Thursday, November 24, 2005
Monterey City Manager Fred Meurer wants to set the record straight.
Following a barrage of e-mails and phone calls from citizens concerned by Safeway’s recent statements in a full-page advertisement, Meurer says he’s eager to clarify what he characterizes as misleading spin.
The “open letter,” which ran in the Nov. 14 issue of The Monterey County Herald, says “Safeway and the City came to terms on the economics of a new downtown Safeway lease.”
“Not so,” Meurer says. According to the city manager, negotiations were suspended because of two issues: Safeway’s unwillingness to refurbish the downtown store and, more importantly, the company’s insistence upon an escape clause which would cede control of the Munras Avenue property to the corporation if Safeway moved out.
“For years we’d been encouraging Safeway to extend their lease and remodel the store,” Meurer says. “They weren’t interested until they had competition.”
The Weekly contacted Safeway officials shortly after the ad ran in the Herald. The Weekly submitted several questions in writing, asking about plans to revitalize the downtown store, and the lease agreement with the City.
Safeway officials refused to answer the Weekly’s questions. “Safeway stands ready to continue discussions with the City,” Webber wrote in an e-mail, “but as with any negotiation, it is most appropriate that specific discussions be held with the City staff and Council.”
According to Meurer, the City and Safeway are in agreement on what the store would pay for the first 20 years and it’s “a very low, very flat rent.” So low, Meurer says, that, taking into consideration 2.5 percent inflation over that time, the city would only be getting a 60 cents on the dollar return on its investment.
“That gives you a sense of how low the rent would be,” Meurer says. “People would love to have that kind of rental rate for their house. We understand that grocery stores are not high-profit producers. We recognize this and have tailored our offer with this in mind. What we disagree on is control of the store.
“This is not about Safeway staying. It’s about Safeway wanting an escape clause. They’ve been telling us, ‘If we leave we get to choose who comes in and what the rent is…oh, but we’ll give you part of the profit,’” Meurer says.
“Let’s say you own a house,” Meurer continues. “I come to you and I say I want to rent your house for five years. We agree. But I say I don’t like your kitchen and I want to remodel. OK, great. I remodel the kitchen, but after two years something happens and I have to leave. Now who gets to decide who’s going to live in your house? You or the owner? Who decides what the rent will be?”
Meurer says the City should retain the rights to decide who would move in and what they would pay—especially in light of Safeway’s recent financial difficulties.
Last month, Safeway announced it would close nearly one-fifth of its 138 stores in Texas, and would offer severance packages to longtime Northern California store workers being paid premium wages. Safeway plans to fill those jobs with workers who will be paid substantially less as part of a new labor contract negotiated last year. As a result of these announcements, Safeway’s shares fell $1.37, or 5.6 percent, to $23.02.
“They’ve closed stores in Marina and Salinas,” Meurer says. “They’re going to do what’s best for Safeway, not what’s best for the people of the city of Monterey.”
Technically, the possibility of further discussion does exist. The council did not cancel the negotiations; it “suspended” negotiations.
“If the council tells us to go back and negotiate, we’re going to go negotiate,” Meurer says. “I think it’s fair to say that from the beginning—before the beginning really—we wanted Safeway. We’ve negotiated literally for years but couldn’t close the gap. We didn’t want to go through this. They’ve made the whole process very difficult.”