San Diego City Council Committee Approves Restrictions on Wal-Mart

But Mayor’s Opposition Probably Means Giant Retailer Will Win in the End

by MARK GABRISH CONLAN and CHARLES NELSON

Copyright © 2010 by Mark Gabrish Conlan for Zenger’s Newsmagazine • All rights reserved

PHOTO: City Councilmember Todd Gloria at the San Diego Democratic Club June 24, one day after he chaired the Council’s Land Use and Housing Committee’s consideration of a bill to require economic impact statements for giant “supercenter” stores.

San Diego residents in the Third City Council District — Hillcrest, North Park, South Park and City Heights — received an unusual piece of mail from Wal-Mart on Monday, June 21. It announced that a committee of the San Diego City Council was about to consider an ordinance that would make it virtually impossible for Wal-Mart to build giant “supercenters” — huge stores that sell groceries as well as other items — and asked readers to contact Third District Councilmember Todd Gloria to get him to cancel his sponsorship of that ordinance. It also contained a detachable postcard, addressed to a local Wal-Mart office, allowing recipients of the mail piece to express their support for Wal-Mart and go on record with a document they could presumably present to the City Council in the future, and it asked people to attend the hearing of the Council’s Land Use and Housing Committee, which Gloria chairs, on Wednesday afternoon, June 23.

As it turned out, Wal-Mart was making a pre-emptive strike against a proposed ordinance that didn’t yet exist. Gloria wasn’t asking his committee to approve an ordinance and sent it to the full City Council for an up-or-down vote, but simply to authorize him to ask the city attorney to write such a proposal and the city’s independent budget analyst to study its likely impact. Nor did what he was asking for ban supercenters outright — as a proposed ordinance in 2007, passed by the City Council but vetoed by Mayor Jerry Sanders under the city’s new strong-mayor form of government. Rather, it required that anyone seeking to build a supercenter — rather awkwardly defined as a store over 90,000 square feet in size, of which 10 percent of its space is used to sell groceries and other items that aren’t subject to state sales tax — seek an economic impact statement which the city’s planning department could review before the City Council allowed such a store to be built. The current rules already require such a report for stores larger than 100,000 square feet.

Nonetheless, Wal-Mart came out with both barrels blazing. Their own presentation against the proposal was split between two speakers: Aaron Rios, Wal-Mart’s senior vice-president for public affairs and public relations in Southern California; and Tom Turner, managing partner with Procopio, Cory, Hargreaves and Savitch. The presence of a high-ranking attorney with a powerful and influential law firm on Wal-Mart’ side was an obvious threat that even if any such ordinance makes it through the City Council and survives Mayor Sanders’ likely veto, Wal-Mart will sue to have it thrown out in court.

Rios’s presentation attempted to establish an image of Wal-Mart as a good corporate citizen that, far from driving existing retailers and other independent enterprises out of business, actually boosts the economy of the regions in which it operates and encourages new businesses to open up near Wal-Marts. He also claimed that, “despite the negative, misleading and false claims, Wal-Mart provides good-paying jobs. The average pay of Wal-Mart associates [Wal-Mart’s euphemism for its workers, a term now used by many other large employers as well] in California is 50 percent higher than the California minimum wage.”

One of Rios’s arguments was that, by making products available at lower prices than other retailers, Wal-Mart helps consumers. “We’ve reduced prescription drug prices and our competitors have followed suit,” he said, “so consumers benefit whether they shop at Wal-Mart or not.” Rios said the city’s effort to regulate supercenters “is aimed at appeasing a small minority of special interests” — meaning organized labor, which has targeted the relentlessly anti-union Wal-Mart and used all legal means at their disposal to restrict Wal-Mart’s expansion. “This is not a minor or passive issue for us or our customers,” Rios concluded.

