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“BIGGER BOXES” Show Transcription Bob Canter - Chamber of Commerce - Emeryville, CA The concept of retail isn’t new, people have been buying and selling things from each other for thousands of years since the cave man days. Carolyn Sapp - Former Miss America If you look around us, you see that we are just getting bigger and bigger here in America and big is good all of the sudden. Buford Crites - City Council - Palm Desert, CA Whether it’s in Kansas or Texas or Maine or wherever else, it’s almost interchangeable at least in major highways and freeways in terms of what you see, it’s the same stuff everywhere. John Gioia - County Supervisor - Contra Costa CA There’s clearly a trend going on in American retail to locate all the goods you need in one big store. George Whalin - President Retail Management Consultants A good big box store today will have everything from food to lawn and garden supplies to automotive parts. Allen Schlottmann - Professor of Economics UNLV Partly because so many people work now a days, it’s a convenient way to basically go and do all of your shopping in one place. Marlon Boarnet, PhD - Professor of Economics - UC Irvine When we were doing this study, some folks came across a report I think it was from Goldman Sacks it said that the shift to Super Centers was the biggest secular shift in American retailing, bigger at that time than the move to the internet. As I first heard that, I was kind of wondering you know, c’mon, bigger than the internet? The more I look at this the more I think that there is a transformation of the retailing industry in the US that is big and it has big impacts and those big impacts are going to be some on the positive side and some on the negative side. Whalin Well, big box impact is significant, in fact, big box retailers today have really taken the place of department stores, the Sears, the JC Penny’s and the Montgomery Wards of the world owned the market place until the mid 80’s and then Wal*Mart and Target and Kmart and Costco, the big box retailers really began to dominate. Graphic The undisputed king of the big box format is Wal*Mart Whalin Wal*Mart is the largest retail company in the world and one of the largest companies in the world. Canter Why is Wal*Mart so dominant? Well, probably because they’re good, I mean ask people why they shop there, cause they like the prices, they like the service and they like the quality of the products. So, what did Sam Walton do? Why did he become a billionaire when so many other people went out of business? Because he came up with something new, the guy was an innovator, that new business model where he flipped it on its head, putting the small stores in the small towns knowing that there’s an under served population there. Whalin It obviously touched a chord with consumers in those communities and began to grow. They really flew under the radar for a number of years, nobody really paid much attention. Clip from “The Today Show “ Fortune magazine is out today with its list of the worlds biggest companies and topping the Fortune 500 for the first time, discount retailer Wal*Mart.. Whalin And all of the sudden they got big really fast. And then they began to look at the rest of the country. Brad Seligman - Executive Director – The Impact Fund What enables them to compete so effectively is partly their mantra internally of cutting costs to the bone but also the efficiencies they bring to it. Schlottmann Starting with the way the inventory is handled in the store, all the way back to dealing with its suppliers who provide those products. And that, there is no question that it is probably the most efficient retailer on the planet. Seligman They have build the rural and suburban parts of the country to the point where you are never more than 50 miles away from a Wal*Mart anywhere. Whalin They’re the now the largest grocer in the world and they have only been in the grocery business for a short period of time. There the largest apparel retailer in the world, they’re also the largest employer in America with the exception of government. Graphic Wal*Mart has announced plans to open 275 new stores in the US in 2004….. That’s an average of one new store every 1.5 days. Sapp They’re also the wealthiest corporation in the world. Their gross national product is larger than most small countries. Graphic If Wal-Mart were a country it would be #19 on the world gross domestic product list. Boarnet Local public officials can easily see and understand the benefits a SuperCenter for example might bring to their locality and they don’t nearly as quickly see or understand the possible downsides. San Marcos City council meeting - Citizens at podium Wal Mart happens to be one of the most corporately irresponsible companies on the planet. Theirs is a scorched earth strategy of market saturation designed to kill local