HomeMy WebLinkAboutItem B - Big Box Stores ControlEUGENE CITY COUNCIL
AGENDA ITEM SUMMARY
Work Session: Banning/Controlling Location of "Big Box" Stores
Meeting Date: May 24, 2004 Agenda Item Number: C
Department: Planning and Development Staff Contact: Tom Coyle
www. cl. eugene, or. us Contact Telephone Number: 541-682-8817
AGENDA ITEM SUMMARY
This item has been scheduled for May 24, 2004 as five councilors have requested a work session on the
topic.
BACKGROUND
Council Action History
A comprehensive update of the zoning code occurred in 2001.
Policy Issues
Policy issues are yet to be determined.
Council Goals
This issue relates to the 2003-2004 Council Goal of Sustainable Community Growth and Change,
specifically the section that mentions successfully managing growth and change in the urban
environment.
Financial and/or Resource Considerations
Due to limited resources, any staff work on this issue should be prioritized consistent with the Planning
and Development Department Work Plan that was considered by the council on February 9, 2004, and
on April 14, 2004. Funding for additional research and code adoption has not been authorized.
Other Background Information
A discussion paper for City Council consideration is attached (see Attachment A).
Timing
Not applicable.
OPTIONS
The City Council may:
· Direct further work and instruct staff to modify the work plan accordingly.
· Take no action.
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STAFF RECOMMENDATION
Staff recommends no action at this time.
SUGGESTED MOTION
None.
ATTACHMENTS
A. Discussion Paper --- Background on "Big Box" Retailing
FOR MORE INFORMATION
Staff Contact: Tom Coyle
Telephone: 541-682-8817
Staff E-Mail: tom.g.coyle~ci.eugene.or.us
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ATTACHMENT A
BACKGROUND ON "BIG BOX" RETAILING
Background
This issue is scheduled for a City Council work session in response to a request by 5
members of the City Council. The study session will be held on May 24, 2004.
Overview
Eugene, a city of approximately 140,000, contains a mix of retail uses, represented by
regional, neighborhood, and central core commercial development. Tenant mix
distribution is typical of this size community.
Regional retail development includes Valley River Center and Oakway Mall. The scale
of these developments attracts a large percentage of sales from a customer base beyond
the City limits (Springfield and Lane County). Tenant sizes within these developments
range from 1,000 square feet up to 100,000-200,000 square feet for the major anchor
stores.
Neighborhood commercial developments are fairly evenly dispersed within Eugene,
consistent with demand for daily or weekly consumer needs. These neighborhood retail
developments are typically 10 to 20 acres in size and provide food and service needs to
nearby residents. A typical anchor for these centers is a market of 30,000-70,000 square
feet and small adjacent tenant spaces of 800-15,000 square feet. The national trend in
these centers is for the anchor (in this case, the market) to expand into additional retail
services (pharmacy, banking, florists, postage service, and fast food) resulting in
traditional food markets of up to 75,000-90,000 square feet. Market operators benefit
from expansion into these "non food" services as product mark-up is much higher than
the small margin for food sale.
Additionally, the city contains several of what is often referred to as "Big Box" retailers
(Costco, Target, Fred Meyer' s, and Wal-Mart). The term as presently used, merits
clarification given the current national dialogue about Wal-Mart's expansion into retail
food sale.
The term "big box" is often used to generally describe the large retail service provider,
but its general application does not provide the needed insight into the understanding of
the consequences of a size limitation imposed by code. Acknowledging that industry
definitions can be numerous, for purposes of this discussion, five general definitions are
described.
1. Department Stores - These are the traditional mall anchors and range from
100,000-160,000 square feet. Historically, these retailers included clothing and
appliances (Sears, J.C. Penney' s, and Montgomery Wards). Currently, these stores are
focused at fashion clothing (Meier & Frank, Dillards, Macy's, and Bon Marche').
2. Specialty Stores - Often referred to as "category-busters", these stores are
retailers who respond to the specialized needs of the consumer (Office-Max, Circuit City,
Petsmart, Borders, and Bed, Bath & Beyond). Where, twenty years ago, consumer
demands were generalized, these retailers respond with retail products that are specialized
and not interchangeable (i.e., ink jet cartridges). These retailers can utilize 50,000-
120,000 square feet.
