City Council Oversight Hearing on Wal-Mart

Testimony to the Small Business and Community and Economic Development Committees

February 3, 2011

Thank you for the opportunity to testify. I’m Adam Friedman, Director of the Pratt Center for Community Development.

The possible entry of Wal-Mart into New York City shows dramatically the inadequacy of our land use and economic development tools to ensure that new development truly serves our communities. As a rule, economic incentives should include job standards, and large scale retail development in low density areas should trigger an opportunity for public comment and site review to ensure that there is minimal negative impact on the surrounding area. Those safeguards do not exist today, and the Council’s options are limited. We should learn from this experience and put such protections in place for the future.

There are some pretty basic property development goals on which we all probably agree: new large scale retail development should 1) Create not simply jobs, but decent jobs; 2) Maintain a city of diverse neighborhoods including diverse shopping options; 3) Expand access to high quality healthy foods, particularly for low-income residents; and 4) Strengthen the City’s tax base and overall economic and environmental wellbeing. To cut to the chase, I think Wal-Mart fails every one of these objectives.

I believe in fair competition, and on some level, consumers can vote with their feet to reflect their shopping preferences and values. Wal-Mart typically does not pursue a fair competitive process. In the past, Wal-Mart has sought public subsidies despite promises to the contrary and by pursuing race-to-the-bottom wage policies.

A 2004 study found that in the state of California alone, Wal-Mart associates must rely on public support for $32 million in healthcare and an additional $54 million in other assistance, such as food or housing programs. In relation to other state-wide large retailers, employees of Wal-Mart depended on an additional 40% in healthcare funding for their families. These same employees received an average hourly pay of $9.70, which is 41% less than the average rate for workers in other large retail establishments. (http://laborcenter.berkeley.edu/retail/walmart.pdf)

Wal-Mart, by its own admission, has a dizzying percentage of associates and children of associates who are unable to afford the company insurance policy and must either live uninsured or rely on public assistance such as Medicaid. According to a 2005 corporate memo from the office of Susan Chambers, then Wal-Mart's executive vice president for benefits, 46% of associates’ children were either uninsured or on a publicly funded health program. According to the same memo, only 48% of Wal-Mart associates were on the company insurance plan, well under the 68% national average. (Memo to the Wal-Mart Board of Directors from Susan Chambers, Wal-Mart's executive vice president for benefits, Oct. 2005)

The net effect is to flatten wages as other retailers struggle to remain competitive and to transfer health care costs to families or to the public hospitals whose emergency rooms become the family doctor. This is ruinous for families, and fiscally unwise for government.

And what’s the local business impact of Wal-Mart-style jobs? There is only so much consuming people can do. New retail development on this scale essentially siphons off shoppers from existing retailers elsewhere. Even if there is a retail gap in New York and consumers are leaving the city to shop, new retail development then means we are stealing shoppers from other New York City retail corridors and the surrounding counties. For example, a 2006 study in Chicago linked a new Wal-Mart to the closure of 25 percent of businesses in a four-mile radius. The chances of a business failing increased the closer its location to the new Wal-Mart. The cumulative job loss: about 300 full-time jobs, roughly the same number that the new Wal-Mart had added. (Loyola University, 2010, The Impact of an Urban Wal-Mart Store on Area Businesses: An Evaluation of One Chicago Neighborhood's Experience)

Still worse, a Wal-Mart may not even improve access to healthy foods based on the Council’s existing definition of a food desert. Because Wal-Mart is auto-dependent and needs to draw from such a large and spread-out market area, food stores in other distant areas may be affected – they may even close, depriving those communities of food stores within walking distance.

What new or simply improved economic development and land use tools do we need to make sure that we have the type of development that supports our communities? First, and most obvious, we need good job standards to be a routine part of New York City’s economic infrastructure. A company that gets a loan, tax benefit or other subsidy needs to provide living wage jobs with benefits. Second, as in other cities, large scale projects in low density areas should prompt an analysis of the economic and physical impacts the development will have on the community. In other municipalities, a Community Impact Review – which is less burdensome than ULURP but entails more than just a notice and a public hearing – allows public agencies to assess whether certain conditions or criteria are met by new development, and empowers them to compel the development to serve the community.

As for how to create such an impacts analysis mechanism, we should look to the many other municipalities across the nation that have such assessments. In many instances, for example San Diego, local governments require a permit for retailers over a particular size, and an impact assessment is used in combination with discretionary actions to ensure large scale development meets mitigates harm to communities and meets their needs.

The Pratt Center would be happy to shed further light on how the Council might create the tools to evaluate the community impacts of large-scale retail development, as a step toward ensuring that we have a lasting plan for good jobs, access to fresh foods, and livable communities.

Thank you.
 

Note: some modest suggestions for issues that New York City should have the power to look at before a large-scale retailer like Wal-mart enters our market (based in part on the 1999 Orange County Big Box Study) are outlined below:

• Traffic impacts – these must be successfully minimized or mitigated based on modeling that takes into account the heavy volume of traffic anticipated in situations that more accurately reflect urban traffic realities;
• Economic impacts-- how much would the big box retailer cut into existing market share; and what is the impact on the local workforce, including impacts on the number of local jobs, the effect on local wages and impacts on the state of health insurance coverage;
• Community impacts – we should fully understand the likelihood of changes in surrounding land use, including vacancies; whether the development is consistent with community character, and how any expansion plans would affect the neighborhood;
• Infrastructure impacts--the costs to the City of hosting the development (such as road, sewer and other infrastructure costs) should be knowable, and recoverable, within a specified period or through a developer extraction;
• Fiscal impacts--Accurate measurements of associated costs: tax gains versus tax losses associated with anticipated decline of smaller stores (including real estate taxes);
• Citywide policy impacts--Is the development likely to decrease or increase food deserts by further concentrating retail options;
• Sustainability impacts--Is the development likely to increase or decrease New York City’s carbon footprint by changing travel and transportation patterns for both consumers and goods?

This testimony was prepared by the Pratt Center for Community Development. It does not necessarily reflect the official position of Pratt Institute.