Greenport, NY Wal-Mart, Lowe’s, Kohl’s Tax Welfare Plan Rejected
One of the nation's largest chain retailers, led by one of the nation's largest developers, has had its request for a lucrative tax break turned down by a county board in upstate New York.
Despite losing its bailout subsidy from taxpayers, it looks like the project will continue anyway.
The town of Greenport, New York claims that its history goes back to Henry Hudson, an Englishman exploring for the Dutch, who stumbled upon Greenport's river while looking for the Verrazano Sea. Roughly four hundred years later, developers looking to locate big box stores in Columbia County stumbled upon this tiny town of 4,200 people. A company called Widewaters discovered Greenport, and the story goes downhill from there.
Widewaters Retail Development says it focuses on convenience, neighborhood and regional shopping centers ranging from 15,000 square feet to 500,000 square feet. "Widewaters ability to identify sites with superior sales potential and develop these sites in a timely and cost-effective manner has led to projects with retailers such as Wal-Mart, Target, Home Depot, Lowes Home Improvement, Wegmans Markets, Food Lion, Lowes Foods, Kohl's and Marshalls. Today, Widewaters owns and operates in excess of 3.5 million square feet of retail properties in 13 states."
Widewaters has also distinguished itself for kicking up controversy in almost every venue it chooses: Saratoga Springs, Ballston, Ithaca, Greece, Colonie -- all New York communities where bitter fights accompanied Widewaters projects.
On April 30, 2008, Sprawl-Busters reported that Widewaters was looking for a public hand out in Greenport, New York, for a project with a Wal-Mart superstore. Wal-Mart already had a discount store in Greenport, but Widewaters planned to close down the existing Wal-Mart, and literally move it across the street and down Route 9 to build a supercenter. Widewaters wanted a general tax break for the whole project, not for a specific tenant.
But the Columbia County Industrial Development Agency (IDA) turned down a request from Widewaters for their "Widewaters Commons" shopping plaza. The Commons is a $73 million project with 565,000 square feet of retail space off Route 9 in northern Greenport. The IDA unanimously turned down the welfare request. "For me, the determining factor was the need for the project to be unique," one IDA member told the newspaper. "I don't think they proved that it will be unique."
The Widewaters Group had asked for a property tax break, known as Payment in Lieu of Taxes (PILOT). Under PILOT, the developer's taxes are "structured" to start low and scale up at the end of a time period to full freight. They also requested an exemption from paying sales tax on construction materials, as well as mortgage recording taxes. The IDA law in New York state was meant for industrial and manufacturing projects, but the law prohibiting the consideration of retail projects has expired. The IDA said that it had received letters from members of the public asking that Greenport Commons not get tax breaks. The only retailer confirmed for the site at that time was the Wal-Mart supercenter.
Wal-Mart owned its parcel of land, and would be paying for its own construction, so the developer said the property tax break would not directly apply to them. But anything that makes the project more financially attractive to Widewaters, helps Wal-Mart's supercenter. "We may be the first IDA in the state to be dealing with a retail outlet," the IDA said at the time. The agency seemed concerned that there were no other tenants committed to mall except Wal-Mart.
Widewaters said it was willing to accept the PILOT benefits on the condition that the developer brought in national chain stores not currently in the county. Ironically, only national and region chain stores would get the tax breaks -- the big players. Any local retailer moving to the mall would get no break.
The developer also said it was willing to cut its PILOT benefits from 10 years to 5 years. Widewaters said the exemption on sales tax for construction equipment would cut down their construction costs -- and that this exemption would also give the retailers, including Wal-Mart, an incentive to build. So part of the deal really was aimed at Wal-Mart -- which needs no tax breaks to thrive.
Widewaters was forced to admit that if the PILOT tax breaks did not happen, the developer would not abandon the project. "If the leasing moves forward, we will move forward," they noted. In other words, we have the funds to do this project, whether we get a break or not. In the end, the IDA did not close the door shut on Widewaters. The board said it was willing to review the request again, especially if more leases were signed. If Widewater had proof that the project would have some uniqueness in terms of its stores and offerings, "we can take another look," the IDA said. "The door is open, and hopefully we made that clear."
Less than two years later, in February of 2010, Widewaters was back knocking on the door. Widewaters came before the IDA again, asking for a tax break for Kohl's department store, which they claimed would then attract a TJ Maxx to the site as well. Widewaters asked for a 20-year PILOT that would keep taxes on the proposed Kohl's site -- just north of Lowe's -- at the current $22,500 a year, instead of the $81,600 the county and town would reap if the property were developed. Widewaters argued that the $59,100 loss in tax revenue would be offset by $101,900 in new sales tax revenue, for a net gain of $42,800 a year. Kohl's would 'create' 125 'new' jobs -- but 70% of those jobs would not be full-time, the developer admitted.
