Wal-Mart’s expansion fight now rests with Gov. Brown
The world’s largest retailer has only Gov. Jerry Brown left to act on its appeal to reject legislation that could curtail plans to build more of its sprawling superstores in urban areas of California.
The Assembly this week approved a bill that would require that Wal-Mart Stores Inc. and certain other mega-retailers conduct economic impact studies before local governments approve proposals to build big-box outlets that sell both general merchandise and groceries. The Senate previously passed the measure.
Labor unions and some small-business owners have supported the legislation, which now goes to the governor’s office for his signature — or veto.
The skirmish is the latest in a more than decade-long conflict between the company and local unions and businesses, both of which complain that Wal-Mart’s huge centers undercut local stores and employ fewer workers than they displace.
“For every one job created, there’s a loss of two or three times that amount around the community,” said Mickey Kasparian, president of Local 135 of the United Food and Commercial Workers union in San Diego.
Wal-Mart, Target Corp. and their trade group counter that their studies show that superstores bring jobs, stimulate local commerce and cut prices, especially for food. Legislation limiting them, they contend, is anti-consumer and anti-competitive.
Modeled on already-required environmental impact reports, the economic studies would gauge the effect that a proposed superstore would have on almost everything nearby — businesses, jobs, schools, traffic, housing, parks, playgrounds and day-care centers.
“Basically, it makes these super-boxes prove they are a good thing,” said Sen. Juan Vargas (D-San Diego), author of SB 469.
The bill calls for an economic evaluation for any proposed business of more than 90,000 square feet that sells a wide range of consumer goods and devotes more than 10% of its sales floor area to goods not subject to state sales tax — a convoluted way of saying food and prescription drugs.
Wal-Mart and Target are the primary superstores in California that would be affected by the legislation.
Membership stores that meet the criteria, including union-friendly Costco Wholesale Corp. and nonunion Wal-Mart-affiliated Sam’s Club are specifically exempted from the Vargas legislation, partly because they also sell wholesale to other businesses.
The legislation is one of several pro-union bills heading to Brown this session by the Democratic-controlled Legislature. Brown, a Democrat, has taken no public position on any of them.
However, earlier this year, he surprised the politically influential United Farm Workers union by vetoing a bill that would have made it easier to organize agricultural employees.
Wal-Mart and other retailers, which have worked to defeat four measures similar to Vargas’ since 1999, are pressuring Brown to veto the bill.
“The real effect of this is it will stifle business growth through arbitrary and duplicative regulation,” said Wal-Mart spokeswoman Delia Garcia.
Superstores create hundreds of new jobs, drive traffic to existing stores and offer discounted prices that help low-income families save thousands of dollars a year, she said, pointing to Wal-Mart’s own economic studies.
Even Costco, which presumably would be helped by the bill, called it “protectionist, anti-competitive and anti-consumer.”
“It is clear that SB 469 has one primary purpose: to erect legal barriers to make it more difficult for Wal-Mart to expand in California,” Costco Chief Executive Jim Sinegal wrote in an Aug. 4 letter to Vargas. “The consumer would be the loser because prices are likely to rise as a result of decreased competition in the marketplace.”
What’s more, opponents of the bill argued, no new statewide regulation is needed since local governments currently can require the kind of economic studies called for by the Vargas bill.
Indeed, at least six California cities, including Los Angeles, and one county, Alameda, have adopted such local superstore ordinances, according to an analysis by the Senate Governance and Finance Committee.
Those ordinances were passed in the wake of some tremendous battles between Bentonville, Ark.-based Wal-Mart and Southern California cities, where labor unions and ethnic minorities have strong sway over elected officials.
Labor dislikes Wal-Mart because it competes directly on price with supermarket chains that have union contracts offering higher wages and better benefits.
The biggest confrontation came in 1994 when Wal-Mart placed a referendum on the city of Inglewood’s ballot, going around an uncooperative City Council to seek voter approval to build a superstore. The company spent more than $1 million on the campaign, which lost by a wide margin.
Last year, the city of San Diego passed an ordinance, along the lines of the Vargas bill, to study the economic impact of superstores. The mayor vetoed the ordinance, but the City Council overrode the veto. However, the council suspended the law before it took effect after Wal-Mart threatened to wage a costly referendum campaign.
The intense local conflict underscored the need for a statewide law, said Lorena Gonzalez, secretary-treasurer of the San Diego and Imperial Counties Labor Council of the AFL-CIO.
“If you come in and ban a Wal-Mart superstore, they’ll go right outside the city limits,” she said. “They can still do that but the [economic] study would still be there and made available to the local community.”
Reducing such economic pressure on revenue-starved local governments would be a positive move, said historian Nelson Lichtenstein, a Wal-Mart expert and director of the Center for the Study of Work, Labor and Democracy at UC Santa Barbara.
“They play one city off against the other in terms of sales tax” revenue, he said. “If an economic impact report stops that kind of competition, which Wal-Mart is a master of, then it’s good for local governments.”