Wisconsin taxpayers foot the cost of opening grocery stores

By Ryan Ekvall | Wisconsin Reporter

MADISON, Wis. — Ben Campioni is working overtime to open his new Pat’s Foods grocery store in Florence by Thursday. If not for the help of state taxpayers, it’s work Campioni says he wouldn’t have.

“We’re going gangbusters here,” Campioni said, reached by telephone Monday. “We’ve got shelving showing up today. We’ve got 40 to 50 guys working. We’re really excited to get it open and so are people in the community.”

After Thursday, most of the county’s 4,482 residents will no longer have to drive 16 miles across the border to Iron Mountain, Mich., to buy fresh produce and meat. And Pat’s Foods should hire eight to 10 full-time workers at $10 to $20 an hour, and an additional 10 or so part-time workers, making it a top 10 employer in Florence County.

A $250,000 grant from the Wisconsin Economic Development Corporation made the project feasible.

“It’s not easy opening a grocery store,” said Campioni, who owns five others in Michigan. “There’s a lot of costs involved. Without (the grant) there’s no way the store would have reopened.”

The building where Campioni will open Pat’s Foods was previously Haberkorn’s grocery store until it closed in 2007 after its owner died unexpectedly. The store has sat vacant since.

In 2012, Campioni offered $275,000 for the building, but officials from two of the three banks that own the building balked. They still held over $850,000 in unpaid debt liability on the building, according to Florence County’s grant application.

Campioni was ready to walk away from the store when county officials approached him with the possibility of a state grant to bridge the financing gap.

Wendy Gehlhoff, director of the Florence County Economic Development Corporation, solicited letters of support for the project from 16 local government officials, businessmen, educators, law enforcement and health officials to include in the county’s application for a Community Development Investment grant through the WEDC.

“It’s big for us. It’s very big for us,” said Gehlhoff. “We worked so hard to try to sell that building over the last seven years.”

The grant from WEDC, which was technically awarded to Florence County, allowed Campioni to increase his offer to the banks to $325,000. This time, the banks accepted.

State taxpayers, in essence, made up the difference between what an entrepreneur was willing to pay for the building versus what a bank was willing to sell it for.

“I guess someone can look at it that way,” said Jason Scott, community development director at WEDC. “We would be more inclined to say we’re happy that the property in general was not allowed to remain vacant. That ends up being a drain to the community.”

The Community Development Investment grant program supports “shovel-ready projects with emphasis on…downtown community-driven efforts,” according to WEDC’s website. Scott said the agency looks to fund “catalytic projects” in communities that will “spur additional economic development down the road.”

WEDC has awarded $5.3 million for 30 projects, ranging from $5,000 to $500,000. Agency spokesman Mark Maley said WEDC expects $89.4 million in local public and private investment to go along with WEDC’s grants.

Officials at the quasi-public agency say they didn’t expect to fund grocery stores, which have a razor-thin average profit margin of 1.3 percent according to the Food Marketing Institute, when they started the grant program in August 2013.

“We hadn’t done a grocery store prior to Florence,” Scott said. “When it first came in, we needed to understand the project too. It wasn’t necessarily a project we’d pursue, but Florence County really did a good job demonstrating the need and value the community put on the grocery store. A lot of residents had to travel significant ways to do their grocery shopping. It was really important to the community that they re-establish a grocery store.”

The U. S. Department of Agriculture lists Florence County as a “food desert” because at least 20 percent of residents live in poverty and at least 33 percent live more than 10 miles from a supermarket.

WEDC announced a $250,000 grant on Monday to help open a grocery store in Menasha, another USDA “food desert.”

That store, a $2.6 million project, is expected to open in November.

Florence, however, already has something of a grocery store.

Kelley’s Corner Market occupies what used to be Haberkorn’s before that store expanded to its new site in 1998. After Haberkorn’s shut down the new site in 2007, Kelley’s, a liquor store, opened nearly 3,000 square feet of grocery space on its shelves.

Gehlhoff said Kelley’s is more of a convenience store; it lacks fresh food options and has higher prices than a supermarket.

Wisconsin Reporter couldn’t reach Andy Kelley, the store’s owner, for comment. Gehlhoff said county officials approached Kelley to purchase the empty Haberkorn’s building, but he was unwilling to take on the debt.

Campioni said he’s already invested nearly $1.7 million in the store, including the building, new equipment and groceries. He’s also putting in a hardware department and a walk-in beer cooler.

Florence County also pledged $50,000, including $15,000 up front, to Campioni in Tax Increment Financing, where governments borrow to fund development projects with the expectation that taxes from the increased property values will repay the debt.

Gehlhoff said the county expects more businesses, perhaps a Family Dollar, to open next to the grocery store.

“It’s so hard to grow a community without having some basic retail to attract folks,” she said.

Even the competition seems happy for a grocery store to open in Florence.

“I think it will be a nice benefit for our neighbors in Wisconsin,” said Jonathan Ringel, manager of the Iron Mountain Downtown Development Agency. “It shocks me people drive a half hour to get to a grocery store.”

Contact Ryan Ekvall at rekvall@watchdog.org, 608-257-1382 or follow him on Twitter @Nockian