It’s this last policy, San Francisco’s formula business policy, that we’re going to spend much of our time talking about today. This local planning law prohibits chains from locating in some zones within the city and requires them to obtain a special permit to open in other zones. The result is that while many other cities are covered in Starbucks outlets and chain drug stores, and national bank branches, and the like, San Francisco’s neighborhood business districts remain largely comprised of independent businesses. AnMarie welcome to the show. 

I could only do that for about six months and then I took a job actually doing habitat restoration for a non profit, but then I was not able to afford living in San Francisco because it is expensive there and non profits don’t pay very well. I looked back for city employment. There were no jobs at that time for landscape architects, but there was this weird city planning gig, and you could get that job if you had a graduate degree in a design related field like I did. I knew a friend who actually studied urban planning with me at the University of Michigan.

I took her out for drinks and I said tell me everything that you know about urban planning and if I get the job I’ll buy you a bicycle. So we sat down for an hour and she said all that you need to know is about Jane Jacobs. Talk about Jane Jacobs and eyes on the streets. I did that in my interview. I got the job in 99 and I could not be happier. I’m committed to public service and I feel like being part of the guiding vision of the city that I live in is really important.

Prohibiting the externalities related to the car was a early focus. Then we went through looking at a similar problem where we had an explosion of pharmacies in the early 2000’s and chain coffee stores that were all just kind of co locating next to each other in a density that was, you couldn’t imagine. It ended up being a Walgreen’s on one corner and directly across the streets would be another pharmacy, a Rite Aid. It seemed like there was no end to the expansion in their efforts to get both a dominance over the commerce, but also to get a real estate foothold in the city. Then we started looking at those uses, and the planners hadn’t really found the right mix.

In 2004 a progressive politician named Matt Gonzalez actually started the first law and it was the basis of the law we still have today. The definition that he used had been similarly developed in another California city and it focused on looking at the identifying standard features. If a business had standardized signage, standard merchandise, a logo, the architecture, if they had at least two of these standard features then they became formula retail if there were more than 11 of them. With that in place, we for the first time had a definition of what a chain store might be.

It was then regulated depending on where we located. Like I said before, in some of the downtown districts, the office districts, or our regional shopping districts, there was no regulation of it. They could just be permitted as a normal business, but in our neighborhood shopping streets he required neighbor notification and also there was a couple of neighborhoods where it was actually prohibited.

We did the neighbor notification with the earlier version of the pharmacies and the chain stores. Matt Gonzalez actually instituted the conditional use. Earlier, when we were grappling with pharmacies and drug stores, the burden was on the neighbors. When Matt Gonzalez came with his new law, he flipped it so now the businesses, the burden was on them and they needed to prove that they were either necessary or desirable to locate in a community.

That it would help with the turnover by pricing out low income people from neighborhoods. There was a lot of dialog when it was first put into place about whether it was the appropriate for San Francisco, and Matt Gonzalez and some of the other elected officials in his party decided that it was really important.

By putting it in place by a voter’s initiative, the law is much stronger. It can only be weakened or overturned by another vote of the people. It’s a pretty high threshold to educate people and to get them to vote on a referendum, and they did that. It passed by 56% when it was on the ballot in 2006. Then it was solidly part of the law. People understood it was not going to be going anywhere.

I think after that referendum, planners came to grips with it, the business community came to grips with it. Everyone seemed to understand that this was a part of doing business in San Francisco is that a business that was a chain store needed to prove that they were a good fit for the neighborhood and they couldn’t just take it for granted that they could be located. 

After 2014, and after we did our study, we really understood a lot more about how the law was functioning both for businesses and for our neighborhoods. That’s when we started to embrace it too. I think that the tide just turned over the course of that 10 year period from when it started in 2004 to 2014. The majority of applications for formula retail in places where it was regulated ended up being approved.

Despite the business community saying that this is a unnecessary obstacle to commerce, 75% of the applications were in fact approved. I think that community certainly understood what a useful tool it was for them to keep businesses out that were not compatible. It was really only when the community fully organized and came to the commission hearing to make their arguments that applications were disapproved.

When we have an application before the planning commission, they are looking at the existing concentrations of formula retail that already exist in that neighborhood where the proposal is. They’re also trying to see if there’s availability of other similar retail uses within the district.

If we have a Subway sandwich shop moving into the district, is there already a deli or two that’s meeting that same need. We also look at the price ranges too, because we know that equity is important to our commission. So then we do a compatibility check of the proposed formula retail architecture with the neighborhood commercial district character. That’s really not quantitative, that’s really a qualitative review. Then we also, as far as quantitative reviews look at the vacancy rates.

Sometimes where we have formula retail controls there have been higher vacancies, but it varies more by neighborhood and by certain characteristics within the neighborhood than it seems to do by the concentration of formula retail or independent businesses. If we have a neighborhood that’s struggling with high vacancies, the community might be more open to a formula retail at that point instead of a vacant store front.

Lastly, we look at the mix of neighborhood serving uses compared to city wide or retail serving uses. In San Francisco because we are a transit oriented city, we want to make sure that everybody can meet their daily needs within an easy walk. Within a quarter mile of your house you should be able to buy everything that you need from groceries, to toiletries, to simple services.

If a neighborhood is low on neighbor serving uses and a chain store is meeting those, we might look more favorably upon the chain store, but if it’s already low on neighbor serving uses and it’s a high end retail store that’s not helping people do their daily shopping, then that would be a factor not in favor of that particular chain store.

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So today we’re talking with AnMarie Rodgers, senior policy advisor for the city of San Francisco’s planning department, and we’ve been talking about San Francisco’s formula business policy. This is a policy that there are quite a number of smaller communities around the country that have a policy similar to this, but San Francisco is the only large city that has such a policy and they’ve had it in place now for about 13 years. Since we’re talking a little bit about how it’s working and how well and how support for it really has been growing.

