Food Co-op Edged Out: What’s Tax Status Got to do with it?

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June 13, 2013; Yes! Weekly

The city council of Greensboro, North Carolina recently decided to go with a private developer rather than a local food cooperative when it sold off a shopping center that was surplus city property. It’s another example of cash-strapped local governments looking for tax revenues at the expense of supporting the community-based nonprofits that serve their constituents.

In this instance, the council decided to sell a shopping center to a private developer, angering members and supporters of a cooperative grocery initiative that hoped to move into the strip in northeast Greensboro. Co-op supporters, who wanted the city to retain ownership and allow the co-op to move in, raised concerns about the developers’ history and lack of roots in the community, the transparency of the decision, and the viability of a new nonprofit that would be formed by a proposed collaboration of eight neighborhood groups to manage 40 percent of the space for the co-op.

In a 5-4 vote, the council approved a $2 million, 10-year forgivable loan to the developer for purchase and renovation of the property. The council specifically stated that the newly formed nonprofit needs to lease 10,000 square feet in the center to the community co-op. But it will be the private developer who will control the entire shopping center and lease the rest out to other tenants.

The developer’s investors include the owners of a local market that has been criticized by community leaders for being a bad neighbor. Local leaders wanted the city to keep title to the shopping center, renovate it, and provide a home for the co-op and other community services. They said that there was precedent for such an arrangement, and that the city owns other properties that aren’t directly used for government services.

Greensboro is a racially diverse city, and the third largest in the state. Tired of asking the city or a private investor to come to the rescue, community leaders in the northeast area have long pushed for a cooperative grocery store, since the last chain supermarket left the area about 10 years ago.

By selling the strip to a private developer, the City of Greensboro keeps it on the tax rolls. Local governments across the U.S. are reluctant to allow private properties to be sold to nonprofits because they would not be subject to the property taxes that municipalities and counties rely on to fund themselves. However, this makes it more difficult for nonprofits to provide the essential public services that complement and supplement the work of government agencies.

Last year, the city of Scranton, PA (Joe Biden’s hometown) threatened to oppose zoning variances sought by nonprofit organizations to prevent the removal of properties from tax rolls. Local elected officials are often caught between the rock and hard place of generating tax revenues versus supporting the community-based organizations whose mission it is to serve the very people who live there.—Larry Kaplan

  • David W

    As an Association and a Business, Food Co-ops are subject to confusion and nuances in tax structure and organization. Most are businesses, making money by selling stuff but the non-profit aspect is that the owners earn no profit on any shares owned, but share profit based on their cash patronage. If a profit is declared. This alters the tax structure and can make it look like the Food Co-op is a tax-exempt social welfare org. We need more and better education on Cooperative Enterprise as if this city council were aware of the business nature of the Co-op, they may have thought differently.