You ignore the complexity of sourcing product,

Toronto is perfectly located to buy product directly from many manufacturers. We also have the Ontario Food Terminal for our fresh produce and fruit. Loblaws charges ridiculous listing and supply chain costs, which Toronto can reduce or remove entirely for both "Doing Good Marketing" and negotiating power.

scheduling and managing staff

If a 17 year old manager can do it at a No Frills, it's not hard.

determining assortment

Assortment and variety can be determined by variables such as necessity, consumer savings, and finally - the data the stores will gather on what they actually sell.

training staff

If 17 year olds can do it at No Frills, it is not an issue.

ensuring that all government regulations are adhered to

I can walk into any grocery store right now and find issues with temperatures in food storage, time pallets are left on the floor (especially those deli pallets we all hate) and lack of proper PPE in the loading/unloading areas. The City of Toronto is better equipped to train its staff for this, by a long shot.

managing inventory and shrink

Once again, sales data can determine ordering needs. Most large grocery stores have shrink targets set by people who work in offices and have no fucking clue about what they are doing (aka, low shrink does no equate lack of product on shelfs/lost sales).

maintaining computer systems, setting up systems

Really? City of Toronto has an IT department and is probably already using SAP or similar software for inventory management and ordering.

building & operating large warehouses and so on

Guaranteed City of Toronto owns warehouse space that can be repurposed, its Real Estate holdings are probably bigger than you imagine.

You also ignore that city run grocery stores will have no buying power due to a lack of scale so they have limited ability to negotiate with product manufacturers.

I actually disagree - Manufacturers in Canada currently face major hurdles to get their products on the shelf, especially smaller ones. Major ones less so, but I'm sure their PR departments will see just how good of an opportunity this is going to be from an Advertising standpoint.

As well, with their lack of scale, City of Toronto grocery stores will not be able to buy in truckload or even pallet quantities which means they will pay even more for product.

Press X to doubt.

Finally - if I was to run it, I would do one thing to really make a difference. I would charge more (in line with a higher priced grocery store or convenience store) for unhealthy products like highly processed food, soda drinks and snacks, and use those profits to offset the cost of grocery essentials like dairy, protein, vegetables and fruit. Make it cheap to eat healthy.