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The Home Town Advantage Bulletin - August 2000
Reprint Policy and Guidelines
CONTENTS
- About this Bulletin
- LOCAL BATTLES
Pittsburgh Businesses Fighting Mayor's Massive Retail Complex
UFCW Union Joins Community Activists to Challenge Wal-Mart
- NEW RULES
Mamaroneck, NY Enacts Law Governing Development Beyond Its Borders
More Cities Ban Large-scale Retail
Demanding Diversity: Formula Business Rules Spread
- BIGGER IS NOT BETTER
Chain Bookstores Squeezing Out Midlist Titles
- ALLIANCES AND COOPERATIVES
Salt Lake City Business Coalition Creates a Voice for Independents
Maui Retailers Join Forces to Reward Customers, Counter Chains
- E-COMMERCE
Cal. E-Fairness Bill Gaining Ground, But Needs Your Help
- FRANCHISE AUTONOMY
Ontario Enacts Franchise Disclosure Law
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
Other good resources for news on chain stores and local retail include Sprawl-Busters at http://www.sprawl-busters.com. Its NewsFlash! page provides weekly updates on hometown battles. The American Booksellers Association's web site (http://www.bookweb.org) posts several in-depth stories on independent bookstores each week. Holt Uncensored (http://www.nciba.com/patholt.html) is a lively email newsletter on the book industry, with a decidedly independent perspective. Additional links and organizations are listed at the end of each story.
I. LOCAL BATTLES
PITTSBURGH BUSINESSES FIGHTING MASSIVE RETAIL COMPLEX
Local activists and business owners in Pittsburgh are fighting Mayor Tom Murphy's plan to use eminent domain to destroy 60 buildings and condemn 125 mostly locally owned businesses. In their place, Murphy wants to build a massive retail complex, anchored by a Nordstrom department store and several dozen national chains such as The Gap, FAO Schwarz, and J Crew.
In July, Murphy took steps to secure a key piece of the $520 million redevelopment plan, known as the "Market Place at Fifth and Forbes" project. His administration announced that the city had offered Nordstrom $28 million to build a department store downtown. A spokesperson for Murphy described the deal as a bargain and noted that Cincinnati spent $47 million to get a Nordstrom's.
But local business owners have vowed to stand their ground. The area is a vibrant, pedestrian hub, home to a variety of profitable businesses, including a few that have been around for more than 100 years.
They contend Murphy's plan is an abusive and unconstitutional use of the power of eminent domain, which enables cities to condemn and acquire property for public purposes, such as road construction. Eminent domain has been increasingly used to condemn existing businesses for the benefit of private developers (see Mamaroneck story below). Such property transfers arguably serve no public purpose. The merchants, together with community activists, have formed the Golden Triangle Community Development Corporation and are moving forward with an alternative plan for the area.
Their "Main Street" proposal would preserve and restore the buildings and existing businesses. The plan emphasizes a sustainable, bottom-up approach. It includes developing empty second story space to incubate new high-tech businesses, as well as adding more housing to the area.
It's not a lack of economic vitality that has left 475,000 square feet of upper floor space empty, according to Bernie Lynch of Golden Triangle. Rather, the buildings were never retrofitted to meet current fire code and accessibility standards, a problem the city could have solved years ago by providing basic incentive programs.
Golden Triangle is already redeveloping and leasing the upper floors. It has asked the city to support the plan with $24 million in public funds. In contrast, the Fifth and Forbes project carries a public price tag of more than $150 million.
"Over his term, the mayor has repeatedly sapped neighborhood resources for these big projects," says Lynch. "The neighborhoods are now crumbling."
The area's merchants have received an outpouring of support from local and national organizations. The Pittsburgh History & Landmarks Foundation has been an ardent opponent of Murphy's plan. The National Trust for Historic Preservation named the area to its annual list of most endangered historic places and described Murphy's plan as "a misguided approach to redevelopment that was discredited long ago."
The Institute for Justice, a conservative organization concerned about property rights, has volunteered to provide free legal representation for merchants who challenge the use of eminent domain. The organization has purchased billboard ads in the city, which say "Eminent domain was meant for roads. Not for Tiffany's" and "Mayor Murphy: Pittsburgh was built on steel. Not stealing."
The Fifth and Forbes project will be presented to the City Council in September.
For more information:
UFCW UNION JOINS ACTIVISTS TO CHALLENGE WAL-MART
Wal-Mart wants to open 300 new "supercenters" by 2002, but the corporation's plans may be derailed by mounting opposition in heavily unionized regions. The United Food and Commercial Workers (UFCW) union has joined with local business owners and neighborhood activists to stop Wal-Mart's expansion in several western states and parts of the Upper Midwest and Northeast.
