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The Home Town Advantage Bulletin - November 2003
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Reprint Policy and Guidelines
CONTENTS
- About this Bulletin
- Reprint Policy
- LOCAL BATTLES
-- Austin Coalition Forces Wal-Mart Retreat, City Agrees to Big Box Study
-- California Communities Embroiled in Supercenter Debates
-- Big Box Wins and Losses on Election Day
-- Alabama Citizens Sue to Block Wal-Mart Giveaways
- ALLIANCES AND COOPERATIVES
-- Austin Retailers Urge Shoppers to Ditch Chains for a Day
- NATIONAL NEWS
-- Consumer Reports Gives Top Ranking to Independent Pharmacies
-- Independent Pharmacists Fight Discriminatory Health Plans
-- National Day of Action Against Wal-Mart
- NEW RULES
-- California Appeals Court Upholds Formula Business Law
-- Vote on Federal Sales Tax Fairness Bill Likely in Early 2004
- INTERNATIONAL NEWS
-- Irish Pharmacists Call for Limits on Corporate Ownership
-- Malaysia Freezes Hypermarket Construction
- RESOURCES
-- New Report on Strategies to Revive Local Retail
-- Directory of Land Use Attorneys
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.
To get this e-bulletin in your e-mail box, subscribe by sending a blank e-mail to: home_town_advantage-subscribe@topica.email-publisher.com
ABOUT THIS BULLETIN
In communities across the country citizens are taking action to defend and strengthen their local economies. 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 organization providing research, analysis, and innovative policy solutions for building healthy communities and strong local economies. This bulletin is part of ILSR's New Rules Project, which maintains a web-based clearinghouse of model public policies at http://www.newrules.org and publishes reports, 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.
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.
REPRINT POLICY
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I. LOCAL BATTLES
AUSTIN COALITION FORCES WAL-MART RETREAT, CITY AGREES TO BIG BOX STUDY
Faced with strong opposition from a broad array of organizations and residents, Wal-Mart has abandoned plans to build a 24-hour supercenter on an ecologically sensitive site in southwest Austin. The 43-acre wooded tract sits over the Edwards Aquifer, the largest underground reservoir in Texas. It feeds Barton Springs and supplies drinking water to thousands of people.
Initially, opposition to Wal-Mart centered on its choice of location and the impact polluted parking lot runoff would have on the aquifer. All of the city's environmental groups, including the Austin Environmental Board, the Sierra Club, and the Save Barton Creek Association, came together as the No Aquifer Big Box Coalition to fight the project.
"But soon people with other concerns about Wal-Mart joined the coalition," explained Mike Blizzard of Grassroots Solutions, an Austin firm that helps citizens fight bad development.
Groups who joined the coalition included the Austin Independent Business Alliance, which is concerned about Wal-Mart's impact on local businesses; the Austin AFL-CIO and several union locals, concerned about the company's treatment of workers; the Austin chapter of the National Organization of Women, concerned about Wal-Mart's discrimination against female employees; Livable City, Austin Neighborhoods Together, and several other community groups motivated by a range of social issues; and numerous homeowner associations from the surrounding neighborhoods upset about the traffic and noise the store would generate.
The coalition circulated petitions, organized a letter-writing campaign, and held a public meeting attended by more than 500 people. Wal-Mart dropped the project in late September.
Rather than disbanding, many coalition members continue to work together and are formulating a citywide strategy to curb big box growth. "This has sparked a broader discussion about big box retailers and about Wal-Mart in particular," noted Blizzard. "Austin residents have learned a great deal about Wal-Mart and its corporate practices through this controversy over the aquifer."
"The scales fell from our eyes," said Susan Moffat, a neighborhood activist who opposed the store initially because of its environmental impacts but whose concerns now include economic and labor issues.
So far, the coalition has logged both victories and losses. In October, the city council unanimously passed a 45-day moratorium on the construction of stores over 50,000 square feet over the Edwards Aquifer (about one-quarter of the aquifer's 350-square-mile watershed lies within Austin city limits). The city will draft permanent regulations during the moratorium.
