Small Business

Is Newark primed for an economic renaissance?

People in Newark march on the second anniversary of the death of 17-year-old Trayvon Martin, shot and killed by George Zimmerman in Florida in a highly controversial case that rested on the state's Stand Your Grand law, on February 26, 2014 in Newark, New Jersey.
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Newark, New Jersey, has struggled with a bad reputation for decades. A recent report calling it the worst city in America to start a business only made matters worse.

In late April, WalletHub released its list of 2015's best and worst cities to start a business, ranking the port city dead last among 150 entrants. The survey cited limited employee availability, low workforce education level and high local cost of living as several of the factors that led to the city's low placement.

There is no question New Jersey's largest city is struggling—in 2013 it had the second-worst graduation rate in the state and the third-highest murder rate in the nation—but community leaders insist you can still succeed there.

It's "a baseless claim," said Otis Rolley, president and CEO of Newark Community Economic Development Corporation (CEDC), which works to retain, attract and grow businesses in the city. "I think the analytics behind how they came to that conclusion doesn't necessary match reality. For anybody in their right mind to say that Newark is not a great place to do business; it doesn't make rational sense."

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WalletHub defended its findings. "Our conclusions are based only on hard data from sources such as the U.S. Census Bureau, the U.S. Bureau of Labor Statistics, the Kauffman Foundation, the Tax Foundation, the Council for Community and Economic Research, and the Federal Deposit Insurance Corporation," spokeswoman Jill Gonzalez said. "We are always willing and open to disclose full datasets with results to anyone who asks."

Newark is one of 35 municipalities participating in the New Jersey Urban Enterprise Zone Program, which benefits both large and small businesses by offering financial assistance, reduced retail sales taxes, and tax credit options in exchange for businesses hiring local residents and low-income individuals.

Newark currently has about 800 businesses that are part of the program, according to Rolley.

Kai Campbell, self-titled "Point Guard" of Burger Walla, is a member of the program and former senior associate of real estate for Brick City Development Corporation. The program exempted him from the New Jersey sales tax when he purchased building materials and helped with labor costs.

Since opening in December, Campbell has seen consistent growth each month for his menu of shrimp, lamb and vegan burgers infused with Indian flavors.

"The community is very strong at showing support for small and local businesses," Campbell said. "You have to respect their dollar and give them a good product at a good price, but they will go out of their way to support you. ... I would not have opened anywhere else because I knew I had the local support."

Nationally, the Bureau of Labor Statistics estimates that one-third of small businesses will close within only two years of opening. In fact, only 53 percent of small businesses are expected to survive after five years of business. In Newark, the five-year survival rate is 47 percent.

"Bankruptcy claims have decreased," said Michelle Labayen, a bankruptcy lawyer operating in Newark, "because a lot of the businesses are not even doing a filing and they are just closing the doors...they are not necessarily aware of their rights."

Labayen noted that many of the small businesses that close in the city were unable to obtain loans or hard cash lending due to aggressive lenders "choke-holding the business" and high filing fees. The largest trend of closures has occurred with independent doctors who cannot afford to keep their practices open.

"Ten years ago you wouldn't think about doctors filing for bankruptcy to shut down their practices," she added.

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In an effort to educate and sustain small businesses, the CEDC headquarters will soon be home to a small business resource center. The nonprofit organization also closed registration on May 1 for a 16 week boot camp that teaches individuals looking to start a business about business finance, business plan writing and operating sales.

"People don't move into a city that is hostile," he said in reference to large businesses like Starbucks supplier Damascus Bakery setting up shop in Newark. "Businesses are not relocating to the city that is not a place to do business."

For some, however, crime rates and poverty are major deterrents when it comes to opening or even relocating businesses.

Violent crime rates remain high within the city. In 2013, Newark had nearly 2,000 more violent crimes than the next-highest community reported by the FBI. Of the 10 categories that the FBI outlined in its report, Newark ranked number one in offenses. In many cases, the crime rates in the city were more than double that of other districts.

"If crime is your main deterrent you shouldn't do business anywhere," said Campbell, "because crime happens on the east side of Manhattan. ... [In Newark], it's random, not endemic. ... Baltimore makes Newark look like kindergarten."

Mayor Ras Baraka initiated a plan to add 150 new officers to the Newark Police Department over the course of 2015. Some 51 recruits began their six month training courses last month.

"The unique thing about Newark is that you have the opportunity to participate in a renaissance," Rolley said. "In many ways I think you have a cultural ambiance and sexiness, if I may use the word, here in Newark.

"It's an ongoing process," he added. "We're trying to take steps, not baby steps, but big boy steps."