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Tuesday, Oct 4, 2022
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Business Rips Bill’s Superstore Impact

Local business groups are lining up against a proposed state law they say would add unfair and unnecessary hurdles before any Wal-Mart-style superstore could open.

The union-backed bill, which has passed the state Senate, would require cities to conduct economic impact studies before approving new superstores such as Wal-Mart or Target. The business groups say forcing cities to conduct these studies would delay superstore projects that could bring much needed jobs and may even force superstores to drop expansion plans in Los Angeles and elsewhere throughout the state.

“It’s hard enough to build a superstore in Los Angeles,” said Stuart Waldman, chief executive of the Valley Industry and Commerce Association, which represents business interests in the San Fernando Valley. “This bill would make it virtually impossible.”

Waldman pointed to a Sun Valley site that he said could remain vacant for years if the law passes. Atlanta-based Home Depot Inc. tried to build a store there, but was blocked by local opponents. The law could further discourage any new efforts.

“That’s a site that’s ready and available and, if built, a store could be generating hundreds of jobs,” he said. “With this bill, that site could remain vacant for the next 20 years.”

Union and small-business proponents of the legislation say superstores often hurt sales at small neighborhood stores, forcing many of them out of business. They believe those issues should be taken into consideration before development approvals.

“Supercenters don’t create net new jobs,” said Caitlin Vega, lobbyist for the California Labor Federation, which is backing the superstore bill. “Rather, they displace existing higher-wage jobs at independent stores and shut down a lot of competing businesses.”

Claims that Wal-Mart and other big-box discounters kill local businesses aren’t new; they’ve surfaced repeatedly over the last two decades. Numerous academic studies have been published on both sides of this dispute.

The bill – SB 469 by Sen. Juan Vargas, D-San Diego – requires cities and counties to conduct economic impact studies for all projects where the store is at least 90,000 square feet and sells a wide range of items. However, the bill exempts discount warehouses and membership stores, such as Issaquah, Wash.’s Costco Wholesale Corp. and Wal-Mart Stores Inc.’s Sam’s Club stores. The bill will likely go to the full Assembly floor around Labor Day.

San Diego battle

Vargas drew up the legislation after the San Diego City Council backed down in a fight with Wal-Mart. Last year, the council voted to require economic impact reports for any new Wal-Mart stores, but the Bentonville, Ark.-based retail giant started collecting signatures to force a ballot referendum on the measure. The council repealed its ordinance rather than face a multimillion-dollar ballot fight over the issue.

“If the San Diego City Council won’t stand up to Wal-Mart, the state of California should,” Vargas said in a press conference introducing his bill in February.

But business groups say cities already have sufficient means of dealing with superstores. The California Environmental Quality Act requires environmental impact studies, including traffic studies, of major projects such as superstores; in many cases, cities also require additional traffic studies on such projects.

If an economic impact study were required, it would mean the developer would have to spend additional time and money. (The law would require cities to have the studies done but developers to pay.) But of more concern: The studies could bog down projects by giving opponents ammunition to oppose a store, much like CEQA has thwarted many developments.

Randy Gordon, chief executive of the Long Beach Area Chamber of Commerce, called the bill a way to “artificially stymie” development of large retail facilities.

Other local business groups opposed to the Vargas bill include the Redondo Beach Chamber of Commerce, the South Bay Association of Chambers of Commerce, the Latin Business Association, the El Monte-South El Monte Chamber of Commerce and the Central City Association.

The Los Angeles Area Chamber of Commerce has not taken a position on the bill, though Chief Executive Gary Toebben told the Business Journal last week that the chamber will likely vote to oppose the bill at an upcoming board meeting.

“There are already enough regulations for major project approvals at the state and local levels,” he said. “To add an additional set of requirements is patently absurd.”

In El Monte, chamber officials are concerned that if the bill passes and goes into effect Jan. 1, it could derail a Wal-Mart store planned for the downtown area. Negotiations between Wal-Mart and the city have dragged on for years and the project faces a lawsuit from nearby residents.

The proposal could go to a City Council vote in November or December.

But if the council doesn’t vote by the end of the year, chamber officials are concerned the Vargas bill could be a death knell for the project.

‘Lost opportunity’

“This legislation would either slow down the Wal-Mart or halt it altogether,” said Richard Nichols, executive director of the El Monte-South El Monte chamber. “If that happens, it would be a lost opportunity for a downtown retail district that has been struggling for years.”

Local business leaders dismissed claims that small, local family-owned businesses are hurt by superstores.

“What the bill’s proponents don’t understand is that superstores bring more overall customer traffic into the area,” said Ruben Guerra, chairman and president of the Latin Business Association. “Some of that traffic can stop at other nearby stores and it’s up to those stores to market and position themselves to take advantage of this.”

Guerra said Wal-Mart and other superstores have been a boon to minority communities because of the chains’ diversity programs in hiring, contracting and sourcing.

“Some of our members have grown their companies because they sell to Wal-Mart or Home Depot,” he said. “Stopping the growth of those stores in our communities could have a lasting negative impact on these members.”

One of the few business groups supporting the Vargas bill is Small Business California, a San Francisco-based organization with about 1,200 members throughout the state.

Scott Hauge, the group’s president, said that council members need to carefully consider competition issues before granting approvals for superstores.

“Some small businesses have been put out of businesses after superstores move in,” said Hauge, who acknowledged superstores in the right location can provide a boost to local communities. But he noted that poorly placed superstores can adversely affect existing businesses and lead to a net jobs loss.

“Sure, it may take a little more time to do this type of study,” Hauge said. “But it seems logical to stop for a moment and look at what a superstore will do to existing stores and the economic health of the community.”

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.
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