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2009-09-19
Bayonne, NJ “Small” Wal-Mart Superstore Gets Taxpayer Help

This week, Wal-Mart officially climbed onboard a huge retail mall in Bayonne, New Jersey that is propped up by a massive amount of public welfare. Without a series of public tax subsidies, the "Bayonne Crossing" mall would never have happened. The developers and the retailers apparently did not have enough private money to make the project stand on its own -- so they sought out a laundry list of public giveaways. "We are committed to growing our business in New Jersey," a Wal-Mart spokesman said. "As we grow, we will continue to create economic opportunity by providing good jobs that give our associates the chance to build careers." But this project has been on the ropes for years, delayed by the soft economy, plus a lawsuit brought by neighbors of the mall who were upset by traffic and environmental issues. The site also had environmental clean up problems, requiring the removal of underground petroleum contaminants on the land, which once was a storage area for Standard Oil Company. But Bayonne Crossing -- thanks to taxpayer welfare -- is finally inching forward on Route 440. There is no market need for this new superstore, because there are currently 11 Wal-Mart stores within 20 miles of Bayonne, include one six miles away in Kearny, New Jersey. None of the other Wal-Marts, however, are supercenters. The Bayonne store will likely cause closures at other Wal-Mart stores nearby. The whole mall will stretch to 360,000 s.f. and the Wal-Mart superstore will be only 91,000 s.f. -- much smaller than the retailer's typical superstores twice that size. Bayonne Crossing will also have a Lowe's and other smaller national chain stores. The media has repeated the developer's unsubstantiated claims that this mall will "create" 800 jobs -- plus 1,200 union construction jobs. Once the Wal-Mart is built, none of the jobs inside the store will be union jobs. One of the biggest supporters of the project, Bayonne Mayor Mark Smith, went to the Bayonne Local Redevelopment Authority seeking a $23 million state loan for the mall. "The main point is that this project will have an economic and social benefit to Hudson County and the region," a spokesman for the Mayor explained. "Going ahead with the project will provide a great concentration of union jobs -- as many as 1,200 union jobs, as well as 800 full-time jobs when fully built out." Under the plan, the city and Hudson County will guarantee repayment of the $23 million loan from the taxpayers of New Jersey. One Hudson County Freeholder told the Hudson Reporter newspaper that some of sales tax generated by the project will not benefit the city. "The downside is that as presently proposed, most of the Payments In Lieu of Taxes (PILOT) payments to the city [especially in the early years] go to pay for the bond so there is not much property tax relief from the project until later." In other words, the taxpayers will have to wait to see any property tax benefit of this project, because the first beneficiaries are the developers themselves. The Bayonne Planning Board gave Wal-Mart site plan approval last March, but it took Wal-Mart another six months to officially reveal itself. The Cameron Bayonne Group, of Syracuse, N.Y., is the big tax winner here. The project is getting $2.5 million from Bayonne's Urban Enterprise Zone (UEZ), plus $2 million in a loan from the New Jersey Redevelopment Authority, plus a $2 million loan from the New Jersey Economic Authority, $26 million from Key Bank and the $23 million low-interest loan from the New Jersey Environmental Infrastructure Trust guaranteed by the City of Bayonne. It's like a medicine cabinet full of pain-killers for the developers, to take away any financial discomfort that the developers might have felt.

What you can do: All these loans and incentives are based on the mistaken assumption that another Wal-Mart store will create 800-900 'permanent' jobs, which is far from the net impact this project will have. The UEZ incentive money, for example, had to be approved by the state. "Governor Corzine is dedicated to growing jobs in New Jersey and re-energizing the state's urban areas with quality economic development projects," said the head of New Jersey's Department of Community Affairs (DCA). It is hard to describe Wal-Mart jobs as 'quality economic development,' but this is the state of affairs in New Jersey. The Bayonne UEZ passes the $2.5 million loan onto the Cameron Group to help pay for construction costs that the developer could have financed privately. The developer will pay the loan back over 7 years, at a subsidized interest rate of only 2%. This loan for a retail mall is the first time the UEZ funding mechanism has been used. The Bayonne UEZ allows businesses to charge 3.5% sales tax, and the money collected from the discounted sales tax stays in the zone to finance local projects, it is not used to help taxpayers generally. The New Jersey Economic Development Authority also tossed in a $1 million "Smart Growth" loan to cover some of the preconstruction costs. It is inconceivable how a sprawling mall project could be classified as Smart Growth. City officials told the media that because of the tight loan market, this mall could not move ahead without the low-interest loan. "The developer, Bayonne Crossing LLC, is looking for a loan from the New Jersey Environmental Infrastructure Trust," said Mayor Smith's chief of staff. "This is a financing vehicle that is used by many local governments for water, wastewater, and stormwater improvements. Private developers also can access these funds, but they need a public conduit borrower to assist with the application. The HCIA [Hudson County Improvement Authority] is serving as the conduit in their role as improving Hudson County. The HCIA, the county, and the city are all supposed to be guaranteeing the loan, which is ultimately secured by the $180 million project and the real estate involved." This project was supposed to break ground two years ago, and some funders have dropped out. The state's Environmental Infrastructure Trust Fund will provide a 20-year, 1% loan for infrastructure work related to the Lowe's, and the Wal-Mart. "The final piece of the financing puzzle is a loan from the New Jersey Environmental Infrastructure Trust Fund," a county Freeholder told the Hudson Reporter. "Without this NJEIT Loan, the project cannot go forward." Mayor Smith thinks this project has made him a Major League player. "In any economic time, this would be a home run," the Mayor told the Reporter. "In these economic times, it is an extra inning, seventh game, World Series, walk-off grand slam." Readers are urged to email Bayonne Mayor Mark Smith at mayor@bayonnenj.org with the following message: "Dear Mayor Smith, The Bayonne Crossing is on life-support from the public, in the form of millions of dollars in taxpayer subsidies for private profit. The city, the county, and the state have all subsidized the Cameron Bayonne Group, because the developer supposedly did not have the financial package to make this mall happen without taxpayer welfare. This must send a sour note to smaller businesses in Bayonne who will be driven out of business by the likes of Lowe's and Wal-Mart. These smaller merchants had no UEZ incentives, they had no NJEIT loans -- but ironically their tax payments are now being used to subsidize the project that will steal sales from their cash registers. All of this public money is being invested to "create" 900 "permanent" jobs -- which are neither permanent, nor anywhere near 900. Once you net out the jobs lost at other retailers (including existing Wal-Mart locations) -- the job gain will be negligible. Unless you see the fundamental difference between economic development and economic displacement, this plethora of cheap capital will amount to nothing but welfare for companies like Wal-Mart, which have plenty of money to pay for their own projects -- without largesse from the taxpayer. I urge you to tell taxpayers in Bayonne that this kind of welfare for developers and malls will never happen again. Don't expect much enthusiasm from existing home improvement stores and grocery stores. Your deal at Bayonne Crossings has turned into a double-cross for your small businesses in Bayonne."











 
 
"Norman has become the guru of the anti-Wal-Mart movement" ~ 60 Minutes

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