The Outstater

June 25, 2025

Auditing Good Intentions

FOR ONCE, my mid-sized Indiana city is ahead of New York City fashion — policy fashion, at least. The Democratic nominee for mayor there is promising to build municipal-run grocery stores. Heck, we’ve had one of those for more than two years.

It was a political promise of our mayor as well. In both cases, the stated goal is to provide wholesome food options to the deserving. The unstated goal is to counteract vile, racist capitalism.

In any case, it provides us an opportunity to test the premise that urban food “deserts” are the result of racism and economic oppression independent of shoplifting, employee theft and violent street crime.

Also, we would like to know if economists are correct that the good intentions driving such projects can create unintended results — in this case, disruption in supply chains, market distortion and an invitation to corruption.

To be clear, the grocery is not designed to generate profit but rather to not lose money (not much of a distinction considering that the average private grocer operates on profit margin of 1.6 percent). The formal business plan anticipates initial losses with the expectation that the store will “eventually” reach a breakeven point.

That understood, after a couple of years it seems fair to promoters and critics alike that profit-and-loss accounting be applied so that the community has the information to ensure that the dollar value created by the store is greater than the dollar value of the community resources used to operate it. 

That is why the foundation today asked four questions of our city’s community development director, the fellow who nominally overseeing the municipal-nonprofit partnership that “owns” our full-service city grocery:

• Are there auditing mechanisms in place to determine whether the Pontiac Street Market, opened Nov. 6, 2023. is breaking even in a conventional sense, that is, including financing costs and excluding either government or charitable monies?
• Will regular financial reports be made available publicly?
• Is a record kept of shoplifting and other thefts, a particular problem in the grocery business?
• Finally, if there is a shortfall who is responsible for making up the difference? 

While we await his answers, we are boning up on other experiments with municipal-run grocery stores. 

The closest case we have found so far is the South End Grocer, a similar private-public partnership in Albany, NY. It closed in less than two years amid serious financial questions. You can read the gory details here. 

But the administration of Chicago Mayor Brandon Johnson is undeterred. It is reportedly inching toward a citywide experiment with municipal groceries. 

When a Walmart and a Whole Foods closed stores in areas of the city, the mayor blamed racism and promised to build his own. The grocers, though, say the closures were due to the stores being unprofitable because of crime. In fact, in 2023 over 2022, thefts in the so-called food deserts were up 25 percent, according to the Chicago Police Department, while robberies were up 11 percent.

Again, crime or no crime, the tax revenue and inputs used by a city-run store have alternative uses, and without proper accounting a city cannot judge the store’s value. That, of course, is what our foundation hopes to clarify in its letter to the city. We will let Peter Jacobson at the Foundation for Economic Education explain further:

“Our big fear with municipal grocery stores shouldn’t be that they’ll be run like a department of motor vehicles. Our fear should be that centrally planned businesses will destroy wealth. In centrally planned socialism there is no wealth to destroy to enable them to even keep up appearances. Since the American economy is by and large capitalistic, the city-run grocery store will be able to operate so long as it can burn the wealth created by the free market.”

Yes, keep a good grip on your wallet. — tcl

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