Gristedes WIC Ban May Violate Lease

Written by Briana Warsing. Posted in Volume 37, Issue 1 - September 10, 2016

On August 12, Gristedes stopped participating in the federally funded, well established Special Supplemental Nutrition Program for Women, Infants and Children (WIC), leaving low-income mothers and young children nowhere on the Island to redeem vouchers for essentials such as infant formula, fruits, vegetables, and eggs.

Community Response

Islanders responded with a protest outside the store and some have announced intentions to use their economic power by no longer shopping at Gristedes. Roosevelt Island Operating Corporation (RIOC) Acting CEO and General Counsel Susan Rosenthal expressed support for Islanders to stand up for what they believe in with “peaceful protest, to use whatever economic power they have.”

Assembly Member Rebecca Seawright wrote a letter to the New York State Department of Health asking them to consider Roosevelt Island separately from Manhattan and Queens when grouping vendors, and to give the Island special consideration due to its geographic location. In an email to The WIRE, Seawright said, “Preserving access to the WIC program in our community is crucial and it should not be taken lightly. I am working closely with the NYS Department of Health to bring the WIC program back to Roosevelt Island.”

The New York State Department of Health (DOH), through their press office explained, “The NYS WIC program is aggressively working to identify locations in Manhattan where participant access may have been inhibited by a low-volume, high-priced vendor’s voluntary decision to withdraw its WIC authorization.”

Gristedes Lease

In addition to creating a burden for some Island families, Gristede’s withdrawal from the WIC program may also violate its lease. Gristedes is required by their lease to meet the needs of residents on the Island. Article 2 of the lease describes the “insular character of Roosevelt Island;” (it’s an island!) and describes, as well, “the varied income levels of the residents of the apartment buildings contained on Roosevelt Island” to underscore Article 43 which states that certain products or services must be offered by Gristedes to maintain a viable community.

Roosevelt Island may be gentrifying, but there is still an income range here, and there are families living here who rely on the WIC program. A Gristedes source acknowledges that the Roosevelt Island Gristedes accepts three to five WIC checks per week.

Ring of Exclusivity

Gristedes’ lease also includes a 1,900-foot ring of exclusivity within which there are many limitations on what types of food stores RIOC, as landlord, and now Hudson-Related, may bring to Main Street. This range extends south to Southtown and north to Coler Hospital campus.

Within that 1,900-foot ring, stores that primarily sell food and are over 3,500 square feet – namely supermarkets – are not allowed. The lease also prohibits stores devoting over 600 square feet of space, or more than 30% of its sales area, or which obtain 15% or more of their annual revenue from the sale of fresh food from self-service display cabinets, and discounted milk, beer and soda, within the 1,900-foot ring around Gristedes.

Southtown

There is one exception: the only part of the Island another supermarket is allowed is in Southtown. Yet, the lease also provides that Gristedes has a right of first refusal on any supermarket in Southtown. Therefore that hypothetical second Island supermarket would most likely also be a Gristedes as it would be offered to Gristedes first, before another supermarket tenant would get an opportunity.

That is significant because if Gristedes does not participate in WIC, and only Gristedes is allowed to open another supermarket on the Island, even with a second supermarket, Islanders relying on the WIC program still have to go off-Island to get their needs met.

RIOC’s Leverage

According to the lease, RIOC and its agents, Hudson-Related, are granted legal ammunition in exchange for Gristedes’ ring of exclusivity and the right of first refusal for a Southtown supermarket. The lease grants RIOC leverage to demand Gristedes offer certain products and services.

Section 43 of the lease entitles RIOC, or in this case, their agents, Hudson-Related, to demand that Gristedes “implement changes and additions proposed by the Landlord for the availability or improvement of certain products or services to be sold or offered” by Gristedes. If Gristedes fails to comply with these demands, the restrictive covenants under the lease (the ring of exclusivity, and the right of first refusal) shall no longer apply. If Gristedes fails to offer certain services, the WIC program for example, RIOC is permitted under the terms of the lease to bring a tenant to Main Street to provide that service and help meet the standard of maintaining a viable community.

