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06. Economic Studies Used to Deny WalmartEconomic Studies Used To Deny Wal-Mart Like San Leandro, many communities have commissioned economic impact studies to determine if a prospective retailer would have negative or positive economic effects on the community. The results of these studies determine land use decisions effecting retail development. The following are some of the findings from economic reports utilized by municipalities to deny Wal-Mart developments: Concord California, February 1994 The Concord City Council commissioned an economic impact report conducted by economic consultants Kotin, Regan & Mouchly, Inc., released in February, 1994. Based on this report, the council denied a zoning change that would have permitted the development of a Wal-Mart: "Given the already large number of retail outlets and the moderate population growth projections, it is considered likely that, for the most part, Wal-Mart's sales, will be transfers of sales already occurring at other retailers in the trade area (both within Concord and nearby jurisdictions)." "The remaining 57.0% of sales, or $18.8 million would be drawn from the competing retailers within the City." New Paltz, N'ew York, March 1996 After four economic impact studies the New Paltz Planning Board determined Wal-Mart would result in detrimental effects to other businesses operating in their city. The Board found: "The plaza's detraction of $29 million from the local economy would lead to a contraction of investment or downward economic spiral effect feeding upon itself that could well lead to blight." St. Albans, Vermont, June 1995 The State of Vermont authorized a Retail Sales Impact Analysis of The Proposed Wal-Mart store in St. Albans, Vermont. The following are some findings of the report and decision to reject by the Environmental Board: ' "For every $10 million in sales at a typical Franklin County retail business, 106 people are employed. For every S10 million in sales at a typical Wal-mart, 65 people are employed. Due to projected sales losses to existing businesses in Franklin County, there will be about 381 retail jobs lost over the next ten years. These jobs will be offset partially by the gain of over 214 Wal-mart jobs during the same time period." A Study by Kenneth E. Stone Professor of Economics Iowa State University For additional information, contact: Dr. Kenneth E. Stone 464 Heady Hall Iowa State University Ames, IA 50011 Phone: (515) 294-6269 Fax: (515) 294-17d0 Figure 10 Average Net Sales Change After 3 Years In Wal-Mart Host.Town Wal-Mart Sales Est. Total Sales In=remse Sales Loss To Others 420 _S10 SO S10 • S20 MINons FM The interpretation of Figure 10 is that if the average Wal-Mart store in the study had annual sales of $20 miHion and the average increase in the host town's sales was $8 million per year, then there was a resulting reduction of sales of $12 miDion per year to existing merchants. Further analysis shows, however, that about 70 percent of the $12 miHion reduction was suffered by ezisting general merchandise stores. That means that smaUer local merchants suffered average combined losses of $3.5 million of sales annually. These figures are averages; some towns fared better, some fared worse. 4 A Report on Three Iowa Communities with a Statistical Analysis of Seven Iowa Counties FOR THE NATIONAL TRUST FOR HISTORIC PRESERVATION by Thomas Muller, Fairfax; Virginia - Elizabeth Humstone, Burlington, Vermont This.report was prepared with the assistance.of the Henry h2. Jackson Foundation. IMPACTT-7NDINGS ON THE , - r i n_ ;olic, ins major findings were made in Parts III and N of the report. Part III Findings. Case Study Community Impacts 1. In all three communities - Boone, LeMars, and Iowa Falls - Wal-Mart located outside -f the downtown in a highway strip commercial area.? The stores were smaller than T` c national average, apparently scaled back to fit more with the small market size of t11ece communities. 2. Sales performance at the stores in the three communities is estimated to be below the rational average for Wal-Mart and ranged from S193 to 5270 per square foot In spite of this lower performance, Wal-Man still diverted sales from existing businesses in the county. From 779� to 100% of Wal-Mart's sales came from these businesses. After Wal-Man ooened. net ad3itionEl s es rose rom SO to $3.8 million in the counties where the three communities are located. 3. There were clearly identified losses in downtown stores after Wal-Man opened. General merchandise stores were most affected. Other types of stores that closed include: automotive stores, hardware stores, drug stores, shoe stores, apparel stores, and sporting goods stores. Some restaurant closings also were noted. Althoueh five vears after Wal-Mart came to the towns, new stores opened in the downtowns of all three c munides, there was still a net decline in the number of stores downtown. ere was no evidence to support e claim that Wal-Mart had boosted downtow h ing. In all three downtowns there are non-ret businesses in prime first floor space that are typically found on side streets or upper floors in healthy downtowns.$ Each downtown had many vacancies on the upper floors. 5. All three communities have compact downtowns with many historic structures. In Boone and LeMars many of these structures are in need of rehabilitation. In Iowa Falls. the community's Main Street Program has resulted in substantial reinvestment in the downtow-n and a visible improvement to the attractiveness of the area. None of the case studies had a Wal-Mart store in the downtown. therefore, we could not compare the differences between a strip commercial location and a downtown location. However, even a downtown location could damage the viability of existing stores. A 75.000 square foot Wal-Mart could have sales of aver S'-0 million, which could exceed the total for all downtown stores in a small community. :though only. some of these stores are in compeddon with Wal-Mart, the effect on the downtown could tx serious. The added square footage could result in a surplus of retail space in the downtown. Small businesses that tN,pically pay higher prices for the same goods sold at Wal-Mart could be at a competitive disadvantage. Nevertheless. a downtown location could help some retail stores that carry goods not available at Wal-Mart by increasing the flow of shoppers in the downtown. sTbe original.design of downtown buildings assumed retail occupancy. Alternative uses tend to be less profitable. often threatening the viability of the buildings. In some cases. a major downtown entrrprisd may etpand and preserve the historic character of a building while smaller banks and retail businesses go out of business. Empty or low -rent tenants of former retail and bank buildings were observed in every Iowa city visited. The loss of retail stores curtails the economic vitality of downtowns even when the space is utilized fCr other functions. IMPACTFINDINGS ON THE marknt area. In order for Wal-Mart to come into a market area without dislocations to existing stores, it must get most of its sales from the first three sources. In the nine counties studied. 