Walmart coming to Gentilly with the aid of a federal grant

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By Ariella Cohen, The Lens staff writer |

It was a week before Hurricane Katrina’s sixth anniversary and the prevailing mood of the Gentilly town hall meeting was frustration.

A tired looking man asked Mayor Mitch Landrieu, the event’s host, why the city still hadn’t repaired flood-damaged roads in his neighborhood. An 80-year-old woman stood up to say a that drug dealers had set up shop in the overgrown vacant lots behind her house, she said. A day earlier, she said, gunshots killed one man and injured another on her block. Another senior citizen rose to implore the mayor to put recovery money toward projects that create jobs for young men in his community. Many begged the mayor to help bring more shops, particularly grocery stores, to the area.

When Councilwoman Cynthia Hedge-Morrell took the microphone to share the news that Walmart  would soon take over a prominent strip mall moldering since Katrina, it felt like  progress finally was being made. After years of staring at the blighted Chef Menteur Highway mall, owned by the New Orleans Redevelopment Authority since 2009, residents would soon have a place to shop. People cheered. The mayor clapped. And the “great thing,” Hedge-Morrell said, “is that it’s not dependent on us getting any federal grants.”

With the mayor nodding beside her, Hedge-Morrell told the crowd that Walmart would purchase the Gentilly Woods Shopping Center site from NORA and redevelop it without taking any of the city’s limited public resources, which already are being stretched.

“It’s their dime,” Hedge-Morrell said. “That, in essence, was one of major concerns because there just isn’t enough money out there to help people that want to develop.”

The mayor repeated “their dime,” punctuated with an open-palmed push into the air in front of him. The gesture seemed to say that the city had shifted the cost of developing the site onto another, separate party.

But now it appears that taxpayers will  contribute as much as $2.8 million to the  effort.

It’s difficult to determine how much Walmart’s development will be subsidized until the retailer and NORA settle on a sales price. Yet it is safe to say that it would be a small miracle if the city broke even on the deal.

Taxpayers have already put $6.1 million into the site, slightly more than its 2008 appraised value of $5.5 million and nearly four times its  value of $1.6 million listed on the city assessor’s website. The $6.1 million reflects $4.3 million spent by NORA in 2008 to acquire the 12-acre property and another $1.8 million appropriation earmarked by NORA to buy adjacent parcels that will extend the site to Louisa Street, clean polluted soil, clear blight and move two businesses from the adjacent parcels.  Both expenditures come from the $411 million pot of Disaster Community Development Block Grant money that the U.S. Department of Housing and Urban Development gave to New Orleans to aid in its Katrina recovery.

Most of that money has been set aside to repair or replace public property. Though the city has set allocated other grant monies for commercial redevelopment efforts, Walmart is the only for-profit entity to benefit so far from such an allocation. Only 11 other projects out of 92 account for more spending.  See the full list here.

The Lens estimated the $2.8 million subsidy by subtracting an estimated market-value sales price of $3.3 million for the 12.8-acre site from the $6.1 million city investment.

We arrived at that sales price using the $260,756 per acre assessed value of the 8.6 acres for the existing Tchoupitoulas Street Walmart. The 1901 Tchoupitoulas St. site’s total land value was $2.2 million in 2012, according to the Orleans Parish Assessor’s Office. Walmart’s building was assessed for $14 million, bringing the entire site to $16 million in assessed value. NORA officials as well as area Realtors declined to comment on how this assessment compares to land values in Gentilly, citing ongoing negotiations.

Neither Hedge-Morrell nor Landrieu responded to requests for comment regarding their remarks in the video above.

NORA officials say that however the negotiations work out, the retail development is something the community wanted that may never have happened without assistance from the public sector.

“I don’t look at it a subsidy as much as an effort to get the site ready for the resale and redevelopment the community wants to see,” NORA’s Commercial Development Director Kevin Hanna said. Hanna noted that Walmart will not make use of an additional $4.5 million in disaster block grant monies that NORA indicated it could furnish in its request for proposals.