3. Mass Merchandizing - This refers to retailers offering a broad range of general
retail needs without the depth of individual product selection referred to in specialty
retail. Target, Wal-Mart, and Shopko are examples of this type of retail. The size of
these facilities can range from 100,000-160,000 square feet.
4. Warehouse Clubs - These stores provide bulk and mass merchandizing with
limited selection and deep discounts generally based upon volume purchase. Interior
finishes are industrial and mass product storage is overhead of the display area. Product
delivery is done via pallet, minimizing labor costs. These membership clubs, resembling
a big box, occupy an area of about 200,000 square feet. It is important to note that
vertical use of space is utilized in a big box. Wide aisle widths are typical in a warehouse
club.
5. Superstores - Superstores are the most recent retail development generating
the social and political dialogue in retailing. These are represented by Wal-Mart
Superstores, Super Targets, and Fred Meyer Superstores. These represent the traditional
mass merchandisers' expansion into food service. This is resulting in expansions of
60,000 square feet to a total of about 220,000 square feet. The recent expansion of the
Wal-Mart (on West 11th) to superstore status has generated the recent public dialogue
about "Big Boxes."
How communities are responding to this most recent retail expansion is discussed in the
following environmental scan.
Environmental Scan
Any random internet search can present a mass of information relating to local
government regulation of supercenters. Additionally, literature supporting or opposing
the emergence of supercenters can be found. Generally, land use issues fall into the
following categories:
· Mass and Scale (aesthetics)
· Adaptive Reuse
· Noise and Glare (operations)
· Parking
· Land use separation
Two non-land use issues that are heavily debated in conjunction with superstores are: · Economic Development
· Labor
In regard to the land use issues, the issue of aesthetics is most easily addressed through a
code. Roof and elevation treatments can be defined through code requirements and
mitigated through architectural means. Our current code provides requirements for such
concerns (Section 9.2173), and was adopted concurrent with the comprehensive zoning
code update.
Reuse of vacated commercial buildings has also become an issue. Many of the
previously constructed Wal-Mart stores are not easily redeveloped due to specific user
needs. While a code amendment focused at requiring re-use or removal could be
considered, this does not appear to be of issue in Eugene given the limitation on available
commercial land.
Noise, light, and glare relating to operations of superstores could also be considered,
given the 24 hour operation of these centers. It is expected that these kinds of issues
would be addressed in the site review permit process. Additionally, maximums for
parking are defined in the code.
Much of the current superstore dialogue relates to the issue of impact on existing small
business. Because of facilitated access to a variety of services under one roof, small
single tenant retailers are challenged by the cost containment associated with big boxes.
While certainly an issue for local government, it is questionable if limiting superstore
access within the City of Eugene will promote use of local small business. In many
cases, it would be reasonable to expect the trip generation to follow the use outside the
city limit.
Of benefit to the discussion of economic impact are retail trends. The Urban Land
Institute (ULI), as early as 1990, reported that retail sales were "trending" in two different
and distinct directions. Retailers are tending either to cater to low prices, or oppositely,
to go to high-end retailing with an entertainment component. Most recently, ULI has
identified this high-end strategy as "lifestyle retail" where consumers are drawn to
premium high customer service and the purchase experience. Fifth Street Market,
Oakway Mall (the recent expansion), and the Saturday Market are good local examples of
this retail strategy. This is also reflected in national tenants embracing this approach
(Borders, Barnes and Noble, and Trader Joes). Frequently, in lifestyle retailing,
entertainment and restaurants co-exist with retailers to provide a recreational purchase
experience.
At the other end of the spectrum is volume based retailing at low cost, with few shopping
amenities. Supercenters and warehouse clubs are the best examples of this type of
retailing. It is acknowledged that this retail component is responsive to the customer who
chooses, by necessity or choice, a low cost option.
The effect of these retail trends on downtown commercial uses, imbedded in many
downtown redevelopment strategies, is that small, owner-proprietor businesses may be
best positioned to compete in the lifestyle retail niche. Redevelopment of downtowns
and the success of their businesses can be facilitated by the local government creating a
"lifestyle" environment in their downtown spaces and public amenities.
