Newport News spending up to $6.5M to build Southeast grocery

Theresa Clift

The city will spend up to $6.5 million to build a grocery story in the Southeast Community, City Manager Jim Bourey said Tuesday, but may be able to bring that total down to $4 million.

About $4.7 million will pay for construction of the 29,000-square-foot grocery store and $2.3 million will be spent on furniture, fixtures and equipment, said Economic Development Director Florence Kingston — a total of $7 million. Jim Scanlon, who the city has chosen to operate the store, will make up the remaining $500,000.

The city is also seeking federal new market tax credits for the project, which could bring the city's portion of the cost down to $4 million, Bourey said.

New market tax credits allow private investors seeking tax breaks to buy credits that are applied toward their federal income taxes. They also allow the localities to borrow money at lower interest rates than regular loans.

The city used new market tax credits to build the Achievable Dream High School, Kingston said.

Bourey said he also had success with the tax credits in his previous position as city manager of Greenville, S.C.

In addition to the cost of the grocery store itself, the city's Industrial/Economic Development Authority Board has agreed to spend $1.5 million — $500,000 in I/EDA money and $1 million in city money — on site work and a parking lot that will be shared by the grocer and other retailers.

Brooks Crossing developers Armada Hoffler and Aaron Brooks will finance an additional $450,000 toward the parking lot.

The grocery store is a centerpiece of the long-awaited Brooks Crossing development, between Jefferson Avenue and Interstate 664, from 29th to 35th streets. Two wings of retail space, a combined 17,000 square feet, will be built on either side of the grocery store, including several retail stores and a proposed day care, funded with $3 million from the developers.

The city selected Scanlon to operate the full-service grocery store, called Jim's Local Market, although the lease has not yet been signed.

The city will own the grocery store and lease it to Scanlon at an amount not yet set. Scanlon will have several options to buy the store after a set number of years, seven or more, Kingston said.

The city money to fund the grocery store construction is already appropriated in cash capital and unused funds from last year's budget, Bourey said.

Since the funds were already appropriated, the council did not need to formally vote to approve the up to $6.5 million for construction of the grocery store, Bourey said, but council members did give an endorsement after being briefed during a Tuesday work session.

The I/EDA Board will vote on the additional grocery store contracts at its September meeting, Kingston said.

"Our goals are to provide a sustainable source of healthy food options for citizens, a place for them to have access to a full-service financial institution, and a source of new jobs," Kingston told the council.

Armada Hoffler has not yet announced additional tenants for Brooks Crossing, including those on the wings connected to the grocery store, but is in active discussions, Kingston said.

Construction is planned to start on a privately funded 30,000-square-foot office building in the first half of next year, Kingston said.

The opening for the grocery store is "on the fast track," planned for the first quarter of next year — between January and March — Kingston said.

"I cannot tell you how hard everybody has worked to get through to this guaranteed maximum price," Bourey told the council Tuesday. "It's been a huge lift, been a whole lot faster than any other project. The tax credits, while they take time, will offer tremendous advantages."

Aside from building a new road at 29th Street, no additional city or I/EDA funds are planned for the project that have not already been announced, Kingston and Bourey said.

Construction of the South Precinct police station, also in Brooks Crossing, funded by the city for $6.6 million, is set to finish in November, Kingston said.

The Southeast Community, home to about 19,000 people, has been without a full-service grocery store for more than a year.

Clift can be reached by phone at 757-247-7870.

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