New York City has already declared its municipal grocery experiment a success before a single store has opened, with City Hall saying its project “will prove” government can make food more affordable through the “efficient use of public resources.” But while Mayor Zohran Mamdani campaigned on city-owned stores, the city now wants private grocers to operate them—and to reveal what taxpayers will spend to make its fantasyland model “work.” Apparently, the first rule of municipal socialism is to invite profit-seeking grocers to explain how grocery stores work.

The New York City Economic Development Corporation (NYCEDC) issued a 44-page request for proposals last month inviting grocery stores to bid to operate one or more of the five stores it plans to open across the city. It intends to achieve the promised affordability by mandating a 30 percent discount on core items, and it predicts shoppers’ total bills will fall by 15 percent. But it has not defined those benchmarks, nor has it disclosed the annual taxpayer cost. Having written the conclusion, NYCEDC is asking private grocers to fill in the missing economics.

Thirty percent below what?

The first problem is the number on which the whole sales pitch rests. A “core basket” of fresh food and other staples must sell for an average of 30 percent below retail. But 30 percent below which retail price?

The RFP says the comparison may use “available market data,” the operator’s advice, “and/​or other observable data points,” while admitting that the pricing methodology will be finalized only after operators have been selected. Companies must therefore bid on a discount for which the measuring stick doesn’t exist.

Some contract details naturally come later. Still, the city cannot meaningfully compare bids until it defines what constitutes an equivalent product and explains how factors such as temporary sales and actual buying patterns will be treated. Comparing private-label peanut butter with a premium national brand could yield impressive paper savings without showing that shoppers pay 30 percent less for a comparable item. Until those choices are made, “30 percent below retail” remains a campaign slogan.

The public store’s private machinery.

City Hall fixed the discount before knowing what it would cost to deliver. Mamdani campaigned on city-owned stores relieved of rent and property taxes, with centralized distribution holding down prices, while leaving day-to-day operations conveniently vague. The RFP resolves that ambiguity with stores that are “publicly funded, privately operated.” The promised central warehouse has vanished.

Private operators will handle everything from sourcing food and managing logistics to hiring workers and running the stores. City Hall will furnish the sites and buildout, control prices and branding, and negotiate the subsidy. So much for the revolution.

That’s what happens when a pitch rests on a childlike theory of retail in which food appears on the shelf and whatever remains after checkout becomes the owner’s profit. Remove rent and profit, the fable goes, and deep discounts should follow. The RFP reads like a guided tour through everything that theory wished away, from spoilage and supplier contracts to refrigeration, security, and inventory. All of it lands on the operator, leaving City Hall to dictate the discount and haggle over who absorbs the loss.

The taxpayer’s open tab.

Outsourcing the work doesn’t make the campaign arithmetic add up. The administration says that a 30 percent discount on core basket prices will lower a shopper’s entire grocery bill by 15 percent. If core items make up about half the bill, a $100 basket at market prices would come out to roughly $85 after the discount. The exact shortfall will depend on volume and sales mix, yet the RFP offers no estimate of the subsidy needed after the city covers occupancy costs.

My Cato colleagues Scott Lincicome and Ryan Bourne pointed out last year that supermarket margins leave little room for the discount Mamdani promised. The Food Industry Association reports a 2.1 percent average net profit margin in 2025, compared with just under 1.5 percent over the past three decades. Erasing all profit would therefore free only about two cents per dollar of sales. “Free” occupancy helps the operator by moving those costs onto the public ledger. Any remaining shortfall can be covered by an “affordability payment,” the RFP’s polite name for a subsidy.

The city has committed $70 million for construction and initial fit-outs at the five stores, a capital expense rather than annual operating support. The agreements will last at least 10 years, and the RFP tells bidders to include the discount and “best-in-class” worker pay and benefits in their annual subsidy estimates. Those estimates would also account for possible community programs, such as nutrition workshops or cooking demonstrations. It offers no formula or ceiling and allows bidders to provide a range for the annual subsidy each location would require.

The RFP scores bids on a 100-point scale, but the requested annual subsidy accounts for only 20 points. Qualifications receive 45 points, and another 35 assesses how the bidder proposes to stock and staff the stores and advance City Hall’s broader policy agenda. The bidder asking taxpayers for the least money needn’t win. Choosing an experienced grocer over a lowball artist can be sensible. Even that 20-point cost comparison, however, rests on mushy inputs.

