Kansas City Council votes to bail out, settle legal claims with failing grocery store
The Kansas City Council on Thursday approved an ordinance that will invest more money and resources into a failing East Side grocery store.
Community Builders Kansas City will receive $161,000 in rent relief and $750,000 in expedited funding so that the Sun Fresh it operates at the city-owned Linwood Shopping Center can remain open.
The ordinance also authorizes the city attorney to pay $450,000 to settle legal claims between the city and Community Builders.
“I would have liked to have a better understanding of the long-term feasibility of this store moving forward, but this allows it to remain open while we figure out next steps,” 4th District at Large Councilmember Crispin Rea told The Star.
The store is the anchor tenant of the Linwood Shopping Center, which the city purchased in 2014. Sun Fresh opened in the 38,000-square-foot space in the summer of 2018 under the operation of John and Pam Lipari. Community Builders took over the store in 2022.
A nonprofit organization, Community Builders operates the store under a for-profit subsidiary called Midtown Grocers LLC. It has struggled to stay out of the red.
Emmet Pierson, president of Community Builders, has said that rampant crime in the area has been a deterrent for customers and created hazardous working conditions for the store’s employees. In recent months, shelves across wide swaths of the store have been bare; Pierson told The Star last week he is no longer placing large orders.
The city has taken a variety of steps over the past year to alleviate problems at Linwood Shopping Center. That includes opening a Community Action Network center staffed by KCPD officers and city staff across the street from the store, collaborating with the Kansas City Area Transportation Authority and Kansas City Public Library to enhance safety in the area, and working with KCPD to increase patrol activity in the area.
It has also sent money — or tried to. The city council voted in November to provide $750,000 to Community Builders after Pierson said the store was in such a precarious financial situation that it could close.
But according to testimony at last Thursday’s full council meeting, those funds were never disbursed to Community Builders. The delay was apparently the result of contract negotiations. Assistant City Manager Mario Vasquez said via a text relayed to the council at the meeting that Community Builders never responded to questions the city had about where that $750,000 would be spent.
“We drafted language and asked for a response but didn’t get one,” Vasquez said.
When Community Builders did respond, it said the terms of the agreement were not acceptable. Without an executed agreement, the city could not release the funds.
Councilmember Melissa Robinson, an advocate for Community Builders, said the grocery store didn’t receive a draft until early February — three months after the $750,000 ordinance passed.
“This was not a priority for City Hall,” Robinson said.
Robinson introduced an ordinance at last week’s meeting to fast-track the disbursal of those funds and relax the terms of the contract, which required Community Builders to keep the grocery store open for at least three more years. She said the $750,000 was only enough to ensure 6-9 months of continuing operation, not three years.
Robinson also said she did not expect it to be the last financial request from Community Builders for its grocery store.
“All this does is make sure this store doesn’t close in the coming weeks or months,” Robinson said. “If we think we are going to spend $750,000 and that’s it — I do not think that is feasible. They will need to come back for a subsidy.”
Robinson’s motion failed, but the matter was taken up in Tuesday’s meeting of the Finance, Governance, and Public Safety Committee. At that meeting, committee members went into closed session with Pierson and city legal staff. Afterward, Mayor Quinton Lucas announced that the groups had agreed on an amendment to Robinson’s ordinance “that speaks to some of these concerns but upholds our obligation as landlords (to Community Builders).”
On Thursday, all present 11 members of the council voted in favor of the amended ordinance. Community Builders did not immediately respond to a request for comment on the vote.
New terms for funds
The updated ordinance authorizes the city manager to provide up to $161,500 in rent relief in the form of a “refund” to Community Builders — whether through reduced rent, reduced contributions to common area maintenance at Linwood Shopping Center, or a reduction in the amount of time left on the term of Community Builders’ lease.
It also sets new boundaries around the previously approved $750,000, which are to be used for building maintenance and security expenses, Vasquez said.
“It is not the intent to provide for other operating expenses or cost of goods sold,” he said.
The store will only have access to half of the $750,000 for six months from the date of an agreement between the store and the city. To get the rest, it must make a presentation to the city that includes:
▪ Monthly budgets and revenues for each of the previous six months
▪ An evaluation of the footprint of the store designed to see if its size should be reduced
▪ A three-year business plan with revenue projections
▪ The evaluation of a plan to sell the store to a new owner/operator
If Community Builders doesn’t fulfill those requirements, the city can claw the rest of the money back.
The ordinance also contains a clause authorizing the city attorney to “pay up to $450,000 to partially settle legal claims between the involved parties, with no admission of liability.”
It is unclear what the nature of those legal claims are. Neither Lucas nor Vasquez answered emailed questions about them.
“At this time, there is nothing additional to share publicly regarding settlement matters,” said Sherae Honeycutt, spokeswoman for the city. “The Law Department will continue working to follow the Council’s directions in resolving any disputes or claims.”
When the city spent $17 million to acquire and redevelop the Linwood Shopping Center in 2014, the primary goal was to eliminate what it considered a food desert in that area. But Sun Fresh is not the only grocery store in the neighborhood. There is an Aldi at 39th and Prospect, and a Happy Foods at 31st and Myrtle Ave. Neither are facing financial hardship.
Zafar Iqbal, who owns Happy Foods, told The Star this week that he spends about $12,000 per month to pay security guards at the store, plus another $500 for security camera monitoring.
“Why is Sun Fresh getting all this money for security and remodeling, and we get nothing?” Iqbal said. “(Community Builders) isn’t even in the grocery business. They just set up a nonprofit to get money from the city. And then they don’t stock the store so the city thinks it has to give them more money.”
He continued: “We’re doing everything out of pocket, we’re paying taxes to the city, we’re dealing with crime, and we can still turn a profit. I don’t understand how they aren’t making money over there.”
Rea said he supports local governments stepping in to resolve food desert issues, but also noted that he was not on the council when the original decision was made to made to purchase Linwood Shopping Center and subsidize a grocery store there.
“The major difference here is that the city owns the property,” he said. “We have a real stake in the outcome.”