AnMarie I want to pick up on something that you said before the break. I really want to underscore what I think is so great about this policy in terms of how its been implemented, which is that it’s neighborhood by neighborhood. As a conditional use permit and so there’s a process by which the city and the neighbors actually review the particular proposal in light of that business district. If it’s a formula business that’s going to add something that the neighborhood needs, then it’s going to get the green light where if it’s going to take it in the direction that isn’t the right mix. It’s going to be something that maybe gets turned down.

I love that there’s that flexibility and that the city’s policy really recognizes that different neighborhoods are in different places and what works somewhere may not work somewhere else. Can you talk a little bit about how this policy intersects with issues of equity and neighborhood serving uses. When we think about what’s important in terms of retail affordability, being able to serve neighborhood needs are really important factors. I know some people think chains are always lower priced. How does that issue play out in terms of how this ordinance works.

We could see that formula retailers tended to employ more people in total, but we also had a sense that there were a good mix of part time folks, and what was the exact mix between part time and full time. We didn’t know that. Colloquially, we heard that there were more full time employees in the independent businesses, but that again was not verified. Also, San Francisco is pretty lucky in that we have a lot of baseline laws that established a floor to protect the lowest income workers for things such as healthcare. We have a higher minimum wage allowance, and all kinds of worker rights bills that apply to any business of a certain size.

The differences between the two independent and formula retailers might not be as broad in San Francisco. What became more important and where the difference is would be the affordability of goods, and that’s why I think to which you mentioned earlier the case by case review is really helpful because it allows neighbors to say if this is something that helps them to be able to succeed and thrive in San Francisco. If it helps them get affordable groceries or affordable medicines, that would be an important consideration for the commission.

One of the other things that we sometimes hear on the pushback side is this idea that the market will determine where businesses open, close, what businesses open, close. How do you speak to that, the role of policy in addressing that here?

We recognize that there are these larger values and impacts that what one person does has all these effects on the surrounding neighbors, and on the community, and that in fact the value, I mean the reason that San Francisco real estate is so expensive in part is because of all the contributions of its residents to making it such a great city. All of the local businesses there, so a value is created by the community, it seems only right that the community then structure how the city grows and develops because it’s all interconnected right?

I want to turn now to other cities, other communities, that might be thinking about doing something similar to what San Francisco has done in terms of regulating formula businesses. What do you think that cities should think about? Are there things that you wish you had known back when San Francisco started down this path? Are there things that would’ve been helpful and just what would be your advice in general to a community that comes to you and says we’re seeing more and more chains come in. We’re not sure that the mix that we’re getting is really right for the community. How should we go about this whole process of looking at this approach?

That is not going to happen. It’s widely established that there is a city interest in securing the general welfare. Zoning can be used to help protect the general welfare and secure a diverse commercial district for a variety of services. Also, to guide a steady considerations. Those are all within the police powers of the city, and those are a proper use of the zoning tool for your future, but zoning cannot be used to reduce competition or to lower commercial rents. Regulating commerce is not a function of local government instead in the US that’s a function of our state and federal governments. That’s one principle, is to look at what are the real powers that municipalities have and how they can write these laws.

Secondly it’s an idea about regulating the use instead of the user. The land use type and planner speak is something like a retail use, an industrial use, a residential use, then you can break those down into further categories like for retail you also have a restaurant use, a grocery store, and that’s where the formula retail is a subset of the retail use so it’s important when you’re trying to define what is a formula retail use that you have a solid objective definition of what a formula retailer may be.

Formula retail use definitions often talk about the homogenizing factors of formula retail. The standardized goods, designs and aesthetic that I described earlier. To be legally defensible, formula retail laws cannot look at who the owner may be or where the owner lives. If a store meets these objective criteria, then the law applies even if it’s a home grown business.

I think that’s more complicated than the average planning department wants to get with their ordinance, so it might be easier to start with just looking at the United States and where you might see homogenizing uses. I think the idea of including international chains is more important in a city like San Francisco because when you have a large international store, they often want to set up a flagship store in San Francisco or a similar city as their foothold into the US. That’s why we consider international businesses.

Our own economists recognize the economic value of the uniqueness of San Francisco as something that matters both for employers and for residents. From his perspective, employers can pay residents less because it was so pretty. That’s one reason why having good aesthetics was helpful for employers. Obviously from just a satisfaction point of view, it’s really nice to have your city be unique and have its own character. For your neighborhood too. His review concluded that only the commission and the neighbors together can decide whether a business is appropriate or not for that neighborhood.

I think in all planning issues, it’s also important to consider not only the democratic process that happens at the commission, but also the democratic process that can sometimes be lost through a public process when disempowered groups are not able to be there and represent themselves as fully. At one point during all these proposals and talks about changing the law, somebody wanted to delegate the decision to a neighborhood group. First of all, that’s not defensible legally, but it was also disconcerting in that it would really focus on the people who had the luxury of time to engage with this neighborhood group.

We would see business proposals that fit their needs as opposed to thinking about everybody who lives in the community, which is the benefit of government. They’re appointed to look at the broader interests and not just the micro interests.

While you’re there you can sign up for one of our newsletters and connect with us on Facebook and Twitter. Once again, please help us out by rating this podcast and sharing it with your friend. This show is produced by Lisa Gonzalez and Nick Stumo-Langer. Our theme music is Funk Interlude by Dysfunction Al. For the Institute for Local Self Reliance, I’m Stacy Mitchell. I hope you’ll join us again in two weeks for another episode of Building Local Power.