competition The EPA has fined Wal*Mart one million dollars for polluting storm water in 17 different locations in the United States, that’s not being a responsible neighbor. Peter Kanelos - WalMart Good evening, my name is Peter Kanelos, I’m the community affairs manager for Wal*Mart stores. I appreciate the opportunity for us to come and address you tonight and answer some of the concerns that you’ve heard about the company and tonight you’re going to hear a lot of comments from critics of this particular project and a lot of them are going to be addressed specifically at Wal*Mart. Most of these criticisms of Wal*Mart are things that you could go on the internet and find, you know, tons of web sites that are going to be out there and they’re going to say all kinds of things about our company and I would just ask you to take everything with a grain of salt and really listen to what you’re hearing. Boarnet Why is it that big boxes are proliferating everywhere and in California people have argued that one thing that is really driving this is that localities are focusing on sales tax revenue that they’re essentially competing with other localities to get more big box retail outlets than the market can support. Corky Smith - Mayor - San Marcos, CA We cannot function with just property tax, there’s no way we could do that. Our total city budget is in the neighborhood of 35 to 36 million dollars and right now we only get in our city of 65,000 people, we only get less than 2 million dollars a year in property tax. Boarnet Now, because local governments recover some of the sales tax revenues that are generated in their locality, one way that they control their sales tax base is by trying to encourage more taxable sales to happen. Rob Schroder - Mayor – Martinez, CA We’re always chasing that retail dollar and competing against our neighboring cities for those big boxes. They produce tremendous amounts of sales tax and we all love it Boarnet You know, bring me the auto mall, bring me the big box retail outlet, bring me the large department store to my city Mike Preston – City Council San Marcos CA My point is the council is not taking this decision, the council did not drive Wal*Mart our staff did, God bless them, we asked them to go out and be aggressive to find sales tax dollars Mayor Corky And we try to market our city to get things like Fry’s. We have a Lowe’s that’s coming in on city property and now they’re building a Wal*Mart in the same shopping center where Costco is at. We also have a Wal*Mart that’s being looked at, at the other end of town. We have a little controversy over that, that particular site. Jim Ristuccia - Citizens for Responsible Growth in Southwest San Marcos Well, we’re organized to oppose this the building of Wal*Mart, right back over my shoulder over here. Susan Denny – citizen It’s not compatible and it’s not livable. Ristuccia I understand the need for big box and I understand the need for growth Brandy Spears – citizen We want it to stay the zone as it was zoned for residential Ristuccia But something of 140,000 square feet on 15 acres, 800 parking spaces is just not appropriate in a residential area Whalin I think it’s a terrible location. As a retail consultant, we look at locations all the time and look at what’s right and what’s wrong, that does not appear to be an ideal retail location for me. Ristuccia This area right now is zoned for residential, it’s supposed to be multi family housing units there. Whalin And I’m surprised frankly, that Wal*Mart, that Wal*Mart has picked that location. It may be an issue though, they can’t find another good location in the community. Ristuccia This area that we’re standing on right now is Carlsbad. San Elijo Hills is San Marcos, the Wal*Mart is going to be in San Marcos, which is right on the boarder. There is also unincorporated land on this side of me over here, which is the county of San Diego Whalin Since Carlsbad doesn’t allow big box retailers in their community and they want to be nearer to Carlsbad, it’s a pretty good location for that. Schroder In fact, I’ve seen that in northern California in a few different places, where Costco is half located right on the boarder of one community that will not approve their entry in to their community but the adjacent community will. So we still have the impacts, but none of the sales tax. Ristuccia The neighbors in Carlsbad are going to be dealing with the traffic, the noise and the congestion immediately in their backyards. Hal Martin - San Marcos City Council You mention that you’re continually told and people kept telling you that you live in Carlsbad that you don’t count, who told you that? Ristuccia @ podium People have called the members of the council and talked to members of the council and people have met with members of the council and they’ve been told at those meetings and those phone conversations that their views because