It has been a tough few weeks for the City of Northwood. With the loss of 185 production jobs at Hostess Brands, Inc., the city was already facing a $125,000 loss in yearly income and other tax revenue. Then word came The Andersons will close.
For a city that has been slowly recovering from the 2008 recession, which sparked layoffs and budget cuts, the loss of The Andersons and Hostess are another setback. The city will see a cut of about $43,000 per year in income tax and other tax revenue when The Andersons closes. Combined with the planned liquidation of Hostess Brands, Inc., the city will lose a total of $168,000 annually in income and other tax revenue.
“We are going to have to cut back,” said City Administrator Bob Anderson. “Not in personnel, but other stuff. We have not discussed any personnel layoffs. This is a major issue. Not just in the number of jobs we are going to lose. Many of the employees from The Andersons and Hostess live here and spend their money here. We are concerned about how this is going to affect the other businesses.”
Northwood Mayor Mark Stoner said he will meet with Ken Yant, the city’s finance director, to discuss the financial condition of the city before any decisions are made about budget cuts.
The city also has other issues to consider besides finances. In October, Toledo Edison cut off the electricity to the dilapidated mall, including service to the pump in a large retention pond located on the property.
The city has made arrangements to pay the electrical service to keep the retention pond running and will try to recoup the payments by assessing the mall owner’s tax bill.
“We have contracted with Edison to make sure the retention pond does not overflow into the surrounding subdivisions, Sears and The Andersons. We cannot allow that to happen,” said Anderson. “We feel it is necessary to keep that pump operable. If it rains heavily or there is a lot of runoff, that pump has to take care of the overflow.”
Meanwhile, Anderson said he will be meeting with members of city council’s Economic Development, Finance and Public Safety committees to address public health and safety concerns with the mall. There will also be a discussion with Law Director Brian Ballenger about any legal action that can be taken against the mall owner.
“We are talking about public safety and health,” said Anderson. “The mall is not only a nuisance property, it is also a public health and safety issue. Someone is going to have to do something about this. We do not want to lose Sears as well.”
Anderson has spoken with mid level management at Sears, and has been told the store will not be closing.
Dan Anderson, president of The Andersons Retail Group, told the administrator that the company had been searching for a new location in Northwood and Oregon for the last two years.
“He told me there are no large retail spaces available,” said the administrator. “There may be a space at Great Eastern, but a new building would have to be built there, which would make the rent too high.”
He plans to speak with owners of Great Eastern to try to facilitate a plan to bring The Andersons back to the east side.
“We can offer tax incentives to them if they build a new building. In turn, they should be able to pass the savings onto The Andersons. We will try to make it economically feasible. We, all of us, need to find them a good place in the City of Northwood so they can restart their business.”
And although the city lost Rite Aid, which closed its store at Great Eastern a couple of weeks ago, it got a bit of good news. Banner Mattress and Furniture, formerly located on Navarre Avenue in Oregon, will be moving into the former JoAnne Fabrics building at Great Eastern in the coming months.
The administrator had hoped that the current arbitration process between Hostess, its lenders and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union would go well.
The entities had agreed to private mediation at the request of Bankruptcy Judge Robert Drain of the Southern District of New York.
“If it saves 184 jobs here in this city, that would be wonderful,” Anderson said. But at press time on Wednesday, mediation talks between the national company and the union broke down, according to the Reuters news service. The company is expected to proceed with a plan to go out of business.
“We still have some hope the economic climate will brighten,” said Anderson. “Jeep is retooling so, hopefully, Johnson Controls will bring more people in as well. We have a great area that is attractive to business. We do have to address the mall and that area, but we have a good transportation system around us, good city services, and a good school system. Northwood is a great location. We have a lot going for us.”
Did city do enough?
Northwood Councilman Dave Gallaher for years has urged the city to create the position of economic development director to aggressively recruit new businesses.
Gallaher also believes an economic development director could help keep businesses such as The Andersons from leaving the city.
