Proposed Ban Could Thwart Wal-Mart Plan

By ANDY FIXMER

Staff Reporter

An ordinance that would effectively ban Wal-Mart Stores Inc. from opening its so-called superstores within the city of Los Angeles is likely to be passed by City Council within the next few weeks in what could be the start of a donnybrook over the retailer’s planned rollout here.

Seven of 15 council members have already voiced support for the measure, arguing it is needed to prevent an influx of lower-paying non-union jobs and the likely elimination of smaller independent businesses unable to compete with Wal-Mart’s low prices. Both sides generally expect an eighth council member to emerge from those currently undecided.

The strongest opponent to the proposed regulations is Councilman Bernard Parks, who says the superstore restrictions would hurt low-income areas such as his 8th District, which covers much of South Los Angeles.

Assistant City Attorney Cecilia V. Estolano, who has been working on regulations for big box retailers, said efforts in other cities offer a roadmap both of the challenges L.A. can expect and of the potential responses from the courts.

“We fully expect that Wal-Mart or some other big box retailer will challenge this ordinance,” Estolano said. “They have done this in numerous other cities and we see no reason why Los Angeles would be any different.”

Expecting a fight

Wal-Mart, the world’s largest retailer, announced plans last year to open as many as 40 of its 150,000- to 200,000-square-foot supercenters in California over the coming years. Because of its size and buying power, non-union Wal-Mart, based in Bentonville, Ark., can sell groceries between 12 percent and 20 percent below average supermarket prices.

The L.A. ordinance would effectively ban big box retailers from selling groceries within a one-mile radius of “economic assistance areas,” a broadly defined expanse covering communities that have received city, state or federal funds to bolster commerce. Taken together, they could cover 40 percent of the city.

“I think it’s safe to say the council is going to pass something similar to this ordinance,” said Peter Kanelos, Wal-Mart’s community affairs manager for California. “We’re operating under the impression that this is going to happen.”

If the ordinance carries as expected, Wal-Mart has a handful of options.

One is shifting focus to nearby cities. “The ordinance basically covers the entire city,” Kanelos said. “Anything that isn’t in those zones is already developed and wouldn’t be available anyway.”

Wal-Mart also has a history of challenging such legislation through the courts. With little debate expected in the Council over the wider intent of the ordinance, the City Attorney’s office has been drafting legislation designed to withstand a court challenge.

Estolano said a handful of court rulings have altered some of the ordinances enacted in other parts of the country, and that L.A. was seeking to incorporate aspects of those decisions into its legislation.

“Other cities have tried different approaches and there have been some rulings that have been incorporated into our ordinance as we moved along,” she said. “Our ordinance is going to be a little bit different than what others have done, but we are confident we can defend it.”

One of the cities watched by Estolano and other city officials is Mesa, Ariz., which in 2000 successfully defended Wal-Mart’s legal challenge to its big box regulations. But while Mesa’s law may be worth emulating, it is not an ironclad defense against a Wal-Mart incursion.

The company responded to the court’s rebuff by getting a referendum to overturn the ordinance on the city’s March 2002 ballot. It passed with 67 percent support, the third time Wal-Mart won at the polls in that state.

Closer to home, Wal-Mart late last year succeeded in going over the head of Inglewood City Council and having a referendum on its ordinance banning supercenters put on the April ballot.

Kanelos said Wal-Mart hadn’t decided how to respond to L.A.’s ordinance if it’s enacted unchanged. “It’s still too early to speculate what our actions will be,” he said, “but using a referendum or legal action are among things we would consider.”

Council aligned

The idea of limiting Wal-Mart’s presence in L.A. enjoys considerable support on the Council.

Antonio Villaraigosa, whose 14th District covers a swath running from East L.A. through the east Valley, said his support of the measure was rooted in an objection to Wal-Mart’s lower pay scales.

“We need to focus our energies in attracting high-wage jobs with good benefits that have been characteristic of this region in the past,” he said in an e-mail while on vacation last week. “The jobs don’t have to be unionized, as long as they are high-wage jobs with good benefits that can lift our residents into the middle class.”

Also backing the limits are Council President Alex Padilla and Councilmembers Eric Garcetti, Jan Perry, Janice Hahn, Martin Ludlow and Ed Reyes.

Garcetti did not return calls last week, but Rich Llewellyn, his chief of staff, said a way could be found to accommodate the supercenters. “We hope the city places some restrictions citywide which wouldn’t necessarily ban them outright,” he said. “Supercenters can live within the ordinance.”

Still on the fence are Councilmen Jack Weiss, Dennis Zine and Greig Smith, though Zine and Smith are expected to oppose the ordinance. Councilmembers Wendy Greuel, Tom LaBonge, Tony Cardenas and Cindy Miscikowski couldn’t be reached for comment last week.

Parks’ opposition comes, he said, from a belief that the stores would be kept from areas in which their low prices were most needed.

“In most of the poor parts of the city there are no (supermarket) options,” Parks said. “When people make these statements about supercenters reducing benefits and salaries, the only jobs in districts like mine are those at McDonald’s and Jack in the Box, and they wouldn’t be suppressing those wages or benefits.”

Parks also cited the political clout of the United Food and Commercial Workers union, now engaged in a months-long job action with Albertson’s, Vons and Ralphs supermarkets, to protect wage and health benefits.

“They are jumping on it like other union issues without a real analysis of it,” he said of his council colleagues. “Government’s role in private industry is to create jobs and it’s the union’s role to unionize them, but here we are trying to unionize jobs before any have been created.”

Parks has proposed adding an “opt-out” clause allowing areas with two or fewer grocery chains and a small retail presence to be exempt from the ordinance.

Eric Moses, a spokesman for the City Attorney’s office, said such a clause would not be included in the draft ordinance sent to council, though it could be added as an amendment.

The Los Angeles Area Chamber of Commerce and Valley Industry and Commerce Association have joined Parks in his objection, and both groups have lobbied the Council to oppose the proposed ordinance.

Wal-Mart, too, has been lobbying. It has retained Richard Lichtenstein, founder of powerful lobbying firm Marathon Communications Inc., to represent the company as it makes its pitch to the mayor and the Council.