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The Home Town Advantage Bulletin - January 2001
Reprint Policy and Guidelines
- CONTENTS
- About this Bulletin
- ALLIANCES AND COOPERATIVES
Iowa Group Launches Buy Local Campaign
Local Business Alliance Forms in Grand Junction, Col.
- NEW RULES
Maine Town Recruits an Independent Pharmacist
Ireland Bans Superstores
- LOCAL BATTLES
New Rochelle Residents Turn Out in Force to Block Ikea
Pittsburgh Redevelopment Plan Dropped
- E-COMMERCE
States Collaborate on Equitable Sales Tax System
Warning: Dot-Com School Fundraisers May be Harmful to Your Community
- OUR PERSPECTIVE: BIGGER IS NOT BETTER
Small Businesses Lend More Support to Local Causes
The Home Town Advantage Bulletin is a bimonthly electronic newsletter reporting on efforts nationwide to stop chain store proliferation and support locally owned, independent retail businesses. Learn about land use policies and other tools that can protect the character and vitality of your hometown. Find out how other communities are bucking the "big box" retail trend and encouraging small-scale, homegrown businesses - and why this approach is proving far more beneficial to the local economy. Plus, news on e-commerce, independent business alliances, development subsidies, franchisee legislation, and all the latest resources.
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ABOUT THIS BULLETIN
In communities across the country--from Belfast, Maine to Taos, New Mexico--citizens are taking action to defend and strengthen their local economies. They are developing strategies and adopting new policies to curb the expansion of chain stores and support locally owned businesses.
The Institute for Local Self-Reliance (ILSR) has been tracking these efforts and will use this bulletin to provide bimonthly updates on significant developments. We hope it will serve as a tool for making connections and sharing strategies within this growing movement. We encourage readers to share news and resources by sending email to smitchell@ilsr.org.
ILSR is a nonprofit research and education organization that promotes healthy and sustainable local economies. This bulletin is part of ILSR's New Rules Project, which publishes a quarterly journal, The New Rules; several electronic bulletins on specific issues; and books, including The Home Town Advantage: How to Defend Your Main Street Against Chain Stores and Why It Matters. We also maintain a web-based clearinghouse of model public policies at http://www.newrules.org
Another good source of news on local efforts to keep chain stores is the NewsFlash! section of the Sprawl-Busters web site (http://www.sprawl-busters.com). Additional links and organizations are listed at the end of each story.
I. ALLIANCES AND COOPERATIVES
IOWA GROUP LAUNCHES BUY LOCAL CAMPAIGN
The front of the poster shows Uncle Sam with his arms embracing a store owner and a shopper, superimposed over an outline of the state of Iowa and a drawing of Main Street. The back lists ten reasons to support independent businesses. Number one: Money spent at a local business stays in your community. Number seven: Shopping in town slows pressure to build strip malls on farmland and in natural areas. The poster is part of a Buy Local campaign launched last fall by 1000 Friends of Iowa, a citizens group based in Des Moines that fights sprawl and works for strong downtowns.
The idea originated with Ed Fallon, a state legislator and Executive Director of 1000 Friends. In October, he made a personal commitment to shop only at locally owned stores between Thanksgiving and Christmas. Other members of the organization liked the idea and decided to create a public campaign to highlight the importance of supporting Main Street merchants.
A kickoff press conference was held the day before Thanksgiving. Two television stations, the Des Moines Register, and several smaller papers covered the campaign. Radio stations called for interviews.
Through a network of volunteers, 1000 Friends distributed the Uncle Sam posters to area businesses and prominent locations in Des Moines and several smaller communities. Soon calls were coming in from other merchants who wanted posters for their stores as well.
The response was so good, says Rose Winkler, coordinator of the campaign, that 1000 Friends has decided to continue it this year. The poster is already in its second printing. The group plans to meet with local business owners to discuss ways to expand the campaign.
LOCAL BUSINESS ALLIANCE FORMS IN GRAND JUNCTION, COL.
