A report to the Commission of Inquiry into the Impact of PredatoryBusiness Practices on New Jersey Employment and Economy

Economic Treason:Case Study of C&S Wholesale Grocersand the Destruction of New Jersey Jobs

Case Study of C&S Wholesale Grocersand the Destruction of New Jersey Jobs

Economic Treason:

A Report to the Commission of Inquiry into the Impact of PredatoryBusiness Practices on New Jersey Employment and Economy

This independent commission was formed to evaluate the economic and socialimpact of C&S Wholesale Grocers’ decision to close its Woodbridge Logisticsfacilities and Grocery Haulers, Inc, and relocate its New Jersey-bound grocerydistribution out of state.

We commissioned the enclosed report by the Center for Labor &CommunityResearch, a Chicago-based non-profit with expertise in economic analysis and research.

Commission of Inquiry Members:

Assemblyman Craig J. Coughlin (D)State of New Jersey, 19th Legislative District

Reverend Monsignor John J. GilchristPastor Emeritus of Holy Cross Church, Harrison, NJ

Professor Norman GlickmanUniversity Professor, Center for Urban Policy Research, Edward J. BlousteinSchool of Public Planning & Public Policy, Rutgers University

Mayor John E. McCormacWoodbridge Township, NJ

Professor William Rodgers, IIIProfessor of Public Policy and Chief Economist, Heldrich Center for WorkforceDevelopment, Edward J. Bloustein School of Public Planning & Public Policy,Rutgers University

Carl SpataroDirector of Economic and Business Development, County of Middlesex

Senator Joseph F. Vitale (D)State of New Jersey, 19th Legislative District

Economic Analysis and Report by:

3411 W. Diversey Ave., Suite 10 • Chicago, Illinois 60647

Commission of Inquiry into the Impact

of Predatory Business Practices on

New Jersey Employment and Economy

C&SWholesale Grocers, the country’s largest grocerydistributor and exclusive grocery supplier to A&Psupermarkets, announced on December 3, 2010,that it plans to close its Woodbridge, N.J. operationsby February 5, 2011 and put more than 1,300 NewJersey workers on the unemployment line.

In response to the announcement, this Commissionof Inquiry was formed to provide an independentassessment of the economic impact of the closureand out-of-state relocation of C&S Wholesale Gro-cers’ Woodbridge operations on New Jersey’s econ-omy. An economic impact analysis of the C&Sclosure on the local community was completed bythe Center for Labor and Community Research(CLCR). Founded in 1982, CLCR has nearly 30 yearsof experience in economic research. CLCR utilizedIMPLAN economic modeling software to calculatethe impact of the C&S closure. The IMPLAN soft-ware is based on U.S. government data and is con-sidered one of the most accurate tools forlocal-level economic modeling.

The report provides clear evidence that the C&Sclosure would have a severe impact on multiplesectors of the local economy and negatively im-pact area businesses and employment.

C&S plans to move A&P distribution hundreds ofmiles away to out-of-state warehouses and supplyNew Jersey shoppers from these locations, all whiledevastating the New Jersey economy. The closureof the C&S facility will extract millions of dollarsfrom the local economy as warehouse workers andtruck drivers at C&S and trucking firm GroceryHaulers, Inc. lose their jobs. Yet the impact of theselayoffs will extend well beyond these 1,300 workers;it will deal a serious blow to the economies of Essex,Union and Middlesex counties.

The economic impact analysis shows that the C&Sfacility closure will, in 2011 alone, cause:

• 2,114 job losses, including 818 additional joblosses in other sectors in the local economy;

• $129.9 million in lost sales for local businesses;

• $48.9 million in lost profits for local businesses;and

• A tax loss of $11.7 million for the state ofNew Jersey.

New Jersey and Essex, Union and Middlesex coun-ties cannot afford the C&S closure. The three coun-ties have already shed 56,395 jobs in the last threeyears. The closure will also have a long-term impacton local businesses and public finances. Local com-munities will bear the burden of additional joblosses; reduced business revenues; loss of govern-ment revenue; and increased government expendi-tures on unemployment benefits.

The potential impact on the New Jersey housingmarket is also troubling. As the impact analysisshows, the C&S closure will hit real estate estab-lishments hard, causing a $12.7 million loss in rev-enue in the tri-county area. New Jersey’s housingmarket is already one of the 10 most distressed inthe nation; C&S’ closure could further depress theregional housing market, harming the financialprospects of thousands of homeowners.

C&S’ decision to rapidly and drastically change thedistribution model for its largest customer, A&P,was announced days before A&P filed for bank-ruptcy protection. Moving distribution out of stateundermines the reliability of the A&P supply chain,thus also hampering A&P’s restructuring.

C&S’ decision also represents a worrisome trend,as it threatens New Jersey’s historic position asa leader in the warehousing and distributionindustries, due to its strategic location andtransportation infrastructure. New Jersey’sCouncil of Economic Advisors has identifiedtransportation and logistics as one of the keysectors of the state’s economy.

In light of these findings and considerations, we rec-ommend a 90-day moratorium on the closure ofC&S’ Woodbridge facilities, so that C&S may consultwith A&P, the state of New Jersey, local govern-ments and employee representatives to explore fea-sible alternatives to the facility closure, and toensure the long-term viability of the distributionmodel; local economic development; and safe andreliable access to food for New Jersey residents.

