Facing $500,000 in rent debt, Elm City Market ­— one of the few grocery stores in downtown New Haven — awaits the final verdict on how the business will navigate intense financial pressure.

The 2,200–member co-op, which opened in 2011 at 360 State St. across the New Haven Green, has fallen behind on a $3.6 million federally-guaranteed loan from Western Bank, its primary lender. Elm City also received a default notice in May from its landlord, Multi-Employer Pension Trust, which owns the high-rise apartment building adjacent to the property. In a letter to co-op members this past August, Elm City Market’s Board of Directors outlined their goals for restructuring the organization and tackling the debt, adding that the group was not provided enough capital to effectively launch the business at its inception in 2011.

However, last week the loan committee of the U.S. Department of Agriculture’s regional office approved a liquidation plan for the co-op — an outlined agenda that ends the current business model but leaves the door open for others to take over the business.

Prospective buyers of the Elm City Market will have a 10–day comment period this month to pitch a sale to Webster Bank.

L. Linfield Simon has emerged as the leading prospective bidder for Elm City Market. He heads the RISC Foundation, an economic development investment firm. Simon said he would turn the market into an employee-owned grocery and continue to utilize it as a prisoner re-entry program. No other buyers have publicly stated their interest in the business.

In a statement issued this past Saturday, the Elm City Market’s Board of Directors said they were deeply disappointed by the news of the liquidation plan. The Board recently met and voted unanimously to accept a rescue proposal by a national non-profit group, the National Cooperative Grocers Association (NCGA), which pledged to take over management and provide additional financing to find a sustainable path for the co-op. However, NCGA withdrew the deal when Webster still had not decided whether to accept the non-profit’s offer after two weeks of negotiations.

If the liquidation plan proceeds as approved and the store’s assets are sold, Elm City Market’s Board of Directors said there will be “many losers.”

“While jobs may be saved and the city may still have a market, it comes at an extremely high cost — a cost which we believe could have been avoided,” the Board said. “We are saddened that it may cease to be a community-owned co-op and are incredibly thankful for the outpouring of support from our member-owners this week.”

The board added that, if a foreclosure were to take place, it would cost taxpayers $3 million, since the USDA is legally obligated to cover 80 percent of Webster Bank’s losses from their loan on which the Elm City Market has defaulted. Webster Bank would lose the remaining 20 percent of the loan, leaving numerous creditors unpaid.

After the USDA’s approval of the liquidation plan, according to the Program Director of USDA’s Regional Rural Development State Office Jennifer Lerch, it is now up to the lender, Western Bank, to put the plan into action.

“This is not something that comes out of left field for anyone,” Lerch said. “But, in the black and white financial picture, some businesses cannot operate under a certain debt load, and that’s no reflection on their mission or operation. The debt load is just too high.”

She added that the liquidation plan will likely include selling the co-op, but that under new ownership the Elm City Market may remain open, which would save about 80 jobs. Webster Bank’s Vice President of Corporate and Government Communications Sarah Barr said in an e-mail that the bank is still working through all of the details of the plan and hopes to soon arrive at a solution that keeps the market open.

“Going into drafting this plan, our strategy sought to keep the market open and the employees employed,” Lerch said. “That’s not something that we require in the liquidation of businesses, but that’s our mission — economic development and initiatives that support rural economies and preserve jobs.”

Lerch also said that USDA originally supported the opening of the grocery store in 2011 and the local community provided tremendous support for the project.

While some students believe Elm City Market expensive, many say it caters to a significant portion of Yale’s campus, especially students who live off-campus in the Chapel St. shopping district. Before this came to downtown, Stop & Shop on Whalley Avenue was the grocery store of choice for students.

Of 20 students interviewed, 10 responded that they have visited Elm City Market and 14 agreed that there is a shortage of grocery stores in New Haven.

Hayley Byrnes ’16 said there are few grocery stores a walkable distance from central campus other than the Elm City Market.

“Elm City is the only one that I can think of that has such a wide variety of products,” Byrnes said. “If it closes, I can’t really think of where I could get fresh produce in a convenient way.”

But other students interviewed, including Valerie Eisenson ’15, said that the grocery store is not critical, adding that she prefers Stop & Shop to Elm City Market, because of its affordability and wider selection.

Elm City co-op members pay a single $200 fee that can be paid in monthly installments.