3�o_ u _ c of all sales at the Wal-Mart stores come from existing businesses within the counties and only 16% came from other sourcesT-ffe secondE7market and recapture of primary market area:residents' sales. im-1 of other Wal-Marts within commutin distance of the case study communities l the ability of the Wal-Mart store to ettand the"niarket arm-,Each_new Wal-Mt market is merchandise: -==Because products that Wal-Mart stocks are typically those already 1 ... available in the primary market, it is likely that most shoppers who previously ' purchased goods outside the primary market continue"to do so.Thus, Wal-Mart does not appear to have recaptured the sales residents made elsewhere:'None of the nine case studies was experiencing a high enough level of population and income'growth to absorb the WaI-Man store without losses to other businesses. 2. RETAIL STORES The number of retail stores in competitive categories in each county after Wal-Mart opened was compared to the number of stores expected if Wal-Mart had not been built. -The number of retail stores after Wal-Mart opened was lower' * than would have been expected otherwise. Townships with small shopping areas in particular had considerable losses.- the data.suggests that although rural area losses began before Wal-Mart, the stores' arrival seems to have accelerated the trend. This pattern, observed in both downtowns and elsewhere, should not be surprising, as weaker stores usually cannot absorb sales losses. Several regional chains, including Spurgeons, Alco, and Pamida.-were weakened statewide by Wal-Mart's presence in It�ua. 3. RETAIL EMPLOYMENT The impact of Wal-Mart on retail employment is an important issue with the Wal- Mart Corporation. Wal-Mart believes, and its found at the company created "hundreds of th al America. Such impressive gains would.be a major boom to these small area economies. ur dataz however, do not sport this positivXassessment_ Although there is an initial increase in general mere- han3ise emp ont in the year Wal-Mart opens, this gain is at least partially offset over time as employment in this category declines. Other retail sectors competitive with Wal-Mart were found to have employment gains below what would be expected given local economic growth. This finding should not be surprising, given the small net gain in sales attributable to Wal-Mart in the counties and given the high efficiencies in the stores' operation. For example, fewer employees are required for each S1 million in sales at Wal-Mart than for the same quantity of sales in other retail stores within competitive sectors. 17 New Paltz, N.Y. Planning Board Decision, larch 11, 1996 Economic & Community impacts: Proposed Wal-Mart - 4 -economic impact studies were prepared:1 by the applicant, 7 by the Planning Board, 7 by the County Planning Board, 1 by consumer groups. - The New Paltz_ Primary Trade Area retail spending potential is $141 $148 million. The proposed plaza would capture $43 to $45 million, leaving $98 to $103 million left for other retailers. 'This translates into a $27-$29 million erosion of existing retail space potential ... or a 21% loss of retail sales to existing businesses during the 1st year of the new plaza's operations. " "In the long term,it is forseeable that a decline in the viability of the 3 major existing plazas would produce secondary ripple effects on other local businesses and small plazas as the center of retail activity moves east of the thruway.... there will most likely be a net loss of jobs and income in the community because of the (new) plaza." -"It would take years for the plaza to pay more than it costs in town government expenses and reduced assessments and possible highway improvement costs." - "Tourism will be impacted and diminished both in the short and long term by the plaza's markedly increased traffic projections and negative social and economic impacts... reducing the desirability of shopping downtown.... the plaza will draw at least $28 million away from existing businesses and will neutralize the small town rural and historical appeal which has attracted many tourists and homebuyers." • Land Use Impacts: "The plaza would result in substantial job losses, closed businesses, requests for property tax abatements, increased vacancies in the downtown and other retail centers, and would result in far less dollars in the local economy as a big box retailer consolidates its gains and expands... the impact of underused, vacant or boarded up shopping centers could very well start a chain -reaction in a continuing contraction of investment leading to disinvestment and blight." - "The (town's) Comprehensive Plan's mission statement clearly states that "The Town of New Paltz places high value on its small town feeling and wishes to retain the character of the Town while enabling responsible growth." - "The New Paltz Economic Development Task Force ... specificialiy stated that 'shopping centers outside of town serve no social purpose' and stressed...that the downtown be preserved and promoted as `the major concentration of retail and commercial businesses." - "The proposed plaza is inconsistent with the development goals set forth by the Comprehensive Plan.. the introduction of a big box retailer to New Paltz would result in a shift in the location of businesses, a movement of trade away from the traditional downtown centers, a decline of other retail centers .... large percentages of downtown businesses would be harmed, older buildings may become vacant ... and any unique community character would be undermined and instead replaced by the lowest common denominator or "Any Town USA qualities." - "The plaza's detraction of $25 to $28 million from the local economy would lead to a contraction of investment or downward -economic spiral affect feeding upon itself that... could well lead to blight, loss of the village core uniqueness, loss of small town atmosphere...These losses would fundamentally change the community's character and would irreparably disrupt and tear the fabric of the local economy and the elements of the community which give the town its identity, vibrancy, attractiveness and stability." (sprawl -Busters, 4i3-772-6289)