HomeMy WebLinkAboutAgenda Report - July 21, 2004 I-02 ERAGENDAITEM 1*02m
PREPARED BY: Community Development Director, Finance Director & Public Works Director
BACKGROUND INFORMATION: On June 2, 2004, the City Council requested that a report on the
impacts of the Large -Scale Retail Initiative be prepared pursuant to
Section 9212 of the California Elections Code. This report allows for
the Council to receive information on a variety of topics. For this report, staff has focused on the seven
areas outlined in the referenced code,
ASSUMPTIONS: In order to adequately assess the impacts of the initiative to the
various topic areas, we chose to base the report on the following set
of assumptions:
0 The initiative affects retail structures over 125,000 square feet including "outside retail areas."
* The initiative includes automobile dealers.
The initiative does not prohibit such structures, but rather requires specific environmental review
and approval by a public vote,
0 No General Plan Land Use designations are amended by the Initiative.
0 No Zoning Ordinance designations are changed by the Initiative.
rIUMMI
1. Fiscal Imoact
For the fiscal impact section, the following assumptions were used:
- A Wal Mart Super Center Development would occur,
- References taken from the following studies:
"Wal Mart Supercenters. What's in store for Southern California?" written by Gregory Freeman of the Los
Angeles Economic Development Corporation.
0.0 laft
'an
�SUPERCENTERS AND THE TRANSFORMATION OF THE BAY AREA GROCERY INDUSTRY., Issues,
Trends, and Impacts "by the Bay Area Economic Forum.
Finance staff concluded that the long term fiscal impact for the location of a large scale retail outlet in the
City of Lodi will be negligible. However, more important is the potential for a negative fiscal impact to the
City of Lodi if a large scale retail outlet (Wal Mart superstore) were to locate in another neighboring
community instead of Lodi. The potential for a positive fiscal impact would be as follows: 1) sales tax
revenues (the average Wal Mart superstore generates sales of $140 million) to the City of Lodi of about
$1 million; 2) business license tax revenues of $140,000; 3) property tax revenues of approximately
$14,000 per year.
The sales that Wal Mart gains in Lodi will most likely come at the expense of competitors in the grocery
retailers in the immediate area. There will be some derivative effects from the increase in discretionary
income that will result from lower prices in general; but this would be somewhat offset by the reduction in
wages that would result from downward pressure by Wal Mart employment practices. The property taxes
and business licenses revenues would most likely be permanent revenue to the City of Lodi. Although it
is probable that the addition of a Wal Mart Super Center will cause an increase in government costs (City
of Lodi costs) it is also likely that other developments that would occur in the same place if the Wal Mart
Super Store development does not occur, would also cause government costs to rise as a result of
development. Therefore, the costs of services to be provided by the City of Lodi will be approximately
the same regardless of the type of retail establishment that is developed; and the cost of providing
government services should not be included in this analysis. The offsetting factor to be considered in the
case of sales tax revenues is that the downward pressure on prices amongst the Wal Mart Super Store
competitors will reduce sales taxes from those retailers; and as Wal Mart reaches its strongest
competitive point the sales that it generates will come at the expense of those it competes with. Thus
sales tax revenues will not necessarily increase in total as the effect of this decrease in sales dollars
occurs. However, most of the decrease in the sales will be grocery which is non -taxable -
As cited from the sources mentioned above, there will be a derivative effect from the spending choices
that would inure to Lodi citizens as a result of the drop in costs for groceries should a Wal Mart be
located in this area, This will occur of the store is located in Lodi or in one of the neighboring
communities such as Stockton. The savings from this after tax income could be as much as $524 per
year per household over the course of Wal Mart's gaining desired market share in this area. This
equates to about 125 jobs (6,500 potential jobs gained in Los Angeles with a population of 1.28 million
households equates to 125 jobs gained in Lodi) gained from this source of discretionary income, This
would be true regardless of whether the Wal Mart Super Store locates in Lodi or whether this occurs in
another neighboring community, There fore, the conclusion is that this derivative effect will occur so long
as the development of the super store takes places somewhere in the market areas of the citizens of
Lodi.
Both studies conclude that there will be a savings on groceries as a result of the capturing of market
share by a Wal Mart Super Store. And; both studies indicate that there will be a loss in market share to
Wal Mart. The employees who would be displaced as a result of lost market share by Lodi retailers could
be employed by Wal Mart. Thus there would not be a IOSS of jobs; but instead there would be a potential
loss of wages or foregone wages as these workers move to Wal Mart. The first study concludes that Wal
Mart will gain a market share of up to 20 percent; and the second study concludes that Wal Mart's market
share would range somewhere between 6 and 18 percent. Both studies indicate that there will be
foregone wages for unionized employees as a result of the employment practices of Wal Mart. The
studies show varying effects from foregone wages. The effect could be equivalent to losing 48 job as
cited by the first report (wages foregone in Los Angeles equate to the loss of 2,500 jobs with a household
population of 1.28 million; and would equal 48 jobs in a community like Lodi, which has approximately
25,000 households), Since these wages would also be foregone if the Wal Mart opens in a neighboring
community, it is not considered to be a relevant factor in this discussion.
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The net effect of not allowing further auto dealerships in the City of Lodi is significant. The information
that is available related to this is confidential in nature and can not be released for public purview. It has
been shown that dealerships in town experience an increase in sales volume as a result of expansion. If
this type of establishment is not allowed to expand its business by virtue of expanding the size of its
footprint, the fiscal impact on the City of Lodi will be significant.
2. Effect on the internal consistencv of the Citv's General and SDecific Plans, includina housina element.
the consistency between planning angl i
_gzgonin and the limitations on citj actions under Section 65008 of
the Government Code and ChaDters 4.2 and 4.3 of Division 1 of Title 7 of the Government Code.
