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Gristedes Owner and Other Grocers Join Fight vs. FreshDirect's Subsidies

By Patrick Wall | November 14, 2012 8:12am

NEW YORK — John Catsimatidis, the billionaire Gristedes supermarkets owner, has joined an outraged group of grocers who object to the nearly $130 million subsidy package that FreshDirect is likely to receive from the city, calling it a misuse of public funds that puts smaller competitors at a disadvantage.

Catsimatidis, who has teamed up with the New York Association of Grocery Stores, the National Supermarket Association and the Bodega Association, said FreshDirect “hustled” the city by threatening to move to New Jersey. He added the online grocer should have been ineligible for certain incentives it may receive to build a new headquarters in the South Bronx.

“I am opposed to using my tax money, and the tax money of all of the smaller and struggling food retailers in NYC, to fund a competitor,” Catsimatidis, a potential mayoral candidate, said in a statement.

“In 42 years in business, I have not received one incentive,” he added in an interview, saying he was “outraged” when state and local officials announced the FreshDirect deal in February.

In return for the tax breaks, grants and loans, FreshDirect agreed to stay put in New York, where it promised to invest $112.6 million to build a new headquarters at the Harlem River Yards and create about 1,000 new jobs.

But Catsimatidis and the grocer coalition question whether the company could have plausibly moved its operations across the Hudson, or if it floated that idea mainly to derive more subsidies from the city.

They also complain that the state should not have offered the company $18.9 million in tax credits through the Excelsior Jobs Program, which is intended for firms in industries such as technology and manufacturing.

“They’re not a wholesaler,” Catsimatidis said. “They deliver 95 percent of their orders to consumers themselves.”

Further, the coalition says the grocery delivery service threatens the existence of small, unsubsidized groceries throughout the city.

“FreshDirect’s goal is the elimination of the neighborhood store — and the city’s tax subsidy is aiding and abetting this assault on neighborhood commerce,” the New York Association of Grocery Stores states on its website.

That group, which formed in June, has “the support of thousands” of small groceries, bodegas and convenience stores, its spokesman, David Schwartz, said. He would not specify how many businesses are active members of the group.

Catsimatidis and the grocer coalition, along with a Bronx group opposed to FreshDirect’s relocation, plan to hold a press conference Wednesday at City Hall to detail their objections to the subsidy deal, which still requires final approval.

FreshDirect said in a statement that their subsidized move "will play a crucial role in stimulating the local economy and create jobs in an area that desperately needs them."

"We are investing $112 million in The Bronx and working to hire people from the area," the company added.

On a website it maintains to provide details about the move, the company notes that real estate tax abatements, not direct grants or loans, make up 58 percent of the incentives package. The company, the website states, is paying for 78 percent of the construction costs of its new facility.

It also notes that the Excelsior program requires it to eventually add 946 new jobs.

A city official said the majority of the city’s nearly $90 million in benefits for FreshDirect were available as-of-right because the project met certain predetermined criteria. Most of this aid is spread out over 25 years, so the company will only receive the full benefits it if remains in the city during that time, the official added.

FreshDirect’s relocation will create jobs, generate economic activity and provide healthy food options in The Bronx, “a major win for the borough as well as the entire city,” said Kyle Sklerov, a spokesman for the city’s Economic Development Corporation.

South Bronx Unite, the group of Bronx residents and activists opposed to FreshDirect’s move, say they are primarily concerned about the environmental and health risks that the company’s truck fleet poses. They plan to attend the rally Wednesday at City Hall.

Some local businesses share those concerns.

Alex Abeles owns the Bruckner Bar and Grill, which was severely damaged during Hurricane Sandy, and is a member of a group of Port Morris merchants trying to revitalize the area. He worries FreshDirect’s move will set back their efforts.

“The neighborhood is trying to get better and all these trucks are going to make it more noisy” and foul the air, Abeles said. “They get millions to come and pollute the area, and we can’t really get help.”

FreshDirect says it intends to create a “100 percent green transportation fleet” within five years.