approval, to sell property without public auction or sealed bids to a sponsor as designated by

HPD. GML

695(2Xb). The Council's role is limited to giving approval to the overall project

in the first

instance,

id. $ 694(3), after which the property disposition itself is left to

the

discretion of HPD and the Mayor. Likewise, in authorizing municipalities to make loans to support urban development projects, GML Article 16 and PHFL Articles 11, 15, and22 vest administrative authority

and in particular, the power the set the business terms of the projects 30

almost entirely within HPD rather than the Council. GML $$ 696(a), 696(d); PHFL $$ 576(c),

802,7152. Where the Council is authorized to play some role in connection with the terms of an
assistance project, as

with PHFL Article 8-a loans, that role is limited to setting terms necessary

to secure repayment of the loan, and the statute does not contemplate the insertion of conditions
extraneous to repayment. PHFL 452(2).

95. In

creating the statutory schemes

for

these assistance programs, the

Legislature assigned particular roles to the Mayor, HPD, and the Council. Where

it

wanted to

give the Council some limited role, it did so. Where the Council is given no role, it may not
interfere with the administration of these State-authorized programs. By subjecting developers and others who receive assistance under these statutes to the prevailing wage requirement, the

Council dictates the terms of the assistance. This intrusion by the Council is inconsistent with
the statutes' administrative frameworks, which expressly give the Mayor and HPD, rather than
the Council, authority to implement the programs, and in particular, to set the business terms for the development projects.

96.
investment

The purpose of these State statutes is to create financial incentives for private

in the construction and rehabilitation of deteriorating buildings, where blighted

conditions and other factors discourage private investment. By increasing the cost of labor in connection with any development project that triggers the Law's wage requirement, and thus
increasing the cost of the project as a whole, the Prevailing Wage Law frustrates this pu{pose.

97.

For these reasons, the Prevailing Wage Law is preempted, and it would be

unlawful for the Mayor or mayoral appointees to seek to enforce that Law against employers
purportedly covered by the Local Laws.

3l

SIXTH CAUSE OF ACTION (Curtailment of the Mayor's Authority to Establish the Terms of Disposition of City Property and the Authority of the Mayor and other City Officials to Review the Land Use Implications of Such Dispositions)

98. 99.

As and for a sixth cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this paragraph.

Any local law that "fa]bolishes, transfers or curtails any power of an elective

offtcer" "shall be subject to a mandatory referendum" of the voters. MHRL 523(2), The City
Charter likewise requires that a local law be approved by referendum

if it transfers or curtails
a

"any power" of an elective offrcial such as the Mayor, or transfers power from a mayoral to

non-mayoral appointee or entity, or curtails the powers of the City Planning Commission. N.Y.

City Charter $ 38(5), 38(11), and 38(16).

100.

The Local Laws are invalid because they have not been approved by

referendum even though they curtail the power granted to the Mayor under the Charter to dispose

of City real property on terms that he or she alone sets.

101,

Many major City economic development projects involve the sale or lease of

City real property to third parties at below market rates. Such sales are accomplished through

NYCEDC. State law and the New York City Charter give the Mayor the power to convey City

real property to NYCEDC

or any other local development corporation for

economic

development or other public purpose without competitive bidding, and on terms that the Mayor

may set, subject only to the approval of the Borough Board. Historically, the terms of the
dispositions set by Mayors have required the local development corporation to, in turn, dispose of the property to a specihc purchaser and on specific terms set forth in the Mayoral approval.

102.

Section 384(bX4) of the New York City Charter assigns to the Mayor the

authority to sell or lease property to a local development corporation. The Mayor authorizes
32

such sales or leases subject to the local development corporation's obligation to dispose of the

property in a specific manner. Under $ 384(bX4), the Mayor is authorized, subject only to the
subsequent approval of the pertinent Borough Board, to lease or sell real property of the City "to

a local development corporation without competitive bidding and for such purpose or purposes

and at such rental or for such price as may be determined by the mayor to be in the public

interest." Charter $ 384(bX4). This provision explicitly ovenides any contrary law, general or
special or local. Id.

103.

Section 384(bX4) operates in tandem with section

l41l of the Not-for-Profit

Corporation Law, which authorizes governmental entities

corporations

to

create local development

development.

to advance a wide array of public purposes related to economic

NPCL $ lal1(a). Pursuant to NPCL $ 1411, NYCEDC was created to assist in furthering the
economic development goals of certain City real property dispositions, as well as to implement
other economic development initiatives.

104.