In early November, the city voted to commission a study of the impacts of big box stores on Austin's economy and environment. The full scope of the study will be determined in a few weeks.
But, under pressure from the developers, area chambers of commerce, and the Real Estate Council of Austin, the city has given preliminary approval to two other Wal-Mart stores and a Lowe's home improvement center.
The Lowe's, which will be built over the aquifer, was approved after a protracted fight that included a bill passed by the Texas legislature known as the "Lowe's amendment." The city felt the measure gave it no legal grounds to block the store, but opponents contend Austin could have prevailed in court.
The two new Wal-Mart stores will bring the city's total to four. The company has said it wants to build several more supercenters within Austin over the next year. But the coalition hopes that continued public education and organizing, along with the results of the city's study, will persuade the council to impose stricter regulations, including a citywide size cap.
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CALIFORNIA COMMUNITIES EMBROILED IN SUPERCENTER DEBATES
Voters in Contra Costa County, California, will decide in March whether to keep a law banning supercenters from unincorporated areas in the county. Contra Costa County is home to about one million people and lies east of the San Francisco Bay area.
The law, which was approved unanimously by the County Board of Supervisors in June, prohibits stores over 90,000 square feet that devote more than five percent of their floor space to groceries. The measure prevents Wal-Mart and Target from opening supercenters just beyond the borders of cities and towns. These areas are attractive to developers, because of lower land costs and the lack of municipal land use regulations.
Shortly after the ban passed, Wal-Mart spent $100,000 to gather the 27,000 signatures needed to put the measure on the March ballot. The company will likely spend millions on the campaign. It has launched a "Consumer Action Network" to collect residents' names and phone numbers, and has hired an army of workers to persuade voters to rescind the ban. At $10 an hour, the campaigners earn more than the $8 an hour Wal-Mart pays its supercenter employees.
A variety of labor, environmental, and community organizations have joined forces to convince voters to back the ban. The ordinance's sponsors, Supervisors Mark DeSaulnier and John Gioia, are leading the campaign. They plan to hold debates, press conferences, and go door to door to reach voters. "We know we will be outspent and we plan to be outspent maybe 4-1. But we hope to raise $1 million," DeSaulnier told the Tri-Valley Herald.
Supporters of the ban are focusing primarily on land use issues---the loss of open space, the large volumes of traffic generated by grocery-department store combinations, and the fact that groceries are nontaxable, leaving the public to pay for the additional road maintenance costs.
"It's also about Contra Costa County---not Wal-Mart executives in Bentonville, Arkansas---having the right to make its own decisions about local planning," said Supervisor Gioia.
Wal-Mart is aiming to steer the referendum away from community issues and turn it into an anti-union campaign. "So-called land-use arguments are nothing more than a way to try to divert the real issues, which is that this is being driven by [supermarket] unions," said company spokesperson Amy Hill.
Wal-Mart hopes that by winning the referendum it can send a strong message to communities across California, where interest in banning supercenters is on the rise. The state is one of the last frontiers for Wal-Mart supercenters. When the company announced a year ago that it planned to open more than 40 supercenters across California, labor unions and community activists began organizing to block the company's expansion.
In November, the Oakland city council voted 7-1 to adopt an ordinance similar to the one in Contra Costa County. Earlier this year, Martinez, the county's seat, implemented its own ban. Supervisors in Alameda County, which encompasses Oakland, are also considering a ban. As we reported in the July issue of this Bulletin, Los Angles is weighing a measure to require that big box stores pay a living wage.
Voters in two other California cities will face Wal-Mart questions on the March ballot. In San Marcos, about 35 miles north of San Diego, a grassroots group called Citizens for Responsible Development gathered signatures for an initiative to overturn a 3-2 decision by the city council to approve a Wal-Mart supercenter. Wal-Mart tried to have the referendum invalidated by a court, but failed. One city councilor who voted for the store has said he may change his vote when the council reconsiders the matter on Nov. 18, which would effectively cancel the referendum.
In Inglewood, near Los Angeles, Wal-Mart has organized an unprecedented referendum to give voters the power to approve a supercenter that has not yet gone before city officials. If it passes, the initiative would allow the supercenter to go forward without a public hearing, environmental impact study, or any of the other standard review procedures.
