01. Defending Main StreetDefending Main Street
Stacy Mitchell
I'd like to thank all of the people and organizations that helped make this event happen,
and to thank all of you for coming out tonight. It's wonderful to see so many people
deeply concerned about the future of their community.
Bozeman, as you know far better than I do, is a very special place. It has something many
cities have lost: a vibrant downtown with numerous locally owned businesses. Every week
I get calls from people who live in places that no longer have an active downtown. They
call me because they are desperate to find some way to get back what they've lost. In the
name of progress, in the name of growing the tax base, in the name of saving a few bucks,
these towns have given up something very valuable. They have lost their sense of
community.
Community is one of those words so often used today that we rarely pause to consider its
meaning. In her book, The Death and Life of Great American Cities, Jane Jacobs writes
that what constitutes community is not any one particular thing, but rather the many small
interactions that occur in our everyday lives.
"It grows," she writes, "out of people stopping by the bar for a beer, getting advice from
the grocer and giving advice to the newsstand man, comparing opinions with other
customers at the bakery and nodding hello to the two boys drinking pop on the stoop ...
hearing about a job from the hardware man and borrowing a dollar from the druggist ... "
"Most of it is ostensibly utterly trivial," she goes on, "but the sum is not trivial at all. The
sum of such casual, public contact at the local level... most of it fortuitous, most of it
associated with errands .. . is a feeling for the public identity of people, a web of public
respect and trust, and a resource in time of personal or neighborhood need. The absence
of this trust is a disaster..."
Although Jacobs was writing about an urban neighborhood, what she describes here
sounds very much like a small city or town. It is a close-knit community built around a
cohesive downtown and a vibrant local retail economy. It is a place of small stores and
sidewalks. A.place where public and private uses intermix. A place where we buy goods
and services from businesses owned by our neighbors.
Such places are increasingly rare. Small-scale, pedestrian streets are giving way to
massive, impersonal shopping centers. Street life has suffered, as our daily errands revolve
increasingly around stores accessible only by car. Locally owned businesses are
disappearing, displaced by national chains that have limited ties and no long-term
commitment to the community.
Over the last fifteen years, the U.S. retail economy has undergone a massive shift from
primarily locally owned to primarily absentee -owned businesses. Since 1990, 11,000
independent pharmacies have closed. Independent bookstores have fallen from 58 percent
of book sales in 1972 to just 15 percent today. Local hardware dealers are disappearing,
while Home Depot and Lowe's have captured one-third of that market. Five firms control
one-third of all grocery sales, up from 19 percent just five years ago. Three companies
account for 75 percent of the office products market. Blockbuster Video rents one out of
three videos nationwide. A single firm, Wal-Mart, now accounts for 7 percent of all
consumer spending.
This trend has transformed much of the American landscape. Many cities and towns are
now indistinguishable. They are ringed by the same big box superstores. Their downtowns
are shuttered and vacant. Their small, local stores are long gone.
Traveling these days has become a unsettling experience. I keep finding myself in places
virtually identical to the ones I left behind. Denver. Minneapolis. Portland. Bozeman.
As Richard Moe, president of the National Trust for Historic Preservation, has said,
"More and more... every place in America looks like every place else, and that means
every place looks like no place."
According to the conventional wisdom, the current trends in retail are both desirable and
inevitable. We tend to take as self-evident truth that these large retail corporations
strengthen the local economy by generating new jobs and tax revenue. We assume that
they benefit competition and consumers. And, even though we may mourn the loss of the
neighborhood pharmacy or the local bookstore, ultimately we believe that there's not
much we can do about it. This is simply the free market at work. The economy is always
evolving. Independent retailers are simply the latest casualty of progress, a price we must
pay for prosperity.
But before the last locally owned store closes its doors, before the last American
downtown withers and dies, before we lose more open space to sprawling retail
development, I think it's important that we pause to question the conventional wisdom. Do
national retail corporations actually strengthen the local economy? Do they create all of
the benefits they claim to? Are there hidden costs associated with large-scale retail
development? And most importantly, how does the disappearance of locally owned
businesses impact our local economies and our communities?
Impact of Chain Stores on Local Economies and Communities
One of the things we often hear about these big retail developments is that they create new
jobs and tax revenue. And in fact they do. A 100,000 square foot store might employ 200
people and generate significant property and sales tax revenue.