The Charter's text and structure provide a context for the power granted the

Mayor in Charter $ 384(bX4), This context reveals the limited role played by the Council in this
area, and shows that the power granted to the Mayor in that paragraph functions as a component

of a rational scheme. Section 384(bX5) provides that dispositions of City property are subject to
the Uniform Land Use Review Process ("ULURP") of Chapter 8 of the Charter and states that

review in the ULURP process is "limited to the land use impact and implications of the
transaction," /d. $ 384(bX5). The Council's role in the ULURP process is in turn defined by Charter

197-d, which provides for various procedures by which the Council can review

different types of dispositions of City real property. The Council cannot regulate the disposition of property outside the ULURP process, because Charter $ 28(a) limits the Council's role:

JJ

The power of the council to act with respect to matters set forth in section[ ] one hundred ninety seven-c fthe main ULURP provision] , . . shall be limited by the provisions of section one hundred ninety seven-d [the section defining the Council's role in ULURP].
Thus, the Council's role with respect to real property dispositions is limited to its review of the

land use implications of these dispositions on an individualized basis.

105.

Contrary to this statutory scheme, which assigns to the Mayor the power to

impose the terms of property dispositions, the Council here is imposing a specific term on every

disposition of property pursuant to Charter $ 384(bX4). Under the Local Laws, any disposition

of City property by the Mayor through NYCEDC in connection with a project that receives City
financial assistance as defined by those Laws, and that meets the other criteria of the Local Laws,
is subject to the wage regulation terms of the Local Laws.

106.

By limiting the Mayor's discretion in setting the terms and conditions of

property dispositions and inserting the Council into matters specifically denied to
structure and text of the Charter, the Local Laws curtail the Mayor's power.

it by the

107.

Further,

by effectively eliminating the possibility of disposition of

real

property in certain sases, the Council has improperly used the local law process to curtail the
powers of other City officials and bodies essential to the City's governmental structure, including

the City Planning Commission, the Borough Presidents, and the Community Boards, to make
recommendations and take actions in the ULURP process. See Charter $$ 197-c, 197-d; see also Charter $ 38(l 1) and 38(16).

108.

By enacting these Local Laws, the Council is imposing a non-land use

related condition upon the ULURP process in excess of its prescribed role, thereby effectively

preventing some property dispositions, and the related development initiatives, from proceeding
at

all. This circumvention of the limitations imposed upon the Council

34

so as to eliminate or alter

the role of the Mayor, the Borough Presidents, and other City offrcials whose roles are defined
by the Charter curtails the powers of those officials.

SEVENTH CAUSE OF ACTION (Curtailment of the Mayor's Authority to Acquire Offce Space by Lease for City Use and of the City Planning Commission's Power to Review Leases by the Prevailing \ilage Law)

109. ll0,

As and for a seventh cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this paragraph.

The Prevailing Wage Law requires that certain lessors of office space to the

City and their contractors pay a prevailing wage to the building service employees who work in
certain buildings in which the City is a tenant. In so doing, that Law curtails the power of the

Mayor and the DCAS Commissioner, a mayoral appointee, to acquire office space by lease on
behalf of the City.
II

1,

As with other real property acquisitions and dispositions, the only authority

that the Charter gives to the Council with respect to leasing of ofhce space is in the area of land

use. The Charter gives even greater authority to the executive branch in such leasing than in
other dispositions or acquisitions of real property,

ll2.

The acquisition of office space by the City as lessee is governed by Charter

$$ 824(a), 195, and

197-c. Section 824(a) gives the DCAS Commissioner the power "to

purchase, lease, condemn or otherwise acquire real property for the city, subject to the approval

of the mayor . . . and subject to review and approval either pursuant to section one hundred
ninety-five,

if

applicable, or pursuant to sction one hundred ninety-seven-c and one hundred

ninety-seven-d." No role is specified for the City Council other than the role it plays through
land use review pursuant to the provisions cited in $ 82a(a). The history and structure of the

35

Charter indicate an understanding that the power to set the terms of acquisitions of real property, other than land use-related terms, is reserved to the Mayor and mayoral appointees.

113.

The leasing of office space by the City as lessee is exempted from ULURP

by Charter $ 197-c(a)(11), which subjects to ULURP all City acquisitions of real property "other

than the acquisition of

ffice space." The acquisition of office space is instead governed by

Charter $ 195, appropriately titled "Acquisitions of office space." The placement and substance

of this provision, which governs the Council's role in such leasing, limits that role to land

use

issues. Charter $ 195 is found in Chapter 8 of the Charter, entitled "City Planning," th subject matter of which is exclusively land use. That chapter also comprises the provisions governing

the full ULURP process, $$ 197-c and 197-d. Section 195 sets forth an abbreviated "miniULURP" procedure that must be followed in such acquisitions,

Il4.