they live outside of the city of San Marcos don’t count. Corky @ council meeting We’ve had three San Marcos people speak tonight and we’re listening to our neighbors tonight. So people tell us we don’t listen to them, I’m thinking that I’m sitting here for three hours and maybe I’m not really here. Jeff Davis - citizen Corky, I would like to say one thing to you Mr. Mayor. Why do we have that feeling as a member, as a resident of Carlsbad that you’re not listening to us, Brandy when she was up here was very eloquent among many things, she lives in Meadowlark, which is county and you specifically said, where do / what’s that address again – Oh Meadowlark – and you immediately went back in your chair, well she can’t vote, that’s the gut feeling I had when you asked her that question Mayor Corky I am responsible for San Marcos, not Carlsbad or the county. (booing from the crowd) Next speaker please. Joanna Wagstaff – citizen I live at (deleted) Way, SAN MARCOS! California 92078 (clapping from the crowd) and I have counted , there have been way more than 4 San Marcos people up here, there’ve been a number of them so you should be paying attention. Gioia We need to be more regional when we look at our planning decisions. The impacts of traffic and air quality don’t stop at a city boundary. We’re suffering here by decisions that are made in a neighboring county up on Interstate 80. Lee Connolly - citizen Hello, my name is Lee Connolly and I reside at (deleted) Court in San Marcos, you can put another check mark down for you, from the city. Mayor Corky Of course, I have to tell you, I’m leaning a little bit in favor of it because of the, of the tax burden that the state has put on us. Boarnet That could generate quite a bit more tax revenue than if they built homes on that same parcel. Mayor Corky Wal*Mart will be somewhere in the neighborhood of seven to eight hundred thousand dollars for the year and with the property tax of multiple units, probably maybe less than five percent of what Wal*Mart would do. Boarnet Residential land uses bring people, bring residents and they bring costs. The residents want schools, the residents wants roads, the residents want sewer treatment drainage, water so on and so forth. Non residential land uses bring costs also, but often not nearly as much. Gioia So often times they won’t build the amount of affordable housing that we need to build and instead opt for the retail, which later on they find may not have yielded all the benefits they thought it was going to yield. Randy Walton @ podium – citizen Number one, it’s totally speculative that this Wal*Mart is going to generate the revenue that has been suggested and that has been put out there. And since that appears to be the primary reason to support it, wouldn’t it be a tragedy if we let this be built and it didn’t come into fruition, I mean the fact is the only folks that are going to get rich off this project live in Arkansas, not in California. Boarnet There were two cities in Orange County where we looked at the time pattern of sales tax revenue, year to year in the 1990’s and the one thing we found was that when a big box retail outlet opened up in those cities, sales tax revenue in the locality did jump up and then tended to fall back down a few years later, which would be consistent with the idea that these big boxes in some sense cannibalize taxable sales from other existing retail outlets in the locality. Schlottmann The reason for that actually, is basic economic common sense. Simply the fact, an additional retailer has entered the market area doesn’t mean that families go out and spend more money. Boarnet A Super Center or a big box outlet enters a local market that, that is going to have to come at the expense of some type of other store. Gioia In the case of Wal*Mart, there have been studies that show that in many communities about 70 percent of their sales tax revenue is not new revenue, it’s revenue that is transferred from existing businesses. Gregg Pettis - Mayor Pro Tem – Cathedral City, CA Whether it is a small business, a stationary store, a book store, a pet store that may be in your community, all of the sudden those customers are going to go to Wal*Mart, you haven’t got any new sales tax, you just transferred it from one neighborhood in your town to another neighborhood and you may very well have hurt your neighboring community because a block down the road was that pet store. Corky I assume that if we approve the Wal*Mart at the other end of town, south of town, that that will draw a lot of people from Encinitas and Carlsbad Crites The real issues where I think it becomes appropriately prickly between communities, is where one community uses various kinds of economic incentives to lure business from one community to another. Gioia It’s a common practice for cities and redevelopment agencies to provide some form of subsidy to large scale