Controversial Mall will not Boost Jobs or Revenue, Study Concludes

Date: 1 Sep 2003 | posted in: Retail | 0 Facebooktwitterredditmail

Developers of a massive shopping center in Leominster, Massachusetts, claim the project will create 869 new jobs and boost the city’s property tax revenue by $400,000 annually.

But a study by a nationally recognized land use economist has found that the development will destroy about as many jobs as it creates and provide the city with only $51,000 in additional revenue. To put that into perspective, if the new revenue were used to cut residential property taxes, each of the city’s 17,000 households would save just $3 annually.

The study, “The Fiscal and Economic Impact of a Proposed Shopping Center Project on the City of Leominster,” was conducted by Dr. Thomas Muller, who has authored dozens of economic and fiscal impact studies of big box retail and other types of development.

The study was commissioned by Leominster First, a grassroots group fighting the proposed 510,000-square-foot shopping center. The project is to include a Wal-Mart supercenter, a Lowe’s, a department store such as Kohl’s, and four chain restaurants.

Muller concludes that, like much of the country, Leominster already has more retail than residents can support. Several big box stores were built in the late 1990s. There are ten Wal-Marts within a 25 mile radius.

The new center would dramatically worsen the situation. Its projected annual sales of $185 million are equivalent to 77 percent of the local market’s current sales in building materials, groceries, and general merchandise. The new restaurants would add 1,000 seats, increasing the city’s dining capacity by one-third.

Since neither population nor incomes are growing, according to Muller, sales at the new shopping center would come entirely at the expense of existing businesses. Competing stores within a 5-6 mile radius would lose $104 million in revenue. Those 5-6 miles further out would lose $72 million. Only 5 percent of the center’s sales would come from outside the local market.

Because of the development’s impact on existing businesses, the 869 jobs created by the center will be offset by about the same number of job losses. “The net long-term employment impact of the proposed center will be minimal,” Muller notes. “There may be a small employment net gain or net loss, depending on specific market conditions.”

The development’s tax benefits are also overstated. Muller concludes the developer inflates the shopping center’s value. He estimates property tax revenue at $312,000, not $400,000. Moreover, because the center will reduce sales at existing businesses, property values will decline in other parts of the city, reducing tax revenue by $156,000. Add the cost of providing city services to the new development, and the city can expect a net gain of just $51,000.

The study mirrors dozens of other economic impact studies in recent years, which have also concluded that big box stores destroy about as many jobs and as much tax revenue as they create.

Leominster First hopes the study will persuade the Planning Board to reject the project. The citizens group has been packing public meetings and organizing expert testimony against the development.

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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.