A "supercenter" includes both general merchandise and a full supermarket. These stores are typically 200,000 square feet or more. Wal-Mart is now the fifth largest grocer in the country and is focusing much of its expansion on this sector. The market research explains why: the average family visits a general merchandise store only once a week, but visits a supermarket four or five times.
The UFCW represents about one million supermarket workers, who earn $8-$16 an hour with full health coverage. Wal-Mart is aggressively anti-union. When meat department workers in a Jacksonville, Texas store voted for UFCW representation in February, becoming the first unionized Wal-Mart workers in the country, the company announced it would buy pre-packaged meat and eliminate their jobs.
Wal-Mart workers earn almost half as much as UFCW members, according to a study of southern California, which found that the company's entrance in the grocery business in that region would cost workers $1.4 million in wages and benefits. Fewer than two of five Wal-Mart employees have company-provided health insurance. Wal-Mart has also been a leader in the global race to the bottom, forcing manufacturers to shift jobs to overseas sweatshops.
To these complaints, the UFCW has added concerns about the retail giant's contribution to sprawl, its impact on traffic and neighborhood character, and its role in eliminating local businesses and consolidating the industry.
"The whole community is short-changed when Wal-Mart comes in," says Chris Ivey of Local 1036 in California. Never before in history has a single company exercised such extensive control over the production and distribution of goods. Wal-Mart accounts for 7 percent of all U.S. retail spending.
"Above all else," says Ivey, "we need to revisit antitrust."
At the urging of Local 1036, San Luis Obispo County passed a measure in August that limits the amount of floor space that stores over 90,000 square feet can devote to non-taxable items (i.e., food). The law prevents Wal-Mart, as well as Target and Kmart, from opening supercenters in the county. The union will pursue similar laws in other California counties and cities.
The San Luis Obispo measure was sponsored by a conservative and approved unanimously by the Board of Supervisors. Of particular concern was the impact Wal-Mart could have on local farms. Most supermarkets are sensitive to the public's desire to buy homegrown meat and produce, but Wal-Mart has a strict policy to buy the cheapest available. According to Ivey, this often means foods imported from countries that have less stringent safety and pesticide restrictions.
Meanwhile, in Washington, Local 1439 has petitioned the Growth Management Board to review a recent decision by the Ephrata City Council to rezone residential land to accommodate a 150,000 square foot Wal-Mart. The union contends the Council did not allow for broad public participation in the decision as required by the state's Growth Management Act.
The local has partnered with other community groups through the Livable Wage Campaign to fight Wal-Mart's expansion in eastern Washington. Over the next year, it plans to push for city and county measures banning stores over a certain size and requiring new retail developments to undergo rigorous public cost-benefit analyses. The union may also introduce a statewide ballot initiative that would ban stores over 90,000 square feet, unless they obtain voter approval.
"We're going to put the community's welfare first and foremost," says Kevin Galik, an organizer for Local 1439, ''rather than a company with its headquarters in Arkansas.
As UFCW locals pursue legislative approaches, they continue to engage in dozens of "site fights." In Springfield, Oregon, union members have joined the Springfield Citizens for Smart Growth to oppose a Wal-Mart supercenter. In both Yucaipa, California and Mesa, Arizona, UFCW locals have gathered enough signatures to force referendums on city-approved big box developments
The UFCW International maintains a Wal-Mart Watch web site at http://www.walmartwatch.com
II. NEW RULES
MAMARONECK, NY ENACTS LAW GOVERNING DEVELOPMENT BEYOND ITS BORDERS
The town of Mamaroneck, New York recently took steps to protect its character and environment from large-scale developments that abut, adjoin, or are adjacent to its borders. Under a zoning ordinance enacted in April, the town now requires these developments to undergo a comprehensive review and obtain a permit from the Mamaroneck Town Board.
The purpose of the law is to ensure that the town has the right to reject or alter developments that would have a substantial adverse impact on the community.
The law covers residential projects of 250 or more homes, facilities of more than 100,000 square feet, and projects involving parking for more than 1,000 vehicles. In granting a permit, the town will consider the impact on natural resources, noise, traffic, cultural or aesthetic resources, and community or neighborhood character.
The town adopted the law in response to a 270,000 square foot Ikea furniture superstore proposed in the neighboring town of New Rochelle. The store would be situated along a narrow residential road that is within Mamaroneck's borders. The road would serve as the primary access for delivery trucks. The store would include 1,300 parking spaces and is expected to generate up to 600 vehicle trips hourly.