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But what is often overlooked is the other side of the balance sheet. Study after study has
found that new retail growth generally destroys about as many jobs as much tax revenue
as it creates. This is because retail spending in a given market is a relatively fixed pie.
Growth in sales at one location will invariably be offset by declines in sales at existing
businesses, many of which will be forced to either downsize their operations or close
altogether. ;
A study in Greenfield, Massachusetts, for example, found that a Wal-Mart expansion
would cost existing merchants $35 million in sales. The 177 jobs expected to be gained by
the new development would be offset by the loss of 148 jobs at other businesses. Another
study in Vermont found that a big box store would cause dozens of local businesses to
close, ultimately leading to a net decline in overall retail employment. Similar conclusions
have been reached in studies of big box stores in California, Maine, Minnesota, New York,
and Virginia.
Some contend that a portion of these losses will be offset by the fact that the new store
will draw shoppers from surrounding areas, creating an overall rise in retail sales in the
host community. This is may be true initially, but it's only temporary. Kenneth Stone, an
economics professor at Iowa State University, has been tracking the impact that Wal-Mart
has had in Iowa for several years. What he's found that nearby towns do experience a big
blow, losing an average of 25 percent of their retail sales within the first three years after
the Wal-Mart opened.
Meanwhile, immediately following Wal-Mart's arrival, the host towns lost several of their
local stores, but overall they had a net gain in retail sales. After the first two or three
years, however, the host towns reached a peak in sales and then began a decline. Many
found themselves back where they started. One in four actually ended up with a lower
level of retail sales than they had prior to Wal-Mart's arrival.
Dr. Stone attributes this decline to the saturation factor. All of the big national retail
companies have a similar pattern of expansion. They build stores first in the medium- or
large -sized markets. Then they build stores in the smaller towns in between until they've
saturated the region. The result is that, after a few years, a big box store draws very few
shoppers from outside of the local market. In Iowa, Wal-Mart is currently building
supercenters in towns as small as 8,000. Although much of the big box focus to date has
been on Bozeman, it's quite possible that these retailers are also considering sites in
Livingston, Manhattan, and other small towns in the region.
Moreover, what usually happens is that cities get not just one, but several of these stores
coming in all at once. When one big box company builds or expands in a certain location,
it often draws the attention of other superstores. Pretty soon you have Home Depot,
Petsmart, Office Max, Blockbuster, and all the other big chains sprouting up.
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Most cities cannot sustain this level of retail expansion and continue to have a vibrant
downtown. The first businesses to close will be those that are in direct competition with
the new chain stores. Over time, however, as vacancies increase, downtown will become
less appealing to shoppers. Even those stores not in direct competition will experience
declining sales. Once this spiral of vacancy and disinvestment begins, it's very difficult to
turn around.
Throughout the midwest, where many of these big box stores first appeared, one can find
countless towns that are now struggling to revive their Main Streets. In essence, what
these communities have done is squander their assets. They've allowed all of the public
and private investment that's gone into the downtown over the years to evaporate.
Meanwhile, they've lost valuable open space and farmland on the perimeter. Often they've
also incurred a variety of new tax burdens to cover the cost of providing roads, sewers,
police and fire services to the sprawling new development.
We all know that a business cannot survive unless it protects its capital investments. The
same is true of a city. The city of Concord, New Hampshire provides an example of what
can happen when a community allows massive commercial growth and fails to protect its
existing assets. Over the last 12 years, Concord added 2.8 million square feet of new
commercial and industrial development. Yet tax revenue has actually declined by 19
percent. To make up for lost revenue, the town now has one of the highest property tax
rates in the state.
A study by RKG Associates, an independent economic consulting firm, found that there
were several reasons for the declining tax base. One was that new retail development,
primarily big box stores, had harmed local businesses. Property values, and subsequently
tax revenue, in the older shopping areas had declined sharply. Another factor was that the
new development had eroded the value of residential property, probably due in part to
increased traffic and noise. The end result was that the city actually experienced a
declining tax base despite all of the new growth.
But job and tax losses are only part of the picture. There are other, less visible economic
losses that occur when locally owned businesses are displaced by national chain stores.
Consider what happens to a dollar spent at a locally owned store. Not only do profits stay
in the community, but local retailers support a variety of other local businesses. They
create opportunities for service providers, like accountants and printers. They do business
with the community bank. They advertise through local media outlets. They purchase
goods from local or regional distributors. They sell products made by local companies and
small manufacturers. In this way, a dollar spent at a locally owned business sends a ripple
of economic benefits through the community.