The initiative reads, "The reviewing official shall be required to issue the requested permit or permits without the exercise of any discretion and no development standards, criteria, requirements, procedures, mitigations or exactions shall be imposed." The referendum needs a simple majority to pass, but a two-thirds vote would be required to repeal or amend it.
"This is the most outrageous thing I've seen a corporation do in a low-income community," said Madeline Janis-Aparicio, director of Los Angeles Alliance for a New Economy, which is organizing opposition to the Inglewood supercenter and support for the living wage measure in Los Angeles.
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BIG BOX WINS AND LOSSES ON ELECTION DAY
Voters in Lakeway, Texas, about 20 miles west of Austin, overwhelmingly rejected a resolution to allow the construction of a 48-acre shopping center anchored by a 184,00-square-foot Wal-Mart store. The election drew the largest turnout in Lakeway history with residents voting 1,880 to 749 to block the development by retaining the town's current 100,000-square-foot size limit on retail stores.
The city council had earlier voted to lift the size cap and grant preliminary approval to the project. Although the ballot resolution is non-binding, the grassroots citizens group Lakeway First believes the strong showing at the polls will convince the city council to withhold final approval for the development and restore the size limit at its next meeting.
Meanwhile, by a margin of just 34 votes, residents of Cotati, a small town in northern California, endorsed a referendum that will exempt a 52-acre site from a city law prohibiting stores over 43,000 square feet. The vote, 1,047 to 1,013, opens the way for a 165,000-square-foot Lowe's superstore. The developers spent $180,000 on the campaign, while citizens opposed to lifting the cap, known as Cotati Residents Against Measure B, spent $30,000.
Residents Against Measure B are considering a legal challenge against the city. They contend the referendum's language was confusing, and that city officials misled residents by saying the store would produce $1 million annually in new tax revenue. The city has never provided documentation supporting this figure. For Lowe's to generate that much in sales tax revenue, it would have to double its national average of $300 in sales per square foot. Nor did the $1 million figure account for public costs associated with the development, such as road maintenance, or lost revenue from existing businesses that will lose sales when Lowe's opens.
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ALABAMA CITIZENS SUE TO BLOCK WAL-MART GIVEAWAYS
Owners of a small business in Birmingham, Alabama, near the site of a proposed Wal-Mart supercenter, have filed suit against the city for giving the retailing giant a $10 million subsidy. Southeast Meats of Pelham, in operation for over two decades, contends the handout gives Wal-Mart an unfair advantage. The suit also asserts that the city improperly threatened to use eminent domain to force owners of the Wal-Mart property to sell.
Meanwhile, 25 miles south in Alabaster, Alabama, a group of residents have sued to block the city from condemning their property for a massive shopping center anchored by a Wal-Mart supercenter. Developers acquired all but twelve acres of the 400-acre site. When the remaining residents refused to sell, the city declared their homes "blighted" and moved to take the property. Alabaster has also pledged $2 million in roads and sewers for the project.
Cities are increasingly using their power to condemn property to facilitate chain store development. Subsidies and tax breaks are rampant as well.
In October, Wheat Ridge, Colorado, declared property owned by three independent businesses "blighted." The three enterprises---a multi-generation, family-owned automotive repair shop, a billiards hall, and a kitchen cabinet business---will be booted for a Walgreens drugstore. The city has also given the developer $500,000 in public subsidies.
Meanwhile, in Denver, more than a dozen Asian-owned small businesses are slated to evicted from a shopping center that Wal-Mart is seeking to redevelop into a supercenter. The city's Urban Renewal Authority has offered Wal-Mart $10 million in tax breaks. (Readers may recall that this plan first surfaced more than a year ago, but, as we reported, the small businesses successfully fought back. Now, under a new mayor, the project has resurfaced and is moving forward.)
Local officials argue these big stores warrant subsidies because of the jobs and tax revenue they generate. But studies have found that big box retailers eliminate about as many jobs as much tax revenue as they create by forcing local stores to close.
