Markets 
The Mamdani administration left scores of questions unanswered Wednesday about the mayor’s plan to open five city-owned grocery stores — exposing major gaps in the taxpayer-backed undertaking.
An Economic Development Corporation official, during an online info session, was forced to admit to prospective partners that the city had yet to figure out simple logistics, including how to reimburse operators or pay store employees.
The EDC official even confessed the city didn’t know how it would calculate the cost of the supermarkets’ signature “core basket” of essential goods, which Mayor Zohran Mamdani has said would be sold at 30% “below typical retail prices.”
“The city does not have the expertise or experience in running stores, and so we’re looking to start to identify operators to integrate with us,” said Jamie Horton, VP of strategic initiatives and business operations for EDC, a quasi-public nonprofit funded by the city.
Horton fielded questions from about a dozen attendees during the 45-minute Zoom call about the EDC’s 44-page “request for proposals” seeking bids from prospective operators to run the shops, which are estimated to cost $70 million to build out.
Industry experts have panned Mamdani’s proposal as half-baked, saying the young socialist’s campaign vow to bring New Yorkers cheaper groceries via five “publicly-funded, privately-operated” supermarkets didn’t make sense in the real world.
“There are big unknowns,” said Avi Kaner, the former owner of Morton Williams. “The way this [RFP] is structured is so risky, and the reward is so low, it would literally be a foolish investment.”
Kaner, who wasn’t at the Wednesday morning sesh, added: “The whole concept is foolish because it does not achieve the goal.”
“If the goal is to reduce the cost of groceries citywide, you don’t do it by adding five small stores. If you want to lower the cost of groceries, make it cheaper to do business in the city.”
How will discounts be calculated?
Asked by one possible operator about how the market rate of groceries would be calculated, in order to then slash prices by nearly a third, the EDC offered up a word salad response.
“There’s a consideration of access to market data, access to… or sorry, a methodology built on looking at kind of broader market data if the operator has existing stores,” Horton said, before admitting the methodology wasn’t complete.
“The 30 percent- the exact retail benchmark that we’re setting against is, again, to be developed in the exact methodology,” he said later, when pressed.
How will the city offset the 30% discount?
While operators will be spared having to pay property taxes, the EDC conceded it didn’t know if that would be enough to offset the cost of the discounted goods.
“How will the city determine if the capital rent and tax relief is not enough for the operator to provide a 30 percent reduction of core basket costs or is the city guaranteeing the offering of that 30 percent?” one potential vendor pressed.
Horton said he didn’t know, and noted the EDC expected to learn during the RFP process whether the city would need to cough up more subsidies.
“So the RFP asks respondents to estimate the discount level that could be provided through just the capital rent, and tax relief,” Horton said.
“And then if that discount level is less than 30%, we would ask respondents to estimate how much additional operational subsidy they would require to provide that 30% discount.”
How will the city handle price fluctuations?
Horton was asked a number of detailed questions about how the city would account for unknown variables that could drive up costs, or how it planned to pay out the operator to cover potential losses.
“If whole costs spike mid-month — e.g., produce after a weather event, delayed delivery — does the operator absorb the margin loss or is there a subsidy true-up mechanism?” one person asked.
But again, the EDC had no answer.
“This is, again, one of those issues that we would work with the operator and selected operator kind of through the program development and operator agreement to work through that,” Horton said.
What about employee pay?
Another attendee asked: “Does EDC intend to set wages or wage ranges? If so, are those currently known?”
But Horton kicked the can, saying just “we can provide more detail in the fall Q&A,” referring to another upcoming meeting.
The RFP also calls for workers to get a share of the profits, but the EDC had no answers on how that revenue sharing would work.
Read the full article here
