THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, May 18, 1996 TAG: 9605180274
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY ALEX MARSHALL, STAFF WRITER
DATELINE: NORFOLK LENGTH: Long : 101 lines
Nordstrom, the luxury department store that is to be the centerpiece of the planned MacArthur Center Mall, is balking at stiffer hiring requirements being imposed by the federal government on a key $33 million package of loan guarantees for the downtown project.
Last month, Henry G. Cisneros, secretary of the department of Housing and Urban Development, said Nordstrom must promise 51 percent of the jobs at its planned Norfolk store to people with low incomes, or his agency would not issue the government loan guarantees.
Previously, HUD had only required that 51 percent of the Nordstrom jobs be ``made available'' to the poor.
But a senior executive with the Seattle-based retailer said Friday that the firm cannot allow HUD to dictate his company's hiring.
``Our employees are the key to our business,'' said David Mackie, vice president of real estate for the store, which is famed for its customer service. ``Who we hire is vitally important to us. We have no issue with making 51 percent of the jobs available, but we simply can't allow someone else to usurp our hiring process.''
Mayor Paul D. Fraim said Friday that with or without HUD, the project would go forward on schedule.
``This project is happening,'' Fraim said. ``It won't be delayed at all.''
However, the cost of the project could increase without the federal guarantees, Fraim said.
Cranes and other heavy machinery are on the 20-acre site, and workers are driving test pilings to determine the best methods to build the mall on the marshy soil beneath the parking lots.
The city is borrowing $33 million from private banks to build the Nordstrom store, which was one of the incentives used to attract the store to this market.
Under the HUD plan, the federal government would guarantee these loans by pledging the city's community development block grant funds. If the mall failed and the city defaulted on the loan, HUD would repay the banks by diverting the city's low-income housing money.
This arrangement allows the city to borrow the money at low interest rates without issuing general obligation bonds and pledging the full faith and credit of the city.
The city is putting roughly $100 million into the $300 million mall. But most of this is not backed directly by the city's taxing power. The biggest chunk - $50 million for parking garages - is being funded through revenue bonds to be repaid through parking revenue.
The proposed loan arrangement had already been approved twice by HUD, but not completed. The new conditions came as a surprise to Nordstrom and city officials, they said.
With the HUD plan in jeopardy, the city is already making plans to borrow the $33 million without HUD's participation, Fraim said. The city would have to pledge some sort of collateral, but this is already the case with HUD, Fraim said. The city would not issue general obligation bonds, Fraim said.
The mayor said an agreement still might be reached with HUD within days.
``We're trying to find ways that HUD is comfortable and we can still make the loan occur,'' Fraim said. ``The folks at HUD appear to be very cooperative. But time is moving on, and we need to have some closure.''
If private banks lend the city, or more specifically the Norfolk Redevelopment and Housing Authority, $33 million without HUD's participation, then no part of the project would be required to pay special attention to low-income residents.
Negotiations have been ongoing between city, Nordstrom, and HUD officials to resolve the conflict. The staffs of Sens. Charles S. Robb and John W. Warner, and Reps. Owen B. Picket and Robert C. Scott, have been involved as well.
Whether HUD might relax the loan conditions is not known. HUD officials could not be reached for comment this week.
The mall will provide roughly 3,000 permanent jobs, city officials say. Only about 10 percent will be at Nordstrom. The others would be in the 100 specialty shops and a Dillard's department store.
Although HUD requirements involve prospective workers' income, not their race, Nordstrom officials said the chain has a track record of hiring minorities. Of Nordstrom's 33,000 employees around the country, 34 percent are minorities, a company public relations official said. This compares to an industry average of 21 percent, the official said. Of the firm's management, 21 percent are minority versus an industry average of 13 percent, the official said.
Nordstrom is one of the most sought-after luxury department chains in the country. It has 81 stores in 16 states, most in the West. The firm has 17 stores scheduled to open in the next three years, including Norfolk's in 1998.
Nordstrom has been involved many times in projects with public funding, Mackie said, but none with explicit hiring conditions imposed.
``How the city finances the project is up to the city,'' Mackie said. ``It is only an issue with us when it impacts how we do business. We're still very excited by the project, and we are proceeding on course.''
The Norfolk Redevelopment and Housing Authority is scheduled to turn over the building site to private contractors for Taubman Inc., the mall developer, June 15.
KEYWORDS: MACARTHUR MALL DEPARTMENT STORES by CNB