Turner argued that “there is no valid purpose for this ordinance,” given that the city’s current laws and the California Environmental Quality Act (CEQA) already require “consideration of social impacts, including blight and deforestation” in deciding whether large new superstores should be allowed to open. “It comes with a cost to the city and the applicants,” Turner said. “Applicants [Wal-Mart and other large retailers] will be likely to pursue their projects just outside the [San Diego] city limits,” meaning that San Diego will suffer the economic and environmental impacts of supercenters without getting any tax money from them. Turner argued that the ordinance as currently drafted could be extended to stores smaller than 90,000 square feet, and said it would be “vulnerable to a successful legal challenge on the ground of vagueness.”

Wal-Mart had a valuable ally in its presentation: Costco, its principal competitor in San Diego and a company usually hailed by labor and other progressives as a positive alternative since it pays better and allows its workers to organize. Costco sent two letters to the City Council opposing the ordinance — one from vice-president and regional operations manager Mario Omoss and one from attorney Matthew Peterson — and Peterson spoke to the Council committee as well. “I’ve stood before you many times against these ordinances,” Peterson said. “We will never endorse a measure that is anti-consumer, anti-competitive and will restrict consumer choices.”

Other speakers against the proposal included John Ziebarth from the city’s department of development services, who called it “duplicative” and said it “doesn’t accomplish anything”; David Almeida of the San Diego Regional Economic Development Corporation; and a few grass-roots citizens. Abdul Mohammed said that if the city passed the ordinance it would have international repercussions and send out the message, not only nationwide but worldwide, that San Diego is not a business-friendly city. Matt Adams said the city was having so much trouble balancing its own budget it shouldn’t be “influencing the regional economy” with the kind of legislation Gloria was proposing.

Speakers in favor of the ordinance to regulate supercenters included Mark Robbo, president of the Neighborhood Market Association; Ben Nichols of the Hillcrest Business Association; and Amy Colbert of the North Park Main Street group, all of whom said their members would suffer if Wal-Mart were allowed to open supercenters without their groups having any chance to challenge the process. Mickey Kasparian, president of the San Diego local of the United Food and Commercial Workers (UFCW) — which lost a bitter strike against Ralph’s, Vons and Albertson’s in 2003-2004 when those stores insisted on major cuts in pay and benefits to their employees merely due to the threat of having to compete with Wal-Mart and the British-owned Tesco chain (which operates in California as “Fresh ’n’ Easy”) — spoke, but surprisingly not as the UFCW’s representative but on his own.

“The idea behind this ordinance is to protect small and neighborhood businesses,” Kasparian said. “If a big-box retailer can comply, they can operate. If an employer is taking out ads and doing direct mail [against the ordinance], it’s a good sign that they won’t be able to comply.”

One of Kasparian’s union’s members, Shirley Mansfield, made the case for the proposal more effectively than he did. Introducing herself as a resident of east Chula Vista for 35 years and a 32-year veteran of the grocery industry, she vividly described what happened to her current employer, a Vons in Otay Ranch, when a Wal-Mart supercenter opened just four miles away. “My store’s sales are down 18 to 20 percent,” Mansfield said. “We have gone down from over 80 employees to 59. Our in-store pharmacy recently had to close because it was losing over $2,000 a week” — an ironic reflection of Rios’s claim that Wal-Mart had benefited consumers by forcing its competitors to lower prescription drug prices.

Mansfield said that Wal-Mart had hurt not only her store but overall business at the shopping mall it’s in. “Our center is less than 50 percent occupied, and even the optometrist and nail salon in our mall are struggling,” she said. “Supercenters hurt small businesses and have a negative effect on the local economy” — a point echoed by the next speaker, Ricardo Gomez, a former small-business owner in Oceanside who was driven out of business nine months ago due to competition from Wal-Mart.

The official UFCW spokesperson, Marti Feinberg, said she was “surprised” at the legal threats from Wal-Mart because similar ordinances passed by Los Angeles in 2004, Inglewood in 2005 and Alameda in 2006 have so far survived without court challenges. “I believe this ordinance will help and is a very important tool for this city to examine the economic impact of supercenters,” she said.

