I'm pretty sure I disagree with this move.
Gov. Ed Rendell announced today that the state will direct $35 million of federal Housing and Urban Development money to Al Boscov and his family to help them purchase the bankrupt department store chain.Rendell said the money will help Boscov secure the funds to complete the purchase in bankruptcy court.
Without the money, the department store chain may not be able to survive, he said. It has 39 stores and 9,000 employees in the mid-Atlantic region. Rendell said there are 25 stores and 5,000 employees in the state. Boscov's is based in Reading.
"It would be devastating in the state of Pennsylvania to lose Boscov's," he said.
The family also is receiving $6 million in federal funding from the cities of Scranton and Wilkes-Barre. Rendell said Boscov and other family members are putting in $53 million of their own equity.
Still, the family needs more funds to complete the deal. Rendell said the $35 million, in the form of a Section 108 HUD loan, is contingent on Boscov arranging the bridge financing to consummate the purchase.
I'm not trying to be heartless. Frankly, I think it would be wiser to provide $7000 in retraining loans or business start-up capital loans or additional unemployment assistance loans or some other targeted effort to help those 5000 employees of Boscov's, rather than to give loan the money to the Boscov family. I don't have anything against Boscov's, I just don't see why pouring government money into a retailer is good economic policy.
Just to repeat - they're a retailer. They don't make anything, they don't provide a unique and essential service that isn't replicated in the market. They really don't have a unique niche. Smaller and larger retailers have gone out of business, and will continue to go out of business. So why is Boscov's different for Pennsylvania's economy?
If we're going to spend $35 million, spend it on the employees, not the ownership.