The Code sections referenced have to do with discrimination and housing project approvals. As this
Initiative relates only to size of retail structures, it is our opinion that there would be no impact on these
sections.
With regard to consistency with the City's General Plan, the Initiative specifically amends the Lodi
General Plan by adding a Policy 7 to Goal A to read as follows:
"The City shall promote preservation of Lodi's small-town and rural qualities by ensuring that retail
structures in excess of 125,000 square feet in gross floor area in any land use designation are approved
by the City Council and a public vote in the next general election."
The General Plan is further amended by adding Policy 6 to Goal D to read as follows:
"The City shall promote and support Lodi's downtown development by ensuring that retail structures in
excess of 125,000 square feet in gross floor area in any land use designation are approved by the City
Council and a public vote in the next general election."
The General Plan is further amended by adding Policy 7 to Goal E to read as follows'.
"The City shall support commercial use development to provide goods and services to Lodi residents and
market area by ensuring that retail structures in excess of 125,000 square feet in gross floor area in any
land use designation are approved by the City Council and a public vote in the next general election."
Finally, the General Plan 'is further amended by adding implementing Policy 17 to read as follows:
"The City shall prepare and implement the requirement for City Council and public voter approval of retail
structures in excess of 125,000 square feet in gross floor area in any district established by Lodi's
General Plan and Zoning Ordinance."
With the above amendments, the Initiative is consistent with the General Plan. Further, as the Initiative
only pertains to the size of retail structures, it is staff's opinion that it would have no impact on the existing
or Draft Housing Element.
3. Effect on use of I he
CiAt to meet its reqional hous_ing_needs.
The Initiative affects the maximum size of retail buildings within Lodi. It is staff's opinion the Initiative will
not change the anticipated use of land with perhaps one exception, which will be described at the end of
this section.
As with the previous section, the initiative is not anticipated to have any impact on housing development,
The existing General Plan and Zoning designation for land within the City are not changing as a result of
the Initiative. Therefore, no effect on the use of land is expected.
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The one exception that may occur as a result of the Initiative relates to the planned use of property along
Beckman Road, north of Kettleman Lane. This area is owned by the Geweke family. Based on one of
the assumptions outlined, staff believes that it would be unlikely that this property will be developed as
previously envisioned by the Geweke family as automobile dealerships. Should that be the case, the
initiative would affect the use of that land.
4. Impact on funding for infrastr icture of all types, including, but not limited to, transportation, schools,
includinq the costs of infrastructure maintenanceto current
residents ang businesses.
Public infrastructure — water, wastewater, drainage, transportation and other governmental facilities -is
planned in incremental steps. These "steps" are typically at the "Master Plan" or conceptual level, then at
a "budget" or preliminary project level, and then finally, at final design level.
Using the example of the transportation system, the City adopted a street master plan as part of the
General Plan update in 1991 . The plan identifies major streets and the number of lanes necessary to
serve the land uses described in the General Plan, along the general location of these facilities. Major
cost factors such as the number and location of traffic signals are included at this level. Portions (and
costs) of the improvements attributable to new development are included in the development impact
mitigation fee program (mainly extra width and traffic signals). Other streets necessary to serve lands
being subdivided and typical frontage improvement are the responsibility of the developer. These
improvements and their cost is based on the various and use designations and their relative weighting as
compared to a single family residential development. Implicit in these calculations are various
development standards such as "floor/area ratio (FAR)" which limits the square footage of building for a
given parcel size, (Note, the initiative does not change these standards,) At the master plan level, a 36 -
acre commercial parcel would be analyzed as if it had 470,000 SF of structures (a FAR of 0,30-1 the
maximum permitted is 0.40). There would be no distinction between the number and size of individual
buildings. In the absence of project specific information, average commercial vehicle trip generation
rated would be used.
5. Impact on the Community's ability to attract and retain business and employment.
As with fiscal impact, this topic will be debated as to the benefit or not of the Initiative proposed. Staff
believes that the procedural requirements the Initiative outlines may well have an impact in attracting and
retaining businesses that exceed the 125,000 square foot threshold. The cost, timing and risk may prove
to be more than that business type would be willing to expend. This would include business expansions
as well.
That said, Lodi is not a retail island. As such, these businesses will locate within our market. Therefore,
it would be difficult to argue that the anticipated benefit to smaller businesses might outweigh the loss of
the larger. Staff does not believe that Lodi will attract more businesses if the larger (over 125,000 square
foot) retait establishments did not exist.
The Initiative will most likely have impact on the size of the structures on some vacant land, but not the
use itself, As an example, the square footage that could be developed on a given commercial site would
not be different with or without the initiative, As described in the assumptions and with item 4 dealing
with infrastructure, development will still occur at the same ratio of building to land area.
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7. Imnact on aaricultural lands o en space, traffic congestion, and existing business districts developed
The Initiative will not have any impact to agricultural lands, open space or traffic congestion based on the
assumption that there is no change in General Plan or Zoning land use proposed or anticipated. The
vacant parce)s that may be used for agriculture or open space today will be used for some urban uses
pursuant to the plan. Likewise, traffic congestion or the lack of congestion, is a factor of building
intensity, not simply the size of the structure,
With regard to impacts on existing business districts, and areas designated for revitalization, no
significant impact is anticipated either positive or negative. As the City Council is aware, the City has
required every major development project since 1997 to analyze fiscal affects on the downtown. In each
instance, the impact was shown to be negligible, and in fact, has proven to be the case in reality.
FUNDING: None Required
—;o radt Bartlarn amK�rueger
Wra-dt
Community Development Director Finance Director
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Richard Prima
Public Works Director