Weighing the Economic Impact of Big-Box Development

Date: 5 Apr 2007 | posted in: Retail | 0 Facebooktwitterredditmail

Cities commonly approve big-box stores without any objective information about how the development would affect the local economy. They know only what the developer has told them: that the store will create new jobs and generate tax revenue.

But how many existing businesses will downsize or close when the store opens? How many jobs will be eliminated in the process? What will it cost to provide public services to the new development? Will it lead to persistent vacancies downtown and in older shopping centers? Could the new big-box store become the dominant or even monopoly provider of certain goods?

These and other vital questions are rarely asked, and even more rarely answered, as big-box projects move through a city’s approval process. Many local officials would undoubtedly reconsider these projects if they knew that a new mega-store would eliminate many more jobs than it creates (a national study by economists at the University of California concluded that this is typically the case with Wal-Mart stores), or that it would cost the city more in public services than it generates in tax revenue (as several case studies have found). But most cities do not assess the likely economic impacts of retail development. They assume that these stores expand the local economy and approve them blind to the potential costs.

Legislation under consideration in Maine would remedy this by stipulating that cities may approve stores over 75,000 square feet only after an independent economic analysis is conducted and the city concludes that the store will have “no undue adverse impact.”

“This will give communities crucial information to ensure that we have just and sustainable development,” said Matt Schlobohm of the Maine Fair Trade Campaign, which is part of a broad coalition of small business, labor, civic, and environmental groups that proposed the legislation. The coalition also includes the ILSR’s New Rules Project, the Maine chapter of the Sierra Club, and Our Town Damariscotta, a citizens group that led a successful campaign last year to pass a store size cap ordinance and block a Wal-Mart supercenter.

Dozens of local business owners across the state have written letters in support of the bill, and both Democratic and Republican legislators have signed on as co-sponsors.

The measure, known as the Informed Growth Act, applies to stores over 75,000 square feet, which would include big-box retailers such as Home Depot, Lowe’s, Target, and Wal-Mart.

The analysis would be performed by a consultant chosen by the town, but there would be no cost to the town. The cost would be covered by a fee charged to the developer. To assist towns, the Maine State Planning Office would maintain a list of qualified consultants.

The bill states that the economic analysis should evaluate the positive and negative effects of the proposed store on existing businesses, jobs, wages, vacancy rates, the vitality of downtowns, the cost of municipal services, and the volume of “sales revenue retained and reinvested” in the community.

The study must look at the store’s impact not only on the host town, but on its entire market area, which may include neighboring communities.

After the analysis is complete, people would be allowed to comment on the study and the economic impact of the development at a public hearing. Residents within 5,000 feet of the proposed store and officials of adjacent municipalities would be given special notice of the hearing.

Under the bill, the town may approve the store only after considering the economic impact study, public testimony, and any other materials submitted by residents, the developer, or community organizations and after concluding that the estimated overall positive effects of the development outweigh the estimated overall negative effects.

The bill is particularly important for Maine’s many small towns and villages, noted Eleanor Kinney, who was one of the leaders of Our Town Damariscotta and who has been working to persuade lawmakers to support the Informed Growth Act. Many of these communities are run by volunteer town boards, are unaware that they might be targeted for large-scale retail development, and have out-dated zoning ordinances that do not allow them to review, alter, or reject such projects.

This was the case in Damariscotta, a village of 2,000 people where Wal-Mart wanted to build a 187,000-square-foot supercenter on land already zoned for commercial development. Our Town Damariscotta was able to intervene only because Kinney and her fellow organizers acted quickly upon hearing rumors of Wal-Mart’s plans and gathered enough signatures for a voter referendum.

Ultimately, though, the bill is about more than protecting local communities. It’s about the overall economic health of the state. “Maine’s future prosperity depends on its ability to grow while maintaining its quality of place and not sacrificing the unique assets that drive the state’s economy,” said Kinney.

Hearings on the Informed Growth Act are expected in late April. Should it pass, the legislation would be the first of its kind in the nation, although several other states have considered related bills in the last year.


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.