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Business threatens to move if city doesn’t reduce its bill

November 13, 2013

WOONSOCKET – Walmart, Lowe’s and Shaw’s have already disappeared from Diamond Hill Road. Now city officials say the entire Woonsocket Plaza, including Burlington Coat Factory, Price-Rite and a half-dozen smaller chain stores, is at risk of vanishing from the city’s retail strip.

The owners of the plaza, WP Woonsocket Associates LLC of Bryn Mawr, Pa., have informed city officials that it cannot afford to renew its lease with Burlington Coat Factory unless the city grants the landlord a major tax break. And if Burlington goes, the other tenants are under no obligation to stay at the plaza because of certain “co-tenancy” agreements tied to Burlington, the anchor store.

The 230,274-square-foot strip mall is taxed on a value of $12.7 million, making it the city’s fourth-largest taxpayer after CVS/Caremark, National Grid, and Walnut Hill Plaza – the other major strip mall on Diamond Hill Road.

Citing the impending lapse of its tenancy agreement with Burlington Coat Factory, WP Woonsocket Associates LLC has appealed its assessment, saying it should be taxed on a value of $2.5 million, according to Tax Assessor Christopher Celeste.

“It’s a $400,000-a-year tax abatement if we give them what they’re looking for,” he said.

Celeste and other city officials say the choice between the proposed tax break and the prospect of a plaza-full of shuttered storefronts isn’t much of a choice at all. An empty plaza would also boil down to a loss of taxable property value that will somehow have to be absorbed by other taxpayers.

As Economic Development Director Matthew Wojcik put it, “The levy is the levy.” WP Woonsocket Associates LLC accounts for such a large share of the revenue pie, the city couldn’t make up for it with a few spending cuts here or there.

Wojcik said he has been doing everything he can to make it possible for WP Woonsocket Associates to maintain its relationships with existing tenants, including negotiating some sort of tax treaty with the company.

Another carrot has been the offer of Municipal Economic Development Zone benefits to the plaza owner. Under state law, merchants in a so-called MED zone would only have to charge half the normal sales tax to customers. The other half would go to the host city, which would be compelled to use the revenue for economic development.

To qualify, WP Woonsocket Associates LLC would have to make substantial renovations to its existing holdings, however.
Wojcik said he first raised the issue of a MED Zone deal with WP Woonsocket Associates in early September and never heard back from a representative of the company. That was before WP Woonsocket Associates filed a preliminary notice of tax appeal with Celeste.

Wojcik, Celeste and Mayor Leo T. Fontaine all consider talks with WP Woonsocket Associates ongoing and open-ended. A representative of the company, Regional Property Manager Paul Ruane, declined to comment when initially contacted by a reporter Wednesday, saying either he or someone else would call back later, but no one did.

The plaza was built in 1990, according to city records, but WP Woonsocket Associates is the fifth in a string of owners. They paid over $23 million for the site, two years before the bust in the real estate bubble sent property values into a national tailspin.

“The next step for them is a formal appeal before the Tax Assessment Board of Review,” said Celeste. “We’re not in favor of corporate welfare, but we’d like to help them because it means helping the city. We want to protect our real estate environment on that major road. We’re willing to give something if we get something in return.”
Headquartered in Burlington, N.J., Burlington Coat Factory operates 470 locations in 44 states and Puerto Rico, according to Bloomberg Businessweek.

In addition to Burlington Coat Factory and Price-Rite, a discount supermarket with several locations in Rhode Island, the Woonsocket Plaza also includes a Dollar Tree, Planet Fitness, Petco, Rent-A-Center, Radio Shack and a Check n’ Go. The Assessor’s Online Database also indicates that McDonald’s and a branch of Milford Federal Savings are also part of the same parcel, situated in freestanding buildings. It could not immediately be determined whether they are affected by the same co-tenancy agreements as the other stores.

News of WP Woonsocket Associates’ appeal has been brewing since Sept. 26, when Celeste was first notified in writing, but it did not leak out until after a private meeting of city officials and the Budget Commission on Tuesday afternoon. The meeting was closed to the public under a section of the Open Meetings Act pertaining to pending litigation. There is no pending litigation, but officials said the administrative appeal could evolve into a Superior Court suit, so the private meeting was justified.

The story also broke one week after Mayor Fontaine was defeated in his bid for a third term by state Rep. Lisa Baldelli-Hunt (D-Dist. 49), who will take office on Dec. 3.

The issue of retail flight from the city’s longstanding commercial strip was a major bone of contention during the campaign. Some of the businesses that have abandoned Diamond Hill Road, including Walmart and Lowe’s, have opened new stores in Dowling Village, a still-growing retail plaza just over the city line, in North Smithfield.

As he asserted during his bid for re-election, Fontaine said that the bleed-out of retail investment from Diamond Hill Road can all be traced back to the loss of Walmart in September 2011. When the store left for Dowling Village, traffic on Diamond Hill Road diminished markedly, hurting other businesses who are now thinking twice about whether they should stay.

Risking the loss of an entire strip mall, or accepting a large cut in the city’s revenue stream, will be a hard choice to make when it comes to Woonsocket Plaza, he said.

“Hopefully the efforts we’ve made to reach out to them will lead to some sort of a cooperative solution,” said Fontaine.

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