Opinion: The impact of Wal-Mart superstores in California

At a time when the economy remains challenging across most of California, local communities do not need greater burdens placed upon them by Sacramento, especially on their ability to help themselves. Instead, they need greater flexibility to generate additional resources to fund their own priorities. This is why I thought it is important to share some findings from my recent analysis of Senate Bill 469 (Vargas) as well as my review of the impact Wal-Mart superstores historically have had in terms of business growth and increased revenues in a majority of California communities.

SB 469 will require an additional economic impact report on top of the current land use regulatory process on large retail stores over 90,000 square feet that have at least 10 percent of their floor space designated for groceries.  Communities currently have the ability to mandate economic assessment of new retail development.  Those communities that wish to be more proactive to help themselves should not be burdened with additional requirements that make them less competitive and self-reliant.

Certain provisions in SB 469 will make it challenging, if not impossible, to complete the required economic analysis in a timely manner as required by the legislation. Specifically, the legislation requires that the economic impact study include: an assessment of the extent to which the proposed superstore retailer will capture a share of retail sales in the market area, an assessment of how construction and operation of the proposed superstore will affect the supply and demand for retail space in the market area, and an assessment of how construction and operation of the proposed superstore will affect employment in the market area. As someone who has performed numerous economic impact studies of proposed developments on California communities, I know of no data source that can provide timely and accurate information to accomplish these assessments.

In the past, I have utilized the Retail Taxable Sales and Retail Business Permits data as reported by California communities to the California Board of Equalization (BOE) in many of my studies. However, this BOE data is always at least 12-months old due to the standard collection and reporting lags in acquiring such information. Even so, for research purposes, this data is objective and factual and provides a strong historical economic snapshot of a California community.

For example, I recently performed quantitative analyses (in 2008 and 2010) on the impacts of Wal-Mart superstores in California communities. The answer I found is that businesses do not close up shop and there is not a significant loss of revenues in communities with new superstores. In fact, I concluded that on average, the number of retail businesses increased in the years following the opening of a superstore. Business leaders have backed up this find by acknowledging that the creation of a superstore creates opportunity for other businesses to open and thrive.

I also found that superstores can help increase tax revenues. Based upon the results of the previous analyses mentioned, I found that on average, taxable retail sales increased, in California communities where superstores opened. These increases were not solely the result of the superstore’s presence, but also the result of other new businesses opening in the same communities. Furthermore, the opening of superstores also enhanced the average taxable sales of other retail outlets such as restaurants and bars and service stations.

One of the Bay Area’s communities with a Wal-Mart supercenter that was included in the analysis is American Canyon. The supercenter opened in 2007 and in just two years, the community experienced a 73 percent increase in retail business permits which totals 79 new retail businesses. In addition, retail sales tax revenue increased by 17.2 percent. Clearly, the supercenter did not harm the development of retail business. In fact, this community – even during the economic downturn – experienced an increase in retail business permits and revenue.

The bottom line is that there is a proven economic value of supercenters in California. There is objective evidence that shows that large-format retail stores like Wal-Mart supercenters spur business development and increase revenue.