Summons _ Complaint 7-27-12 - __ Legal 3666356_

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Summons _ Complaint 7-27-12 - __ Legal 3666356_ Powered By Docstoc
					SUPREME COURT OF THE STATE OF NEW YORK

:îilt::Ì:Yt?Y                                        ...........x
THE MAYOR OF THE CITY OF NEW YORK,

                                                      Plaintiff,     SUMMONS

               -against-                                             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        503(a).

Dated: New York, New York
       Iuly 27,2012

                                      MICHAEL A. CARDOZO
                                      Corporation              of     City of New York
                                      Attorney for             the         of the City of Ne wYork

                                      By

                                                sistant              on Counsel
                                              100 Church
                                              New York, New York 10007
                                              212,788.1007
SUPREME COURT OF THE STATE OF NEW YORK

::ili::YYt?Y                                     ...........x
THE MAYOR OF THE CITY OF NEW YORK,

                                                  Plaintiff,    COMPLAINT
                          -against-                             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   of

the City of New York, alleges as follows:

                                      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   case


of the Living Wage Law.
              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)(Ð, 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



                                                      2
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 staû.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        of   such housing that can be produced, and

because through this Law the Council seeks       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,




                                                   J
             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          law. It is therefore   preempted by the federal

Employee Retirement Income Security Act         of 1974 C'ERISA"), 29 U.S.C. $$ 1001 et seq.; see

29 U.S.C. $ 11aa(a).

                                              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



                                                   4
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

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

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




                                                 5
and conduct investigations based on such complaints.                 Id.   gg 6-130(eX1), 6-130(e)(2), 6-

I   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       of

the other above-stated reasons, they are unlawful and invalid.

                                        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.

               For projects that still do move forward,        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.

               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.




                                                 7
             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. 18-

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

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     a


"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

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

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

$6-134(cX1). "Covered employers" include "financial assistance recipients," tenants, or
subtenants   in assisted properties that are owned by financial assistance recipients, recipients'

concessionaires at assisted sports facilities, and entities that contract   with recipients to work for

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

assistance from the    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(Ð(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)   a   highly pafücularized exception:

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

in "supplemental     health benefits" that may be provided         in the form of cash wages,     health

benef,rts,   or any combination of the two.       $   6-134(bX9). The wage rate is adjusted annually

based on the Consumer Price Index for           All Urban Consumers,     .1d. The supplemental health

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"    suggests that   it is intended to encompass entities   such as NYCIDA,

even though   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(Ð(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

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

projects agreements that results    in additional    assistance being awarded   will   make the Law

applicable. $ 6-134(iXl).

               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.       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).

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

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

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                     a


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          in    connection with projects receiving City f,rnancial

assistance. $ 6-134(hX3).

B.      The Prevailing Wage Law

             38. In contrast to the Living Wage Law -               which excludes building          service

workers, see $ 6-134(dX6)     -   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             it   extends to additional

categories   of employers. As indicated by its title - "Prevailing Wage for Building                Service

Employees    in City   Leased or Financially Assisted Facilities"     -   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                   assisted

residential housing, as well as owners        of commercial office buildings,       and   their   respective

contractors and subcontractors.

             39. In enacting the Prevailing Wage Law, the Council               made a declaration of

legislative f,rndings and intent, finding that:

                [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
                middle class for New York City residents .           The Council is
                concerned, however, that     in some cases, those who benefit from

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

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

the Bronx, Queens, and Brooklyn, or anywhere             in   Staten   Island. $ 6-130(a)(11)   (cross-

referencing Real Property Tax Law $ 421-a).

              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         in interest of real property that qualifies as a city
development   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

"covered developer" provide      for a   number   of exemptions that are incorporated into           the

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

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

            45.     The Law defines "prevailing wage" as the rate of wage and supplemental

benefits paid   to building   service workers   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

services workers employed by entities that contract directly with the     City. The Prevailing   V/age

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

assisted project opens. $ 6-130(bX6) and    (cX6). The City is to maintain current lists of covered

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

seeks   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-for-
profit 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     of the major   challenges these companies face   in expanding their
presence in the City.

            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

increases the operating costs       for any   development project     to which it   applies and thus

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   - well over half of the total of 12.6 million square feet of offlrce
space leased by the City   -   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



                                                   ¿J
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

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

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.    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.

               66.    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   one.

             69.      McMillen's second exception        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,         if   those

conditions elevate costs and reduce competition.

             70.       The Local Laws seek to leverage certain development programs and offlice

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

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.      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.

             73.      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.   Applies to or affects any provision of . . . the labor law.

MHRL $11(1).

             74.      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.

             75.      Similarly, Municipal Home Rule Law ç 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.     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.

            78.     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,
               constructing, reconstructing, improving, maintaining, equipping
               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
               improve their recreation opportunities, prosperity and standard    of
               living.

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;

               (l l) To accept gifts, grants, loans, or contributions from, andenter
               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
 t
               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.     Because the Local Laws are in conflict with, and inconsistent with, State law,

they are preempted.

              85.     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.    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.

              87.    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."

              88.    The General Construction Law defines "public corporation" to include public

benefit corporations. GCL $ 66(1).

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

benefit corporations. GML $ 856(2).

              90.    As alleged above, the Local Laws, which specifically target NYCIDA         and

dictate to   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.        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.

            92,        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             of

a blanket wage requirement that       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 ç 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.    The purpose of these State statutes is to create financial incentives for private

investment   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.     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.

            99.     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
"any power" of an elective offrcial such as the Mayor, or transfers power from a mayoral to           a


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              to   create local development

corporations   to advance a wide array of public purposes related to economic          development.

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          it by the
structure and text of the Charter, the Local Laws curtail the Mayor's power.

             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    so as to eliminate or alter



                                                  34
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 Offïce Space
                     by Lease for City Use and of the City Planning Commission's
                         Power to Review Leases by the Prevailing \ilage Law)

           109.         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.

           ll0,         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 sçction 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," thê 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 "mini-

ULURP" 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   of the Mayor and mayoral       agencies   to present proposed sites to   the

Department    of City   Planning and the City Planning Commission pursuant           to $   195, and

supersedes the site-specific land-use review process given     to the Council by that section     and

$   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.      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.

           ll7.      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);

       O   inspect the payroll records of covered employers, lessors, and developers, id.
           $$ 6-130(bxs), 6-130(cX5), 6-l3a(Ð(3);
       o   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);

       o   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
        o   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.     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.

            123.     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          if employers attempt to pay a
cash wage, they     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.     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.

             129.     Article IX, section 3, of the New York State Constitution provides in relevant

part: "(a) Except    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

				
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