Brooklyn's Progress
January 2002

In an effort to assist the nearly 25,000 neighborhood-based retail businesses in Brooklyn and New York City, the Brooklyn Chamber of Commerce recently retained accounting firm KPMG to aid in the development of a package of economic incentives aimed at stabilizing and growing New York’s neighborhood-based retail sector. Over the last three months, Brooklyn Chamber staff have been working with members of KPMG’s Strategic Relocation and Expansion team to create economic incentives which will encourage property ownership among neighborhood-based retailers, as well as increase the sector’s competitiveness within New York City. Neighborhood-based retail businesses, sometimes known as “mom and pop” stores, have always played an invaluable role in the Brooklyn economy. Aside from providing vital goods and services to Brooklyn residents and a sense of character to the borough’s many communities, neighborhood-based retail stores have served a valuable economic role within Brooklyn. The neighborhood-based retail sector has both provided the borough with a critical mass of much-needed entry-level jobs and served as a gateway to business ownership for thousands of Brooklyn residents. Despite the significant economic value of the borough’s mom and pop stores, the neighborhood-based retail sector is facing serious challenges in today’s economy. A combination of rising retail rents, the rapid expansion of national-level chains stores and decreased consumer confidence in the days after September 11 have threatened the existence of many of the borough’s neighborhood-based retailers. While New York City offers a number of business incentives, such as tax credits and utility rate reductions, to industrial and commercial companies seeking to maintain their presence or grow and expand within the five boroughs, the city does not have any programs encouraging the growth and stabilization of the neighborhood-based retail sector. In an effort to assist the nearly 25,000 neighborhood-based retail stores located in Brooklyn and within New York City, the Brooklyn Chamber has partnered with accounting firm KPMG to create a proposed package of incentives encouraging the growth and expansion of New York City’s neighborhood-based retail sector. For the purpose of this initiative, Brooklyn Chamber defines neighborhood-based retail businesses as firms with less than ten employees, less than five locations throughout New York City and with locations occupying less than 5,000 square feet. KPMG research has found that neighborhood-based retail stores combine to employ over 81,000 people city-wide, generating over $1.9 billion income tax revenue per year. KPMG has also learned that neighborhood-based retail stores comprise almost 85 percent of the establishments within New York City’s retail sector, an industry whose employment has grown at an average of four percent per year. In addition to assisting the Brooklyn Chamber in identifying the value of the neighborhood-based retail sector within New York City, KPMG has also worked in partnership with the Chamber to create a group of incentives aimed at encouraging neighborhood-based retailers to buy and improve property within New York City. For those neighborhood-based retailers with the financial ability, buying property works to both stabilize everyday operating costs and protect their businesses from rapidly escalating rents. In addition, property ownership will encourage the improvement of the city’s under-maintained buildings and, in the case of mixed-use structures, the upgrade of the city’s housing stock. The Brooklyn Chamber and KPMG are proposing the creation of three incentives to encourage property ownership by neighborhood-based retailers. Proposed incentives are modeled after existing programs available to industrial and commercial businesses, and, as a result, could be easily administered by city government. Incentives will be available to qualified neighborhood-based retailers who buy and improve a building in which they will operate. They include: A 12 year property tax abatement; A 12 year electricity rate reduction; and A tax credit against the mortgage recording tax assessed at property closing. This package of incentives will allow for the significant reduction of costs for neighborhood-based retail stores. Says Brooklyn Chamber President Kenneth Adams, “These incentives serve two crucial purposes: reducing the significant up-front costs associated with purchasing and owning property and lessening the everyday expenses of doing business within New York City.” The Brooklyn Chamber and KPMG are also considering other incentives which would make neighborhood-based retailers more competitive in New York City. One idea that could be implemented once the city economy recovers is an expansion of the current sales tax exemption available to clothing and footwear items. At present, all clothing and footwear purchases under $110 are sales tax exempt. A recent report by the Manhattan Institute states that this sales tax exemption has resulted in the creation of approximately 13,000 jobs within New York City. Preliminary research by KPMG indicates that extending this sales tax exemption to the purchase of such goods as books and educational items, computer software and supplies and home improvement goods would significantly increase consumer spending and the creation of entry-level jobs at neighborhood-retail stores based within New York City. Once the study is complete, the Brooklyn Chamber will partner with local business groups to push for the creation of an incentive package for neighborhood-based retailers on a citywide basis. Says Adams, “We will be reaching out to our colleagues at business improvement districts, merchants associations and local development corporations to push for the creation of economic development policy for this very vital sector of business.”