Proposed
New Pioneer Co-op Relocation is Financially Risky
A rosy outlook in
life and an optimistic attitude about the future are nice, but not useful when grounded in unreality, something Republicans learned in the recent election.
I believe a majority of the New Pioneer board is wearing
rose-colored glasses when it comes to its proposed relocation of New Pi to the
corner of College and Gilbert Streets.
For tax
year 2011 the downtown New Pi paid $24,948 in property tax; a new store with a
$5 million assessed valuation would pay at least seven times that. (Tax levy on
100% of commercial valuation is $40.74369/$1,000.)
In the first quarter of FY'13 labor costs for both
stores for 135 full and 59 part time employees was $1,438,150*, which projects
to an estimated $5,872,600 in yearly labor costs. The
potential 40 new employees, to which the General Manager referred in his
presentation to the City on December 4, would add more than a million dollars
to the operating costs.
New Pi currently
carries no mortgage on the downtown store. A $4 million mortgage on any new
store, carrying an interest rate of 3% (likely higher) for 15 years would add
$163,115 per annum to operating costs.
If New Pi becomes a member of a condominium association there
likely would be a substantial annual fee paid to the association.
In FY 2011 less than nine
percent of the Co-op’s approximately 26,000 members were responsible for 57% of
total sales at both stores. This
means that approximately 2,340 members conducted a majority of all
transactions. Less than a third of the membership qualified for the patronage
dividend paid to those spending more than $500 during that year.
It is indisputable that the planned relocation would cause a large increase in
New Pi's operating costs. It is reasonable to conclude that it would be
difficult to generate the amount of sales needed to cover this large increase,
especially considering that New Pi is an expensive place to grocery shop (and
food costs are projected to rise considerably in coming years) and that a
very small percentage of total members do a majority of the transactions.
The GM stated that the proposed location would attract 250,000 additional
people downtown, a per day average of 685. Where will they park and where would they come from? Would
those who currently shop at the Coralville store come to the new store on a
regular basis and why? If they did, would that not negatively impact the sales in
Coralville?
The impact on The Bread Garden cannot be as lightly dismissed as
the GM stated at the December 4 Council meeting. If the Bread Garden --
which is believed to be sensitive to any pressure that would detract from its
customer base -- went under, the assessed valuation of Plaza Towers would
decrease and so would the amount of taxes the City collects on this property.
(Plaza Towers was a TIF recipient.)
Many members recall the near collapse of New Pi due to the rose colored glasses of a previous board. If New
Pi also fails, the downtown would be without a grocery store, a significant
loss to the many who now live and will live downtown; and there would be two
very large spaces of ground floor commercial property standing empty. (The size
of the proposed new store is roughed out at about 20,000 square feet.)
The current New Pi board majority -- six of seven -- who want to relocate the store include a retired adjunct
professor from the School of Business Administration and a Carlson-KPMG
Research of Accounting Professor from the same school. The 1999 New Pi board,
which voted to proceed with the Coralville store, included an Entrepreneur of
the Year and a full professor in the College of Business. This move, based on a
majority faith that we could afford a second store that would be wildly
successful, nearly brought the Co-op to bankruptcy. It was a long haul for the
Cooperative to return to the sound financial position it is in today; along the
road to recovery there were staff reductions, no bonuses, no raises, no
patronage dividends, no senior discounts, and no community donations.
I hope any
member of the Council who may be giving consideration to any one of the
four proposals that has New Pi on the ground floor will seriously consider the
potential of Iowa City New Pi failing should it be relocated to the Gilbert/College site. No
one would want to see the bottom floor of whatever is built there empty in five
or six years, with only office space and apartments/condominiums above it.
I believe the City and New Pi have a shared interest, one that would be served
by the City negotiating a land exchange with the Co-op, trading City land east
of the Unitarian Church for the Van Buren Street NPC property. New Pi would have
space to build a LEED certified larger store that could continue to serve the vital 'quick in, quick
out' shoppers who come by car as well as those that come by foot or
bicycle. In exchange the City would get land to build a permeable paver
parking lot for employees and visitors to the Civic Center.
City
For something visionary, how about this idea recently sent to a friend of mind: Iowa City builds a year-round food market like the recently opened
NewBo City Market in Cedar Rapids, with New Pi as the anchor. There could be
food trucks/carts with outdoor seating, and a covered, but open-air pavilion for
an expanded, pleasanter Farmers Market. Something like this would create a true
local foods destination. An appropriate location might be in the yet developed
Riverfront Crossings area. The City would be foolish not to be a willing and
supportive partner in such an endeavor, as such a project would help to drive the
future residential and retail growth the City hopes to see in that part of
town.
While the citizenry is generally fed up with TIFs, a TIF to enable an option of public good is a lot
different than one that simply allows a business to get a 20 year tax
break. It's a very good thing that the Robert A. Lee Recreation Center is
downtown. It's on prime development land and it doesn't generate a penny of
property tax. Citizens today would very likely support public funding to build
it if it weren't there already.
TIF bonds to support bowling alleys, theaters, and an art gallery would be public money spent to enable a
public good: expanded recreational and educational opportunities
downtown. For this reason, the Moen proposal's TIF request is far more acceptable
than the requests by the other developers to help them build for-profit
commercial space from which the ordinary citizen will not see any benefit for
at least 20 years when the TIFs expire. If the Council has concern about the height of The Chauncey that point should be negotiated with the developers.
*Information
provided by Matt Hartz, New Pi General Manager.
Carol deProsse
New
Pioneer Member
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'The
belief that one's own view of reality is the only reality is the most dangerous
of all delusions."
--
Paul Watzlawick