The roles given to elected officials in these Charter provisions are clearly set

forth: the powers are structural in nature, and cannot be set aside by a local law without a
referendum. The Council's Prevailing Wage Law, which requires that landlords who lease to the

City ensure that their contractors pay aprevailing wage and comply with reporting requirements,
constrains the ability Department

of the Mayor and mayoral

agencies

to present proposed sites to

the

of City

Planning and the City Planning Commission pursuant

to $

195, and
and

supersedes the site-specific land-use review process given $

to the Council by that section

824. Indeed, a property that is owned by an individual or entity that will not comply with the

new superimposed business term cannot be leased at all.

115.

Thus, the Law improperly curtails the power of the Mayor and the DCAS

Commissioner to set the terms

of City office

space leases, as well as the power

of the City

Planning Commission under Charter $ 38(16) to review leases.

36

EIGHTH CAUSE OF ACTION (Curtailment of the Mayor's Executive Enforcement Authority and Transfer of Authority to the Comptroller)

116. ll7.

As and for an eighth cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this parcgraph.

Under the Local Laws, the Comptroller shares implementation and

enforcement powers with the Mayor in a manner that impermissibly curtails the executive power

of the Mayor and transfers mayoral powers to the Comptroller

I

18.

In particular, the Local Laws give the Comptroller the authority to:

monitor the compliance of covered employers, lessors, and developers, Admin. Code $$ 6-130(dX3), 6-l 3a(g)(l); conduct investigations whenever there is reason to believe a violation has occurred, id $$ 6-130(dX3), 6-134(9)(1), with the express authorization under the Living Wage Law to observe work being performed, interview employees, and examine the books and records relating to payrolls, id, S 6-l3a(gX1);
request, at the start of any investigation, that the City or City Economic Development Entity withhold any payment due to the financial assistance recipient pursuant to withholding procedures established by State Labor Law, id. $$ 6-130(dX3), 6-13a(eX1);

"report the results of [any] investigation to the mayor, or his or her designee, who shall, where appropriate issue an order, determination, or other disposition, including, but not limited to, a stipulation of settlement," id. $$ 6-130(dX4), 6-t3aG)Q);
o

submit annual reports to the Mayor and the City Council summarizing and assessing the implementation and enforcement of the Living Wage Law, id, g 6-130(dXl);

inspect the payroll records of covered employers, lessors, and developers, id. $$ 6-130(bxs), 6-130(cX5), 6-l3a((3); request certified original payroll records from covered employers, lessors, and developers, id. $ $ 6- I 3 0(bX3), 6- I 3 0(c)(3), 6- 1 34(e)(2);
receive from financial assistance recipients and covered lessors and developers annual certifications stating that all employees are paid no less than the requisite wage, id. $$ 6- I 30(b)(2), (c)(2), 6- I 3a(f(1 );

37

prepare written notices to be provided to employees, detailing the wages, benefits, and other protections to which employees are entitled and inviting employees to request that the Comptroller launch an investigation, id. $$ 6-130(bX4), 6- 1 30(cXa), 6- I 34(e)(1),

119.

Under the Charter, the Comptroller does not have the power to administer

programs, to regulate, or to enforce. See Charter $ 93. Under $ 3 of the Charter, the power to

administer programs and enforce laws rests squarely with the Mayor, as the chief executive

officer, and with his or her appointees. By giving enforcement powers to the Comptroller,
consolidating information gathering duties

in the Comptroller's offlce, and mandating

that

mayoral agencies obey the Comptroller's determinations, the Local Laws impermissibly
encroach on the Mayor's authority and the discretion of the mayoral agencies.

120.

Further, the Local Laws unlawfully require the Mayor to share investigatory

and enforcement power with the Comptroller, giving both the Comptroller and the Mayor power

to receive complaints and conduct investigations based on such complaints. N.Y.C. Admin.
Code $ $ 6- I 30(e)( 1 ), 6- 1 3 0(e)(2), 6-13 4(9)(6), 6-134(sX8), 6- 1 3a(eX9).

l2I.

The Mayor possesses the sole power to implement and enforce local laws,

and a delegation of this authority to the Comptroller is a curtailment that is impermissible absent a referendum.