retailers, like a Wal*Mart, like a Target. Pettis About ten years ago, the city council here in Cathedral City entered in an agreement with Wal*Mart to bring in one of their stores and they made significant concessions about it, 1.6 million dollars in land assembly costs and infrastructure improvements. Gioia They’ll say we’ll locate in your city if you give us a subsidy to build the infrastructure for our building. Schlottmann There are often financial, in the context of tax holidays. You know, lower property tax rates for the first five years of existence etc.. Pettis What the deal was actually, is that Wal*Mart put that in, spent the money up front and the city over the course of ten years was to repay that amount of money over sales tax. Schlottmann It just drives me nuts, to see communities do that. One of the fundamental issues in economics is opportunity costs. What could you do with the money instead? And giving a tax break is not free. What it means is that you’re not spending the money on schools, on the police department or parks or something else, you’re helping subsidize a business who you hope in the long run will more than compensate for the tax break. Gioia It’s easy for business to say, if they disagree with the government regulation, look, just let the free market reign. But in fact, stores like Wal*Mart are actually the first in line to seek subsidies from local government to help them locate in a particular community, so they play both sides of that argument. Boarnet Well offering, offering tax breaks or fiscal incentives to big box retail outlets could unbalance the playing field. Schlottmann What happens is, those are only given to new developments and not existing businesses. So, by definition, if they’re in the same line that we are, we got a problem because they’re not paying property taxes or they put in sewers and roads for them, I mean, c’mon give me a break, I can’t compete with that. You know, and it has nothing to do with competition. They’re being subsidized. Pettis When they came in we lost untold number of businesses, small businesses, mom and pop businesses that couldn’t compete with someone the size of Wal*Mart that undercut all of their prices. So we lost that sales tax revenue, we lost those jobs, we lost those businesses. Crites I don’t think any of us are necessarily very happy about watching good businesses in a community simply close their doors, but we all know that’s what is going to happen. Schlottmann It also sometimes allows businesses to engage in a strategy, where they come in for the time just sufficient to enjoy those tax breaks and other kinds of subsidized aspects of their operation, then when they have to act like another business, they pick up and they move down the street because they know if competitors are no longer there, that the consuming public has to follow them down the street. Pettis We didn’t start receiving %100 of the sales tax until this fiscal year. About the same time Wal*Mart announced that they are moving and close their store and move about ten miles down the road. Schlottmann When they do that now, that jurisdiction not only no longer has the Wal*Mart facility but in addition the other retailers that used to be there are gone. Now they’re left with nothing. Pettis So you end up with a vacant building of the size that most business can’t fill. So you have a huge building that sits vacant for months and years. Crites Empty boxes do not make for the perception of a healthy community. It hurts the adjacent merchants dramatically in many cases. I think it has a general negative impact on the perception of an entire community. Pettis There has been no net gain to Cathedral City by having them there. There has been a loss on the front end, there’s going to be significant loss on the back end and I know this is happening across the country where they are doing the exact same things. So, not that makes me feel any better, it just doesn’t make me feel alone. Paul Staley – citizen The differences between locally owned and national chains is that locally owned retail puts that same money back into circulation, it’s a basic economic multiplier, you’re gaining tax revenue on the same money over and over every time it is redistributed and run back through the grinder. National retail chains take all that profit, they take all that money from retail sales and they ship it back to their headquarter cities, that’s what they do, that’s their whole purpose. Gioia Cities shouldn’t be fighting each other and tripping over each other to provide huge subsidies to have retail located in their community. We need to step back, redistribute how sales tax is apportioned, there’s been attempts in the legislature to do that and every time that happens the large shopping centers, which include Wal*Mart oppose the bills because it takes their power away and it makes it harder for them to leverage