FreshDirect: Stop the Handout

Fresh DirectThere is an ongoing campaign against the city and state decision to give a $127 million hand out to the online grocer Fresh Direct. The campaign is being led by a coalition of South Bronx groups-aided and abetted by Good Jobs New York and NY Lawyers in the Public Interest.

South Bronx Unite

What the coalition understands and what each and every New Yorker should know, is that this is a gross misuse of tax payer money. We should not be using public funds to subsidize businesses to compete against existing indigenous firms that have, in many cases, been doing business in the city for decades without any public subsidies.

Michael Powell over at City Room laid this out clearly last February:

“As I noted in my Gotham column Tuesday, the company, which forever has “iconic” pasted to its name in press releases, toyed briefly with relocating to New Jersey. Development officials there batted their eyes and whispered of a golden subsidy and a handsome nest in Secaucus.

New York City and state officials reacted like class nerds about to get tossed over and began showering cash on the modestly profitable grocery service. When the city and state reached $127.8 million in tax subsidies and cash, FreshDirect’s owners smiled gracefully, agreed to create about 1,000 jobs in the next 10 years and accepted the deal.”

Michael Powell, City Room Blog

The community groups have raised a hue and cry for a whole host of reasons-and have filed a lawsuit on environmental grounds to defeat the project that they say will harm the surrounding neighborhoods that are part of the area known as “asthma alley.”

South Bronx Unite

As the Daily News reported:

“Opponents of FreshDirect relocating to the South Bronx have attached new charges to their lawsuit against the publicly-subsidized plan and claim the additions make their case stronger.

The petitioners – Bronx residents and activists represented by New York Lawyers for the Public Interest – first sued in June to block the controversial project, citing problems with an environmental review. But now the scope of their lawsuit has expanded.

“There are various issues on the table now,” said Mychal Johnson, petitioner and local resident. “This makes us more confident that we can stop the project.”

Making matters worse is the fact that Fresh Direct is redlining those neighborhoods where their trucks will generate the most environmental damage:

“And yet, gallingly, FreshDirect CEO Jason Ackerman has said the business doesn’t have plans to deliver to the very neighborhood, Mott Haven, where it will build a new base of operations for its more than 100 delivery trucks.

“We have always felt that the Bronx has not wanted our service, and we’ve seen over time no natural request for our service,” Ackerman told WNYC this winter.”

NY Daily News

Another strong criticism of the deal-leveled by Good Jobs New York-sees the Fresh Direct subsidy as an example of corporate welfare:

“No one has examined the sweetness of the FreshDirect deal in more fine-grained detail than Bettina Damiani, project director of the nonprofit group Good Jobs New York. She takes a dim view, and her analysis is here, along with relevant city and state documents.

“It’s not only an awful lot of money, it’s an awful process,” she says.

Her disappointment is that much greater because Mr. Bloomberg, despite a profligate slip here or there, has taken a tougher line than his predecessors on corporate welfare. He has refused to toss cash at any corporate chieftain who decides to have lunch with a New Jersey economic development official.”

Another aspect of the lawsuit challenges the rationale for the subsidies because Fresh Direct is essentially a retailer. The Daily News points this out: “The revised lawsuit also claims that FreshDirect cannot receive $19 million in state subsidies because the Excelsior Jobs Program is reserved for manufacturing and agriculture deals – not retail. The lawsuit classifies the FreshDirect project as retail because the company sells online, said Christina Giorgio of New York Lawyers for the Public Interest.”

NY Daily News

Powell goes on the lay out the insider dealing in this undeniable example of corporate welfare:

“This was inarguably money well spent. The deal puts the welfare in corporate — the company faces few penalties if it fails to keep its side of the bargain. The Industrial Development Authority does not have contract language that would allow it to claw back tax subsidies should FreshDirect fail to deliver on the thousand jobs.”

What about those 1,000 jobs? Well, they certainly won’t be good paying jobs that might somewhat justify all of the tax payer largesse:

“As it stands, the city will pour about $130 million into a modestly profitable company over a decade without requiring that it pay more than $9 an hour to workers who labor in frigid warehouses hauling 50-pound boxes. The workers get less than two weeks off a year, and that includes sick, personal and vacation days.

Local 805 of the Teamsters has twice tried to organize the workers, and the company has fought back vigorously.”

The mathematics here adds up-for Fresh Direct but not for workers or NYC tax payers: “A FreshDirect warehouse worker working full time for a year makes a touch under $20,000. Thanks to city, state, and Bronx subsidies, FreshDirect will be paid about $130,000 per job to create 1,000 more of these jobs.”

One last point. The city has a policy, ironically called Fresh, that is supposed to encourage supermarkets to come into the underserved areas of NY:

“FRESH, an initiative of Mayor Bloomberg’s Five-Borough Economic Opportunity Plan, promotes the establishment and retention of neighborhood grocery stores in underserved communities by providing zoning and financial incentives to eligible grocery store operators and developers.”

NYCEDC

Yet the business model of FreshDirect directly contradicts city policy because it is subsidizing a company that will directly compete against local food stores. Imagine what local supermarkets could do with $127 million dollars?

NYC, as we have been pointing out, has been waging an assault against small businesses. The FreshDirect deal is simply another example of the disdain that the current administration has for neighborhood retailers. It is unfair and should be stopped. All city food retailers should join with us in this effort.

 

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