Economic Impact Review – California (proposed)

Date: 8 Sep 2011 | posted in: Retail | 0 Facebooktwitterredditmail

Update: Governor Brown vetoed this bill.

On September 2, 2011, the California Legislature passed the following bill, which requires 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. It will affect Walmart and Target, both of which operate large stores that include groceries.

Under the law, the city or county considering the superstore application must hire a qualified consultant to conduct an economic impact study. The cost of the study is paid by a fee levied on the applicant.

The study must assess a range of impacts enumerated in the law, including:

  • the extent to which the proposed superstore retailer will capture a share of retail sales in the market area.
  • how the construction and operation of the proposed superstore will affect the supply and demand for retail space in the market area.
  • how the construction and operation of the proposed superstore will affect employment in the market area, including an analysis of whether the proposed superstore will result in a net increase or decrease in employment in the market area.
  • the effect on wages and benefits of employees of other retail businesses, and community income levels in the market area.
  • the costs of public services and public facilities resulting from the construction and operation of the proposed superstore retailer and the incidence of those costs.
  • the effect that the construction and operation of the proposed superstore retailer will have on retail operations, including grocery or retail shopping centers, in the same market area.
  • the effect that the construction and operation of the proposed superstore will have on average total vehicle miles traveled by retail customers in the same market area.
  • the potential for long-term vacancy of the property on which the superstore is proposed in the event that the business vacates the premises

The “market area” is defined as an area around the store large enough to support its operation, but which may not extend further than 25 miles from the store.  After the study is complete, the city or county must invite public comment on the study and the application at one of its meetings.

History In 2010, San Diego enacted a ordinance requiring an economic impact review of superstores. The measure was repealed in early 2011, after Walmart threatened to organize a referendum campaign to overturn the law.

The repeal prompted San Diego Senator Juan Vargas to introduce the statewide bill. Vargas has said that the legislation does not violate local control; cities are still free to approve superstore applications, regardless of the study’s findings. “They will know what they are doing is wrong but at least they will have the facts,” he said. “Before they were acting in the dark.”

San Diego Assemblyman Ben Hueso, who presented the bill in the house, said that it provides decision-makers “with facts, not hearsay.” Walmart and other large retailers often claim their stores will increase employment, but studies indicate these stores often cause more job losses than gains.

By making the requirement apply statewide, the new law ensures that cities that would like to consider economic impacts are not placed at a disadvantage. The preamble to the bill notes: “Currently, local governments that desire to perform due diligence for their constituents by performing an economic analysis are placed at a disadvantage because a neighboring city or county may not perform an economic analysis. This a situation may result in the shifting of sales tax and destruction of the business community in a city or county that simply wants to study the impacts of the development project before making a final approval.”


BILL NUMBER: SB 469 ENROLLED BILL TEXT

PASSED THE SENATE MAY 31, 2011

PASSED THE ASSEMBLY SEPTEMBER 1, 2011

INTRODUCED BY Senator Vargas FEBRUARY 17, 2011

An act to amend Section 65950 of, and to add Section 65957.3 to, the Government Code, relating to land use. LEGISLATIVE COUNSEL’S DIGEST

SB 469, Vargas. Land use: development project review: superstores.

(1) The Permit Streamlining Act requires the lead agency that has the principal responsibility for approving a development project, as defined, to approve or disapprove the project within 60 days from the date of adoption of a negative declaration or the determination by the lead agency that the project is exempt from the California Environmental Quality Act, unless the project proponent requests an extension of time.

This bill would, in addition, require a city, county, or city and county, including a charter city, prior to approving or disapproving a proposed development project that would permit the construction of a superstore retailer, as defined, to cause an economic impact report to be prepared, as specified, to be paid for by the project applicant, and that includes specified assessments and projections including, among other things, an assessment of the effect that the construction and operation of the proposed superstore retailer will have on retail operations and employment in the same market area. The bill would also require the governing body to provide an opportunity for public comment on the economic impact report. By increasing the duties of local public officials, the bill would impose a state-mandated local program.

The bill would also require the lead agency to approve or disapprove the project within 180 days from the date of certification of an environmental impact report and approval of an economic impact report, or within 60 days from the date of adoption of a negative declaration and approval of an economic impact report or the determination by the lead agency that the project is exempt from the California Environmental Quality Act and approval of an economic impact report.

(2) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

SECTION 1. It is the intent of the Legislature to promote economic development in all communities of the state and to address the impact on the state’s small businesses from the superstore retail model. Therefore, the Legislature finds and declares all of the following:

(a) It is in the interest of local governments to promote economic development in their jurisdictions.

(b) Land use decisions are frequently linked to fiscal policy because local governments receive a share of sales tax revenues generated within their borders. California cities thus often seek large sales tax revenue sources, such as superstores, without taking into account all of the external economic effects that superstores bring to communities.