Bidders may propose alternative core basket categories and calculate their subsidy requests using a retail benchmark NYCEDC has yet to define. They may also submit a range of figures rather than one number. The RFP promises full credit to the “lowest” request, but a range has no single price to rank. A bid of $5 million to $10 million could look cheaper or more expensive than one seeking $7 million to $8 million, depending on how NYCEDC scores them.

The proposal criteria also reward an ideological wish list, with its costs folded into the payment request. The RFP’s bland reference to “wider policy goals” encompasses ambitions that extend well beyond cheaper groceries. It requires undefined “best-in-class” pay and benefits, including health coverage, plus what it calls a “labor peace agreement” to avert strikes or other disruptions if a union seeks to organize a store. It favors local or sustainable sourcing and invites community programming, while telling bidders to include those ambitions in their payment estimates. Whatever their merits, the additions turn a grocery store into a leftist policy Christmas tree, with taxpayers paying to keep it lit. As Bourne and Nathan Miller observe, the redesigned plan is mainly a subsidy with a municipal label.

Even after an award, NYCEDC must decide who bears the losses when costs or demand exceed projections. A fixed annual payment would give taxpayers a predictable bill and reward cost control, though the grocer would bear the overruns. Reimbursing actual deficits would shift that risk to taxpayers and weaken cost discipline. It would also require the city to determine how much of an operator’s shared supply chain and back-office costs are attributable to the municipal stores. A hybrid could establish a base payment that adjusts when specified costs or losses move beyond an agreed range. Final contracts normally settle such details. City Hall has nevertheless declared the project an efficient use of public resources before choosing a basic payment structure. The shopper’s discount has been decreed, while the taxpayer’s price remains blank.

Somehow, amid all this uncertainty, the RFP still finds room for limited-edition merchandise developed with New York designers. The subsidy formula may be blank, but at least the tote bags are on schedule.

The rush for subsidized groceries.

Selling core basket goods far below surrounding prices will raise demand and create an obvious resale opportunity. The RFP anticipates excessive bulk purchases, yet it demands full shelves and calls for “robust demand management.” The voluntary savings card is supposed to track individual purchases so operators can identify repeat bulk buyers and help enforce any limits, though shoppers needn’t even use it. City officials say there will be no residency or income verification. The city thus has no reliable way to identify repeat bulk buyers.

A subsidy that rises with sales raises the taxpayer bill as demand increases. Capping it would make purchase limits or empty shelves more likely. If “robust demand management” means limits on subsidized staples, City Hall should drop the euphemism and call it rationing.

Cheaper groceries without City Hall.

The RFP treats limited grocery access and inadequate purchasing power as one problem. A new store can improve access in the area, but five fixed locations will primarily benefit their surrounding neighborhoods. As an income-assistance measure, a universal discount also subsidizes shoppers who do not need assistance. Neither concern establishes a case for a city-branded chain backed by public capital and annual subsidies for at least a decade.

One week before releasing this RFP, Mamdani announced a separate citywide package of more than 50 small-business reforms. The administration conceded that opening delays and inconsistent enforcement make it harder for food businesses to start and survive. Its own diagnosis points toward lowering barriers for all grocers.

Then there is the larger irony Matt Yglesias identifies. New York politicians and labor unions spent years fighting Walmart’s entry, even though its scale and logistics enable it to offer low prices without asking City Hall to reimburse losses on discounted goods. The city now plans to spend at least $70 million, plus annual subsidies, to construct an ideologically acceptable version of the low-cost model that its supposedly enlightened political class opposed.

Five stores will not transform New York’s grocery market, although they could pull business from nearby unsubsidized stores that must cover their own occupancy and construction costs. Among the performance measures the RFP identifies, none track closures or lost sales at surrounding grocers. Nor, of course, does it identify the taxpayer cost per household helped.

The municipal stores may indeed produce cheaper receipts. Any government can make $100 of core basket goods ring up at $70 if taxpayers absorb enough of the cost. The meaningful test is whether those benefits justify the full public expense and any disruption to nearby grocers. The RFP leaves the first undefined and identifies no measure of the second. It treats a discounted receipt as evidence of efficient government.

This is Peter Pan economics in procurement form, asking New Yorkers to believe in a 30 percent discount while taxpayers furnish the pixie dust. City Hall can lower the number on the receipt, but it can’t make the cost disappear.