Decades of Losses Could Await Mamdani’s Municipal Food Markets, If Federal Track Record Is Any Guide

New York City’s socialist mayor, Zohran Mamdani, has a plan to sell food at a discount at future municipal grocery stores. What could possibly go wrong, especially for taxpayers ultimately footing the bill? Plenty, if decades of selling food at a loss on Amtrak, President Biden’s favorite form of public transportation, is any guide.Amtrak naturally isn’t a grocery store, but it has nonetheless lost hundreds of millions of tax dollars selling food and beverages — despite decades of promises to the contrary. Starting in 1981, Congress nominally required Amtrak to break even on its food and beverage sales. Food and beverages could be sold on trains, the law stated, “only if the revenues from such service are equal to or greater than the total costs of such services as computed on an annual basis.”That never happened.In 2005, the nonpartisan Government Accountability Office reported that “Amtrak’s financial records show that for every dollar Amtrak earns in food and beverage revenue, it spends about $2.” GAO added that “Amtrak’s current food and beverage product pricing seems to ensure that its food and beverage service will not be profitable.”That was putting it mildly. A 2012 New York Times article, “Amtrak Losing Millions Each Year on Food Sales,” spotlighted that “Amtrak loses about $80 million a year selling food. Since 2002, Amtrak’s food service has lost $834 million.” Overall, “The railroad’s food and beverage service has never broken even since it was required by Congress to do so in 1981.”Amtrak’s own inspector general focused on widespread fraud and abuse in a 2011 report, finding that “long-standing internal control weaknesses” allowed food and beverage employees “to carry out schemes in which they falsify documents to conceal stolen cash or inventory.” The fraud losses ran into millions of dollars each year.In a 2012 hearing, Republicans lamented those losses while Democrats accused GOP members of wanting to “privatize” Amtrak jobs. Representative Corrine Brown, who was later indicted on federal corruption charges, went even further, arguing that losing money might “make sense from a business perspective.” Ms. Brown suggested that the 1981 break-even requirement “may have been an unsound approach,” since airlines used “free and subsidized food” to “attract enough additional passengers to make this a good option.”In 2021, Congress simply gave up, eliminating the break-even requirement and creating a “food and beverage working group” in its place. Revenues from food and beverage sales remain less than half pre-pandemic levels today.Amtrak’s decades of experience losing money selling food and beverages raise a number of red flags for taxpayers on the hook for New York City’s new municipal grocery stores. For one thing, beware politicians promising “affordability.” Remember GAO’s 2005 finding that, for every $1 of revenue Amtrak made selling food and beverages, taxpayers paid $2? For 40 years, federal law said Amtrak food and beverage sales must break even, yet they never once did. Today’s promises of grocery store affordability are even more tenuous, especially for taxpayers, who already foot the bill for multiple government food benefit programs like food stamps and WIC. Management matters, too. Everyone should be concerned that one of the key officials overseeing Mr. Mamdani’s new grocery stores is New York’s first Deputy Mayor for Economic Justice, Julie Su. Five years ago, while running California’s unemployment benefits agency, Ms. Su admitted her agency lost potentially $31 billion to fraud and improper payments. Little was ever recovered.Plus, what happens when groceries walk out the door? Representative Alexandria Ocasio-Cortez in 2022 famously blamed rising retail theft not on the thieves but the expiration of federal tax credits. Today, the DSA platform “demands” include ending “the criminalization of working-class survival.” Translation: Giving a free pass to “shoplifting up to $1,000.”That’s a lot of “affordable” groceries for some—but not taxpayers, who will have to pick up the tab.

Decades of Losses Could Await Mamdani’s Municipal Food Markets, If Federal Track Record Is Any Guide

Decades of Losses Could Await Mamdani’s Municipal Food Markets, If Federal Track Record Is Any Guide

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