Manhattan Rent Tax Killing Borough's Supermarkets, Officials Say

NEW YORK CITY HALL — An outdated tax is leaving Manhattan's supermarkets out to rot, officials in the borough said Monday. Borough President Gale Brewer called for the City Council to exempt supermarkets from paying the commercial rent tax, which market owners say makes it tougher to keep stores open as other costs skyrocket.

"It has outlived its purpose, and now it's crushing our local businesses," Brewer said at a news conference Monday outside City Hall.

Only businesses in Manhattan between Murray Street and 96th Street pay a tax of up to 3.9 percent on their rent if it costs at least $250,000 a year. The city first imposed the tax in the 1960s but it was repealed everywhere else years ago, officials said.

City Councilman Corey Johnson (D-Chelsea) introduced a bill this spring to end the tax for supermarkets. It would cost the city about $5 million in revenue toward its $85 billion budget, Brewer said.

Brewer's office counted 132 supermarkets in that Manhattan corridor as of summer 2016. It's uncertain how many the rent tax has forced to close. But it's a significant financial hit to stores that operate on razor-thin profit margins to give neighborhoods access to fresh, healthy foods, officials and market owners said.

Paul Fernandez had to shutter Met Foods market in Little Italy in late 2016 after 25 years in business. The more than $30,000 in rent tax he was paying each year could have helped him keep the store open, he said.

"There will be more closing, and commercial rent tax would be able to help us at least ... give us the opportunity to remodel our stores and stay competitive," said Fernandez, who's also a leader in the National Supermarket Association, a trade group.

Some advocates say the rent tax issue is a distraction from the Small Business Jobs Survival Act, a Council bill that would provide protections for small business owners who see their rents hiked, giving them more power to negotiate fair leases. The bill has been introduced several times since the 1980s but has not had a hearing since 2009.

"This is really the only way to get at the root cause," said David Eisenbach, a Columbia University history professor who ran unsuccessfully for public advocate this year. "This is what every small-business owner will tell you — it's all about the rent."

Brewer, who said she wrote the Small Business Jobs Survival Act in 1985, said the two issues aren't mutually exclusive.

"I don't want it to be pending for another 25 years," she said. "This tax should go for the supermarkets no matter what."

(Lead image: Manhattan Borough President Gale Brewer calls for the City Council to end the commercial rent tax for supermarkets on Monday. Photo by Noah Manskar)