their sales tax argument when they want to locate in a city. Robert Johnston – citizen The deal that impacts me is after you build it and it screws up, who do I go to? Boarnet One thing that local governments need to think about is if you’re looking at a decision to permit a big box retail store today, might that become a Super Center some years down the road. Seligman The biggest area of expansion of Wal*Mart in recent years has been the supermarket industry. With their Super Centers, the take a discount store and they add a supermarket in the middle. Boarnet As of the late 1990’s over half of Wal*Mart Super Centers that they were building at that time were conversions of existing big box discount retail stores. Graphic Walmart has announced plans for up to 40 new SC’s in California over the next 4 years Seligman And because they are non union and because they keep their wages so low, they’ve essentially have been able to come in and undercut all the main supermarket chains Kanelos But you know, two of the very important things that I think that need to be brought to the attention of, are the jobs and the opportunities that our stores create. This will be the second store in San Marcos and that’s going to be a total of about 700 jobs that are going to be created in the city. Schlottmann There have been several studies starting back with Kenneth Stone study of Iowa, Edwin Shils study that came out of Wharton and the University of Pennsylvania, Marlon Boarnet and Randall Crane in California and a host of others that suggest that the net impacts of employment frankly, aren’t what local communities anticipated. Pettis Wal*Mart or any of the big boxes will talk about the number of new jobs that they are creating, in reality, we don’t see that happening. Schlottmann The data that we’ve been looking at suggest that the net impact of employment of a Wal*Mart Super Center after five years, one sort of / the market area has kind of worked through this process, is basically a slight loss of employment. Pettis As they close the mom and pops, as they close the small businesses, those jobs are just being transferred over to a lower pay. Schlottmann You know, 250 to 350 employees really ends up being a loss of about ten jobs not a gain of 250 to 350. Boarnet In 1999, we looked at wages paid that were typical of Super Centers, that were typical of major southern California grocery chains, and what we found that there is a gap in total wage and benefits that’s about $8.50 per hour. Seligman The Albertson’s the Safeway’s the Krueger’s, they find it difficult to compete against a company that has that low of labor force costs. Boarnet So there’s a question of downward wage pressure on a sector that currently provides entry level jobs that one could make a living out of, potentially make a career out of. Schlottmann The reason that has an indirect impact on communities is of course, those workers spend less. As they spend less, the communities actually garner less sales tax collections due to that decrease in consumer earnings then they would otherwise. Boarnet One of the conclusions that we came to in 1999, was that the full economic impact of lost wages and benefits of Super Centers entering the southern California market, could be on the high end of 2.8 billion dollars if you count for the direct impact and then the multiplier effect. Kanelos We’re opening a store in National City on the twentieth of this month, we have 350 job opportunities at that store. In a two week period we received over 12,000 applications for those jobs. The vast majority of people that applied for those jobs, actually already had jobs. Why do they want to work at Wal*Mart? They want to work at Wal*Mart because it’s a good corporation. It’s a corporation that takes care of it’s associates, has competitive pay and great benefits. Schlottmann Economist are always a little difficult at trying to decide what the definition of good is, but in that context, I think to coin a phrase, the proof is in the pudding and if they basic figures that are quoted in the existing literature are correct and you have only %38 of your work force covered by your health care, that definition of good doesn’t seem to fit the average figures at least that are publicly available. Boarnet Southern California grocery employees get full health care benefits. The employees are covered, the dependents are covered, the premium is all paid for by the employer and because of that there is a very high take up rate. Now, when we were looking at the Super Center side, Wal*Mart offered lots of different health benefit plans, some being rather generous, some being not so generous and that the take up rate among employees is substantially lower Schlottmann Partly because of the price of being so severe relative to average wages. Larry Allen - Wal*Mart SuperCenter Associate I make $8.70 an hour, I take home approxamitely $1200 a month and to have insurance, to purchase their insurance, I do believe that it is going to cost me $210 a month just for the medical. That’s approximate; let’s say 20% of my take-home pay. Schlottmann As a result, what happens is, those people and their families, of course, go ahead and use public and provided health care. So, it’s not only the worker it’s the multiplier effect with their family. In essence, some people will argue that the Super Center has other businesses and local tax payers subsidizing the health care of their workers? Gioia What were finding is, the largest number of uninsured generally in the county and the state, are not people who are unemployed, but people who work at lower paying jobs, the working poor. Employers like Wal*Mart. Schlottmann If I’m able to take some of my costs and not bare them myself and my business operation, I can for example charge you a lower price. Whether it’s the chemical factory charging a lower price for chemicals or a lower price of a grocery store for a bag of Cheetos. As a business strategy, frankly, in many respects it’s brilliant. But, what might be brilliant for the individual firm is not necessarily brilliant for the state of California because forward shifting your costs doesn’t mean they’re zero or they go away, it means someone else has to pay for them. Sapp - Wal*Martversuswomen.com So what does that mean in a nutshell, you and I as taxpayers are picking up the slack of Wal*Mart, the wealthiest corporation in America can’t afford to pay enough? So you and I have to pay the difference. Gioia When you go into a Wal*Mart and you buy a low price product and you think that you are getting a deal but if you look at the receipt and the price that you’re paying , what you need to do is add into that the cost you’re paying on your taxes for their uninsured workers, Federal and state taxes to support their free and reduced lunch program and the increased sales tax that you may have to pay to support transportation improvements in your community to address the negative implications from that store. Schlottmann Do you pay me now or do you pay me later? Do I pay upfront for the price for the true price of the product when I purchase it at this store or do I have to wait and get my tax bill and pay for the extra costs for that product later on? Susan Denny - citizen Peter Kanelos, I’m sorry Peter but you’re an agent of disinformation. You’re getting paid to push the product into my neighborhood. He has convinced you of it’s need and that’s his job. He has no reservations about ruining our neighborhood. Kanelos Our customers are the most important aspect of our business but our associates are the ones that allows us to do that. And I would just like to let them know how much we do appreciate them and that is why in Fortune magazine named Wal*Mart the most admired company in America this year and we’re proud of that fact so. Thank you for the opportunity. I would be happy to answer any questions you might have now or later. Graphic Wal*Mart declined to be interviewed for this program Lee Thibadeau - City Council Member - San Marcos Most people in San Marcos that I’ve spoke to about a Wal*Mart or a second Wal*Mart support it because they know we need the tax increment to deal with the real problems and that’s traffic and transportation. Audience Where are they?(from the audience) HOW COME THEY ARE NOT HERE? Corky Would you uh, let’s vote please. Ristuccia The people have spoken, they don’t want it!!!! Corky Call for the question please. (more from the audience….THEY DON’T WANT IT) Ristuccia LISTEN TO US!!! Corky Call for the question. Boarnet Local governments aren’t in the habit of thinking about labor markets. And the policy decisions are landing in the laps of local governments. The permitting of a Super Center comes before a planning commission and then it goes before a city council, where people are trained to think about land use and they’re not really trained to think about labor market policy. Mike Preston It’s a representative form of government…Let’s vote Corky Can we call a vote for the council please… Graphic On a series of 3 to 2 votes the San Marcos City council voted to rezone the parcel to commercial and approve the Wal-Mart Audience sounds and yells Cowards! Boarnet I mean as an individual shopper, I’m kind of reacting the way a lot of people would react, you know, you see low prices, you’re there, but I would encourage you to think not only what happens to you as an individual but also what happens to your community. Graphic In an attempt to overturn the council’s decision opponents of the WM have gathered signatures to place the issue on the 2004 ballot. The citizens of San Marcos will ultimately determine the fate of WM # 4698 END CREDITS TO ORDER A COPY OF BIGGER BOXES OR FOR MORE INFORMATION CALL 800.848.FILM |
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