In giving the Comptroller rather than the Mayor the lead role in the enforcement

scheme,

in derogation of the Mayor's executive authority, the Local Laws impair a power

conferred on the Mayor as part of the framework of local government.

NINTH CAUSE OF'ACTION (Preemption of the Living Wage Law by ERISA)

122. 123.

As and for a ninth cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this paragraph.
Because

it

mandates that covered employees must provide health benefits or

a cash equivalent to employees, the Living Wage Law is a law that relates to employee benefit
38

plans and is therefore preempted by ERISA, 29 U.S.C. $$

l00l

et seq., which preempts State

laws insofar as they relate to any employee benefit plan covered by the

Act,

29 U.S.C.

tt44(a).

124.

As defined by ERISA, employee benefit plans include any "plan, fund, or

program . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise . . . medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability,
death or unemployment, or vacation benefits, apprenticeship or other training programs, or day
care centers, scholarship funds, or prepaid legal services." 29 U,S.C. $ 1002(1).

125.

ERISA prohibits states or localities from mandating or favoring certain

benefits over others. By mandating that covered employees must provide health benefits or cash,

without crediting employers for other benefits they may provide, the Living V/age Law
impermissibly favors health benefits over other benefits. Even
cash wage, they

if employers attempt to pay a

will

have to coordinate the health benefits spending required by the Living

V/age Law with their existing ERISA plans. Any law that requires such coordination is
preempted.

126.

Moreover, the effect the Living Wage Law

will have on ERISA plans and

plan sponsors runs counter to the purpose of ERISA, The purpose of the ERISA preemption provision was to ensure that plans and plan sponsors would be subject to a uniform system of benefits law so as to minimize the administrative and financial burden

of complying with

conflicting directives and

to avoid the

need

to tailor plans and employer conduct to the

peculiarities of the law of each jurisdiction. The Living V/age Law will require employers to do

exactly what ERISA aims to prevent: tailor their plans to the peculiarities

of a particular

39

jurisdiction's laws. By dictating that employers must provide health benefits, without any
consideration of other benefits employers may provide, the Living V/age Law has a connection

with ERISA employee plans and imposes on employers to the very burdens Congress sought to
avoid by enacting ERISA.

127.

Accordingly, the Living V/age Law is preempted by ERISA., and it would be

unlawful for the Mayor or mayoral appointees to seek to enforce that Law against employers
purportedly covered by the Local Laws.

TENTH CAUSE OF ACTION (Violation of N.Y. State Constitution, Art.IX, $3(a)(2) and Municipal Home Rule Law $11(1)(e))

128. 129.
part: "(a) Except

As and for a tenth cause of action, plaintiff repeats and realleges the above

allegations with the same force and effect as if fully set forth in this paragraph.

Article IX, section 3, of the New York State Constitution provides in relevant
as expressly provided, nothing in this article shall restrict or impair any power

of the legislature in relation to: . . . (2)The courts as required or provided by article VI of this
constitution."

130. In

addition, Municipal Home Rule

Law $ l1(1Xe) provides

that

"[n]otwithstanding any provision

of this

chapter, the legislative body shall not be deemed

authorized by this chapter to adopt a local law which supersedes a state statute,
..

if

such local law:

, e. Applies to or affects the eourts as required

or provided by article six of the constitution."

131.

Both Local Laws provide that enforcement orders may be filed with one or

more county clerks, and that such orders are to have the

"full force and effect of a judgment duly

docketed in the office of such clerk," so that they can be entered in the same manner as money judgments under the Civil Practice Law and Rules. Admin. Code $ 6-130(dX7); $ 6-13a(gx5),

40

I32.

These provisions are unlawful because they exceed the constitutional home

rule powers of the City Council, in that they relate to the courts and the filing of local decisions

with county clerks, acting in relation to the New York State court system. N,Y. Const., Art. IX,
$3(aX2); MHRL $1 1(lXe),

133.

It would be unlawful for the Mayor or mayoral appointees to seek to enforce

the Local Laws against employers purportedly covered by the Local Laws.

WHEREFORE, plaintiff respectfully requests a declaratory judgment that the

Local Laws are invalid, without force or effect; a permanent injunction enjoining the operation
and implementation of the Local Laws; and such other and further relief as the Court deems just
and proper,

Dated:

New York, New York Iuly 27,2012

MICHAEL A. CARDOZO
Corporation Counsel of the City of New York Attomey for Plaintiff 100 Church Street, Room 20-94 New York, NY 10007 (212) 788-l 007

By:

Of

counsel:

Andrea Berger Spencer Fisher Brian T. Horan

4I