Originally published in Saint Paul Pioneer Press
Home Depot wants to build one of its giant stores with a multiacre parking lot on the corner of Lexington Parkway and University Avenue. The St. Paul City Council has authorized city officials to negotiate a financing package with the Atlanta-based corporation that could include as much as $5 million in tax increment financing (TIF), a form of public subsidy. Once a formal plan is submitted, the City Council will vote on whether to approve the development.
Supporters contend Home Depot will generate new jobs and tax revenue. But numerous studies have found that these giant chain retailers destroy about as many jobs and as much tax revenue as they create. This is because retail spending in a given market is a relatively fixed pie. Adding a massive amount of new retail in one location — in this case an estimated $40 million in annual sales — will invariably cause revenue to decline at established local businesses.Many of these businesses will be forced to downsize or close. The resulting job and tax losses will substantially offset the gains created by Home Depot.
Grand Avenue Ace Hardware, a locally owned business and neighborhood institution since 1939, is one of the stores likely to be impacted. As the Grand Gazette reported recently, in 1999 and again in 2000, Grand Avenue Ace Hardware requested $175,000 in loans and grants from the city to rehabilitate the exterior of its building. The city turned down the request both times.
Yet, St. Paul is now considering a multimillion-dollar subsidy for a wealthy, absentee-owned corporation. Do we really want city policy to favor national companies over homegrown businesses? Given the economic and community benefits of local ownership, city policy should do just the opposite: support our local stores and limit chain store expansion.
Consider,for example, what happens to a dollar spent at a locally owned business. Not only do profits stay in the community, but local stores support a variety of other local businesses. They create opportunities for service providers like accountants and printers. They bank with the local bank, advertise in local media and buy goods from local firms.
Corporate chains like Home Depot centralize these functions at their head offices and keep local spending to a minimum. They bank with big national banks. They deal primarily with large manufacturers and offer few opportunities for local firms. In this way, much of a dollar spent at a chain store leaves the local economy immediately.
Perhaps more important than any of the economic considerations, local businesses build strong communities. Their owners live here and are deeply invested in the city’s long-term well being. Local merchants often take a leadership role in community affairs. Studies have found that small businesses give more than twice as much per employee to charities as do large companies.
In contrast, Home Depot and its distant decision-makers in Atlanta have little commitment to St. Paul beyond the bottom line. Home Depot and other “big box” retailers routinely abandon their stores when the economic winds shift or their business plan changes. The United States is now home to hundreds of these blighted, vacant boxes, many of which are less than 10 years old.
In the past, most cities, including St. Paul, have actively recruited national chains. They’ve lured them with tax breaks unavailable to local businesses and zoning rules that favor sprawling, auto-oriented development while undermining neighborhood business districts.
Many cities are now taking a different approach. They are adopting policies that support and encourage small-scale, community-based businesses. Some have barred construction of big box stores. Others have stopped the flow of tax dollars to national chains. They are instead putting public funds behind projects that foster entrepreneurialism and strengthen local businesses.
The Lexington-University site needs new investment, but Home Depot is a poor choice. Although city officials have focused much of their attention to date on this proposal, it is not the only option on the table.
Many residents and community leaders are instead calling for the construction of a traditional neighborhood that would combine desperately needed new housing with small, local businesses and public parks. Such a neighborhood would foster walking and public transit and strengthen the area’s sense of community and neighborly connection.
Unlike another sprawling, traffic-inducing commercial box, this project would be an investment in St. Paul’s most important economic asset: our quality of life. It is this vision, and not Home Depot’s, that the city should put its resources and energy behind.
-Stacy Mitchell is a researcher with the Minneapolis-and Washington, D.C.-based Institute for Local Self-Reliance and author of ”The Home Town Advantage: How to Defend Your Main Street Against Chain Stores and Why It Matters.”