The Fredericksburg Food Co-op is a step closer to having the financing it needs to open its first grocery store.

City Council voted unanimously this week to approve a Tourism Zone performance agreement that will provide the co-op with an annual performance grant from the Fredericksburg Economic Development Authority. The incentive will be equal to 100 percent of the local sales tax revenue that the store will generate for the first five years, and 50 percent for the next five years.

Co-op members have been working for the past four years to get where they are comfortable moving forward with a bricks-and-mortar location, said Bill Freehling, the Fredericksburg Department of Economic Development and Tourism’s director, noting that several of them were in attendance at the meeting. He added that the store will be open to both members and non-members, but since it’s member-owned, any profits would stay local. It will also work with local suppliers, providers and farmers.

“We’re excited about both the possibility of a great new store to shop at, but also just the symbolic value of a community that can support and has a food cooperative,” he said. “We think that says something about the city of Fredericksburg, what a great place this is and what a great community this is.”

In order to qualify for the funds, the co-op will need to produce and maintain a lease for at least 9,000 square feet of space in the city, invest at least $500,000 in the store, open by the end of 2020 and hold regular community-oriented events. It will also be required to submit annual reports saying it has met those criteria. If the co-op fails to meet all of them in two consecutive years, the city may terminate the performance agreement by sending written notice to the co-op and the EDA.

Co-op board members have signed an agreement with Lee Plaza LLC, which owns the strip shopping center at the corner of Charles and Princess Anne streets. It gives them until June 17 to decide if they want to open a local food cooperative in a roughly 9,000 square-foot space in the shopping center, which is within the Downtown/Princess Anne Street Tourism Zone. Other Lee Plaza tenants include Hard Times Cafe and Captain D’s restaurants.

If the board decides to execute the lease, renovations can begin in what is now the Kabul Mart so the co-op can open a store there next year. Kabul Mart, which sells groceries and halal meats, is looking for a smaller location in Fredericksburg or Stafford County.

The co-op has 1,065 members, and has raised more than $1.1 million so far through its member loan campaign. It needs another $500,000 in pledged loans in order to obtain a loan. The new performance agreement is estimated to be worth nearly $360,000 over 10 years, based on the co-op’s projections. It expects to have sales revenue of more than $3 million in the first year of operation, and around $5.9 million by 2030.

Dami Odetola, vice president of the National Cooperative Bank, has written a letter supporting approval of the incentives. NCB is the primary lender to many cooperative businesses in the United States.

Odetola said that one of the many factors that he considers in the credit analysis he conducts as part of the loan approval process is whether a local government supports a cooperative enough to provide some form of meaningful incentive.

“Most tangibly this governmental support comes in the form of certain financial incentives,” he wrote. “These incentives are extremely valuable because the early years of many cooperatives, while exciting from a mission perspective, margins are generally thin from a financial standpoint. It usually takes a co-op several years to show a profit.”

Sales tax revenues aren’t the only tax revenue that the Fredericksburg Food Co-op could generate for the city. Other forms will likely include business personal property taxes, business license taxes and some meals taxes. Business license taxes, for example, would be about $6,000 for the first year based on the co-op’s projections.

“I’m very excited about the possibility of the co-op, it really paints us as a progressive community, and I’ve always loved that juxtaposition of we’re very historic and we’re very progressive at the same time. I think this really showcases that,” said Council member Kerry Devine, who disclosed that she is a co-op member.

She said that she is thrilled that the co-op has found a potential location in the city, and thinks that it will benefit residents, help revitalize Lee Plaza and provide a draw for people outside Fredericksburg to spend some time and money in the city.

Council member Tim Duffy said he’s encouraged by the co-op’s rapid momentum—it received the Best of the Best award last March at the Up & Coming Startup Food Co-op Conference in Milwaukee. He said that it’s important that the co-op be community oriented, and said he’d like to work with its members to make sure all the city’s neighborhoods participate. He also asked if the co-op anticipates being in Lee Plaza long term.

Rich Larochellecq, a co-op board member, said the co-op would be taking over Kabul Mart’s 10-year lease and is interested in getting two five-year renewals. He said that there may be possibilities to expand in Lee Plaza.

Mayor Mary Katherine Greenlaw said she remembered when that space was an A&P, and called it a “great adaptive reuse of an old grocery store.”

Council member Billy Withers mentioned offering a discount to people using a SNAP benefits card. Larochelle said that many co-ops do, and that it appeals to the board because part of its mission is outreach.

“Are you considering the possibility of more than one location?” asked Council member Chuck Frye Jr.

Larochelle said that there are co-ops with more than one location. Roanoke’s, which got its start in the 1970s, has two. He said that the board is focused on getting one up and running for now.

Council member Jason Graham noted that there is no FRED bus stop at Lee Plaza, and asked if the co-op board could work with Fredericksburg Regional Transit bus service to get one there, since one of the board’s goals is to reduce food insecurity.

“Great point,” said Greenlaw.

Larochelle said people can find information on the co-op’s website, Facebook page and Instagram account, and can join by clicking the “become a member now” tab on fredericksburgfoodcoop.com. “While sitting here, we got two new members,” he said.

Get our daily Headlines Newsletter

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Cathy Jett: 540/374-5407

cjett@freelancestar.com