Grocery Store Incentive Area Personal Property Tax Credit, Baltimore: Urban Food Policy Snapshot

by Cameron St. Germain

Part of the Food Policy Snapshot Series

Policy name: Grocery Store Incentive Area Personal Property Tax Credit

Location: Baltimore

  • Population: 622,104

Food policy category: Food supply & distribution

Program goals:

  • Retain supermarkets in, and attract new supermarkets to, areas that have limited access to fresh food

Program initiation

  • The Baltimore Food Policy Initiative conducted an assessment with dozens of grocery retailers in Baltimore, and the tax rate was consistently raised as a barrier to doing business.
  • The city’s Food Environment Map and related research provided the evidence and context for creating the incentive areas where grocery stores could receive the tax credit.
  • The policy was unanimously approved by the Baltimore City Council in December of 2015

How it works

Supermarkets establishing new locations in, or renovating current locations in, Grocery Store Incentive Areas, and that meet certain qualifications, are entitled to 80 percent credit against the personal property tax, which typically covers furniture, fixtures and equipment.

First of all, in order to qualify, a store must meet the definition of a supermarket, meaning that all major food departments (produce, meat, seafood, dairy, canned and packaged foods) are represented, and more than 50 perfect of floor space is dedicated to selling food.

In order to get the tax credit, a supermarket must spend at least $150,000, or $25 per square foot (whichever is greater), to expand on new personal property, dedicate at least 500 square feet to selling fruits and vegetables, and dedicate at least 500 square feet to selling other perishable foods, including meat, seafood and dairy products. Finally, the supermarket must be located in a Grocery Store Incentive Area.

A Grocery Store Incentive Area is any area that fits Baltimore’s official definition of a food desert, any area that is located within one quarter mile of a food desert, or any area that would be a food desert if it were not for the presence of a qualified supermarket.

A food desert is defined as an area where the average distance to a supermarket is greater than one quarter of a mile, median household income is at or below 185 percent of the Federal Poverty Level, at least 30 percent of households have no vehicle, and the average Healthy Food Availability Index (HFAI) score for all food stores in that area is low.

The Healthy Food Availability Index (HFAI) is a way of measuring how healthy the food at a store is. Stores are judged in eight categories: low fat and nonfat milk, fresh fruits, fresh vegetables, low fat meat, low fat frozen foods, low sodium foods, whole wheat bread, and low sugar cereals. The more varieties of the aforementioned items a store has, the more points it receives.

A supermarket owner or developer must obtain a pre-qualification for the tax credit before beginning construction or renovation. Once construction is complete, the applicant must submit a second form to verify that the supermarket meets the qualifications to obtain the tax credit. Supermarket owners then re-apply every year for the credit, and they can receive it for up to 10 years.

Progress to date

One supermarket has taken advantage of the credit since the law went into effect, and the Baltimore Development Corporation expects a few more stores to take advantage of the credit in the next one to three years.

The Grocery Store Incentive Area property tax credit is only one component of Baltimore’s Food Desert Retail Strategy. Other components of the plan include expanding the virtual supermarket program (ordering groceries online and picking them up), encouraging the growth of urban farming, increasing the amount of fresh foods at public markets, and improving public transportation.

Why the program is important

One in four Baltimore residents and almost one in three Baltimore children live in food deserts—places where it is very difficult to purchase fresh foods, particularly fruits and vegetables.

Multiple studies have concluded that lack of access to healthy food is associated with poorer health. This review of studies found that a poor quality food environment coupled with limited economic resources likely increases one’s risk of obesity. Another study done in rural Pennsylvania found that school districts with higher rates of overweight children also had a higher percentage of their population residing in food deserts.

Baltimore has an obesity rate of about 34 percent. For residents in the lowest income bracket, the rate is 39 percent. For residents in the highest income bracket, the rate is 16 percent.

Multiple studies have concluded that increased consumption of fruits and vegetables is associated with lower risk of obesity and heart disease.

One of the reasons why food deserts exist is that no matter where they operate, grocery stores have very low profit margins, typically between 1 and 1.5 percent. Baltimore’s tax credit aims to reduce overhead costs so opening a grocery store in a food desert is more likely to be profitable.

Evaluation

Questions remain as to whether the tax credit is sufficient to encourage supermarkets to move into food desert areas. Because supermarkets are a low-profit business, it is possible that more tax credits or subsidies would be required to attract a sufficient number of supermarkets to areas that are currently food deserts.

Research on how supermarkets affect neighborhood residents’ diets shows mixed results. A study published in 2015 compared a low-income neighborhood in Pittsburgh that received a supermarket for the first time in 30 years to a demographically similar neighborhood that received no supermarket. The researchers found that the residents who got the supermarket did experience a change in diet, consuming less calories, added sugars and solid fats, on average. However, contrary to expectations, the residents also consumed less whole grains, fruits and vegetables.

A 2002 case study on a British city also found that a significant increase in access to fresh fruits and vegetables had only a small effect on the residents’ diet—an increase of about half a serving of fresh produce per day. These results point toward the conclusion that greater availability of fresh produce does not necessarily translate to greater purchasing. A 2005 survey of dietary habits supported this conclusion; it found that distance from the nearest supermarket had no significant impact on the number of fruits and vegetables a person eats.

Learn more

http://baltimoredevelopment.com/incentives/tax-credits/food-desert

http://planning.baltimorecity.gov/baltimore-food-policy-initiative/healthy-food-retail

Point of contact

[email protected]

Similar practices

  • In 2004, Pennsylvania began the country’s first ever statewide plan to stimulate supermarket development. The program gives grants to supermarket developers planning to open in underserved communities
    • By 2009, 88 applications had been approved, and a total of $11.3 million grants distributed
  • Illinois, Louisiana, Colorado and New Jersey have programs similar to Pennsylvania’s
  • The NYC FRESH program offers tax deductions and exemptions, among other incentives, to supermarkets that open in areas of the city with low access to fresh food.
  • In 2002, Washington DC passed a law exempting supermarkets located in Priority Development Areas from certain taxes and fees.

References

http://baltimoredevelopment.com/incentives/tax-credits/food-desert

http://www.jhsph.edu/research/centers-and-institutes/johns-hopkins-center-for-a-livable-future/_pdf/research/clf_reports/BaltimoreCityFoodEnvironment.pdf

http://planning.baltimorecity.gov/baltimore-food-policy-initiative/healthy-food-retail

http://health.baltimorecity.gov/sites/default/files/HealthyBaltimore2015_Final_Web.pdf

http://www.baltimoresun.com/news/opinion/editorial/bs-ed-food-deserts-20160104-story.html

http://www.rand.org/pubs/research_briefs/RB9874.html

https://dmped.dc.gov/sites/default/files/dc/sites/dmped/publication/attachments/Supermarket%20Tax%20Credits.pdf

 

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