December 14, 2004

Development Permit Abuse

I've written before about the abuse of zoning and development permits to try to keep Walmart out of an area. In fact, the real reason WM wanted a vote (that it eventually lost) in Inglewood, CA is that the local politicians were abusing the regulatory process. Now comes another case where a development permit for one site requires WM to lease another building elsewhere:

Not even Wal-Mart is happy with the Planning Commission's recent approval of a 226,868-square-foot Supercenter and nearly a dozen other retailers in southwest Lodi.

A firm associated with the retail giant was among two to appeal the commission's Dec. 8 approval of the project's environmental report, use permit and tentative parcel map to City Council, said Community Development Director Konradt Bartlam. Doucet & Associates, a Roseville-based civil engineering firm, is contesting two conditions tacked on by the commission, including one that requires Wal-Mart to lease its existing store before it can receive a building permit for the Supercenter.

Like it or not, this type of authority does not really rest in the hands of the planning commission. It's seems like an overt abuse of the power granted to them.

Posted by Kevin on December, 14 2004 at 11:37 AM | TrackBack

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Bob Pence wrote:

When Wal-Mart moves from an existing location and builds a larger store nearby, two general scenarios can take place:

1) The old location remains empty and the shopping center it anchored dies. There is a slight increase in employment and the commercial tax base because the new shopping center and the new Wal-Mart are bigger, but employees of the other shops in the old shopping center are thrown out of work. Area property values stay about the same or go down because there is now an expanse of unused commercial space. The old Wal-Mart shell reduces good will toward Wal-Mart, and the new store does not do well. Those hurt by the move vote against the planning commission members in the next election.

2) Another retailer moves into the old Wal-Mart space and the existing shopping center does well. There is a large increase in employment as people are hired by the new anchor store as well as at the new shopping center, and the commercial tax base is increased as even more stores open in the busy strip between the old and new shopping centers. Area property values rise, both making existing neighbors feel more affluent and resulting in higher-income consumers moving in. Competition from the new anchor store keeps Wal-Mart on its toes and means that both stores can hire employees with experience at the other, meaning a more productive labor supply and higher profits all around. The planning commissioners keep their cushy government jobs.

Yes, it may be an abuse of authority, but its seems that Scenario 2 is better for all concerned, including Wal-Mart. Even if they defend their rights and do not agree to this as a requirement, it would still be a good thing for them to work for.

-- December 14, 2004 01:32 PM

Kevin Brancato wrote:

A lot of people assume that it is costless for WM to keep a store empty, but that's not the case at all. Whether leased or owned, WM must pay to keep that space open. Many people insist that WM refuses to sell spaces where they used to do business, because they don't want the competition nearby. But WM has a reselling unit--Walmart Realty, and they have almost incredible turnover.

But for it to be worth it for WM to hold onto empty stores, the benefits of reduced competition must outweight the cost maintaining empty space. First off, I don't think is easily demonstrated by those working for Wal-Mart or those who oppose it. Second, if they could determine this cost-benefit ratio, the rate of return of the invested capital in empty lots must be higher than alternative uses for that capital, namely operating stores. Third: Why would WM engage in this type of tactic when most of its stores are in areas where land is relatively cheap and available for competitors to build?

Fourth: If the costs of keeping stores empty are less then the benefits, and it is such a successful business tactic, why doesn't WM just buy up empty stores near them to keep them empty? Why didn't WM buy up all those Kmart outlets that were left empty? Why doesn't WM buy out other open stores, and leave the space empty?

Honestly, I think WM would find a tenant for their old location as soon as they can.

-- December 14, 2004 04:20 PM

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