Austin Study Says City Pays Price for Big-Boxes

Date: 8 Oct 2004 | posted in: Retail | 0 Facebooktwitterredditmail

A coalition of organizations in Austin, Texas, released a report this week that concludes that big-box retailers impose significant costs on the community. It recommends that the city scrutinize big-box projects more thoroughly and adopt a long-range plan to strengthen locally owned businesses.

The report reviews and refutes several of the findings of another big-box study commissioned by the city and released in June.

That study, “Big Box and the City of Austin,” conducted by Texas Perspectives and the Gateway Planning, concluded that big-box stores control a relatively small share of the Austin market and do not compete directly with independent retailers.

It found that big-boxes undercut wages and contribute to a range of social costs, but concluded that these issues “should play out on a national stage.” With regard to local policy, its only recommendation was that the city adopt design standards for big-box stores.

Concerned that the study’s findings were flawed and that it provided inadequate analysis for the city, several groups—the Austin Independent Business Alliance; two civic organizations, Livable City and Austin Full Circle; and a local government employees union, AFSCME Local 1624—commissioned an independent review.

The review team included Dan Houston of Civic Economics, an Austin-based economic analysis firm, and University of Texas professors Michael Oden of the School of Community and Regional Planning and former City Council member Bill Spelman of the LBJ School of Public Affairs.

“We strongly question the central conclusion of ‘Big Box Retail and Austin’ that the principal concern of city government should be in establishing design standards for a subset of big box establishments,” the authors wrote.

“The big problems with big box retail aren?t design, they?re economic,” Professor Oden added at a news conference. “We need economic solutions.”

The review team’s report disputes the notion that big-box chains do not compete directly with local stores. It argues that the study’s finding that big-box retailers have only one-fifth of the market is flawed, because box stores smaller than 100,000 square feet, such as Barnes & Noble, Staples, and Toys R Us, were not counted.

The reviewers also criticize the study for not analyzing the burden large chains place on roads, police, and other public services and infrastructure. “These measures are crucial to assess the true costs of big box development for the city,” the report contends.

The reviewers do commend the study for doing “an excellent job of highlighting the low wages and attendant social costs” associated with big-box retailers. But they take issue with the conclusion that these problems should be dealt with exclusively at the national level. Some of the costs of public assistance programs are borne locally, they note, and job quality should be a consideration in local development policy.

With regard to the problem of retail spending leaking to the suburbs, the report corrects figures in the original study showing that Austin’s share of metro retail sales had fallen from 84 to 54 percent since 1990. In fact, Austin’s share is 69 percent today, while the city has 50 percent of the metro’s population.

Rather than trying to replicate suburban-style retail offerings, the report argues that Austin should play to its advantages: “The mixed use, pedestrian friendly, and ‘weird’ retail offerings in Austin cannot be duplicated in the suburbs and should instead be nurtured and protected in order to preserve the city’s share of urban retail activity and sales tax generation.”

The report recommends that the city require an impact analysis before approving new big-box stores. The analysis should factor in the added cost of providing public services and infrastructure, the quality of the jobs created, and the effect on existing businesses and vacancy rates.

It also recommends that Austin develop long-term strategies to strengthen locally owned retail. One idea offered by the organizations who sponsored the report is to create “Independent Business Investment Zones”—areas where the city would target incentives for creating and expanding local businesses.

The sponsoring organizations note that Austin is at a critical juncture for big-box retail development. Wal-Mart has announced plans to build eleven supercenters in the city, two of which have already won approval.

A recent poll found that 59 percent of Austin residents are concerned about increased big box development and 71 percent think the city should do more to promote the interests of independent businesses over those of national chains.

Follow Stacy Mitchell:
Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.

Follow Stacy Mitchell:
Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.

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