The purpose of this section is to protect the community. This section empowers RIOC and their agents to achieve its mission to plan, design, develop, operate, maintain, and manage Roosevelt Island. RIOC’s Rosenthal affirms that the spirit of these provisions require a supermarket to meet the needs of our very unique residents, including offering WIC participants a place to purchase their groceries. Rosenthal says it is Hudson-Related’s responsibility to approach Gristedes, and that she has pointed out those two areas in the lease and shared her interpretation with Hudson-Related. Hudson-Related affirms this.

The WIC Program

WIC was established as a permanent program in 1974 to safeguard the health of low-income women, infants, and children up to age five who are at nutritional risk. Currently, 2,000 grocery stores and pharmacies in New York State participate in the program. Pregnant, postpartum, and breastfeeding women, infants, and children up to age five who meet certain requirements are eligible.

The foods provided through the WIC Program are designed to supplement participants’ diets with specific nutrients. WIC-authorized foods include infant cereal, baby foods, iron-fortified adult cereal, fruits and vegetables, vitamin C-rich fruit or vegetable juice, eggs, milk, cheese, yogurt, soy-based beverages, tofu, peanut butter, dried and canned beans/peas, canned fish, whole wheat bread and other whole-grain options.

The program is available in all 50 States, 34 Indian Tribal Organizations, American Samoa, District of Columbia, Guam, Commonwealth of the Northern Mariana Islands, Puerto Rico, and the Virgin Islands. While funded through grants from the Federal Government, WIC is administered by 90 State agencies, with services provided at a variety of clinic locations.

Participating Markets

Many well-known New York supermarket chains do accept WIC. For example, Trade Fair, Associated, Food Bazaar, Stop & Shop, Fairway, Met, Western Beef, C-Town, Waldbaum’s, and Shoprite all participate in the program and might be a good fit for Roosevelt Island.

For Vendors

WIC vendors are grocery stores and pharmacies who are authorized to issue healthy supplemental foods to WIC participants in exchange for WIC food instruments (WIC checks) and vouchers. Gristedes was the sole WIC vendor on Roosevelt Island until mid-August when they cancelled the program.

WIC participants are issued blank checks that list how many, and the size, of each product they are entitled to purchase. In the “pay exactly” box, the vendor, Gristedes, enters the total purchase price for the items listed on the check. The State of New York, using a metric based on costs in statewide urban chains, has a price in mind for the items listed on the check but those prices don’t appear anywhere.

Gristedes claims they don’t know what the State-sanctioned prices are, and says that if they did, they would be able to train their cashiers to charge the correct price to WIC participants. Instead, Gristedes cashiers charge all customers the Gristedes prices. That causes every single WIC check to bounce. (Even though the checks are blank, they do have a value and therefore do not enable the participant to spend more than the State-sanctioned price on these items). The DOH’s response is “Although we cannot identify individual vendors due to confidentiality, the statewide bounced check rate is 43% for August 2016. We have found this is due to vendor error in the product or quantity, or higher prices than similar stores for WIC-authorized products.”

Another cause for bounced checks the DOH offers is, “WIC checks that are rejected for exceeding the maximum reimbursement levels are the result of vendors having shelf prices that are significantly higher than their peers, or because of errors by the vendor in processing WIC transactions.”

Where cost is concerned, the DOH explained, “Higher food costs reduce the number of participants that can be served. The NYS WIC Program has an obligation under federal requirements to establish cost containment systems that contain WIC food costs while still allowing vendors to be reimbursed at reasonable prices and ensuring adequate participant access for the redemption of WIC benefits.”

Neither Gristedes nor Hudson-Related would comment on the record for this story.

Tags: Briana Warsing Retail Island Life Gristedes

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