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II. ALLIANCES & COOPERATIVES
AUSTIN RETAILERS URGE SHOPPERS TO DITCH CHAINS FOR A DAY
Independent retailers in Austin, Texas, are calling on local residents to break the chain store habit by shopping exclusively at locally owned businesses on Saturday, November 15.
The one-day event---known as Austin Unchained---is being organized by the Austin Independent Business Alliance (AIBA), a association of some 200 locally owned businesses. The group is promoting Austin Unchained through tee-shirts, flyers, and posters.
AIBA has generated significant media coverage in the days leading up to the event, including appearances on local radio and television stations.
"Our core message is that there is a considerable economic impact when consumers choose to make their purchases at locally owned stores instead of chains," said Steve Bercu, owner of BookPeople and a co-founder of AIBA.
To support AIBA's contention, Civic Economics, a consulting firm, analyzed the potential economic impact of the event. The firm concluded that if Austin consumers shift all of their chain store spending to local businesses on that day, it could generate an additional $7.2 million in local economic activity (due to the fact that, compared to chains, local retailers spend a much larger share of their revenue within the local economy, purchasing more goods and services, such as printing and accounting, from other local businesses).
In the next issue of this Bulletin, we'll let you know how residents responded to Austin Unchained.
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III. NATIONAL NEWS
CONSUMER REPORTS GIVES TOP RANKING TO INDEPENDENT PHARMACIES
An article in the October 2003 issue of Consumer Reports opens with the following recommendation: "If you're among the 47 percent of Americans who get medicine from drugstore giants such as CVS, Eckerd, and Rite Aid, here's a prescription: Try shopping somewhere else. The best place to start looking is one of the 25,000 independent pharmacies that are making a comeback throughout the U.S."
The article highlights the results of a year-long survey of more than 32,000 readers about their drugstore experiences. "Independent stores, which are edging toward extinction a few years ago, won top honors from Consumer Reports readers, besting the big chains by an eye-popping margin," the magazine reports.
Independents outranked all other pharmacies----including drugstore chains, supermarkets, mass merchandisers (e.g., Wal-Mart), and internet companies---in terms of providing personal attention, offering health services such as in-store screenings, filling prescriptions quickly, supplying hard-to-find drugs, and obtaining out-of-stock medications within 24 hours.
Overall, more than 85 percent of customers at independent drugstores were very satisfied or completely satisfied with their experience, compared with 58 percent of chain store customers.
The one drug chain that nearly equaled the scores of independent stores was The Medicine Shoppe, which is actually a franchise, meaning that its outlets are locally-owned and operated.
The survey did find that internet pharmacies and mass merchandisers often have lower prices, but customers wait longer and receive less personal attention and heath information. Chain drugstores, such as CVS and Walgreens, had the highest prices, higher than independents.
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COMMUNITY PHARMACISTS FIGHT DISCRIMINATORY HEALTH PLANS
Pennsylvania pharmacists are up in arms over a new health plan for state workers that bars them from filling prescriptions at locally owned drugstores, requiring instead that they use Rite Aid or a mail order service.
The plan is run by a pharmacy benefit management company (PBM), which the state says will reduce costs by negotiating lower drug prices. In exchange, employees must accept restrictions on where they fill their prescriptions.
"They bought a pig in a poke," contends John Rector, senior vice president for government affairs at the National Community Pharmacists Association (NCPA). More often than not, he says, it's more expensive to use a PBM. These companies own their own mail order pharmacies and have financial ties to major drug manufacturers. Benefits are often structured to boost profits for the PBM and its affiliated drug company, not reduce costs or provide high-quality care.
One reason that PBMs are more costly is that they underutilize generic drugs. On average, more than half the drugs dispensed by a retail pharmacy are generics, but under PBMs, the rate is only 28 percent. Name-brand drugs are favored because PBMs commonly receive kickbacks from drug makers. Several employers, including the state of West Virginia, have filed suits alleging PBMs pocketed rebates and discounts, and did not deliver the cost savings they promised.