The sale of Avon products in the parking lot is about the only retail activity at the former Gentilly Woods shopping center. Photo by Ariella Cohen

Walmart did not return phone calls or emails from The Lens. In the past, the company has said that the new store will cost $13.4 million, not including the cost of purchasing the lot from NORA. Early in the redevelopment process, neighborhood leaders opposed a Walmart on the site because of concerns that the discount big-box would bring noise and traffic to the area while taking away business from locally owned stores. After two years of inaction at the site, however, opponents have largely resigned themselves to Walmart’s entre. They say Walmart may be the only option for replacing an abandoned strip mall.

“The community got into supporting Walmart because we’ve been looking at the blight of the mall since Katrina,” said Gretchen Bradford, president of Pontchartrain Park Neighborhood Association. “It’s almost like our backs (are) against the wall. What choice to do we have?”

This fall, the superstore donated $20,000 to the neighborhood’s annual Gentilly Fest, festival organizer Denise McConduit said.  

“They said they didn’t just want to build a store, they wanted to build a community,” McConduit, a Gentilly resident, said.

The expected sale to Walmart will end a protracted process that began in 2008 when NORA outbid a private developer for the shuttered, storm-damaged mall. Using $4.3 million in federal disaster aid money, NORA purchased the 12-acre site between Louisa Street and Press Drive on Chef Menteur Highway.

At the time, The Times-Picayune reported that NORA outbid developer Kailas Properties by $700,000 so it could “deliver the kind of high-end shopping center” the agency had promised neighborhood leaders.

“Being in control gives us the ability to give the neighborhood what they want,” former NORA official Richard Monteilh told The Times-Picayune.

As with many post-Katrina development plans, there was plenty of talk about best practices and opportunities to “build back better.” Then the national economy tanked and the redevelopment proposal the agency favored fell apart.

Saddled with a blighted mall for which it paid more than it was now worth, the authority reissued its request for proposals. The request elicited three responses, one of which was from Walmart. Faced with few options and no high-end contenders, NORA selected the super-retailer. In response to neighborhood opposition, NORA defended the decision as practical and said Walmart would receive no government assistance.

“They don’t need any government incentive to get the deal done,” Hanna told The Times-Picayune in July.

Other retailers who have returned to New Orleans since Hurricane Katrina have not gotten the same kind of public assistance pledged to Walmart. A Winn-Dixie grocery a few blocks from the Gentilly Woods Shopping Center reopened soon after Katrina at its own expense, and it now will be competing with the subsidized Walmart. Also since Katrina, locally owned chain grocer Robert Fresh Market has opened stores in Carrollton and Lakeview using low-interest federal Gulf Opportunity Zone bonds but without direct subsidies for infrastructure or land, said Rick Fernandez, Robert’s chief operating officer.

And while other grocery stores are eligible for direct assistance through a new Fresh Food Retail Initiative intended to spur development of supermarkets in low-income neighborhoods, individual stores are limited to a maximum grant of $1 million, half of which must be a loan.  With $14 million set aside for the program – $7 million coming from the city’s disaster grant fund and the other $7 million coming from a nonprofit financing partner – competition is fierce. In the Seventh Ward, Circle Food Store owner Dwayne Boudreaux is one of the applicants.

“If someone like Walmart is getting what it needs,” he said in a July interview, “I’m just praying I’ll get what I need.”

The retailer is the first multinational corporation to directly benefit from the city’s disaster assistance grants. The federal money is designed to provide “flexible grants to help cities, counties, and states recover from Presidentially declared disasters, especially in low-income areas.” Such money comes with relatively few restrictions beyond guidelines that projects must principally benefit areas or groups where a majority of people live in households with low-to-moderate incomes.

In New Orleans, that means funded projects must principally benefit households with an annual income between $18,500 and $42,000. Funneling money through the CDBG program was devised as a way around rigid rules that limit FEMA funding – the other main source of recovery money. The CDBG money can be used for infrastructure, housing, economic development or safety improvements.

