Obama plan seeks to bring grocers to ‘food deserts’

March 2, 2010

California advocates for using government grants and loans to bring grocery stores and other food outlets to local communities are hoping that their efforts will get a jump-start from an Obama Administration proposal to spend $400 million to spur investment in inner cities and rural areas.
The Obama initiative, which is included in the president’s budget pending before Congress and is a top priority of First Lady Michelle Obama, would create a new fund to give one-time grants and loans to grocers that locate in under-served communities.
The proposal is modeled after a Pennsylvania program that leveraged $30 million in state seed money to help spark $190 million in total investment that resulted in the opening of 83 supermarkets and fresh food outlets in the state, according to PolicyLink, an Oakland-based research group that tracks public policy solutions. About 400,000 people live in the areas served by the new markets.
“In California, we have a big problem around areas that lack access to healthy foods,” said Judith Bell, PolicyLink’s president and an advocate of the program. “We tried to move legislation to replicate this model in Pennsylvania that has been so successful, but the state couldn’t come up with the dollars to the start the public-private partnership and start the leveraging that has been so key in Pennsylvania.”
California already has a growing network of entrepreneurs, non-profits and community activists who are eager to work on grocery store projects if the seed money can be found.
The Low Income Investment Fund, based in San Francisco, is already working on the Pennsylvania project and could be a source of financing in California as well.
“We have the capacity to do this,” Bell said.
One characteristic of the Pennsylvania project that appears to have helped make it a success is decentralization. Rather than the state dictating how the seed money would be spent, it asked the grocery industry, community leaders and others to identify the barriers that kept stores from opening in low-income communities and then find ways to remove those obstacles.
In economic terms, the shortage of such stores amid widespread demand seems to be a contradiction. If so many people want access to supermarkets and the foods they carry, wouldn’t grocery store companies want to serve that demand?
But one of the major hurdles is financing. The big chains see low-income neighborhoods as riskier investments, and small grocers or entrepreneurs who want to enter the business find it difficult to get bank loans to finance their start-ups.
“It’s not the large chains that have come and been a part of that expansion,” Bell said. “It’s been the smaller chains, individual entrepreneurs, it’s folks looking at a community and saying, ‘I can see the elements here but it’s going to take me seeing who lives in the community, what they want and how I can market my business to allow me to be successful over time.”
In rural areas, the new grocers tapped into the regional food system and offered more fresh produce and meat than could be found in other stores. In urban areas, new operators studied immigrant communities and offered choices that would appeal to their food cultures.
“A store in Philadelphia needs something very different than saving that store in a town of 15,000 people that is about to go out of business,” Bell said. “You end up with these flexible solutions.”

–Daniel Weintraub

Additional resources:
A fact sheet on the Pennsylvania program.
Federal government announcement on the Obama proposal.

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