In terms of quality of care, Rector says the decision-makers in Harrisburg should visit the U.S. attorney in Philadelphia, who filed suit against Medco, the nation's largest PBM, in September. The complaint alleges that Medco routinely shorted customers by mailing less than the prescribed number of pills but still charging full price; creating false records indicating physicians had been contacted to discuss medications when they had not; and favoring drugs manufactured by Merck, Medco's former parent company, over less expensive alternatives.
The NCPA is working on several fronts to prevent PBMs from forcing independent pharmacies out of businesses. The association and its members have persuaded 33 states to adopt laws that bar health plans from limiting patients' choice of pharmacies or imposing higher co-pays on those who choose community pharmacies over chains or mail order.
The NCPA has also filed a class-action suit against Medco and AdvancePCS, which together manage drug benefits for 140 million Americans. The suit charges that the companies violated antitrust laws by using their market power to force retail pharmacies to accept one-sided contracts and artificially low reimbursement rates. It accuses them of steering consumers to their own mail order operations by, for example, barring retail pharmacies from providing more than a 30-day supply, while the mail order firms routinely dispensed 90-day supplies.
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NATIONAL DAY OF ACTION AGAINST WAL-MART
The United Food and Commercial Workers union and dozens of allied groups are organizing a National Day of Action to protest Wal-Mart's treatment of workers and its impact on small businesses, communities, and the environment. Rallies, meetings with lawmakers, and public educational events will be held in all 50 states on Wednesday, January 14.
We may not get another issue of the Bulletin out before the 14th, so please mark your calendars now and check the Day of Action web site (still under construction) for state-by-state details and information on how you can get involved: http://www.walmartdayofaction.com
IV. NEW RULES
CALIFORNIA APPEALS COURT UPHOLDS FORMULA BUSINESS LAW
A California Appeals Court has upheld a local ordinance restricting the proliferation of formula retail businesses in Coronado, a city of 24,000 people near San Diego. The court ruled that the ordinance does not violate the US Constitution's commerce and equal protection clauses, and is a valid use of municipal authority under California state law.
The ordinance, enacted in December 2000, requires anyone seeking to open a formula retail business to obtain a special permit. Approval hinges on demonstrating that the store will be compatible with surrounding uses, will be designed and operated in a manner that preserves the community's character and ambiance, and will contribute to an "appropriate balance of local, regional, or national-based businesses." The ordinance further requires that formula retail stores be limited to no more than 50 linear feet of street frontage and no more than two stories.
The law defines formula retail businesses as those "required by contractual or other arrangement to maintain any of the following: standardized ('formula') array of services and/or merchandise, trademark, logo, service mark, symbol, decor, architecture, layout, uniform, or similar standardized feature."
A group of property owners challenged the law several months after it was enacted. The ordinance was upheld at the superior court level and then again on appeal.
Most of the appeals court ruling deals with the property owners' primary contention, which is that the ordinance discriminates against out-of-state companies. The court found that the law does not in fact "impose different regulations on interstate as opposed to intrastate businesses, nor does it distinguish between those businesses that are locally owned and those that are owned by out-of-state interests." The court notes the law focuses on whether the store is contractually required to have standardized features, regardless of whether it is part of a national chain or owned by a California resident.
The court further ruled that the law does not have a discriminatory purpose. The ordinance's lengthy preamble states that the city seeks to maintain a vibrant and diverse commercial district, and that the unregulated proliferation of formula businesses would frustrate this goal and lessen the commercial district's appeal. The court concludes that this is a legitimate purpose, noting that "the objective of promoting a diversity of retail activity to prevent the city's business district from being taken over exclusively by generic chain stores is not a discriminatory purpose under the commerce clause."
The court also dismissed the equal protection and state law challenges, stating that the ordinance is rationally related to a legitimate public purpose.
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VOTE ON FEDERAL SALES TAX FAIRNESS BILL LIKELY IN EARLY 2004
Legislation introduced in Congress that would require internet retailers to collect state and local sales taxes stands a fairly good chance of passing in the first few months of 2004, according to supporters of the bill.