The city has earmarked or spent all but $29 million from the $411 million handed over from Washington. Of the $382 million obligated, most will go towards rebuilding roads, infrastructure, health care facilities, libraries and parks. One recent allocation, for instance, was $4 million for the development of a Festival and Recreation Complex inside City Park.

As the world’s largest private employer, Walmart is no stranger to government subsidy. Nationally, $1.2 billion in tax breaks, free land, infrastructure assistance, low-cost financing and grants has gone to the giant discount chain since its birth in 1970, according to Good Jobs First, a Washington-based watchdog group that opposes subsidizing Walmart. In Louisiana alone, $96.5 million in subsidies has gone to the company, putting the state fourth out of 50 in a Good Jobs First ranking of Walmart subsidy totals by state.

“Usually public officials don’t drive a hard bargain with Walmart,” Good Jobs First analyst Phil Mattera said. “They feel like Walmart is doing them a favor by opening, even though clearly Walmart’s profit-generating strategy is to be everywhere, and pay the least amount possible to be there.”

Walmart’s “supercenter” on Tchoupitoulas has been permitted to make payments in lieu of taxes that will cost the city an estimated $6.5 million over 20 years, according to the nonprofit watchdog Bureau of Governmental Research. Another store proposed for the former Lake Forest Plaza in eastern New Orleans would be part of a tax-increment financing district that will keep tax revenue for site improvements, rather than pay it to the city’s general fund.

Unlike the Tchoupitoulas Street Walmart or the one proposed in eastern New Orleans, millions in annual sales tax revenue from the Gentilly Woods store will flow back to the city’s general fund. Still, critics say Walmart is benefitting from public assistance in the form of site preparation that it should pay itself.

“The infrastructure being built may be used and enjoyed by the public, but in the end, it is enabling the largest corporation in the country to open a store, and profit,” Mattera said.

The recent $1.8 million appropriation will allow NORA to buy a narrow strip that connects the site it already owns to Louisa Street, Hanna said at a recent meeting of NORA’s Board of Commissioners.

A plan released by Walmart and NORA in July called for a 116,000-square-foot store to back up to Louisa. A loading dock would stand on a narrow outparcel between the store and the street that is currently occupied by a Chase Bank branch and a lot owned by Delta Sigma Theta’s local alumnae foundation, a charitable organization. In return for the loading dock, Walmart would allow the agency to maintain ownership of a one-acre parcel on the other side of the site, on Chef Menteur near the intersection of Press Drive, where Chase would be relocated at NORA’s expense, Hanna said.

“The neighborhood indicated they want a bank,” he said. “Chase is critical to the site footprint.”

The Delta Sigma Theta headquarters would also be relocated by NORA, he said.

Officials from NORA and Walmart have said in the past that it was completely NORA’s decision to design the store in a way that would require moving Chase and Delta Sigma Theta. In response to community pressure, officials promised to attract a restaurant to the Press Drive side of the mall. That plan is in jeopardy, but the new Chase site might also accommodate a coffee shop, Hanna said. 

“Even if we don’t get a restaurant,” Hanna said, “we will get a coffee shop.”

NORA is now negotiating with Chase on what its branch will look like and how a coffee shop could fit into the plan, he said. A spokesman for the bank indicated that those negotiations are moving forward.

“We’re committed to that area and will cooperate with NORA and Walmart so that we can continue to serve our customers,” spokesman Greg Hassell said.

When asked why limited recovery grant dollars were paying for two corporations – Walmart and Chase – to swap land, Hanna said the city had no choice but to clean and clear the entire site, including the outparcel Chase owns.

“We already sunk $4.3 million into the acquisition costs,” he said. “Whether it’s Walmart, Kmart, Target, Goldman Sachs or whomever it was we sold the site to, they would want the entire site, rather than 80 percent, and they would absolutely require it was remediated.

“Since we are the owners we have the responsibility to get the site, and clean it.”

“Let’s put it like this way,” he said.  “We put out an RFP in March and got three responses. We could try again next March but the point is, the community is ready to see progress.”

 

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