Two-Decade Push to Build a Grocery in a Food Desert Finally Pays Off
Two-Decade Push to Build a Grocery in a Food Desert Finally Pays Off
By Bill Lucia, Route Fifty, November 23, 2020
Getting a new grocery store established in northeast Oklahoma City, in an area that people describe as a “food desert,” has required a two-decade effort by community leaders.
But the project is now finally coming together, thanks in part to a federal tax credit program, support from the city government and a nonprofit economic development agency—as well as the involvement of an employee-owned grocery chain that will operate the store.
“I’ve been working on it a long time, 22 years,” said Cathy O’Connor, president and CEO of the Alliance for Economic Development of Oklahoma City.
Developers broke ground last month on what is slated to be a full-service, 30,000 square-foot store with about 75 workers. The store will be run by Homeland, a division of HAC, Inc., a grocer headquartered in Oklahoma City. The plan is for the store to open in fall 2021.
O’Connor and others who helped to drive the project forward describe it as a strong example of how the public and private sectors can work together to benefit a community.
The grocery will be located at Northeast 36th Street and Lincoln Boulevard, in a Zip Code where about half of the 5,400 residents are Black and around a quarter had incomes that were below poverty level in recent years, according to Census Bureau estimates for 2018.
Oklahoma City Councilmember Nikki Nice, who represents Ward 7, where the grocery is being built, said the area historically has been underserved.
The absence of a full service grocery, she said, reflects past “redlining” and other practices, which stanched the flow of capital to the neighborhood, and restricted access to lending and financial services to residents and businesses.
“You’re not going to get a lot of the investment and the development that you want in such a community,” she said.
“This is a community who had been promised a grocery store for many years and none of them had come to fruition,” Nice added.
O’Connor explained that Willa Johnson, who represented Ward 7 on the council for about 14 years beginning in the 1990s, was one of the earlier proponents of bringing more grocery options to the area, but that later Ward 7 councilors have continued to focus on the issue.
There are a number of factors, O’Connor said, that made it tough to get a new grocery store installed in the neighborhood—such as finding both a viable site and the right store operator. Broader economic trends in Oklahoma City, including generally rising per capita income since the early 2000s, also help to make it possible now, she said.
In total, the grocery store will be a roughly $11 million to $12 million project, with financing coming from a variety of sources.
The Alliance for Economic Development—a private nonprofit—is working to line up about $8.5 million through the New Markets Tax Credit program. In short, these federal credits provide a way for large institutional investors to get tax breaks in exchange for funneling investment dollars towards projects in economically distressed areas.
In addition to the tax credits, Oklahoma City has a local tax increment financing district that covers the site where the grocery will be built that will provide around $3.5 million in support.
There’s also a $300,000 loan from Metafund, a “social impact” investor. And two individuals took on an equity stake in the project. Securing the site also involved a land swap arrangement between the Oklahoma Industries Authority and the state Commissioners of the Land Office.
Additionally, the store meshes with plans to locate a new $13 million to $14 million senior health and wellness center at the same intersection.
Developers of the store include the Alliance and Milwaukee, Wisconsin-based Endeavour Corp. Through a limited liability company they’ve set up, they will be the owners of the grocery store site and it will be leased to Homeland.
“We always knew that it would be a difficult deal. That it would require New Markets Tax Credits, that it would require local incentives and a pretty big push by the city,” said O’Connor, previously an assistant city manager for Oklahoma City.
She said public sector support for the project was “absolutely necessary” for making it happen.
Homeland’s President and CEO Marc Jones echoed that point and said that his company wouldn’t have been able to commit to the new store if the tax credits and local government programs were not in play to help make the economics more feasible.
Jones pointed to issues like lower-income demographics, competition from nearby super center grocers, and a general lack of investment in the neighborhood as reasons why other grocers may have not been interested in opening a store where the new one will be located.
“There’s a bunch of economic factors that have to come together in order to make a ground-up supermarket work,” he said, “that weren’t small hurdles for us to overcome.”
Jones said that while the financing package that enabled the deal to proceed may seem clear cut now, it wasn’t always obvious what it would look like. “We learned a lot about some tools that we really didn’t have a very good understanding of heading in,” he added.
He also credited Homeland’s employee ownership as one of the many reasons the project materialized, with employees focused not just on profits, but also community needs. “They’re working in our stores and living in our communities,” he said. “We’ve got financial goals, but we’ve also got that goal of giving back to our community.”
O’Connor said the project, along with the senior wellness center, will ideally help to draw other investment to the neighborhood—perhaps without the same level of public subsidies.
“We’ve seen that over and over again in Oklahoma City, where you build one thing and a bunch of stuff after it starts to happen,” she said. “These kinds of projects prime the pump.”