“We’re missing an economic development arm to the city. And that’s what’s so frustrating with The Andersons situation,” said Gallaher, who is also chairman of the city’s economic development committee. “I’m sure when it comes up at a meeting, it will be said that we didn’t find out about it until the last minute and there’s nothing we can do about it. And it’s just frustrating to hear that because I think the city has a very passive economic development program. We hope that people will come and locate in Northwood. Other than that, I’m not sure we’re really out there doing anything encouraging anybody to look at us. And in this atmosphere, in today’s times, you have to be at least trying to do something on your own.”
There are two ways to generate revenue to fund city services, he noted. “One is to raise taxes, and the other is to build the tax base.” Voters in November 2010 defeated a proposed .25 percent income tax increase on the ballot. The additional revenue would have provided funds for capital improvements, capital investment and operating expenses following 18 months of drastic cuts the city made in personnel and services as a result of reduced revenue due to a poor economy.
“So we have to make economic development a top priority,” said Gallaher. “The daily operation of the city is up to the mayor. Until it becomes clear to him that economic development is important, you’re just not going to see anything happen.”
Stoner said he doubts an economic development director could have kept The Andersons from closing. He said that he, three different city administrators, the law director and the economic development coordinator have met many times this year with company officials.
“We tried to open lines of communication. We tried to do everything we could to assist them,” said Stoner.
There’s little the city can do, he added, in such circumstances.
“We don’t have money that we can subsidize a business with,” said Stoner.
The city has kept track of the condition of the mall since it was closed earlier this year due to mold and other health related issues, he said. In the spring, the owner of the mall was behind in back property taxes, he added, and the facility was about to be auctioned off by the sheriff.
“We had some people who were really interested in purchasing and demolishing the mall because there is some money to be had in tearing it down with the raw materials and metals in there. But then the owner became current on his taxes and that was it,” said Stoner. “We have not heard from the owner since.”
Oregon Mayor Mike Seferian also said communities are limited in what they can do to keep business in town due to the poor economy.
He didn’t think Northwood officials could have done much more to keep the store in town.
“The Andersons were there because the mall owners gave them the spot cheaply - $10,000 per month in rent - to help draw people to the mall itself. I don’t think anybody could have done anything. There is no one to blame. When it opened, it was state of the art and a hopping place. Then the mall became obsolete.”
Seferian said he and City Administrator Mike Beazley have spoken to The Andersons Retail Group a number of times about finding retail space for the store in Oregon. The Kmart store on Navarre Avenue was the only building in the city that fit The Andersons needs.
The former Food Town store on Navarre would not work, he added, because it did not have enough storage. The owner of the building had offered to tear it down and construct a new store for The Andersons, but the rent would have been much higher than what was being paid to the owner of the mall.
“The Andersons was worried they would not turn a profit if they had to pay much more in rent,” said Seferian. “We thought they would do more business closer to town than where they were, but their rent would have quadrupled.”
Seferian said the shops in the mall benefited from customers drawn to The Andersons when the store first opened there 24 years ago. When the mall started to lose stores in the last several years, the number of customers diminished substantially.
“The Andersons told us there were months the store did not turn a profit even with the low rent,” Seferian said. “They were getting by because of the cheap rent.”
Seferian added that Oregon would love to have The Andersons, a Target, and a Kohl’s department store, but only when the city and the surrounding communities are ready to support that type of growth.
“The demographics are not there yet. We can’t go from a city of 20,000 to 40,000 overnight. We don’t want them to come to Oregon and not be successful. We don’t want a store to come in and fail. We want stores like Kohl’s and Target to come when they can be successful here. We could not afford to have them close up. We have to be in shape to handle what comes our way,” he said.
The stores would also strain city services, he added.
“Without additional business and industry to help with those costs, we would be sunk.”
Still, Seferian said the city would welcome The Andersons.
“We are still talking to them about possibly giving them a site to build on and a few deals,” Seferian said. “We know it is a long shot. If we can work a deal, we will try. We want them to know they have no hurdles in Oregon. If there is something we can do for them, we will be very happy to do it, but we will respect their decision.”