Two issues that relate to big box retailing are labor practices and type of ownership.
Both are briefly discussed here.
The issue of wage levels paid by supercenters, as compared to those employed at
traditional food markets has been cited as cause for concern. Much of the dialogue in the
California food clerk impasse related to the assertion that traditional supermarkets had to
address wage costs to be competitive with supercenters. In a traditional food retail
business, labor cost approaches 15% of sales in an environment where the gross margin
(the difference between the cost of merchandise and the sale price) is about 28%.
Acknowledging the disparity of wages between supercenters and markets, a zoning code
amendment to address the issue of retail wage practice is problematic. Distinguishing
uses based upon the wages paid to employees is difficult to advance given the purpose of
zoning (impact associated with land use). No better example of this is the self service
check out that is beginning to emerge in the retail industry.
Code provisions relating to the national vs. local ownership of retail use is the second
issue. My scan of local ordinances did not find an example distinguishing uses on an
ownership basis (national vs. local). While from a consumer point of view Jerry's and
Home Depot represent different purchase options, they are indistinguishable from an
objective zoning impact assessment.
Issue Analysis
In response to the recent editorial by Joan Kleban in the Register Guard, staff categorized
the issue of concern as expressed by 77 e-mails received by PDD. While not presented as
a scientific analysis, it does present an indication of what is the issue with Wal-Mart.
77 e-mail messages were received between March 29, 2004 and May 5, 2004. The
distribution was as follows:
12 (16%) Supportive of the Wal-Mart Expansion
55 (84%) Opposed to the Wal-Mart Expansion
As it relates to the issue of a potential zoning code amendment, the issue cited as the area
of concern is particularly significant. Of the 55 opposed, the cause for concern was as
follows:
29 (45%) Competition with local businesses
25 (38%) Wages and business practices
1 (1%) Traffic
7 (11%) Aesthetics
3 (5%) None cited
Code Amendment Consequences
A 50,000 square foot limitation on retail square footage has been advanced for
consideration by the City Council. Should the Council direct staff to undertake a
limitation of this size, it would be necessary to reprioritize the PDD Work Plan recently
approved by the City Council. It is offered that the Council should consider the
following consequences prior to directing that action:
1. What would be the effect of creating a non-conformity for all retail buildings
of over 50,000 square feet?
Generally speaking, creating a non-conforming building or use tends to promote its
preservation as relocation becomes impossible. Additionally, competition by other
similar retailers is precluded.
2. What would the effect of a size limitation associated with nodal development
be, on a city-wide application?
The retail size limitation of 50,000 square feet was preliminarily discussed with nodal
development, and applied to Chase Village. No development within this node has yet
materialized. Review of this size limitation will occur with the discussion on the nodal
development principle later this year.
3. Will a size limitation result in an absence of competition for uses and
development currently in place?
It is of note that Wal-Mart's application has already been submitted. As such, they will
be able to develop to the limits in their application. Will precluding competing retailers
of a similar size perpetuate Wal-Mart's presence beyond that expected in a competitive
environment?
4. Will a size limitation on retail preclude redevelopment of existing sites?
In addition to Wal-Mart, Home Depot has submitted an application for the reuse and
redevelopment of an infill site on West 11th Avenue. This property has been vacant for
approximately 5 years. This raises the question of missed opportunities for future
redevelopment.
5. How does a square footage limitation relate to the use of internal retail space?
As noted previously, warehouse clubs use vertical space for storage. Additionally, some
retailers provide greater aisle space and storage area. How is this assessed in a square
footage limitation?
SUMMARY
Rather than fully examine the economic issues associated with "Big Box" retailing, the
paper has attempted to identify the distinction between the various uses that operate
large-scale commercial sales centers. Additionally, the question has been raised, what
problem are we attempting to address with a zoning solution? To date, the factors of
economic development and wages have been predominate rather than the code issues of
traffic and aesthetics. Given the existing code provisions relating to aesthetics, and
impact mitigation through the assessment of fees, a code provision focused at a 50,000
square foot size limitation for retailing does not appear of merit.
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