Chicago inches closer to a city-owned grocery store after study finds it ‘necessary’ and ‘feasible’

CHICAGO — Nearly a year after Mayor Brandon Johnson’s administration floated the possibility of opening a municipally owned grocery store to help improve food access on the South and West sides, a feasibility study created for the city describes a municipal grocery model as “necessary, feasible, and implementable.”

The study recommends the city pursue some version of a municipally owned store or stores — and finds such stores could even turn a profit. It also suggests the city not attempt to operate a supermarket itself, but rather partner with a for-profit operator, a non-profit operator or a co-op.

Private grocers have shuttered a number of supermarkets on the South and West sides in recent years, leaving many residents with significantly diminished access to fresh groceries.

In an interview with the Tribune, city policy chief S. Mayumi “Umi” Grigsby said internal and external working groups will now work on finalizing a proposal for a store or stores. The city would then be ready to apply for funding for such a project, including from a new $20 million state grocery initiative.

“We truly believe that public options can increase access, affordability and services in areas where government really should be leaning in and leading the way,” Grigsby said.

The report says that “decades of structural racism, segregation, and disinvestment have led to diminished resident density, disposable income, and community infrastructure,” which makes it difficult to attract and retain grocery stores in certain city neighborhoods.

“Grocers are typically unwilling to take the market risk that these neighborhoods present. In the absence of private sector action or commitment to provide sustainable grocery options, it is necessary for the City to play a role in creating and sustaining grocery services in neighborhoods that lack grocery access,” the report said.

Chicago would be the first big U.S. city to open a municipally owned grocery store if it does so. Several smaller municipalities have tried their hand at public stores. Earlier this year, the mayor of Atlanta put a call out on social media for firms interested in partnering on a municipal grocery store.

The grocery business is notoriously tough, with operators forced to contend with razor-thin margins, high overhead costs and a perishable inventory.

Early detractors of the city’s initial announcement about exploring a municipally owned grocery expressed skepticism that Chicago would have the capacity or expertise to operate a store. The feasibility study reflects those concerns, noting the city lacks in-house experience in the grocery industry. The study instead recommends the city leverage public resources to partner with an outside operator that would run a municipally owned store.

“We’ve always wanted more of a collaborative scenario,” Grigsby said.

Last fall, the city said the feasibility study would be released to the public early this year; Grigsby said the city did still plan to release the study publicly but would not give a specific date when that would happen.

The study suggests that a network of three stores could provide the city cost savings based on scale. A network of stores could cost more upfront — $26.7 million, the study estimates — but the overall profit margin of the project could improve. Grigsby said the city hopes to pursue more than one store.

The report, which was created by researchers at the economic development consultancy HR&A, does not suggest specific neighborhoods or locations where a store or stores would be located. But it weighs the pros and cons of scenarios in which the city would partner with either a for-profit operator, a non-profit operator or a co-op.

For-profit operators bring grocery industry expertise and experience, the report notes, but are “profit-driven and risk-averse” and have historically struggled to operate sustainably on the South and West sides. Non-profits, the report finds, are mission-driven and therefore likely to try and stay open even if faced with budget shortfalls. Co-ops are described as strongly connected to the community but difficult to replicate and scale across multiple neighborhoods.

“It’s really not some radical departure from what we already do,” said Ameya Pawar, a former alderman and senior adviser at the non-profit Economic Security Project, which partnered with the city on the report and hired HR&A.

“It might mean free rent — okay, there’s a cost to that, certainly — but there’s also a return on that investment that you make for free rent or not paying property taxes in the form of longer life expectancies or lower rates of chronic disease. That return is exponential compared to whatever the outlay is today.”

Chicago’s mayors have historically struggled to achieve long-term success in their attempts to address grocery store access on the South and West sides.

Over the years, Chicago has attempted to attract and keep grocery stores in disinvested neighborhoods with tax incentives and grants doled out to developers, for-profit grocers and non-profits. The feasibility study recommends the city leverage its resources such as land ownership and access to public funds to partner with an outside operator. The city could, the report suggests, act as a landlord and offer rent or utility subsidies to the independent grocery operator.

Some of the models and funding options suggested in the report echo strategies the city has attempted in the past, though others are likely novel in Chicago — such as the city offering direct gap funding to the grocery operator when necessary.

In one scenario suggested in the report, the city could pay a developer to construct a new grocery store on city-owned land. In another, the city would occupy an existing retail space and then sublease it to a private operator, with the city and operator each paying portions of the rent. Both scenarios, the report notes, would require high upfront costs, though those costs could be mitigated by accessing public grant funds and tax credits.

Some of the same tax incentives or grants — such as Tax Increment Financing dollars, Community Development Grants and New Market Tax Credits — listed in the report as possible funding sources for a municipally owned store are sources the city has used in the past with mixed success.

Former Mayor Rahm Emanuel brought a Whole Foods to Englewood with the help of $10.7 million in city funding, but the store closed after only about six years in operation.

After Whole Foods announced its abdication from Englewood, Mayor Lori Lightfoot’s administration allocated $13.5 million to help grocery operator Yellow Banana reopen an Auburn Gresham Save-A-Lot that shuttered in 2020 and renovate five other Save-a-Lots it already operated on the South and West sides.

The Lightfoot administration first announced the Yellow Banana grant two years ago, but all six stores remain closed with the company now targeting opening dates throughout the fall, Save-A-Lot spokesperson Sarah Griffin told the Tribune.

Yellow Banana — which has also rebuffed criticism from community groups and residents who say the stores sell low-quality and even rotten produce and offer a poor shopping experience — has about eight months left to open those stores to remain in compliance with its redevelopment agreement with the city. Griffin pointed to construction and equipment delays and said two stores have been without power for two months following vandalizations.

The city allocated another $4.87 million grant to Yellow Banana early last year to open a new Save-A-Lot in Altgeld Gardens. That funding has yet to make its way through an approval process by City Council, according to Department of Planning and Development spokesperson Peter Strazzabosco.

The city has also provided grants to nonprofits in pursuit of grocery access. The Go Green Community Fresh Market in Englewood, for instance, opened in 2022 with the help of $1.75 million in Neighborhood Opportunity Fund dollars.

Land acquisition is a strategy the city has tried its hand at in the past.

After Aldi shuttered a West Garfield Park store in 2021, City Council authorized Chicago to purchase the property for $700,000 in public funds. The city is in the process of selecting a developer for the site, which will include a grocery store. A future redevelopment agreement with whichever developer is chosen will include the sale of the land to the developer, Strazzabosco said.

A public option would be distinguished from other strategies the city has taken in the past in part because the city would be assuming the responsibility of keeping the store up and running, said Andrea Batista Schlesinger, a managing partner at HR&A who oversaw the team that authored the report.

“Rather than figure out how to coerce the private market into serving marginalized communities, the city is entering into the industry itself,” Batista Schlesinger said.

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