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In contrast, chain stores typically centralize these functions at their head offices. They
keep local investment and spending to a minimum. They bank with big national banks.
They bypass local media in favor of national advertising. They deal almost exclusively with
large manufacturers and offer few opportunities for local firms. In this way, much of a
dollar spent at a chain store leaves the community immediately.
Maintaining a large number of small, local stores also ensures economic diversity and
stability. Local ownership means these stores are firmly rooted in the community. They are
unlikely to move and will do their best to weather economic hard times. Because there are
so many of them, consumers have options about where to shop and the community as a
whole is not overly dependent on any single business.
Contrast that with the situation now facing many cities and towns, where there are few
local businesses left and residents instead depend on a handful of absentee -owned chain
stores. This kind of dependency carries risks. With little or no competition, the chain
retailers can raise prices at will. A survey of Wal-Mart stores in Virginia, for example,
found that prices were as much as 25 percent higher in areas where the local competition
had been eliminated.
Dependency on a handful of national retail companies also carries risks for the community
as a whole. Chain stores are highly mobile. They routinely abandon locations when the
economic winds shift or when their business plan changes. Many cities are now home to
dozens of vacated big box stores. West Columbia, South Carolina has ten empty or soon
to be vacated superstores, including Target, Lowe's, Circuit City, and Wal-Mart. Kansas
City has more than two dozen empty big boxes. In some cases, the retailer leaves town
altogether. More often, it closes one store only to open a newer, larger store down the
road, spreading urban sprawl further out into the countryside. Meanwhile, it's difficult for
cities to find new uses for the empty stores. They usually remain vacant for many years,
creating blight and eroding local property values.
When a few large retail companies dominate a local market, they are often able to make
demands that local governments find hard to refuse. Let me give you an example of what I
mean. A Costco store in Lancaster, California recently demanded that the local
government provide $3.9 million in free land, along with substantial tax breaks, to finance
the store's expansion. If the city refused, Costco threatened to move the store elsewhere,
taking with it a substantial chunk of the city's tax base. Stuck between a rock and a hard
place, Lancaster officials ultimately gave in. But giving in of course only makes matters
worse. A larger Costco will have even more power to exact tax breaks and other
concessions in the future. This is not an exceptional occurrence. Stories like this occur on
a weekly basis and nearly all of the nation's biggest retail companies have made similar
demands of local taxpayers.
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Which brings me to what I think might be the most powerful argument in favor of limiting
chain store expansion and supporting locally owned businesses. Controlling our own
destinies requires both political and economic democracy. True independence means not
only holding the reins of government, but also owning a piece of the economic pie and
having a say in the economic decisions that affect our lives. As Senator John Sherman put
it in 1890, "If we will not endure a king as a political power, we should not endure a king
over the production, transportation, and sale of the necessaries of life."
In the 1920s, 30s and 40s, America experienced its first wave of chain store expansion,
which met with a very strong negative response from the public. Most states moved
immediately to curb retail consolidation by enacting special taxes on chain stores. Senator
Hubert Humphrey summed up the general feeling of that time during a 1952 debate on the
Senate floor. He declared:
We are not necessarily talking about [saving] half a cent on a loaf of bread. We
are talking about the kind of America we want... Do we want an America
where the economic market place is filled with a few Frankensteins and giants?
Or do we want an America where there are thousands upon thousands of small
entrepreneurs, independent businessmen, and landholders who can stand on
their own feet and talk back to their Government or to anyone else.
These days, many of the most important decisions affecting our lives are out of our hands.
Who decides whether to close a store in a distressed community, stock a controversial
book, sell produce from local farms, pay a living wage, or contribute to a local charity? In
the case of chain stores, these decisions occur in distant boardrooms, where the values of
the local community carry little or no weight.
Lastly, I want to touch briefly on a few of the qualitative benefits of maintaining a
homegrown economy. Locally owned businesses build strong communities. There are
several reasons for this.
The first is that small, local stores help maintain humanly -scaled, pedestrian -oriented
shopping districts. These traditional commercial centers create a vibrant street life and
provide a foundation for all of those unplanned interactions with our neighbors that build a
sense of trust and community. These are the kind of interactions that we experience less
and less often these days as we spend more time running errands alone in our cars.
The second reason is that local stores create a sense of place. They reflect the local
culture. They give cities their unique flavor. They make the places we live special and
distinct from all the other cities and towns in America.