“The only special interest here is Wal-Mart,” said Artie Schoenberg. “The question is, do we have the freedom to regulate our own communities and control blight? Wal-Mart does not create jobs; it just moves jobs around and takes jobs that people have been working for 30 to 40 years and makes them into part-time jobs. It pays less wages and leaches off social services in the public sector instead of providing its employees adequate benefits” — the last a reference to one of Wal-Mart’s most controversial policies: encouraging their workers to sign up for food stamps and other public benefits, and even giving them information packets on how to apply (a practice the company says it has discontinued).

Former City Council candidate Lorena Gonzalez said she supported the ordinance because it would force Wal-Mart to document its claims that it provides good-paying jobs with benefits and helps, not hurts, its small-business neighbors. “If any supercenter provides jobs, let them prove it,” she said. ”Let’s protect small businesses and good jobs.”

“This is not a ban [on supercenters], nor does it target just one retailer,” said Councilmember Gloria, kicking off the committee’s debate. “That is not something I would support. We’re talking about providing additional information. We already have an environmental impact process and we’re talking about asking for economic impact information as well. The retailers’ claims that they create jobs and provide good wages, health care and stock-sharing plans are information we should have on the record, along with the prices they charge. We also should have information from small businesses on how they would be affected.”

Gloria also addressed the objection that restrictions on supercenters take away consumer choice, arguing that by addressing the impacts on small businesses regulations like his proposal actually protect consumer choice. “I would wish that my constituents who want to shop at a supercenter could have that choice,” he said. “But I would also want my constituents who want to shop at neighborhood stores to have that choice as well, and we have a very strong concern that the particular land use a supercenter provides means that choice is no longer afforded to the consumers of San Diego.” Gloria also pointed out that the city has spent $1,265,000 this year to promote small businesses and small-business districts, and “we need to ask why we’re spending that money — if we’re working at cross-purposes” by spending money to help small businesses and simultaneously encouraging supercenters that may drive them out of business.

“I did not support the previous legislation in 2007, so it should not come as a surprise that I don’t support this,” said Second District Councilmember Kevin Faulconer, the only Republican Councilmember at the June 23 hearing. “We should be spending our time incentivizing and encouraging business opportunities. I believe this proposal will impede those opportunities. We should encourage as many consumer choices as possible, and I think that [this proposal] makes that more difficult. I believe this is the wrong way to go. It is anti-competitive and anti-consumer.”

Faulconer’s comments were seconded point by point by Scott Casey, representing Mayor Sanders —who under San Diego’s strong-mayor system, recently approved by voters as a permanent change in the city charter, has the power to kill the ordinance the way he did a similar but more drastic one in 2007. Casey’s comments made it clear that even if the City Council passes the ordinance, the mayor will just veto it again — and the supporters will need six of the eight Councilmembers to agree to override the veto.

“Mayor Sanders opposes this proposal as misleading and anti-competitive,” Casey said. “By limiting access to lower-cost products, this measure simply puts people living at the margins at a further disadvantage, especially if they don’t have transportation” — an odd objection, considering that most big-box retail outlets are either difficult or impossible to get to without a car, while the neighborhood stores they allegedly threaten are much easier to get to by bus. “Instead of enjoying the benefits of the free market,” Casey continued, “these San Diegans will be forced to pay much more for their goods or be forced to do without, while those with resources will continue to be able to shop where they please.”

Eventually the committee passed the proposal on a party-line vote, with Republican Faulconer the lone opponent and the three Democrats — Gloria, Sherri Lightner and Tony Young — in favor. Young asked that the ordinance be ready to go before the full City Council in 30 days, but the representative of the city attorney’s office at the meeting said they’d need much more time than that to research and draft an ordinance embodying Gloria’s proposal.