The Locally Owned Business Organization (LOBO) of Grand Junction, Colorado celebrates its first anniversary this month. In a year's time, LOBO has grown from a handful of founders to 52 dues-paying members, ranging from retail stores to contractors, banks, and media outlets.
"Our goal is to develop a strong presence in the community and convey to people that there are very important reasons to do business with locally owned companies," says Don Teets, founder and president of LOBO. "The majority of [national chains] are here on a bottom line basis. If the economy goes south, they go north. The health of this community depends on maintaining our own economic infrastructure."
The origins of the alliance can be found in an unsuccessful shopping trip to Home Depot in 1999. After finding that the store would not deliver a new door, Teets stopped at locally owned Harbert Lumber. Not only did they deliver, but the price was lower and the service better.
The experience led Teets to conclude that a major problem facing local businesses is that they tend to be overlooked by consumers swept up in a sea of chain store marketing. He began meeting with several business owners. They decided that the only way to get their message out was to form an alliance with more power and reach than any of them could muster on their own.
The organization plans a paid advertising campaign once it reaches about 300 members. For now, LOBO relies on less expense ways of reaching the community. The group's newsletter is inserted in the Grand Valley Business Times. Several news outlets have run stories and interviews on the alliance. LOBO held a public meeting last year and plans to speak to several community organizations this year.
LOBO also encourages its members to support each other. To join, businesses must provide discounts to all LOBO members, their families, and their employees. This simple step has already had an impact, according to Teets. The local office supply store, for example, has seen a bump in sales as LOBO businesses stop shopping at Office Max.
One of LOBO's projects for the upcoming year is to meet with both government and industry purchasing agents throughout the county. The organization is concerned that local businesses are often unaware of requests for bids. LOBO plans to function as a central clearinghouse where purchasers can send bid requests to be forwarded to appropriate LOBO members. LOBO will also make a case to purchasers, especially public agencies, that giving preference to locally owned businesses generates economic and community benefits. LOBO's monthly membership dues range from $50-$200. The organization has one and a half full-time employees and hopes to have 300 members by the end of 2001.
II. NEW RULES
MAINE TOWN RECRUITS AN INDEPENDENT PHARMACIST
Faced with a gap in the local retail base---no pharmacy or bookstore, for example---city officials almost invariably try to lure a national chain into the community. There often seems to be little alternative: how exactly does a town go about establishing a new independent business to fulfill an important function?
While there's no obvious path and it may well prove more difficult than attracting a chain, officials of Orono, Maine recently demonstrated that it can be done.
Downtown Orono has long been anchored by a pharmacy. For many years, it was a Rite Aid store. In 1996, the chain sought to move a few blocks down Main Street to build one of its 11,000 square foot drive-through boxes on a prominent corner. Residents vehemently opposed the project and some 250 came out for a protest in front of the store. Rite Aid backed down, and then, in 1999, decided to close its downtown Orono location entirely.
Town officials felt a pharmacy was both an essential need and a critical component of the overall health of downtown. But residents and local officials did not want another footloose chain. A better option, they decided, would be an independent, locally owned pharmacy.
"We felt it would be more reliable and create a better image for the community," says Gerry Kempen, Orono Town Manager.
The town sent letters to some 1,200 pharmacists licensed by the state of Maine, asking if they might be interested in opening a pharmacy in Orono. About half a dozen responded and soon the town found its man. Ali Aghamoosa, who received his pharmaceutical license in 1995 while working for a Maine hospital, arrived from Texas on November 3. On November 18, the Orono Community Pharmacy opened for business.
The rapid start-up was made possible by several residents who volunteered to stock shelves, as well as Bill Miller, owner of Miller Drug in nearby Bangor, who provided Aghamoosa with timely advice and information.
"It was certainly more work for the city than bringing in an established company," says Kempen, noting that chain retailers employ an army of staff to negotiate with contractors, obtain licenses, and handle all of the details involved in opening a new store. "But we felt it was well worth the effort," he continued. Although Orono was unable to offer financial assistance, the town did provide Aghamoosa with contacts, information, and logistical support
IRELAND BANS SUPERSTORES
The Irish government has made permanent a temporary cap on the size of retail stores in effect since 1998. The new law restricts stores in the Dublin area to 3,500 square meters (38,000 sq. ft.) and applies a 3,000 square meter (32,000 sq. ft.) limit to the rest of the country.