(c) Transformations in the big box retail industry have altered retail business nationwide. The engine of this change is the retail format known as the superstore–a big box retail store that also contains the equivalent of a full-size grocery store, with the total floor space often three to four times as large as that of a conventional supermarket.

(d) As a result of the restructuring of retail business, particularly the grocery sector in California, the following effects may be seen: local grocers, who yield a greater community return on investment, are driven out of business; less community access to viable superstore alternatives; lower wages and benefits paid to grocery workers by superstore retailers; and a host of complex land use, traffic, and fiscal impacts.

(e) Superstores typically combine a large variety of discount general merchandise with full service grocery sales to the general public under one roof, thereby generating more intense land use and environmental impacts than other large-scale retailers and wholesale membership clubs.

(f) Industry and academic studies indicate superstores rarely add any retail services not currently provided within a community, and the majority of sales growth at a superstore comes from a direct shift of dollars from existing retailers within a community, primarily from grocery stores.

(g) Land use decisions regarding superstores fall to city and county governments, even if the impacts will be regional as well as local.

(h) Currently, local governments that desire to perform due diligence for their constituents by performing an economic analysis are placed at a disadvantage because a neighboring city or county may not perform an economic analysis. This a situation may result in the shifting of sales tax and destruction of the business community in a city or county that simply wants to study the impacts of the development project before making a final approval.

SEC. 2. Section 65950 of the Government Code is amended to read:

65950. (a) Any public agency that is the lead agency for a development project shall approve or disapprove the project within whichever of the following periods is applicable:

(1) One hundred eighty days from the date of certification by the lead agency of the environmental impact report if an environmental impact report is prepared pursuant to Section 21100 or 21151 of the Public Resources Code, and approval of any economic impact report required pursuant to Section 65957.3, for the development project.

(2) Ninety days from the date of certification by the lead agency of the environmental impact report if an environmental impact report is prepared pursuant to Section 21100 or 21151 of the Public Resources Code for the development project and all of the following conditions are met:

(A) At least 49 percent of the units in the development project are affordable to very low or low-income households, as defined by Sections 50105 and 50079.5 of the Health and Safety Code, respectively. Rents for the lower income units shall be set at an affordable rent, as that term is defined in Section 50053 of the Health and Safety Code, for at least 30 years. Owner-occupied units shall be available at an affordable housing cost, as that term is defined in Section 50052.5 of the Health and Safety Code.

(B) Prior to the application being deemed complete for the development project pursuant to Article 3 (commencing with Section 65940), the lead agency received written notice from the project applicant that an application has been made or will be made for an allocation or commitment of financing, tax credits, bond authority, or other financial assistance from a public agency or federal agency, and the notice specifies the financial assistance that has been applied for or will be applied for and the deadline for application for that assistance, the requirement that one of the approvals of the development project by the lead agency is a prerequisite to the application for or approval of the application for financial assistance, and that the financial assistance is necessary for the project to be affordable as required pursuant to subparagraph (A).

(C) There is confirmation that the application has been made to the public agency or federal agency prior to certification of the environmental impact report.

(3) Sixty days from the date of adoption by the lead agency of the negative declaration if a negative declaration is completed and adopted, and approval of any economic impact report required pursuant to Section 65957.3, for the development project.

(4) Sixty days from the determination by the lead agency that the project is exempt from the California Environmental Quality Act (Division 13 (commencing with Section 21000) of the Public Resources Code), and approval of any economic impact report required pursuant to Section 65957.3, if the project is exempt from the California Environmental Quality Act.

(b) This section does not preclude a project applicant and a public agency from mutually agreeing in writing to an extension of any time limit provided by this section pursuant to Section 65957.

(c) For purposes of paragraph (2) of subdivision (a), “development project” means a use consisting of either of the following:

(1) Residential units only.

(2) Mixed-use developments consisting of residential and nonresidential uses in which the nonresidential uses are less than 50 percent of the total square footage of the development and are limited to neighborhood commercial uses and to the first floor of buildings that are two or more stories. As used in this paragraph, “neighborhood commercial” means small-scale general or specialty stores that furnish goods and services primarily to residents of the neighborhood.

(d) For purposes of this section, “lead agency” and “negative declaration” shall have the same meaning as those terms have in Sections 21067 and 21064 of the Public Resources Code, respectively.

