Chicago has moved away from establishing government-run grocery stores, a decision that follows the recent termination of a licensing agreement between Save A Lot and its operator, Yellow Banana. This development has reignited debate about the effectiveness and sustainability of taxpayer-funded markets aimed at addressing food access in underserved communities.
The city had allocated $13.5 million towards these initiatives, which are now reportedly on the brink of closure. Experts argue that such government-backed ventures often fail because they do not align with market realities.
Rob Karr, president and CEO of the Illinois Retail Merchants Association, expressed skepticism about government-run grocery stores, stating that they have consistently failed wherever attempted. He noted that proposals in other cities, such as New York and Seattle, to artificially lower prices using general revenue funds have been dismissed as inherently flawed. Illinois itself considered and rejected a similar approach.
"So what we're seeing, particularly in New York and Seattle, are proposals to having the government actually artificially lowering prices by using their general revenue funds to make those groceries ‘more affordable,’ The state looked at that here in Illinois and dismissed it because it's inherently flawed," Karr told Fox News Digital. "It has failed everywhere it has worked because it doesn't recognize the realities of the marketplace."
The closure of seven Save A Lot stores on Chicago's South and West sides, operated by Yellow Banana, reportedly stemmed from financial challenges, including a significant decrease in SNAP purchases. This situation underscores the difficulties faced by businesses in the area.
Bryce Hill, director of Fiscal and Economic Analysis at Illinois Policy, pointed to Chicago's challenging business environment as a contributing factor to the struggles of these stores. He cited high property taxes, with commercial property taxed at a significantly higher rate than residential property. Additionally, Chicago's total sales tax, which also applies to groceries, is among the highest in the nation. Hill suggested that addressing these systemic business barriers would be more effective than investing in projects likely to fail.
"Illinois and Chicago specifically is one of the toughest places to do business. So, Illinois has the second-highest property taxes in the nation," Hill said. "They're even higher in Chicago. Commercial property here is taxed at 250% more than residential property, which makes it tougher for businesses to operate."
"So, property taxes are out of control, which affect business margins as well," Hill added. "But on top of that, for consumers and for businesses, Chicago's total sales tax, which also applies to groceries, was just at an increase on August 1st. So the total sales rate in the city is now 10.5 percent. It's the second highest of any city in the nation. If the city's serious about helping businesses and residents in need, it should start there rather than wasting millions of dollars on projects that we know are going to fail."
Previously, a Whole Foods store in Chicago’s Englewood neighborhood, which closed in 2022, had received a substantial $11 million Tax Increment Financing (TIF) subsidy from the City of Chicago. State Rep. Sonya Harper, D-CH, expressed disappointment at its closure, noting that the store had initially stated its intention was to ensure access to healthy food rather than to pursue profit.
Karr recommended that cities focus on practical measures to support grocery store operations, such as streamlining permitting and licensing processes, and re-evaluating labor mandates and property tax structures, rather than employing what he described as "gimmicks."