The bill, sponsored in the Senate by Byron Dorgan (D-SD) and Michael Enzi (R-WY) and in the House by Rep. Bill Delahunt (D-MA), gives Congressional approval to a national compact made up of states that have simplified and aligned their sales tax rules and regulations. Once states have sufficiently simplified their tax codes and joined the compact, they would be allowed to require internet and mail order retailers with more than $5 million in annual sales to collect local and state sales taxes.
Supporters argue that e-commerce companies like Amazon.com should be subject to the same sales tax requirements imposed on bricks-and-mortar stores. The legislation would also restore millions of dollars in state and local revenue lost as consumers have migrated to internet shopping.
The Supreme Court has ruled that requiring remote sellers (e.g., mail order or internet companies) to comply with the various rules and rates governing the nation's 7,500 local sales tax jurisdictions would impose an unreasonable burden on interstate commerce.
Led by the National Governors Association, a group of states began working several years ago to streamline and simplify their sales tax rules, thus removing the burden of collecting taxes for multiple jurisdictions and opening the way for the bill now before Congress.
To date, 32 states have approved a model interstate agreement that establishes uniform sales tax rules and definitions, and 20 state legislatures have enacted implementing legislation.
Under the new rules, states and cities will still have the authority to determine what goods are taxed at what rate, but must adhere to rules governing such things as how and when they can change tax rates, as well as uniform definitions (e.g., whether marshmallows are considered food or candy for tax purposes).
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V. INTERNATIONAL NEWS
IRISH PHARMACISTS CALL FOR LIMITS ON CORPORATE OWNERSHIP
The Irish Pharmaceutical Union (IPU) has asked the government to adopt restrictions on the ownership of pharmacies similar to regulations in place in most European countries.
The IPU favors restricting pharmacy ownership to pharmacists, and capping the number of pharmacies any pharmacist can own at five. Eleven of the fifteen European Union countries, including France and Germany, have similar laws prohibiting corporate chains from operating drugstores. The rules are often part of national healthcare regulations and are designed to preserve the integrity of prescription drug services by keeping pharmacists in control.
More than one-third of Irish pharmacies are already part of a chain. In Norway, where ownership restrictions were lifted two years ago, 70 percent of drugstores are now owned by three chains.
MALAYSIA FREEZES HYPERMARKET CONSTRUCTION
Malaysia has placed a five-year ban on the construction of hypermarkets in Klang Valley, which includes Kuala Lumpur, and the states of Johor and Penang. New guidelines also lengthen the approval time for developers seeking to build hypermarkets in other areas from four months to two years.
Hypermarkets are stores larger than 8,000 square meters (86,000 square feet) that sell both department store merchandise and groceries, similar to Wal-Mart supercenters. The global chains Carrefour, Tesco, Makro, and Giant operate hypermarkets in Malaysia.
In announcing the new policy, Minister of Domestic Trade and Consumer Affairs Tan Sri Muhyiddin Yassin said that the three regions are saturated with hypermarkets and additional development of large stores would adversely impact thousands of small businesses.
Klang Valley has 18 hypermarkets, or one for every 278,000 people. Planning guidelines suggest no more than one per 350,000 people. The U.S. has one supercenter for every 158,000 people.
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- -- For news on other countries that have restricted large-scale retail development, see the International subheading at the end of our HTA Articles Index by Location
VI. RESOURCES
NEW REPORT ON STRATEGIES TO REVIVE LOCAL RETAIL
Written by Stacy Mitchell of the Institute for Local Self-Reliance and published by the Preservation Trust of Vermont, a new report, "10 Reasons Why Vermont's Homegrown Economy Matters and 50 Proven Ways to Revive It," offers specific reasons why locally owned businesses matter and practical ways to plan for a homegrown economy, foster downtown revitalization, and strengthen independent businesses. The report highlights examples from across the U.S.
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DIRECTORY OF LAND USE ATTORNEYS
A directory of attorneys who will represent citizens in land use and environmental cases has just been published by Community and Environmental Defense Services (CEDS). CEDS has only done minimal screening of the attorneys listed and urges citizens groups to exercise prudence in hiring an attorney. CEDS hopes to enlarge the directory over time and encourages people to contact them with names and contact information for attorneys with a good history of representing citizens in land use and environmental cases.
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