The policy also requires that new retail stores be located in town centers. If no sites are available, and the development is deemed necessary by local authorities, then it may be located on the edge of the town center (defined as within "convenient walking distance of the primary shopping area of the town centre"). Out-of-town retail developments are strongly discouraged. The policy was issued by the Ministry for the Environment and Local Government. Its purpose is to foster sustainable development, maintain competition, ensure that retail outlets are readily accessible by public transit, and protect the viability of town centers.
The policy applies to grocery stores and "hypermarkets," which, like U.S. supercenters, sell both food and general merchandise. Non-food warehouse stores, such as do-it-yourself home centers, are restricted to 6,000 square meters under existing law.
Unlike the U.S., where land use is strictly a state and local matter, Irish planning policy is determined at both the national and local level. The national government establishes broad policies and guidelines, which are implemented through plans developed by local governments.
The policy outlines the importance of town centers as focal points for community and civic activities, and notes that these functions cannot be replicated by shopping malls. Moreover, the long-term viability of town centers depends on maintaining their commercial base. "Where new developments compromise [downtown vitality], they should be rejected," the policy states. The policy also stipulates that local governments should enact zoning policies that safeguard local shops, provided that they substantiate the importance of such stores to the community.
In preparing the policy, the government commissioned a study by Goodbody Economic Consultants, who concluded that "available evidence suggests that economies of scale are exhausted at a store size of approximately 2,000 [square meters]."
Developers and chain retailers lobbied intensely for an easing of the size cap in the months leading up to the Ministry's final decision. They were joined in their opposition by the Irish Competition Authority, which contends that larger stores would reduce prices.
Studies, however, have found that grocery prices in the Republic are 5 percent lower than in England and Northern Ireland, which have few restrictions on large-scale chains. Indeed, the Irish grocery market is robustly competitive compared to most of its heavily consolidated European neighbors. Independent grocers enjoy a 45 percent market share in Ireland, up 10 percent in the last decade. By comparison, independents have only 8 percent of the English market.
Limiting the size and location of new retail stores has become increasingly common as communities look for ways to maintain their character and local economies. Dozens of U.S. cities have enacted size caps. Many countries have them as well, including Norway, France, Denmark, and Argentina.
III. LOCAL BATTLES
NEW ROCHELLE RESIDENTS TURN OUT IN FORCE TO BLOCK IKEA
At a hearing held in mid-November, residents of New Rochelle, New York were finally given an opportunity to comment on a proposed 308,000 square foot Ikea furniture store. They gave city officials an earful. More than 400 people packed City Hall, while hundreds more stood outside.
So many wished to testify that the city was forced to extend the hearings over five nights, taking 18 hours of testimony from more than 200 residents. All but a handful opposed the project. They were joined by officials from the neighboring towns of Mamaroneck and Larchmont, whose borders abut the proposed store.
Much of the credit for the large turnout goes to Westchester Residents Against Ikea Now (WRAIN). The group held a massive rally against the project last summer, phoned 7,000 households in the days leading up to the hearing, and lined up testimony from experts.
Opponents contend the store will create a traffic nightmare, undermine the community's quality of life, and destroy dozens of local businesses. Ikea estimates the store will attract 20,000 visitors on a typical weekend day, the equivalent of one-quarter of New Rochelle's population. The traffic will substantially lower nearby property values, according to Eliot Sklar, a professor of land use at Columbia University.
Ikea's proposal hinges on government help. City officials plan to use eminent domain to clear the 16 acres needed for the store, condemning much of the City Park neighborhood and razing 26 local businesses employing 400 people, two churches, and the homes of 160 residents.
In addition to 26 condemned businesses, the superstore is likely to harm New Rochelle's 31 local furniture stores, many of which may be forced to close.
