WebVan Puts Stock in the South Bronx

Webvan Group Inc. is bringing its online grocery and drugstore delivery services to the South Bronx region of New York City, unveiling new opportunities for an area that has been in financial distress.

WebVan’s decision to move into the South Bronx underscores the multiple advantages for corporations to expand beyond traditional commercial districts. While the company has found a strategic location central to roadways that will allow it to better serve consumers in the New York City/Westchester area, it also is taking advantage of lucrative tax incentives and an opportunity to highlight its community outreach initiatives.

“We become very active in the communities where we do business,” said Amy Nobile, manager of public relations, WebVan.

WebVan’s 400,000 square-foot facility will serve as the main distribution center for a hub-and-spoke system that promises to create at least 900 jobs. The building is the size of four-and-a-half football fields. One distribution center alone does the volume of 18 supermarkets, Nobile said.

“Additionally, we will also operate out of several sub stations as part of the distribution chain,” she said. “Positions to be filled will include courriers, who are the face of the WebVan, pickers, packers, managers and directors.”

It is expected that the company will open its doors during the first quarter of 2001.

Charles Flemming, director of research and real estate, Bronx Overall Economic Development explained that WebVan’s announcement culminated a eight-month courtship by the borough. But while the strategic and financial reasons behind WebVan’s endeavors are readily apparent, the impact of its outreach is more esoteric. And community leaders’ sentiment remains cautious albeit optimistic about the economic prospects for the region.

“It is good to get people in a community of color exposed to dot-com companies and offer them challenges and opportunities. It is wonderful that an equity culture is moving to the South Bronx. Offering industrial job opportunities with a stock option package is truly transformative,” said Omar Wasow, executive director of blackplanet.com, a leading Web site aimed at the African-American community.

According to Flemming, the company has received several New York City Industrial Developmental
Agency (IDA) incentives. It is getting abatements on real estate taxes, full land taxes, building taxes and sales tax exemptions as part of its prenuptual agreement. Since it has a 10-year lease, with two five-year options to renew, the company will have about $10 million in savings over the next 10 to 20 years.

Further, since the WebVan building is located in the New York/Bronx County Empowerment Zone, the company receives a tax write-off by hiring employees from that zone. “This could result in a a federal savings of $3,000 and a state savings of $1,500 per employee,” Flemming said. Stock options will be available to all employees. The Bronx Overall Development Corp. is assisting the online retailer in hiring nearby residents.

“What is important to us is to that the South Bronx, an area that has been much maligned, becomes a place where people want to work and live,” Flemming said. “Presently, half of the Bronx residential labor force works outside of the Bronx. We would like to see this area become a place where people can make a decent wage. Our definition of a decent wage is about $9 an hour, but WebVan has gone well above that figure.”

It is estimated that the average salary will be around $41,000 per year.

“The New York Times article [about WebVan] quotes salaries of $30,000, or $41,000 a year, stock options,” said Matthew Lee, Esq., executive director of Inner City Press/Commun

ity on the Move and Inner City Public Interest Law Center. “These type of jobs — and compensation — would be of much benefit in the South Bronx, which has been ‘redlined’ by financial institutions. For example, in the South Bronx there are nearly 20,000 people per bank branch, while the figure in Manhattan is one bank branch for every 3,000 people.”

Lee’s organization, a non-profit group, has relied on the Community Reinvestment Act to get four banks to open new branches in the South Bronx, but disparities remain. On top of the check cashers and pawn shops, the area is littered with second- or third-tier financial institutions often associated with predatory lenders.

As upbeat as today’s development was, the simple fact of life in the region has proven to keep euphoria to a temperate level. There have been other high-profile job creation attempts in the South Bronx that have not worked out as well as anticipated, Lee explained.

“For example, more than a dozen square blocks in the Bathgate neighborhood were cleared for an industrial park (the Bathgate Industrial Park). Many of the jobs there, though, are at or near minimum wage, with frequent unpaid layoffs.

“While the South Bronx, with nearly 500,000 people, has slowly been rebuilding from its nadir in the late 1970s and early 1980s, it is still a very low-income community,” he said.

And Wasow noted that while corporate developments like WebVan do try to bridge the so-called Digital Divide, the root cause of the problem transcends corporate responsibility.

“It is unlikely that someone hired as an errand boy will be promoted to computer programmer,” he said. “The equation in our economy is that the person who thrives best has a college degree. There is an ‘educational’ divide out there that needs to be addressed in order to truly benefit the community as a whole.”

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