Thursday, 13 September 2012

Hill District supermarket is delayed by multiple challenges

The supermarket that is planned for the Hill District neighborhood in Pittsburgh has been delayed by serious challenges. The project requires several million dollars in public and non-profit financing, in addition to the usual private sector financing, but not all of the expected money has been confirmed. The opening had been expected in November 2011 but is now scheduled for spring 2013.  Neighborhood residents are angry and frustrated.

This blog reported in July 2011 on early plans for the supermarket.  I viewed the cleared building site and took a long walk through the Hill District while visiting Pittsburgh for the Agricultural and Applied Economics Association annual meeting that summer.  I was interested in this particular supermarket because it will be the subject of economic analysis in Rand's Phresh study, comparing food and health outcomes before and after the introduction of the supermarket.

The Hill District is famous for its jazz history and as the setting for the plays of the great American playwright August Wilson.  There is some question about whether the Hill District meets official definitions of a food desert, because some parts of the neighborhood do have other supermarkets less than a mile away, but these official definitions cannot easily adjust for the steep hills that give the neighborhood its name.  Some federal financing sources seek to target neighborhoods that meet a technical definition.  Any visitor on foot would immediately recognize the Hill District as an exceptionally impoverished neighborhood, which seems like a food desert in laypersons' terms.

Even as recently as September 30, 2011, a report (.pdf) from the Reinvestment Fund, a neighborhood financing initiative, seemed to expect the store to open in November 2011.  However, the report did explain just some of the challenges facing the Hill House Economic Development Corporation (HHEDC), which played a central role in organizing the supermarket project.  About $6.8 million in financing was anticipated from multiple sources, which may have been difficult to coordinate.  The Reinvestment Fund wrote, "Despite a strong board and significant community support, a project of this scale was still a daunting task for HHEDC as a small [Community Development Corporation]."

These challenges have worsened.  Julie Matthews, who had led the Hill House development arm, was fired on February 9 this year, a day before she was scheduled to make a presentation about the project's financing.  In April, Matthews filed a whistleblower lawsuit, alleging that Hill House used restricted funds from the Reinvestment Fund and the Mellon Foundation in other unspecified ways. I have no information other than the news report about this allegation.  This week I noticed that the Reinvestment Fund's website has a whistleblower policy (.pdf), making clear that people involved in projects financed by the fund, who become aware of any misuse of funds, are obliged to report the misuse.

It seems likely that the project will go forward in 2013 despite these challenges.  Politicians and institutions in both local and national food financing initiatives would lose face if this high-profile project failed.  It is possible that resolving all the problems will require even more public and non-profit financing than initially expected.

Nobody should judge major national policies from one example, but this episode is likely to contain some cautionary lessons by the time it is over.  Though I fear some readers might think me an incorrigible economist for saying so, I think we should ask why supermarket chain managers could not make this project work using purely private financing, or even with just $1 or $2 million in public financing.  Supermarket chains are astute judges of local food retail conditions and market demand.  Just to take one example, they must recognize that not all Hill District residents will use the local market even after it arrives.  Despite the very high level of poverty, about a third of local resident households own an automobile, and even more have some access to shared automobile transport for grocery shopping.  One reason a supermarket may require a large public subsidy before choosing a particular location may be that they anticipate a tough competitive environment when they start operating. 

If the public bill reaches $6 or $8 million for a single supermarket, and even then the project is stressed by financial management challenges and delays, it raises hard questions about this supermarket-centered and high-budget approach to addressing food retail problems in low-income neighborhoods.

Pittsburgh, July 2011 (Wilde)

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