Ikea contends the store will generate $4.2 million in local sales and property taxes, as well as 350 jobs. But these numbers fail to take into account the revenue and jobs that will be lost as local businesses close and home values decline.
Although the mayor and several city council members have expressed strong support for the Ikea, opponents hope the hearings have made clear that a favorable vote might cost them their jobs come election day.
Meanwhile, in a related development, a federal district court returned New Rochelle's lawsuit against neighboring Mamaroneck to the New York Supreme Court. The lawsuit was filed after Mamaroneck adopted an ordinance that enables it to review and reject large development projects, such as the Ikea, that are situated just beyond its borders. (See the August 2000 issue of this Bulletin at http://www.newrules.org/hta/hta0800.htm for more details.)
The federal court dismissed New Rochelle's claim of due process and equal protection violations. The court concluded that the law did not necessarily violate the Commerce Clause, but might under certain circumstances. The court left that issue open and returned the case to the New York Supreme Court, which is expected to hear arguments on the law's validity under the state's constitution and municipal home rule law. --
PITTSBURGH REDEVELOPMENT PLAN DROPPED
Small business owners and neighborhood activists were elated in November when Pittsburgh Mayor Tom Murphy decided to drop his controversial downtown redevelopment plan. The $522 million project involved demolishing 60 historic buildings and condemning 120 mostly locally owned businesses. In their place, Murphy sought to build a massive retail complex, anchored by a Nordstrom department store and several dozen national chains. (See the August 2000 issue of the Bulletin at http://www.newrules.org/hta/hta0800.htm for more details.)
Murphy has appointed a task force to devise an alternative plan for enhancing the downtown business district. Several of the most outspoken opponents of Murphy's original plan are represented on the task force, including the Golden Triangle Community Development Corporation, the Pittsburgh History and Landmarks Foundation, and two merchants whose buildings would have been demolished.
The task force held its first meeting this month. Although a big step forward, the road ahead will be difficult. "The goal is that everyone will walk away winning, but we're dealing with widely divergent points of view over how to go about this," says Bernie Lynch of Golden Triangle.
While the use of eminent domain has been taken off the table, the idea that some of the district's older retail stores need to be pushed out---albeit more gracefully---persists. Some task force members who supported Murphy's original plan, still envision a complete overhaul for the district. Stores that do not represent the latest fads in retailing, especially immigrant-owned and multi-generation businesses, continue to be seen by some as targets for removal.
"We should be working with the merchants and building owners, not against them," says Lynch. "These are all viable businesses. It's that entrepreneurship that's at the very heart of this area's identity and success." She hopes the city will abandon the top-down approach and instead focus on ways to help existing merchants build on their strengths and re-energize the area.
Ultimately any task force proposal must be approved by the mayor, who holds the keys to the $128 million earmarked for the district.
One of the strengths of the movement against mayor's original plan, which once seemed unstoppable, was that it drew people from a wide variety of perspectives. Conservative property rights activists joined with liberal groups who viewed the project as a attack on the immigrant and African-American populations largely served by the district.
The challenge now will be whether these disparate groups can develop shared objectives. Preservationists, for example, may be tempted to turn the district over to companies with deeper pockets and greater resources for building renovation. Some contend that preserving the district hinges not only on protecting the buildings, but ensuring that long-term businesses and traditional retail uses have an opportunity to continue.
Meanwhile, the district's years of uncertainty are beginning to show. With the wrecking ball just around the corner, property owners have put off needed repairs and renovations. Repeated references to the area as "blighted"---an official designation necessary for the city to condemn buildings as planned in the original proposal---threatens to become a self-fulfilling prophesy.
But despite the challenges ahead, the demise of the city's s redevelopment plan is cause for much celebration. This area of downtown Pittsburgh has been saved, at least for now, from becoming an urban version of the cookie-cutter, absentee-owned shopping centers proliferating in suburban America.
And, although task force members bring widely divergent perspectives to the table, they do share some common ground. All agree that the area needs more housing and parking, better transportation options, tenants for the upper stories, and a cohesive marketing strategy.
