When South Tucson successfully lured Food City in 1999, it was a coup for the square-mile city, which until then had been without a large general-service grocery store.
It now appears in danger of losing its prize.
The Food City at 2950 S. Sixth Ave. has been losing “substantial sums” each year since 2008, and its owner, Bashas’ Inc., has closed 40 unprofitable stores since it filed for bankruptcy protection in 2009.
Executives at the family-owned company blame the state’s immigration legislation — including SB 1070, which requires police to check the status of someone they’ve stopped if they suspect the person is in the county illegally — for much of the dwindling sales at the store. The surrounding neighborhood has large Hispanic and immigrant populations.
Bashas’ isn’t yet threatening to close the store — “It’s the last thing we want to do,” said Johnny Basha, the company’s vice president — but it’s brought the location’s unfavorable finances to the attention of the South Tucson City Council.
At a council meeting Monday, Basha suggested that a reconsideration of the city’s 2.5 percent tax on food for home consumption could help ease the pain.
“When we’re in a 1 percent business, that’s a lot of money,” he said.
The South Tucson Food City is in direct competition with El Super, a Mexican-owned grocery that opened in 2009 just across Interstate 10.
As El Super is in Tucson, which does not tax groceries, shoppers there do not have to pay the extra 2.5 percent.
“We run lower prices for this store to even the playing field,” Bashas’ Vice President of Operations Robert Ortiz said.
Analysts cited the company’s unusual willingness to continue operating underperforming stores as a factor leading to its 2009 bankruptcy.
Basha reminded the council that despite a commitment to the community, that attitude is no longer one the newly “lean” company can afford since emerging from bankruptcy in 2010.
Bashas completed a $700,000 renovation at the South Tucson store this year, adding wider aisles, a revamped seating area and brighter decor, but it’s seen only a 10 percent uptick in sales since. Similar remodels led to as much as a 40 percent revenue improvement at other stores, Basha said.
“We’ve made a big financial investment,” he told the council. “We need some help.”
It’s not clear that South Tucson, for its part, can afford to provide the assistance.
Its sales-tax revenue fell from $2.1 million in fiscal year 2008 to $1.8 million in fiscal year 2013, and the largest share comes from the “retail trade” category that includes the food tax.
Interim Finance Director Roy Cuaron would not disclose sales-tax receipts stemming from the tax on food for home consumption, citing confidentiality concerns.
But he said each percentage point in the city’s sales tax, excluding bars and restaurants, brings in about $548,000. “Any change to the rate could obviously have a detrimental effect on the city’s finances,” Cuaron said.
Shoppers at Food City are emphatic about the importance of the store to the city, not only as a shopping outlet but as a gathering spot.
“It means a lot,” said Juli Spear, who cleans offices nearby. “I eat lunch here every day.” The prices it charges are reasonable, she said. “It’s not an arm and a freaking leg, and it’s spotless.”
“There’s such diversity here,” said Aaron Rodman, who lives across the street. “There seems to be a family environment here that bleeds over to the public.”
Rodman sometimes comes to the store just to soak up the atmosphere, which includes live mariachi music on the weekends. If the store closed, “I’d find another Food City to go to,” he said.
Mayor Paul Diaz said South Tucson will consider changes to the food tax during its next budget discussions.
He and other council members point out that it’s where they shop, too.