The Ikea store has generated heated opposition in both neighboring communities and within New Rochelle. To make way for the 16 acre project, the city plans to use eminent domain to condemn 26 businesses employing 400 people, two churches, and the homes of 160 residents. Ikea tried to buy the properties, but few in this working class (or "blighted" according to the city) neighborhood were willing to sell.
"What IKEA could not buy on the private market, it wants city government to steal in public," declared Al Norman of Sprawl-Busters at a rally organized by Westchester Residents Against Ikea Now (WRAIN). The rally drew more than 400 people. Sprawl-Busters helps communities nationwide fight corporate retailers.
New York's State Environmental Quality Review Act requires major developments to obtain approval from state authorities, who consider the project's impact on surrounding municipalities. Impacted communities may submit comments, but they do not have the power to approve or reject the proposal. Mamaroneck officials petitioned the state to grant neighboring communities a greater say in the process, but the state refused.
The city of New Rochelle contends that Mamaroneck's law violates state law and the interstate commerce and equal protection clauses of the U.S. Constitution. It has challenged the law in court. Mamaroneck officials insist that the law is well within the authority of a local government to protect its citizens. That authority, they say, must on occasion extend beyond the town limits to address external problems with internal impacts.
For more information:
MORE CITIES BAN LARGE-SCALE RETAIL
In August, the city of Rockville, Maryland adopted an ordinance barring stores over 65,000 square feet and requiring those that exceed 25,000 square feet to meet design guidelines. The action puts an end to a proposed 128,000 square foot Costco warehouse store. (Wal-Mart stores range from about 80,000 to 250,000 square feet. A typical Borders Books is about 35,000 square feet.)
Rockville's law makes permanent a moratorium on large stores imposed last October to give the city time to study the issue. In public forums, residents voiced concerns that large-scale retail development would undermine the city's quality of life by increasing traffic, eroding Rockville's character, and bringing in businesses that have little commitment to the community.
Towns across Maryland are struggling over the issue of big chains. The city of Easton capped new retail stores at 65,000 square feet in March. Gaithersburg imposed a 80,000 square foot limit on single-story structures (allowing up to 160,000 square feet on two stories). Chestertown has barred stores over 60,000 square feet. Efforts to keep giant stores out are underway in several other towns.
In May, the city of Boise, Idaho altered its zoning ordinance to prohibit stores that exceed 60,000 square feet and shopping centers that exceed 70,000 square feet from locating in neighborhood business districts. The city hopes to encourage small, neighborhood-oriented businesses that are easily accessible by foot or bicycle.
Sprawl-Busters NewsFlash reported that several New England towns adopted size limits in March. By a 2-to-1 vote, residents of Boxborough, Massachusetts capped new retail at 25,000 square feet. Residents of Walpole, New Hampshire voted 3-to-1 to enact a 40,000 square foot limit.
In San Francisco, a measure to limit new businesses in the Castro neighborhood to 4,000 square feet became law on August 18. Sponsored by Supervisor Leno, the ordinance was prompted by Pottery Barn's attempt to open a store in the area. A similar ordinance covering the Northbeach neighborhood was enacted last year.
For more information:
DEMANDING DIVERSITY: FORMULA BUSINESS RULES SPREAD
Size restrictions keep the large stores out, but many places are grappling with the proliferation of smaller chains, like Starbucks and Blockbuster. These cookie-cutter operations often displace unique homegrown businesses and have made many cities and towns virtually indistinguishable.
A handful of communities have responded to this problem by adopting ordinances that essentially outlaw uniformity. These rules either ban altogether or limit the number of "formula" businesses that are allowed. Formula businesses are those which adopt standardized services, methods of operation, and other features virtually identical to businesses located in other communities.
Port Jefferson, New York recently enacted an ordinance barring formula fast food restaurants from the village's historic commercial and waterfront districts. The measure was proposed by the Port Jefferson Civic Association.
Coronado, a city of 20,000 in southern California, is currently reviewing ways to strengthen or expand its formula business ordinance. The existing law allows no more than ten formula fast food restaurants.
The city of Boulder is considering an ordinance that would limit all types of formula businesses, including both restaurants and retail stores. The Boulder Independent Business Alliance proposed the measure.