- Contact the Golden Triangle Community Development Corporation at 412-391-4080.
IV. E-COMMERCE
STATES COLLABORATE ON EQUITABLE SALES TAX SYSTEM
In December, representatives of the 29 states participating in the Streamlined Sales Tax Project (SSTP) approved model legislation that they hope state legislatures will adopt this year. If enacted, the legislation would move states one step closer to a sales tax system that applies equally to both traditional and electronic retailers.
A US Supreme Court ruling bars states from requiring remote sellers, including mail order and internet companies, to collect sales tax. The Court concluded that forcing companies to comply with the varying rules and rates governing the nation's 7600 local and state tax jurisdictions would unduly burden interstate commerce.
The issue is of mounting concern to the states, which stand to lose an estimated $20 billion in revenue annually by 2003 as a result of the growth in electronic commerce. Moreover, the ruling gives remote companies, which contribute little to the communities where they do business, a five to eight percent price advantage over local retailers.
The goal of the SSTP, launched in early 2000, is to remove the burden of collecting sales taxes for multiple jurisdictions. Under the proposal, businesses would use state-certified software to calculate, collect, and remit tax for each sale. All costs would be covered by the states.
If adopted by state legislatures, the model legislation would accomplish two important steps. First, it would simplify and align each state's sales tax system. All participating states, for example, would share common product codes, tax law definitions, and registration procedures. Second, the legislation would authorize the state's revenue department to enter into an agreement with other participating states to design and implement the SSTP system.
For now, the project must proceed on a voluntary basis. Companies that participate will benefit from lower administrative costs and audit protection in exchange for agreeing to collect state and local sales taxes on out-of-state sales. The only volunteers are likely to be national retailers that already pay sales tax in every state (by virtue of having physical outlets in every state). It's unlikely than any mail order- or internet-only companies will voluntarily participate.
Mandating that these companies collect sales taxes will require an act of Congress. The SSTP states believe tax code simplification and collection software are necessary to convince federal lawmakers that such a requirement would not harm interstate commerce.
A bill sponsored by Senator Byron Dorgan of North Dakota would authorize states that have streamlined their tax systems to enter into a joint compact and require remote sellers with more than $5 million in annual income to collect sales taxes.
WARNING: DOT-COM SCHOOL FUNDRAISERS MAY BE HARMFUL TO YOUR COMMUNITY
In an effort to raise funds, thousands of public schools are encouraging parents and neighbors to shop on-line. More than a dozen new companies, such as Schoolpop.com and SchoolCash.com, have created web portals that enable users to shop a hundreds of on-line retailers. Most of the featured merchants are national chains or Internet-only companies, including Barnes & Noble, Toys R Us, Office Max, and Buy.com.
In return for shopping through their portals, these companies rebate a percentage of each sale to the customer's school of choice. Schoolpop.com, the largest of the school fund-raising sites, has raised an average of $100 each for 19,000 schools since its inception in 1999.
The programs have been aggressively promoted by local schools and PTAs. Many have sent kids home with brochures (usually emblazoned with the logos of major corporate retailers) or arranged for speakers to tout the web sites at school meetings. Some have urged parents to dedicate a portion of their spending, such as all school supplies or holiday gifts, to on-line shopping.
Although the sites have provided revenue for cash-strapped public schools, shifting consumer spending to on-line retail companies may do more harm than good, according to Dave Simpson, owner of the Lafayette Book Store in Lafayette, California. Simpson has been researching Schoolpop.com and related companies for the Northern California Independent Booksellers Association (NCIBA).
There are two primary concerns. The first is that encouraging parents to shop on-line may reduce sales tax revenue. Web-based retailers are exempt from collecting sales taxes. Nearly half of all state income is derived from sales taxes and almost one-third of state income is spent on education.
