FreshDirect rings up deal to expand in New York City

Fresh Direct's grocery warehouse will expand in New York City with help of city and state incentives. Photo: Arvind Grover/Flickr

FreshDirect, the fast-growing online grocer whose expansion plans sparked a border war between New York and New Jersey, isn’t checking out of New York City.

Gov. Andrew Cuomo and Mayor Michael Bloomberg announced Tuesday that the grocer, which had been outgrowing its headquarters in Long Island City, Queens, will move into a 500,000-square-foot facility in Harlem River Yards in the Bronx. To enable FreshDirect’s expansion, state, city and Bronx officials pieced together a $100 million package of tax breaks, grants and loans.

The board of the city’s Industrial Development Agency will vote on its piece of the city’s incentive package — adding up to $74 million in tax exemptions and another $15 million in other benefits – next Tuesday, and it will hold a public hearing this Thursday to discuss the project. In addition to grants and loans from the Empire State Development Corp. and other state agencies, FreshDirect’s package also includes $3 million loan and $500,000 capital grant from the Bronx Overall Economic Development Corporation and a $1 million capital grant from the Bronx Borough President.

New Jersey had been trying to woo FreshDirect across the Hudson River with incentives worth about the same amount. In a prepared statement about the company’s decision to stay in New York City, chief executive Jason Ackerman said the relocation will allow FreshDirect to keep doing business with “vendors, local farmers and purveyors and continue our long track record of growth and job creation in New York.”

The company, which employs more than 1,600 full-time workers and another 595 part-time staff, expects to add 1,000 new jobs by 2020, according to its application. The New York City Industrial Development Agency estimates the project will generate more than $254 million in economic activity for the city. “A thousand new jobs at the Harlem River Yards is great news for the Bronx and a welcome boost to our City’s economy,” said Mayor Bloomberg in announcing the deal on Tuesday.

Since it received $2 million in city subsidies for its Queens facility a decade ago, FreshDirect’s popularity has steadily grown among New Yorkers. Customers place orders online for groceries—from artisanal cheeses and baguettes to diapers and cleaning supplies—and schedule deliveries at their convenience.

FreshDirect’s application to the Industrial Development Agency indicates that intends to lease an undeveloped piece of land on East 132nd Street from local real estate developer Galesi Group. Through an investment of more than $118 million, it will construct a new building to house its corporate office manufacturing and production facilities; truck facilities and a parking garage also will be included.

The company estimates that construction will begin in the fall and should be completed within two years. It intends to increase employment by an average of 190 new full-time equivalent employees each year over the next five years.

A history of friction between the company and some of its workers has union-affiliated groups demanding more specifics about Fresh Direct’s employment obligations under the deal. The company has rebuffed efforts to unionize many of its workers; only truck drivers are unionized, through United Food and Commercial Workers Local 348S. FreshDirect truck drivers, who represent about a third of its workforce, make between $11 to $16 an hour depending on seniority and experience level, says Eduardo Cordero, a representative for the union.

“What are the wages and benefits?” asked Bettina Damiani, director of Good Jobs New York, a nonprofit watchdog group. “If we are first subsidizing jobs but people then have to rely on things like food stamps or subsidized housing and child care, then that affects that quarter of a billion dollars that the city expects to get back.”

According to the IDA, selection considerations for its support include a company’s need for financial assistance and the impact of the project on New York City’s economy. The program aiding FreshDirect requires a specific commitment to job creation, and failure of a company to uphold it could result in recapture of benefits and penalties.

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