For more information:
III. BIGGER IS NOT BETTER
CHAIN BOOKSTORES SQUEEZING OUT MIDLIST TITLES
One might be tempted to think that the rise of giant chain bookstores has been a boon to authors. After all, the typical Barnes & Noble or Borders superstore stocks upwards of 150,000 titles, compared to an average of 20,000 for an independent.
Not so, according to a new study written by David Kirkpatrick on behalf of the Authors Guild. Midlist titles---serious nonfiction and literary fiction books which typically sell fewer than 10,000 copies---are more available now than ever before. Publishers continue to turn them out. More and more shelf space is devoted to selling them. Yet, midlist titles are fast losing market share.
"The best explanation for the leveling off of midlist book sales in the 1990s is in the rise of the superstores and other large chain booksellers," concludes Kirkpatrick. A close look at sales data reveals that most of the titles stocked in a superstore "serve essentially as wallpaper."
People buy a much narrower range of titles at chains than they buy at independents. Few in publishing believe this is the result of a change in readers' tastes, noting that popular interest in literary works, as evidenced by the surprise success of books like Frank McCourt's Angela's Ashes and Charles Frazier's Cold Mountain, is higher than ever.
The explanation lies in chain store marketing policies. The chains exact subsidies from publishers for promoting titles through prominent in-store placement and advertisements. A publisher might pay $10,000, for example, to have a title tabled at the front of the store for two weeks.
Only bestsellers, celebrity autobiographies, thrillers, and other big name books get this kind of promotion. This impacts midlist book sales in several ways. Publishers have fewer resources left over for marketing midlist books. Superstore customers are drawn to the prominent displays and give little notice to other books. Small presses can't afford to have any of their titles get the star treatment.
Independent bookstores also take some promotional money from publishers. But while the chains rarely promote a book without being paid to do so, independent booksellers do it all the time. They recommend and "hand sell" good books for free, because they like them and think their customers will too.
"Virtually every time a midlist book succeeds its editor credits independent bookstores with having gotten it going and kept it alive," the report notes.
Moreover, independent booksellers make their own decisions about what titles to stock and promote. At a chain, these decisions are largely dictated by the head office. The result is that independent bookstores collectively promote a vastly broader range of titles than those promoted by the chains.
As chains muscle out independents, bestsellers are muscling out midlist books. Between 1986 and 1996, bestsellers almost doubled their market share from 7 to 13 percent.
While this trend is most disturbing in the book industry---ideas, after all, are the lifeblood of a democracy---it is a trend underway in every sector. Big supermarket chains levy hefty fees for shelf space, to the detriment of both small food producers and independent grocers. Department store Goliaths like Wal-Mart bully big manufacturers and refuse to deal with small ones. Future issues of this bulletin will take a closer look at this problem in other sectors.
For more information:
IV. ALLIANCES AND COOPERATIVES
SALT LAKE CITY COALITION CREATES VOICE FOR INDEPENDENTS
Salt Lake City officials now routinely consider how their decisions might impact locally owned businesses, thanks to the work of a new independent business coalition and the election last year of Mayor Rocky Anderson.
The Salt Lake Vest Pocket Business Coalition was launched in early 1999 and now includes more than 150 local businesses. The Coalition works to generate increased awareness of the economic and community contributions of independent businesses.
Several members of the Coalition's board serve on a newly formed business advisory committee, which provides feedback to the mayor and the Department of Economic and Community Development on issues affecting local businesses.
The Coalition scored a big victory this month when a proposal for a large shopping mall was dropped by the City Council. Coalition members had joined with other local activists, including the Sierra Club's Utah chapter, to oppose the mall.
Mayor Anderson was an early opponent as well, contending that the "Sprawl Mall" would threaten the downtown economy and exacerbate sprawl. When asked about the developer's threat to build in a nearby town, he said that the city's policies should not be "dictated by other communities that have already shown that they will grab onto just about any kind of chain store development in an attempt to build up their sales tax base." Salt Lake City, he said, has a charm and unique identity worth protecting.
MAUI RETAILERS JOIN FORCES TO REWARD CUSTOMERS, COUNTER CHAINS
Locally owned businesses on the Hawaiian island of Maui are facing a invasion of national chains. It began with the arrival of Eagle Home & Garden in 1996. Borders Books, Office Max, Old Navy, Kmart, and Costco soon followed. Home Depot recently broke ground.
The sprawling new shopping centers have caused many homegrown businesses to close down. But those that remain have developed an innovative way to fight back.
Last winter, 24 locally owned businesses launched the Ohana Savers loyalty card program. The cards enable customers to accumulate points on purchases and redeem the points at any of the participating businesses. Loyalty cards are available at many retailers, but most work only at one store or chain of stores. The Ohana Savers card covers a variety of businesses, ranging from a grocery store to an appliance dealer.