The rebates vary from retailer to retailer, but average between 3 and 7 percent. When lost sales taxes are accounted for, many purchases at school fund-raising sites produce a net loss for the community. A California resident shopping at a local store generates 8.25 percent in sales tax to pay for schools and other public services. The same purchase made at Amazon.com through SchoolCash.com would generate only 4 percent, a net loss of 4.25 percent.
The second concern is that encouraging parents to shop at these sites may undermine locally owned businesses. Local stores provide economic and social benefits to their communities that far out-weigh those of distant corporations. The state income and local property taxes paid their employees are vital sources of revenue for public education.
The NCIBA will be discussing ways to respond to school fund-raising dot-coms at a meeting later this month. The association's strategy will focus on educating its members, urging them to meet with their local schools and PTAs, and offering alternatives.
"We understand that schools need this revenue. Developing alternative funding sources will be central to our approach," says Simpson.
Encouraging local stores to develop or expand school fundraising programs in their own communities would be one option.
Another would be to work with companies like Schoolpop.com to ensure that locally owned businesses are given as much representation as national companies. Schools could then encourage parents to support the school and the local economy when utilizing the sites.
While most of the sites are limited to national retailers, at least one, Schoolpop.com enables shoppers to support local businesses through its Local Offers program. After registering their credit card and designated school with Schoolpop.com, consumers can shop at affiliated local stores and earn rebates. Unfortunately, the Local Offers program is relegated to a sub-section of the site and is not part of the main attraction.
- The NCIBA is gathering anecdotal information about these sites and how schools are promoting them. If you've had experience with one or received literature through your local school or PTA, please drop a line to Dave Simpson at dave@lafayettebookstore.com
V. OUR PERSPECTIVE: BIGGER IS NOT BETTER
SMALL BUSINESSES LEND MORE SUPPORT TO LOCAL CAUSES
National retail chains frequently use charitable giving as a tool for overcoming local opposition to their expansion plans. Facing strong resistance in Western Branch, Virginia, Wal-Mart ran ads in the local paper touting the $200,000 it had given to local causes. In Auburn, California, Home Depot made charitable contributions a focal point of its campaign to overcome the community's long-standing opposition to big box stores. In Arlington, Texas, just weeks before elected officials were scheduled to decide the fate of a controversial proposal to build a Wal-Mart supercenter, the company donated a much publicized $20,000 to local charities.
Strategic donations can be very effective in convincing reluctant residents and city officials that a new chain store will benefit the community. As the industry publication Chain Store Age noted, "Cause programs can help operators in their real estate negotiations and dealings with local zoning boards." Giving to local causes can help put a local face on a distant global corporation.
But Al Norman of Sprawl-Busters cautions that communities need to keep corporate retailers' donations in perspective. "Wal-Mart donated $163 million in 1999," he notes. "That's a lot of money, but it represents less than one-tenth of one percent of Wal-Mart's total revenue. It's the equivalent of someone who makes $40,000 a year giving $40 to charity, and then making a lot of noise about it."
Moreover, the arrival of a large retail chain almost invariably means dozens of local businesses will be forced to either scale back their operations or close altogether. In the process, communities lose an important source of support for local causes, one that may be far more significant than any support provided by the newly arrived chain.
Empirical research comparing small and large business giving is hard to come by. But existing evidence suggests that, contrary to common perception, small businesses give more time and money to charitable causes than do big businesses.
In 1991, Dr. Patricia Frishkoff, Director of the Family Business Program at Oregon State University, completed a study of charitable giving by 182 businesses in four communities. She combined cash donations with the value of in-kind contributions and found that the small businesses were more generous.
Companies with fewer than 100 employees gave an average of $789 per employee, compared to $334 per employee at firms with more than 500 employees. The 128 small businesses studied donated a combined total of $2.5 million to charitable causes.
"I have significant concerns about the loss of community dollars when local businesses close," Frishkoff says.
- Dr. Frishkoff's study, "Business Contributions to Community Service," was published by the Small Business Administration and can be ordered from the National Technical Information Service, http://www.ntis.gov
- Contact Sprawl-Busters, an organization that helps communities fight superstores, at http://www.sprawl-busters.com
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