Executive Summary

The Economic Impact of Closing C&SWoodbridge Logistics Facilities andGrocery Haulers, Inc.The Center for Labor and Community Research has examined theeconomic impact of closing the C&S Woodbridge Logistics facilities andGrocery Haulers Inc. C&S Wholesale Grocers, the leading New York areagrocery distributor, announced these closings that will impactMiddlesex, Union and Essex counties in New Jersey.To determine the impact of the Woodbridge facilities’ closure,

including all the below projections and estimates, CLCR used theIMPLAN 2009 Middlesex, Union and Essex counties input-output modelsoftware developed by the U.S. Forest Service and maintained by theMinnesota IMPLAN Group.All economic development has a “multiplier” effect. This is because

business activity, such as a warehousing, requires purchases fromnumerous other industries, which in turn buy goods and services fromstill other businesses (see Figure 1). Also, the workers and small businessowners who receive income by working for and serving that businessactivity go out and buy goods and services.

So any major event, such as a closing, has a much greater impact onthe immediate geographic area beyond just the stakeholders within thebusiness. The closure of the Woodbridge facilities would have aprofound impact on the lives of all the residents living in Middlesex,Union and Essex counties in addition to the people who work there.The following data were provided to CLCR by the company and by

the Teamsters Union, which represents workers at C&S and GHI:The closure would directly affect 967 workers at Woodbridge and

329 truck drivers at GHI, excluding management at both sites. Theannual average earnings for the warehouse workers is $43,900, andfor the truck drivers, $60,191, excluding pension contribution from thecompany. Both numbers were lower than the industry average in thethree-county area, probably because there were a large number of newhires at the entry pay rate in both facilities in recent years.Based on the above information, CLCR has developed the following

estimates on the economic impact of closing the Woodbridge facilitieson the economy of Middlesex, Union and Essex counties:

“Multiplier Effect” Labor Demand Cycle

SupplierRetailer

WarehouseDistributor

Manufacturer

Fig

ure

1

Business Sales LossC&S does not provide actual sales figure for both facilities. However,CLCR is able to estimate the direct business loss of $170.1 million basedon the warehouse industry average for sales per worker in 2009 in thethree-county area. This estimate is very conservative because unionworkers usually are more productive than nonunion workers, and a largefacility like Woodbridge Logistics tends to have a relatively high level ofmechanization, which results in higher productivity.In addition to this direct loss in output, the closure would also create

a decline in sales for the suppliers and the service providers to bothsites. For example, equipment suppliers would sell less equipment,local office suppliers would sell less paper products and independentcontractors would lose maintenance contracts. As a result, thoseworking for these suppliers and service providers could feel the pinchof shrinking business at their companies. As a consequence, theseworkers would themselves begin to consume less.CLCR estimates this trickling down, chilling effect could amount to an

additional induced and indirect loss of $129.9 million in sales to localbusinesses (see Figure 2).

Job LossIn addition to the direct loss of 1,296 jobs at the Woodbridge facilities,CLCR projects there would be additional loss of 818 jobs (see Figure 3)because of the trickling down impact of the closure, resulting in a totalloss of 2,114 jobs.The largest number of job losses would be distributed in the

following industries: real estate establishments, 83 jobs; employmentservices, 57 jobs; other warehouse companies, 56 jobs; and foodservices and drink places, 40 jobs.

$170.1 milliondirect businessloss in thethree-county

area

$129.9 millionin lost salesfor localbusinesses

2, 114 totaljobs lost

Output Impact of Closure of WoodbridgeLogistics and Grocery Haulers (in Millions)

Direct

Indirect

Induced

Total$300

170.1

65.6

64.3

Fig

ure

2

Job Impact of Closure of WoodbridgeLogistics and Grocery Haulers

Direct

Indirect

Induced

Total2,114

1,296

426

392Fig

ure

3

Income Loss for the Self-EmployedAs all other industries, the warehouse industry supports a large numberof independent contractors, such as construction workers, accountants,electricians, etc. Closure of Woodbridge facilities would create a loss ofbusiness to these self-employed people. CLCR projects the loss to thesepeople would amount to $10.2 million, mainly affecting the following areas:

• Maintenance and repair construction, non-residential and residential;

• Real estate establishments;

• Cable and other subscription programming;

• Food service and drink places; and

• Security and commodity investment companies.

Corporate Profit LossThe closure definitely pulls down the entire business world. Because of theclosure, other businesses would suffer shrinking profits. CLCR estimatesthe owners of the companies located in Middlesex, Union and Essexcounties will see a decline of profits by more than $48.9 million, mainlyin the real estate, rental, telecommunication, and food and drink services.

Tax Revenue Loss for Federal andState GovernmentThe closure of Woodbridge facilities would also create a loss of taxrevenues for both federal and state government. The federal governmenttax loss could amount to $22.9 million, including $10.3 million of SocialSecurity tax, $9.2 million of income tax, $1.9 million of corporation incometax and $1.1 million on indirect business taxes and fees.For the state of New Jersey the tax loss could be $11.7 million, including

$3 million on household income tax, $6.8 million on indirect business taxesand fees and $1.7 million of corporation income tax.All these numbers do not include the possible increase of expenditures

for both federal and state government. Because of the job losses morepeople would seek financial aid from government. Given the current jobmarket situation, they might depend on unemployment checks for aconsiderable period of time. Families may have to use other safety netprograms such as Temporary Assistance for Needy Families (TANF) orState Children’s Health Insurance Program (SCHIP).

ConclusionC&S’s decision to close the Woodbridge facilities would have a far largereconomic impact than just on the bottom line of the company. Mitigationof the burden of plant closure to the local communities and governmentshould be taken into consideration in the closing decision-making process.

$48.9 millionprofit loss for

localbusinesses

$34.6 millionin lost incomefor federaland state

governments