Big-box debate

Fighting for scant tax dollars, local governments are embroiled in disputes over the proliferation of so-called “big box” and “superstore” retailers across California–such as Wal-Mart, Target and Costco–that capture revenue but enflame anti-growth and organized-labor interests.

Gov. Arnold Schwarzenegger successfully walked a tightrope by wooing Democrats to win re-election while using his veto pen to side with the superstores–a move that received little notice during his re-election campaign but which was aimed at the heart of the Democrats’ base: organized labor.

The issue is all but certain to arise again as Schwarzenegger prepares his 2007-08 state budget and hunts for support from majority Democrats to get the spending plan approved in the Legislature. The superstore issue is only one of several that have emerged in the Capitol following the November 7 election that promise to derail the public pronouncements of bipartisan cooperation

The crux is the money.

The base local-sales-tax rate is 7.25 cents per dollar, and local jurisdictions get to keep 1 percent for themselves. Thus, a superstore providing both general merchandise and groceries that does $100 million annually in taxable business–a Wal-Mart, for example–brings $1 million year to local coffers. That’s good money, especially for a smaller city, such as Woodland in Yolo County near Sacramento, with a $33 million total budget, said former Woodland Mayor Matt Rexroad, a newly elected member of the Yolo County Board of Supervisors.

“That $1 million is great, especially if you don’t have to raise anyone’s taxes,” Rexroad said. “You’ve got this pull from people who want more parks, city-provided child care, city swimming pools kept open, more police and fire protection. You have this insatiable demand for services, but you have a reluctance to pay for them. So you have to find a happy medium.”

But the debate is contentious, city by city. In nearby Davis, a university town where residents were asked whether to approve a new Target superstore–“They would never have approved a Wal-Mart,” Rexroad noted–the medium wasn’t happy: The vote remains too close to resolve. The emotional dispute pitted growth and business interests on one side, and anti-growth, labor and small businesses on the other. A final tally is expected Friday.

Wal-Mart, for its part, believes organized labor is behind a “massive political-style campaign to smear Wal-Mart. But shoppers–not union bosses–should decide for themselves where to work and shop,” says the company’s Web site.

Davis exemplifies the tensions in other cities. By one estimate, there are some two-dozen Wal-Mart superstores in the state, a half-dozen Targets looming, and other retailers, such as Sears, are planning their own. Ordinances targeting superstores have been approved in Oakland, San Francisco, Sacramento, Long Beach and elsewhere, and San Diego is considering one. In Livermore, the city council just voted unanimously to explore regulations limiting superstores.

“If you want to have more money to fund your services, if you want a new fire station, for example, or this or that, then some communities may decide it’s better to bring in these big-box retailers,” said Michael Coleman, a fiscal-policy adviser to the League of California Cities, agreed in part. But, he added, “you have to consider the costs, the impacts of traffic trips, of bringing in additional numbers of people, of law enforcement, of maintaining the streets, of water and sewer.”

For labor, the issue is more complex than it may appear. Wal-Mart, for example, is fiercely anti-union, while about one-fifth of Costco’s work force is unionized, and labor clearly would like to expand its membership. But labor groups also want to protect their existing employers against the super retailers who can transform the market and drive smaller employers out of business, thus costing union jobs. But unions see the superstores as the harbinger of declines in the quality of life, of a downward spiral of wages, union or not.

“It’s not necessarily the labor issues that are the most important, although our position is clearly out there. They [the superstores] spin this as labor versus Wal-Mart, but the issue isn’t the unions against Wal-Mart, it’s the impact that the superstore has on the local community,” said John Getz, of the United Food and Commercial Workers. “The language of those ordinances is different, but they all have the same effect. The cities want to be assured that they know the economic impact of the superstores.”

Labor-commissioned studies conclude that the price-cutting of the huge retailers cripples or closes smaller businesses and lowers wages. Economic impacts can be severe, but local officials looking at the sales-tax benefits don’t always see them, one labor expert said.

“We’re saying that local officials have to get as much information as possible about the economic impact in order to make an informed decision in terms of the net benefit,” said Grantland Johnson of the Central Labor Council and a former Sacramento County supervisor. “They have to look at the impact on land use, the economic impact. They have to look at the wage rates, the property tax. There are assertions made by proponents, but those assertions are seldom validated. There are a lot of factors that go into this.”

During the campaign, however, Schwarzenegger was not persuaded.

In his final round of vetoes, he rejected a pair of bills authored by Sen. Richard Alarcon, D-Los Sun Valley, that would have limited big-box retailers. One, which Schwarzenegger vetoed on September 29, was SB 1523, which would have required an economic-impact report prior to local approval. The other, SB 1818, which the governor rejected the next day, would have required big-box retailers who acted in an “arbitrary and capricious” manner by challenging local authorities to recompense the locals for attorney fees and court costs.

“The argument about whether a ‘superstore retailer’ belongs in a neighborhood is a daily occurrence in many California communities,” Schwarzenegger wrote in his veto message of SB 1523. The bill would “only limit the authority of local communities to decide what kind of retail projects they want to embrace” and “effectively sends to retailers and others that California is ‘closed for business.'” Regarding, SB 1818, Schwarzenegger said that the “bill simply discourage large retailers from opening stores in California.”
For Rexroad, the municipal advantages of a major retailer far outweigh the disadvantages.

“If communities like Davis want to continue to fight a Costco, then we will be happy to provide their people with shopping opportunities. We’ll have the sales tax revenue, and we’ll be happy to have the people of Davis subsidize our parks. What we’re saying is, tell us what the rules are, and we’ll play by the rules.”

Contact John Howard at

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