"We want to encourage people to shop at local stores first," says Joeline Trenholm, owner of Valley Isle Lighting, explaining that "Ohana" means family in Hawaiian. The loyalty card program is part of an ongoing effort to increase awareness of the ways homegrown businesses enrich the community and local economy.
So far, it's been a success. More than 20,000 people have signed-up. Card holder purchases totaled $1.3 million in July. A marketing magazine ranked Ohana Savers as the fastest growing loyalty card program in the nation.
For more information:
- Kimberly Macadangdang, Ohana Savers Coordinator, 808-873-8080
V. E-COMMERCE
CAL. E-FAIRNESS BILL GAINING GROUND, BUT NEEDS YOUR HELP
A bill to clarify California state law to ensure that all retailers with a physical presence in the state collect sales tax on internet transactions is making headway. The bill (AB 2412) passed the Assembly on a 42-32 vote in late May. It then cleared two Senate committees in June and August. It is expected to come before the full Senate in the coming weeks. Governor Gray Davis has not yet taken a position on the bill.
The U.S. Supreme Court has ruled that any business that has a physical presence in a state---a store, warehouse, or office---must collect sales taxes on goods purchased by state residents. This applies to all retail sales, including in-store, mail order, and internet purchases.
Nevertheless, a number of national retail chains do not collect tax on their internet sales. The list includes businesses whose physical presence in most states is undeniable: Barnes & Noble, Borders Books, Gateway Computers, and Sam Goody Records. These companies contend that their web and retail operations are separate subsidiaries. Their web sites have no physical presence and therefore are not required to collect sales taxes.
This shell game is nothing more than a ruse to evade the law and gain an unfair advantage over local retailers, contends a coalition led by the Northern California Independent Booksellers Association (NCIBA).
The coalition first approached the state's tax authority, the Board of Equalization. When the board failed to take enforcement action, the group turned to the state legislature. AB 2412 was introduced earlier this year by Assembly members Carole Migden and Dion Aroner. The bill clarifies that existing sales tax law does indeed apply to internet sales made by companies with stores in California.
TAKE ACTION:
AB 2412 will come up for a Senate vote in the coming weeks. NCIBA is urging California residents to immediately contact their state senator (for contact information, go to http://www.leginfo.ca.gov) and to call Governor Gray Davis at 916-445-2841.
For more information:
VI. FRANCHISE AUTONOMY
ONTARIO ENACTS FRANCHISE DISCLOSURE LAW
Companies offering franchise business opportunities in Ontario will soon have to provide prospective franchisees with key information about their operations. A new franchise disclosure measure, Bill 33, was passed by the provincial legislature in late May. It will become law once the Ministry of Consumer and Commercial Relations drafts rules and regulations for its implementation.
The law is similar to a U.S. franchise disclosure rule adopted in 1979. One difference is that the Ontario law allows franchisees to sue companies that violate the law. In the U.S., enforcement has been left entirely to the Federal Trade Commission and franchise business owners may not seek redress through the courts.
The bill was presented by the Ontario government in response to a growing number of complaints from franchisees. There are 40,000 franchise businesses in Ontario -- and 5,000 new franchise lawsuits every year.
During four days of public hearings, lawmakers heard from dozens of small franchise business owners about growing abuses within the industry. Franchisees testified that they had risked their life savings only to discover that they had little control over the business and that the franchise company reaped the bulk of the financial rewards.
The new law requires franchise companies to disclose financial and other relevant information at least 14 days before the franchisee enters into a contract with the company.
It also protects the right of franchisees to form associations and imposes a duty of fair dealing on both parties to the franchise contract. This last provision is significant in that for the first time franchise companies must conform to legally defined standards of good faith dealing, similar to those governing a landlord's dealings with his tenets or a banker's responsibility to her depositors.
Les Stewart of the Canadian Alliance of Franchise Operators hopes the new law and the public hearings will serve as a springboard for additional reforms. Franchise companies, for example, should not be allowed to terminate a contract without good cause. He'd also like to see the government create an affordable dispute resolution process. Most franchise owners can not afford the legal fees necessary to bring a case against a large franchise company to court.
A far more comprehensive franchise protection bill was introduced earlier this year by Ontario Parliament Member Tony Martin. His bill was adamantly opposed by franchise companies, who backed the disclosure law as a means of deterring more stringent regulations. Martin plans to reintroduce his bill this fall.
For more information:
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