State Aid: Too Little, Too Late for Korean Businesses?

Along with Korean nail salon owners and dry cleaners in Flushing, Queens, on Jan. 19, Assemblymember Ron Kim requested that $50 million be added to the 2017 state budget to fund struggling small businesses. (Photo via Korea Daily)

The New York State legislature on June 20 approved a bill designed to assist nail salons and dry cleaning businesses, many of which are owned by Korean immigrants, in complying with new environmental requirements.

The bill would require the state Urban Development Corporation (UDC) to create a new fund that would help those businesses meet new state and federal regulations, such as installation of non-perchlorethylene machines in dry cleaners and ventilation systems in nail salons.

The legislation, however, fails to specify the exact size of the new fund and fund allocation procedures, which leaves its effectiveness in question.

In January, when Assemblymember Ron Kim, the bill’s main sponsor, sought to include such a fund for struggling small businesses in the 2017 state budget, the proposed amount of the fund was $50 million. That amount was later cut to $3 million when the Assembly included it in their 2017 state budget proposal. In the end, no mention was made of the fund in the state’s final budget due to a lack of the support from the Senate. Kim and Senator Tony Avella continued to push for the fund. But, key decisions like how much funding would be allocated to struggling small businesses were not included.

The bill, which awaits Governor Andrew Cuomo’s signature, would entrust the UDC with full authority in determining the size of the fund, how to allocate the money through grants or loans, and the time of implementation. It could take a long time for the UDC to conduct a study ascertaining the number of struggling nail salons and dry cleaners who need help and, finally, to allocate the funds to those businesses.

The problem is that many Korean nail salon owners and dry cleaners, who account for more than half of the nearly 8,000 in New York, are already facing financial difficulties, and at least 30% of them are considering selling their businesses soon, said Sangho Lee, chair of the Korean American Business Council of New York and president of the Korean American Nail Salon Association of New York.

He said that many of these Korean business owners claim that their financial situation has worsened and will deteriorate further not only because the cost of rent and personnel expenses have increased, but also because the cost of compliance with environmental regulations is high. Therefore, it would be more “cost efficient” for them to sell their businesses, he said. Also, many Korean nail salon owners and dry cleaners are reaching their retirement age, and thus have little inclination to upgrade their facilities and may prefer to simply sell them.

According to Lee, the non-perc alternatives for dry cleaners cost at least $75,000 per machine, and the installation of ventilation systems in nail salons costs at least $30,000, which is about one-third of their average annual sales revenue.

“Although I’m delighted that the bill was approved, we can’t just sit and wait until UDC allocates the funds,” said Lee. “Even if the money finally reaches us, it would be of little help, because the grants would only be a few hundred dollars per business or about $1,000 at most, realistically speaking.”

“More than half of Korean dry cleaners are now leaning towards the idea of selling their businesses and retiring sooner,” said Sangsuk Kim, president of the Korean American Dry Cleaners Association of New York. “The cost of purchasing and installing non-perc alternatives is just too high. We still don’t know how the state government would help us through such a fund although the bill for it was passed. We just can’t predict anything about our future.”

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