Property Tax Post: Can Property Tax Credits Be an Oasis for Those in Food Deserts?

The Maryland Legislature enacted S.B. 541 last week, which authorizes the Mayor and City Council of Baltimore City to grant a property tax credit against the personal property tax imposed on personal property of a supermarket that completes certain construction and is located in a “food desert retail incentive area.”

The credit would apply to the construction of a new supermarket in such an area, or to the substantial renovation of an existing supermarket. Further, to qualify, the supermarket must contain all major food departments: produce, meat, seafood, dairy and canned and packaged goods; and must receive more than 50 percent of its sales from food sales and devote more than 50 percent of its floor space to food sales.

The bill leaves it to the Mayor and Council to define “food desert retail incentive area,” but some guidance from the U.S. Department of Agriculture may be instructive.

The USDA defines “food deserts” as:

Urban neighborhoods and rural towns without ready access to fresh, healthy, and affordable food.  Instead of supermarkets and grocery stores, these communities may have no food access or are served only by fast food restaurants and convenience stores that offer few healthy, affordable food options.

The USDA estimates that 23.5 million Americans live in food deserts. In addition to the above definition, food deserts are often defined by the combination of high poverty rates and relatively far distances to the closest supermarket (one mile for urban areas and 10 miles for rural areas).

Based on the USDA’s food desert locator tool, and its standard definition of food deserts using a one-mile distance to the nearest supermarket for urban areas, Baltimore’s food deserts are represented by the green areas in the map below.

Source: USDA Food Access Research Atlas

However, the city may want to consider using a shorter distance when defining “food desert retail incentive area” to increase the impact of its new credit. For example, changing the default on the USDA’s tool to ½ mile or to being based on vehicle access rather than on distance alone, the food desert areas expand dramatically, as represented by the orange and yellow shading, respectively, in the maps below.

Source: USDA Food Access Research Atlas

Source: USDA Food Access Research Atlas

This isn’t the first time that a tax credit has been used to try to combat the problems associated with food deserts. As of April 1, the Navajo Nation has begun to impose an additional sales tax on junk food and sugary beverages, while exempting fresh fruits and vegetables from tax, according to NPR’s “the salt” blog.

The Navajo Nation has been identified as a food desert by the USDA, and up to 90 percent of inventory at local stores may be made up of junk food, the NPR blog notes. Further, for the entire reservation, which consists of 27,000 square miles across three states—roughly the size of West Virginia, there are only 10 full-service grocery stores.

And after Berkeley, Calif., became the first city in the country to enact a tax on soda late last year, lawmakers in Connecticut, Illinois and Vermont are also considering similar measures, all based on public health concerns.

Attempts have also been made at the federal level, but with little success. In 2009, the Food Desert Oasis Act was introduced, which would have increased federal tax credits for rehabilitation expenditures, among other tax benefits, for qualified expenditures by grocers in food deserts. Although the bill was never enacted, it did specifically list several American cities as food deserts, notably including many of the largest cities in the country: Atlanta, Baltimore, Chicago, Cleveland, Detroit, Houston, Kansas City, Los Angeles, Philadelphia, San Antonio and Washington D.C.

If Baltimore finds success with its foray into trying to use property tax credits to incentivize supermarkets to locate to food deserts, there will be no shortage of other major cities that can follow in those footsteps.

Continue the conversation on Bloomberg BNA’s State Tax Group’s LinkedIn page: Can property tax credits for supermarkets in food deserts be a more popular incentive than soda taxes?

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