But local and county officials balked at the 20 year length of the PILOT subsidy, and Widewaters would not lessen the term. The IdA voted to reject the tax agreement, but negotiations continued.
This week, two months after the last Widewaters appearance, the Columbia County Industrial Development Agency unanimously denied another request from Widewaters -- still on behalf of the Kohl's department store chain.
Widewaters came in this time with a 15-year PILOT agreement. This rejection was the end of months of public debate and controversy. But at the end of the line, the IDA board balked at the idea of subsidizing large chain stores. The board said that the Kohl's agreement, if approved, would create a precedent for other chain stores to come to the county looking for a hand out. The IDA was created forty years ago to help bring manufacturing jobs to their area -- not retailers.
After the vote, one IDA member pointed out that retail jobs were not the focus of his group. "It's questionable whether this qualifies as something we should be addressing," he said. Even the county's Chamber of Commerce testified against the tax break request.
"It's been a long process for us but I think we made the right decision," the IDA chairman told the Register-Star newspaper. "We have to live with our policy. If we don't, future boards would have to live with a decision we made in haste ... I think we came out on the right side of this one. I still hope they come. We'll see."
The lawyer for Widewaters was upset by the IDA decision. "The Kohl's will be an anchor, a magnet for larger retail," the developer's lawyer said. "They made the wrong decision, that's for sure." The attorney then criticized the board members of the IDA saying they "are all very comfortable and successful in their own right. They have no money worries. They essentially sold out all the people in Columbia County that are looking for work."
The Widewaters lawyer then threatened that Kohl's would back out of the project: The reason why we worked so hard at trying to add this PILOT is because Kohl's could not justify paying the taxes given the anticipated level of sales in the community. They're going to maximize their profits and they'll probably do that someplace else, unfortunately."
But Greenport officials report that Kohl's has already paid for a building permit, and has been discussing the project with Greenport's building department. If this project proceeds, it will demonstrate that big box developers do not need this candy store of incentives and welfare to consummate projects. If Kohl's backs out, it suggests that the company could not financially swing the project with its own capital -- and should move on anyway.
What you can do: In 2008 Widewaters said that they would need tax incentives "to keep this market on the radar for tenants who may be deciding to look elsewhere."
The Widewaters contingent was "visibly disappointed" after the 2008 rejection. "We tried to accommodate them at every turn," a Widewaters spokesman said. "We will go forward, but we're not going to have an important selling point." "Some people are philosophically against any incentives being offered, and some feel it would be a competitive threat," said another Widewaters spokesman. "The bottom line is, the county town and school district are losing out on a lot of revenue. 100% of nothing is still nothing."
The Hillsdale Independent newspaper editorialized in 2008 against the PILOT "deal that would lower its property tax payments substantially over the next decade." The paper said Widewaters "wants a holiday from paying sales tax on construction materials and no bill from the county for its mortgage tax. In effect, the company has asked town and the county taxpayers, through the county Industrial Development Agency (IDA), to become partners in this enterprise."
New York law allows Widewaters to have its tax burden start about half of the normal amount, with the payment gradually increasing to the full cost after 10 years. Widewaters wanted to get a tax break for bringing in a Lowe's home improvement, while local stores like Dunn's, just down Route 9, would get nothing. County taxpayers end up subsidizing Widewaters to bring in a chain store that kills off local firms that did not get -- or ask for -- any tax break.
"If Lowe's sees an opportunity, let it open a store here and compete. But why should government intervene in the marketplace to favor one competitor?" the Independent newspaper asked. "Widewaters started Greenport Commons because it thinks it can make money here. If the company calls it quits, the economy will be the culprit, not a lack of tax abatements. If the project succeeds, taxpayers should reap the full benefit rather than surrender revenue to more tax breaks."
Readers are urged to email the Chairman of the Columbia County IDA Board, Bruce Bohnsack at Kflood@chpartnership.com with this message:
"Dear Chairman Bohnsack, congratulations for voting against the PILOT subsidy for the Widewaters Commons project.
Large national retail chain store do not need taxpayer subsidies to destroy smaller merchants. Let the chain stores use their own capital to do that -- the playing field not level for the small retailer anyway, and tax welfare only makes it worse.
You are right to worry that national retailers will line up for tax breaks. This is not why the IDA was created, and this is not a job-generating sector. The Commons project will simply cannibalize existing retail jobs in the trade area, leaving residents with empty stores and lost jobs.
Please suggest to Widewaters that they find tenants who can carry their own water financially, and stop coming to the public trough."