NEW YORK – Manhattan Borough President Gale A. Brewer, Council Member Corey Johnson, and members of the National Supermarket Association rallied today to end the unfair, regressive Commercial Rent Tax (CRT) burdening supermarkets in much of Manhattan. Brewer and Johnson sponsor Intro 1472, City Council legislation that would offer supermarkets a full exemption from the CRT.
“I’ve been to too many rallies and heard too many alarmed pleas from neighborhoods to keep local supermarkets open,” said Manhattan Borough President Gale A. Brewer. “Every neighborhood needs a supermarket and access to affordable food, but even the most successful supermarkets operate with slim profit margins. Ending this tax can and will make a big difference for these essential businesses.”
“Affordable supermarkets are lifelines for our communities,” said Council Member Corey Johnson. “As the cost of living continues to rise, these stores help ensure that our city can continue to accommodate the seniors and working class families that built our city into what it is today. The proposal that Borough President Gale Brewer and I have put forward would give our neighborhood supermarkets a fighting chance for survival. It’s good for business, it’s good for our communities, and I’m proud to have joined with Manhattan Borough President Gale Brewer to tackle this issue head-on.”
“We want to thank Borough President Gale Brewer and Council Member Corey Johnson for taking a meaningful look at the business climate for grocery stores in Manhattan. It’s no secret that the industry is in crisis, with neighborhood grocery stores closing their doors regularly and leaving communities devoid of healthy food options. The elimination of the Commercial Rent Tax is a commonsense solution that would save local grocery stores tens of thousands of dollars — savings that will be reinvested in store upgrades, jobs and the community — and free store owners from what is essentially a double tax on sky-high rent in Manhattan,” said Rudy Fuertes, President of the National Supermarket Association.
“The Food Industry Alliance supports this important legislation. The bill will provide much needed relief to Manhattan’s grocery stores, who are struggling to keep up with soaring rents,” said Jay Peltz, General Counsel and Senior Vice President of the Food Industry Alliance of New York State. “If this bill is not enacted, Manhattan grocery stores will continue to close.”
The Commercial Rent Tax applies to most commercial tenants in Manhattan south of 96th Street and north of Murray Street paying $250,000 or more in rent per year. A survey conducted by the Borough President’s office in 2016 found 132 supermarkets in the Commercial Rent Tax zone.
Businesses in this zone that pay $300,000 or more in rent annually are charged an effective marginal rate of 3.9 percent of their rent in extra taxes, while businesses that pay between $250,000 and $300,000 receive an increased exemption and pay a lower effective rate.
Because the tax only applies in Manhattan between 96th Street and Murray Street, it puts an unfair, regressive burden on businesses in some of the city’s most expensive neighborhoods, where there is immense upward pressure on commercial storefront rents. Because even a small supermarket requires a large footprint relative to other retail and commercial storefront tenants, and because even successful supermarkets operate with slim profit margins, this tax hits supermarkets especially hard.
Independent supermarket owner Paul Fernandez’s Met Foods-branded store in NoLita was one such market. Its roughly $90,000 per month in rent ($1.08 million per year) resulted in more than $30,000 of Commercial Rent Tax liability. Negotiations for the market’s lease renewal broke down in part because the market could not afford to make upgrades and changes requested by the landlord to appear more ‘high-end’ while remaining affordable. Mr. Fernandez, who operates multiple supermarkets in other neighborhoods, argued in testimony before the City Council that a full Commercial Rent Tax exemption could have kept this market open.
Exempting supermarkets from the Commercial Rent Tax was one of a number of initiatives to save supermarkets that Borough President Brewer proposed in a report published earlier this year.