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Economic Impact Review

| Written by ILSR Admin | No Comments | Updated on Dec 1, 2009 The content that follows was originally published on the Institute for Local Self-Reliance website at

States and municipalities have long evaluated the impact that large retail development projects may have on such things as traffic and the environment.  Some are now adopting policies that require that the economic and fiscal impact of these developments be considered as well.(Economic impacts include the effect on local businesses, jobs, and wages.  Fiscal impact refers to the impact on tax revenue and government costs.)

These policies usually have two key components:

  • They require that an independent study of the economic and fiscal impact of the retail development be conducted by a qualified analyst selected by the municipality (or other reviewing authority) and paid by a fee assessed to the developer.
  • They establish a standard (or multiple standards) that the project must meet in order to be approved. The policy may say, for example, that the planning board (or city council or regional planning commission) may approve the development only if it concludes, based on the data provided by the study and other evidence submitted, that the project will not have an undue adverse impact or that the benefits of the development will outweigh the costs.

Typically, these reviews are triggered when the proposed development exceeds a certain size. For example, the law may apply to all projects involving retail stores larger than 10,000 square feet or those that will generate more than 500 vehicle trips per day.

Most of these laws spell out the types of impacts that the study must analyze and that officials must consider in determining whether to grant approval.  The list may include such things as the impact that the development will have on existing businesses, the vitality of the downtown, employment (jobs gained versus jobs lost), wages, tax revenue, and municipal costs.  Some laws also include community impacts, such historic and scenic resources, and environmental impacts.

The advantage of an independent study is that it ensures that the city (or regional planning board) has objective information about the economic impacts of the project.  In the absence of such a study, the only information that local officials are likely to have are the rosy, and often misleading, job and tax revenue projections provided by the developer.

To learn more about how these studies are conducted see A Guide to Retail Impact Studies.  We’ve also posted below some examples of actual impact studies of large-scale retail proposals conducted by various communities.

Most of these policies also stipulate that a public hearing must be held in order to give citizens an opportunity to testify on the findings of the study and to submit additional evidence regarding the impacts of the proposed development.

Below are examples of local, regional, and statewide economic impact review laws.  Local policies are those enacted by cities and towns.  We include several examples below.  Reviews conducted under these laws generally only consider the impact of the project on the local community.

Large retail developments often have impacts that are felt far beyond the borders of the city in which they are located, however.  In most of the country, there is no process for evaluating the regionwide costs and benefits of large-scale retail construction. Authority to approve or deny a development rests entirely with the host town, and any costs that fall on adjacent communities, such as loss of businesses and higher road maintenance costs, are generally not considered.

To remedy this, neighboring communities in a handful of regions have worked together to enact regional policies A good example is the Cape Cod Commission, established in 1990 by the fourteen towns that make up Cape Cod, Massachusetts.  Composed of representatives of each of the towns, the commission is charged with reviewing all development projects that are large enough to impact multiple towns.  The commission’s review of these projects is in addition to any review and permitting required by the host municipality.

A significant advantage of implementing a regional approach is that it ensures that towns will not feel pressure to approve a harmful project out of fear that, if they reject it, the  development will simply locate in a adjacent town, generating many of the same impacts but without any local tax revenue or oversight. Regional cooperation offers a solution to this problem.

Some states have considered policies that make economic and fiscal impact studies mandatory for large-scale development proposed anywhere in the state (but the decision on whether to approve the store remains in the hands of the municipality).

Another approach, taken by Vermont, is to establish regional planning boards throughout the state that review and decide whether to approve large developments. These boards are composed of representatives from all of the towns in each region.

More Information:

  • A Guide to Retail Impact Studies
    This guidebook is designed to give municipal officials and citizens an understanding of how economic and fiscal impact studies of large-scale retail projects are conducted and what types of data they provide.


Economic Impact Review – California (proposed)

In September 2011, the California Legislature pased a bill requiring cities and counties to have an economic impact analysis prepared before deciding whether to approve an application to develop a large superstore. The legislation defines a superstore as a retail store of at least 90,000 square feet that devotes 10 percent or more of its space to groceries. The law lists a range of impacts that the study must assess and quantify.  Continue reading

Economic Impact Review – Vermont’s Act 250

Vermont’s Act 250, adopted in 1970, requires development proposals of regional impact to obtain approval both from the local town and from one of nine regional commissions.  Approval depends on meeting several conditions that focus on the project’s environmental and economic impact.  This regional review process has limited sprawl and resulted in fewer large-scale retail stores per capita in Vermont than in all other states. Continue reading

Economic Impact Review – Oregon (proposed)

Introduced in 2009, this bill stipulates that Oregon cities and counties may only approve retail stores larger than 75,000 square feet if they determine, based on an independent economic impact analysis, that the store would not have an "undue adverse impact." In addition to the economic factors, the analysis must examine the vehicle miles and carbon dioxide emissions that would be generated by the store. Continue reading

Economic Impact Review – Maine

Enacted in June 2007, the Informed Growth Act stipulates that cities conduct an economic impact analysis for proposed stores larger than 75,000 square feet (roughly half the size of a typical Target or Home Depot). After considering the findings of the analysis and testimony taken at a public hearing, a town may approve such a project only if it concludes that the store would not have an undue adverse impact on the local economy. Continue reading

Economic Impact Review – Westbrook, ME

In 2005, following a heated debate over a proposed big-box development, the town of Westbrook, Maine, adopted a zoning provision that require retail projects of 10 acres or more to undergo an economic impact analysis.  The Planning Board must consider the study in deciding whether to approve or reject the project. Continue reading

Economic Impact Review – Carbondale, CO

Carbondale’s plannign policy requires the town’s planning staff and city council to weigh the community and fiscal impacts of a large-scale retail proposal before deciding whether to approve or deny the project. The ordinance applies to any retail development larger than 15,000 square feet in neighborhood business districts and those larger than 30,000 square feet in other areas. Continue reading

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