The third way that independent businesses strengthen community is through their
contributions to civic and cultural life. Local merchants are more than providers of goods
and services. They often take a leadership role in community affairs. Many chair
neighborhood organizations, host cultural events, or organize local festivals. And,
although we hear a lot about the charitable giving of national retailers, studies have found
that small businesses actually give more than twice as much per employee to charitable
organizations than do large companies.
All of these things add up to a stronger local economy, because ultimately a community's
quality of life is its most valuable economic asset. I don't know how many of you saw
Money Magazine's annual "Best Places to Live," which came out a couple of weeks ago.
This year, the editors chose cities and towns that had successfully managed growth. Cities
that limit sprawl, preserve open space, and maintain compact, walkable neighborhoods,
are not only the best places to live, according to the editors, but they are the places most
likely to prosper in the future. By protecting and enhancing their unique assets and quality
of life, these cities will continue to attract skilled workers and people who want to invest
in homes and start new businesses.
Role of Government
Some argue that trying to retain locally owned businesses and viable downtowns is to
resist the inevitable. This is simply the free market at work.
Certainly some small businesses fail because they are inefficient or have poor service. But
the tremendous shift now underway from locally owned to absentee -owned businesses is
not simply the result of market forces. It is a trend that has been helped in no small part by
public policy. In a variety of ways, at all levels of government, public policy has actively
encouraged the growth of large corporations at the expense of independent businesses.
Let me offer a few examples.
Failure to adequately monitor and enforce antitrust law has allowed corporate chains to
use their market power to unfairly disadvantage rivals and undermine competition. State
antitrust authorities routinely receive complaints from small business owners who feel
they've been the victim of illegal predatory practices on the part of their larger
competitors. For the most part, antitrust authorities have neither resources nor the impetus
to investigate these complaints. One exception recently occurred in September when the
state of Wisconsin charged Wal-Mart with engaging in predatory pricing in an attempt to
put its smaller rivals out of business in five towns. The state has been aware of these
practices since 1993, but is only now taking action.
At the local level, city officials in many communities are actively recruiting large chain
store developments. Often, they have land use policies in place that allow or even
encourage these kinds of sprawling projects. And many provide tax breaks and other kinds
of subsidies.
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Target received nearly $20 million from the state of Wisconsin a few years ago to build a
distribution center. Long Beach, California waived $6 million in taxes for a development
that included Kmart. Walgreens received $2 million in state and county money to fund its
expansion into Florida. New York recently supplied Wal-Mart with several million dollars
in public funds. All of the big chains have been recipients of these subsidies, which amount
to tens of millions of dollars nationwide, and have played a significant role in their
expansion.
Rarely are public funds made available to locally owned businesses. Instead, they often see
their tax dollars used to subsidize their biggest competitors. Even if your city, county, or
state government does not provide these kinds of subsidies, the chains that expand here
are able to do so in part because of the public funding they've received elsewhere.
New Rules
These are just a few examples of the way public policy undermines local businesses. How
might we do the opposite? How might we design policies that support the homegrown
economy?
One of the first things local governments can do is to consider how their decisions impact
local businesses. Over the last few years, for example, many local, state, and national
agencies have chosen to move various government buildings, like post offices, libraries,
and schools, out of downtown and into new locations on the outskirts of the city. In doing
so, they inevitably shift economic activity away from the central business district. A survey
by the National Trust for Historic Preservation found that 80 percent of downtown
shoppers planned their shopping trips around a visit to the post office. A Nevada study
found that retail sales can decline by as much as 8 percent when a nearby high school
closes.
Another area of government decision -making that often impacts local retailers has to do
with how local and state officials approach economic development. Traditionally, cities
have focused on attracting national companies. Now, many are instead redirecting their
economic development resources towards strengthening downtown commerce and
fostering the creation of new independent businesses. They no longer offer tax incentives
to national retailers. They no longer provide taxpayer funded roads, sewers, and other
services needed to build on undeveloped land. Instead, they are rebuilding their central
business districts. They are offering low -interest loans and other assistance programs to
help local businesses renovate or expand.
Land use and zoning policies are perhaps the most significant determinants for how a city
will grow and whether it will maintain a vibrant downtown. Hundreds of cities have
adopted zoning policies that deter chain stores and support locally owned retailers.
