Twist in California city’s plot for new grocery store tax that would send prices rocketing

A controversial plan to slap a new tax on vacant grocery stores in San Francisco has been abruptly shelved after running into resistance from City Hall and the business community.

Supervisor Bilal Mahmood said Sunday he is dropping the proposed tax and will instead pursue a city ordinance aimed at expanding access to grocery stores through incentives, funding and zoning reforms.

The reversal comes just weeks after Mahmood unveiled his “Affordable Groceries Act,” which originally called for two measures to go before voters in November.

One would have established a city-run fund that could help corner and convenience stores expand their fresh food offerings and support new grocery stores.

The other would have targeted large chains that leave former grocery store locations sitting vacant with a new tax.

But the tax proposal quickly ran into opposition from Mayor Daniel Lurie, business interests and concerns among Mahmood’s fellow supervisors.

Mahmood will now focus on advancing the grocery fund through an ordinance rather than asking voters to approve the original pair of ballot measures.

The revamped effort would divert funding toward helping convenience stores stock fresh produce while using incentives and zoning changes to encourage new supermarkets to open.

“Ultimately, it’s clear there is no consensus at City Hall on corporate accountability or on solutions that mix carrots and sticks at this time,” Mahmood wrote on social media.

“But we have to be driven by results and find a path forward on solutions that are possible to drive consensus around today.”

The original proposals came as San Francisco grapples with a string of major supermarket closures that have left some neighborhoods with fewer options for groceries and fresh food.

Mahmood had previously said his proposals were inspired in part by New York City Mayor Zohran Mamdani’s push for city-run grocery stores as a way to tackle food costs.

San Francisco’s plan stopped short of having the city itself operate supermarkets.

Instead, the proposed fund could have used private nonprofit donations or revenue generated by the vacancy tax to support grocery stores, while the tax was also intended to encourage major chains to keep locations open.

Lurie opposed the tax approach.

A spokesperson for the mayor told the San Francisco Chronicle that Lurie was working to bring more grocery stores to the city but did not believe imposing a vacancy tax was the way to do it.

The proposal also drew pushback from the Chamber of Commerce and Align Real Estate — the developer seeking to turn the shuttered Fillmore Safeway into a housing complex.

Mahmood further revealed that Amazon — owner of the empty former Whole Foods location in Mid-Market — was “actively lobbying” against the proposed tax.

The measure faced another major obstacle earlier this month when Supervisor Connie Chan, who chairs the board’s budget committee, did not put the tax proposal on the committee agenda.

Board of Supervisors President Rafael Mandelman also raised concerns that taxing vacant grocery properties could have “unintended consequences” as San Francisco tries to lure businesses back following the pandemic.

Mandelman said he was “concerned that measures like this send a different message that is a little more adversarial and that imagines that San Francisco can tax and regulate our way to recovery.”

Mahmood’s remaining grocery store fund ordinance is set to be heard Monday morning by the Board of Supervisors’ rules committee.

He thanked Supervisor Shamann Walton, who chairs the committee, for moving the proposal forward and signaled that abandoning the tax does not mean he is giving up on the broader effort.

“This is not the end of the conversation,” Mahmood wrote. “This is just the beginning of a larger effort to address our affordability crisis, and I won’t stop fighting until every neighborhood has reliable access to affordable, healthy food.”

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