With No Ban in Place, Superstores Still Struggle Up North

Wednesday, July 18, 2007 | Fearing a ban on Wal-Mart Supercenters and other big-box grocers would likely be overturned by San Diego voters next year, and dominate local political discourse in the meantime, Councilwoman Donna Frye looked north for help.

After Frye broke from her previous support for a ban in a surprise, 11th-hour move that killed the four-year-old proposal last week, the councilwoman redirected the council’s strategy for dealing with the behemoth food-and-retail emporiums by proposing guidelines similar to those in the city of Los Angeles.

Under Frye’s proposed rule, businesses that qualify as superstores would be subjected to a more rigorous review of their impacts on the local environment and economy than standard projects. The proposal, which the company instantly endorsed, leaves open the possibility of Wal-Mart Supercenters opening in San Diego, spurring critics to scoff at the regulations as “watered down.”

But in Los Angeles, no superstores have sprouted up or been proposed within the metropolis’s boundaries since the City Council there passed its regulations in 2004, despite the emergence of Wal-Mart Supercenters and SuperTargets elsewhere in urban Southern California.

Observers close to the issue in Los Angeles, including supporters and critics of the superstore business model, said the ordinance — despite not being an outright ban — has been effective in shutting out the controversial stores. But they note that the 2004 law set in place a few of the many hurdles that a superstore operator must overcome before setting up shop in the state’s largest city.

“By the time you get through land costs and the city’s regulatory hoops, most people are saying that it’s not worth the trouble,” said Jack Keyser, the chief economist for the Los Angeles Economic Development Corp. Keyser said he thinks superstores are beneficial to a local economy, although he describes them as a “miserable shopping experience.”

Los Angeles’ regulations require the developer of a proposed superstore in areas prime for redevelopment or revitalization, such as in downtown or near the harbor, to obtain a “conditional use permit.” The law was intended to keep blight from spreading in corners of the city that are already in need of an economic boost, said Josh Kamensky, spokesman for Los Angeles City Council President Eric Garcetti.

“The purpose of the legislation is that in areas of blight that you don’t get the Supercenter effect, which is to destroy jobs and create blight,” Kamensky said.

The process gives city officials, including the City Council, more discretion over approving the project. At this level of review, officials have to make an explicit finding that a superstore is appropriate for its proposed site, basing the decision on evidence obtained from technical studies on environmental factors such as traffic or water quality.

In addition to the environmental studies, the ordinance adds a new layer of scrutiny to superstores in those downtrodden areas by requiring an analysis of the superstores’ impact on the local economy.

The economic impact of Wal-Mart Supercenters in particular has been the biggest point of controversy in the debate here in San Diego. The retailer’s backers argue that the stores generate jobs and allow consumers, especially those of modest means, to purchase the groceries at cut-rate prices. They also claim the sales tax generated by superstores helps fill the coffers of local municipalities to pay for city amenities like parks and police officers.

But Wal-Mart’s critics, found in organized labor and small business districts, see the superstores as drains on the local economy and a precursor to blight in a community. They argue Wal-Mart is able to undercut traditional grocers that pay their employees union wages by offering low pay to its own workers. By offering a one-stop shopping experience with thousands of products, Wal-Mart’s low prices make it difficult for smaller businesses who don’t have the same wholesale buying power to compete, leading to the demise of smaller shopping centers that keep neighborhoods stable.

“The ordinance is doing everything we were looking for,” said Dan Brown, a spokesman for United Food and Commercial Workers Local 770, which represents employees at traditional grocers in the area. “The idea is not to ban anyone from moving in but to make sure the community benefits from anyone who is moving in.”

In Los Angeles, a superstore developer is required to undergo a full analysis of its proposal’s economic impact on the community. The report must gauge whether the superstore would:

• Physically displace businesses or homes;
• Adversely impact or benefit nearby grocers or retail stores;
• Provide goods that were higher or lower in quality or cost;
• Displace or create jobs and, specifically, whether the jobs added or lost are temporary or permanent;
• Have a positive or negative impact on the city’s tax revenue;
• Add to or eliminate blight in an area;
• Include any benefits the developer can offer to compensate for any negative impacts the store may cause.

The city has not had to conduct such a review so far because no superstores have been proposed in Los Angeles since the council passed the ordinance. In nearby Inglewood, where a similar law was passed in 2006, Wal-Mart has not yet pursued building a Supercenter after the company vigorously opposed an earlier proposal by city officials to ban superstores altogether.

Wal-Mart spokesman Aaron Rios contends Los Angeles’ requirements are not the key factors in keeping the company from planning Supercenters there. He said the company does have designs in mind for Los Angeles, but that none have reached the point of conducting an economic analysis.

Rios said that, when talking to Wal-Mart executives about the reasons for not building in Los Angeles, he “didn’t get the impression it was related to the city’s ordinance.”

To San Diego City Council President Scott Peters, the regulations set up a review process that serves as unnecessary window dressing for an inevitable result: that no council member will support the construction of a superstore in their district and that, thereby, none would ever be built within the city limits.

Peters said he preferred the ban because it let superstore developers know specifically what would be acceptable. The ban, which had survived two council votes before dying last week, would have prohibited businesses that were larger than 90,000 square feet in size and used 10 percent of that floor space to sell tax-exempt items such as groceries.

“I think we gave some very objective parameters for people,” Peters said.

Frye disagrees. She contends the blanket ban would have been overturned at the ballot box, which is where Wal-Mart vowed to challenge the ban in 2008, because the debate became not about urban planning and economic impact, but about shoppers’ choice. By judging the stores on a case-by-case basis with economic and environmental data in hand, the community will have to judge each superstore on its merits, Frye said.

“We don’t get to have that discussion if it becomes a campaign issue,” Frye said, “because then it’s just about whether or not the city should tell you where to shop.”

Mayor Jerry Sanders, who vetoed the ban in June, said he was considering Frye’s proposal.

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