Zoning is one of those words that rubs many people the wrong way. This is a free country
and many contend that zoning unfairly impedes private property rights. But there's a flip
side to that argument. Everyone in this room is a stakeholder in this community. All of you
have invested in Bozeman. Most of you work here. Some of you own a business. Many of
you own a home or would like to some day. In various ways, you have invested financially
and personally in this community.
During the time I've been here, I've asked many of you why you chose to make that
investment and what it is that you love about living in Bozeman. Many of you have said
that it's the magnificent wide open spaces, the ability to get out into the middle of nowhere
and hike or ski or fish. Others have said it's having this unique, vibrant downtown, a center
for the community. And many of you would probably also say you made that investment
because Bozeman has maintained a high quality of life that will enable it to continue to
create good jobs in the future.
All of these things are threatened by sprawl. As residents of this community, you have
both the right and the responsibility to determine how Bozeman will grow, how it will
look in the future, and what kind of community you will leave for your children and
grandchildren. Instead of leaving these decisions to developers, more and more cities are
taking a pro -active approach. They're enacting land use rules that ensure that new
development enhances, rather than harms, their quality of life and the vitality of their local
economies.
Let me offer a few examples. A number of communities have adopted land use rules that
steer new development to areas in or adjacent to the central business district. This ensures
that new growth and investment compliments existing businesses and does not detract
from the viability of the downtown and other neighborhood commercial centers.
Dozens, or maybe even hundreds, of cities have adopted laws limiting the size of new
retail stores. The city of Walpole, New Hampshire, for example, adopted a law limiting
new stores to no more 40,000 square feet. Boxborough, Massachusetts capped new stores
at 25,000 square feet. These measures are driven partly by concerns about traffic
congestion and sprawl, but also because many cities have concluded that they can absorb
only so much new retail without causing the dislocation of dozens of local businesses. The
city of Easton, Maryland, for example, spent several months studying the issue and
concluded "Once a big box retail store exceeds 65,000 square feet, it is of such a scale that
its negative impacts outweigh its positive ones." Easton now limits new stores to no more
than 65,000 square feet.
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Another zoning tool that many cities are using is to require that proposals for new
development undergo a review and obtain a special permit. To pass, developers must meet
specific criteria outlined in the law. What criteria are included vary from one community to
the next. In Greenfield, Massachusetts, for example, proposals for stores that exceed
20,000 square feet or generate more than 500 vehicle trips per day must demonstrate that
they will not negatively impact traffic, public revenue, the environment, the local economy,
the downtown businesses district, and the character of the community. Public hearings are
usually part of this process. Many towns also require an economic impact study conducted
by an independent consultant, rather than just relying on the numbers supplied by the
developer.
This kind of review process can also be established on a regional basis. This ensures that
nearby towns also have a say in developments that are large enough to have impact
beyond the city where they locate. In 1990 the towns of Cape Cod, Massachusetts got
together and created a regional board that reviews proposals for large-scale retail
development. The economic impact of a new store is carefully weighed and guidelines
require that the region encourage the growth of locally owned businesses. Vermont
established a similar review process statewide under its Act 250. Both regions have
rejected a number of national chain stores, including proposals from Wal-Mart, Home
Depot, and Costco.
One last example: In Boulder, Colorado, the City Council is currently considering a
measure entitled the Community Vitality Act. It consists of four provisions. One requires
that the city give preference to local businesses in all city purchases and contracts provided
that their bid is within 5 percent of the lowest bid. Another requires that city -owned
property only be leased to local independent businesses. The third provision limits the
number of formula chain stores that can locate in the downtown area. The final provision
provides for a special review for retail development proposals that exceed 12,000 square
feet. The law has the support of the mayor and several city council members. A vote is
expected soon.
These are just a few of the innovative policies towns are developing to ensure that their
homegrown businesses continue to be a vital and thriving part of the local economy. The
full text of all of the policies I just described as well as others are available on Institute for
Local Self -Reliance's web site at www.newrules.org.
Finally, I'll end by noting that there's a difference between change and progress. Change is
inevitable. We'll have change whether we will it or not. But we'll have progress only if we
channel the forces of change in directions that are compatible with our values and in ways
that improve our lives. In the context of tonight's discussion, that means taking steps to
curb sprawl and ensure that locally owned businesses and active downtowns survive and
thrive in the coming years.
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Stacy Mitchell is a researcher with the 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. This speech was originally delivered at a public forum held in Bozeman,
Montana on November 30, 2000.
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