SEC. 3. Section 65957.3 is added to the Government Code, to read:

65957.3. (a) As used in this section, “superstore” means a business establishment that exceeds 90,000 square feet of gross floor area, sells a wide range of consumer goods, and devotes 10 percent of the sales floor area to the sale of items that are exempted from the Sales and Use Tax Law pursuant to Section 6359 of the Revenue and Taxation Code. “Superstore” shall include retail establishments with multiple tenants, and the cumulative sum of related or successive permits that may be part of a larger project, including piecemeal additions to a building, so long as consumer goods and nontaxable items are sold under the same roof with shared checkout stands, entrances, and exits. This definition excludes discount warehouses and discount retail stores that sell more than half of their items in large quantities or bulk, and also require shoppers to pay a membership or assessment fee.

(b) As used in this section, the term “market area” has the same meaning as that term is defined in Section 53084.

(c) Prior to approving or disapproving a permit for the construction or conversion of a superstore retailer, a city, county, or city and county shall cause to be prepared an economic impact report.

(1) The city, county, or city and county may prepare the economic impact report or contract with a private entity, other than the permit applicant, or with another public agency for the preparation of the report. The private entity or other public agency shall be qualified by education, training, and experience to conduct economic and fiscal impact analyses.

(2) The applicant for the development project shall pay the city, county, or city and county for the costs of preparing the economic impact report.

(3) The economic impact report shall include, but is not limited to, all of the following:

(A) An assessment of the extent to which the proposed superstore retailer will capture a share of retail sales in the market area.

(B) An assessment of how the construction and operation of the proposed superstore will affect the supply and demand for retail space in the market area.

(C) An assessment of how the construction and operation of the proposed superstore will affect employment in the market area, including all of the following:

(i) The number of persons employed in existing retail stores in the market area.

(ii) An estimate of the number of people who will likely be employed by the proposed superstore.

(iii) An analysis of whether the proposed superstore will result in a net increase or decrease in employment in the market area.

(iv) The effect on wages and benefits of employees of other retail businesses, and community income levels in the market area.

(D) A projection of the costs of public services and public facilities resulting from the construction and operation of the proposed superstore retailer and the incidence of those costs.

(E) A projection of the public revenues resulting from the construction and operation of the proposed superstore retailer and the incidence of those revenues.

(F) An assessment of the effect that the construction and operation of the proposed superstore retailer will have on retail operations, including grocery or retail shopping centers, in the same market area, including the potential for blight resulting from retail business closures and the nature of any businesses displaced.

(G) An assessment of the effect that the construction and operation of the proposed superstore will have on the ability of the city, county, or city and county to implement the goals contained in its general plan, including, but not limited to, local policies and standards that apply to land use patterns, traffic circulation, affordable housing, natural resources, including water supplies, open-space lands, noise problems, and safety risks.

(H) An assessment of the effect that the construction and operation of the proposed superstore will have on average total vehicle miles traveled by retail customers in the same market area.

(I) An assessment of the potential for long-term vacancy of the property on which the superstore is proposed in the event that the business vacates the premises, including any restrictions that exist on the subsequent use of the property on which the superstore is proposed to be located, including the provisions of any lease that, in the event the owner or operator of the superstore vacates the premises, would require the premises to remain vacant for a significant amount of time.

(J) An assessment of whether the superstore would require the demolition of housing or any other action or change that would result in a decrease or negative impact on the creation of extremely low, very low, low-, or moderate-income housing.

(K) An assessment of whether the superstore would result in the destruction or demolition of park or other green space, playgrounds, child care facilities, or community centers.

(L) An assessment of whether the superstore would result in any other adverse or positive economic impacts or blight.

(M) An assessment of whether any measures are available that may mitigate any materially adverse economic impacts identified by the applicant.

(d) This section shall not preclude a city, county, or city and county from conducting additional studies of the effects of the construction and operation of a proposed superstore retailer.

(e) At any regularly scheduled meeting or meetings of the city, county, or city and county governing body, after the completion and approval of the economic impact report required by subdivision (b), and 30 days prior to the issuance of any entitlement, including, but not limited to, a building permit, a city, county, or city and county shall provide the opportunity for public comment on the economic impact report and its findings.

(f) (1) The Legislature finds that the construction and operation of a superstore retailer has land use, environmental, economic, fiscal, and social equity effects that extend beyond the boundaries of the city, county, or city and county in which it is located.

(2) The Legislature finds that it is essential for the statewide public health, safety, and welfare to require cities, counties, and cities and counties to understand the potential spillover effects of approving the construction and operation of superstore retailers.

(3) The Legislature further finds and declares that the review and regulation of superstore retailers is a matter of statewide concern and not merely a municipal affair, as that term is used in Section 5 of Article XI of the California Constitution. Therefore, this section shall apply to charter cities and to charter cities and counties. SEC. 4. No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act, within the meaning of Section 17556 of the Government Code.

Follow Stacy Mitchell:
Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance, and directs its Independent Business Initiative, which partners with a wide range of allies to implement policies that counter concentrated power and strengthen local economies.