Wal-Mart's Economic Costs Need to be Independently Examined

In an earlier post, we examined the Bloomberg sustainability sham, and linked that analysis to the threatened Walmartization of NYC. Now, however, we need to move beyond the environmental issues that are inextricable from the biggest big box of all, and tackle head on the false sense that the entry of Big Wally is an economic benefit to New York. Put simply, NYC loses more than it gains if Wal-Mart comes to town.

We have begun to make this argument already-and have piggybacked on the work of the University of Illinois-Chicago researchers who examined the impact of the second city's first Walmonster. As we pointed out previously: "The results of the Chicago Wal-Mart study provides us with a cautionary tale. For all those who promote the Walmonster in the name of economic development, these results indicate that the retail giant-unlike almost any other retailer-generates the kind of collateral damages that yield a net loss for the host community. And this analysis doesn't take into consideration what Stacy Mitchell calls, "the big box swindle;" the fact that these box stores like Wal-Mart generate much fewer local dollars than do the local competitors that they so often replace."

City Limits underscores this in an article on chain stores in its latest isssue: "National studies show that for every $100 spent in locally owned business, $85 is reinvested in the community-whether in paychecks for the employees or goods and servicies ourchased from othe local businesses-compared with $15 that stays local when the $100 is spent at the national chain."

Many communities around the country have begun to recognize this-and, as a result, have looked to raise the review criteria as well as the barriers to entry for these retail giants. Mitchell outlines this in her New Rules Project review: "States and municipalities have long evaluated the impact that large retail development projects may have on such things as traffic and the environment. Some are now adopting policies that require that the economic and fiscal impact of these developments be considered as well. (Economic impacts include the effect on local businesses, jobs, and wages. Fiscal impact refers to the impact on tax revenue and government costs.)"

These reviews consist of the following criteria: "These policies usually have two key components:

•They require that an independent study of the economic and fiscal impact of the retail development be conducted by a qualified analyst selected by the municipality (or other reviewing authority) and paid by a fee assessed to the developer.

•They establish a standard (or multiple standards) that the project must meet in order to be approved. The policy may say, for example, that the planning board (or city council or regional planning commission) may approve the development only if it concludes, based on the data provided by the study and other evidence submitted, that the project will not have an undue adverse impact or that the benefits of the development will outweigh the costs."

Now, as most of us well know, the NYC ULURP process has some of these elements-with the caveat, of course, that the concept of independent review is foreign to the local lexicon. That being said, it is also clear to any student of ULURP that the economic impact analysis is a step child of the review and is often neglected completely-this is a big mistake at a time when the mayor, EDC, and the assorted usual suspects in the media, are touting the economic boon that box stores-and especially Wal-Mart-allegedly provide.

Put very simply, the city council needs to elevate the centrality of economic impact analysis for mega real estate developments-particularly those that include the Walmonster. But, in addition, as Mitchell suggests, it needs to set some stringent standards for a box store like Wal-Mart-standards that clearly examine the collateral damages: "Most of these laws spell out the types of impacts that the study must analyze and that officials must consider in determining whether to grant approval. The list may include such things as the impact that the development will have on existing businesses, the vitality of the downtown, employment (jobs gained versus jobs lost), wages, tax revenue, and municipal costs. Some laws also include community impacts, such historic and scenic resources, and environmental impacts."

As an integral part of this review, the council should also insist that the consultants examine the strength of Mitchell's assertion that local businesses have a greater economic impact-because of the greater circulation of local dollars-than out of town box stores and chains. Mitchell has persuasively argued:

"Research shows local businesses deliver significantly greater economic returns for a community than national chains. A study conducted in Chicago by the firm Civic Economics found that every $100 spent at a national chain generated an average of $43 in additional economic activity in the local area. That same $100 spent at a locally owned store or restaurant created an average of $68 worth of new local economic activity.

Why do local businesses deliver so much more economic bang for our buck?
Part of the answer is that they spend a larger portion of their revenue on local payroll. Because they do not rely on a staff at a distant corporate headquarters, they employ more people locally to manage and operate the business.
The other factor is that local retailers tend to buy more goods and services from other local businesses. They bank at local banks. They get their printing done locally. They hire local accountants and other professionals. They source more of their inventory from local and regional suppliers."

Mitchell provides a guide to how these retail studies should be conducted-and our only caveat here is that AKRF not be allowed within 100 miles of any review that purports to be independent, For a full list of the skeptical literature on box store impacts consult the New Rules Project review of the scholarship. She also points out that the State of Maine is leading the way on this issue: "A growing number of states are considering and enacting statewide policies that make economic and fiscal impact studies mandatory for large-scale development proposed anywhere in the state. Maine's Informed Growth Act, for example, stipulates that large retail projects must undergo an economic impact analysis and grants cities the authority to reject those developments that they determine will have an adverse impact."

So the prospect of  a 180,000 square foot Wal-Mart coming to East New York should be viewed as an opportunity for the city council to sharpen its charter-given oversight role of mayoral power. It needs to craft economic impact legislation on a fast track-and figure a way to insure that it stands (legally) separate and apart from the suborned ULURP process. We are sure that Wal-Mart coming into New York is good for Wal-Mart-but for this city, there should be grave uncertainty.

We need to hold the mayor to a higher standard, not only on the environment that he claims to champion, but also on the issue of economic development, and what we envision makes the most sense for NYC's sustainable future. We believe strongly that the nurturing of local business-and the immigrants that increasingly enliven it-is where the city's best future lies-and a mayor who champions immigration should be able to comprehend this. (see especially the latest issue of City Limits for a fuller discussion of the importance of small business in NYC)

And on that note, we'll give Stacy Mitchell the last word: "What drives people's choices about where to buy a house, where to put down roots and where to start a business are what makes a place special. These might be cultural and natural amenities, but just as often, they are the kinds of small businesses that make daily living more enjoyable. They're the neighborhood bakeries, the lively independent bookstores, the local hardware stores that excel in personal service."