Discovering the formula

Discovering the formula

Is San Francisco’s local charm really safe?

By Amanda Witherell

San Francisco has a thing for local businesses. From Chinatown to Hayes Valley, the dozens of distinctive neighborhoods that constitute this city have for the most part maintained their individuality with one-of-a-kind, locally owned places to shop, snack, and seek services.

While many cities and small towns across the country have succumbed to the sprawl and homogeneity of chain stores, some have resisted, even in the face of lawsuits and wily campaigning from megaretailers. Big corporations including Wal-Mart, Home Depot, and Target are combating restrictive municipal legislation with their money, pouring millions into local political races and flying in paid signature gatherers for ballot referenda.

“They’re spending $100 per vote in some cases,” Stacy Mitchell told the Guardian. Mitchell is the author of Big-Box Swindle and a senior researcher for the New Rules Project, a subsidiary of the Institute of Local Self-Reliance, which tracks legislation against formula retail.

“They’re getting mixed results,” she said, which means sometimes the big boys lose, like in the multiyear battle with Inglewood that sent Wal-Mart walking. But more often than not, the formula retailers win.

Take Chicago as a recent example: Mayor Richard Daley overrode city councilors and issued his first veto in 17 years, against legislation that would have required large retailers to pay a living wage to employees. Councilors hoped to trump the mayor with another vote, but at the last minute three councilors switched positions to side with Daley.

“I still don’t understand how it happened,” said SF supervisor Tom Ammiano, who flew into Chicago to speak in favor of the legislation. He told us the city was behind it, though opponents were arguing that low-income people needed the option to work and shop at Wal-Mart and it was discriminatory to not allow the store to move into the city. “They played the race card. It was obvious they were people on [Wal-Mart’s] payroll.”

In the week since the veto, Wal-Mart has already swooped in with several site proposals for the first 20-acre megamart in Chicago. It’s stated an eventual goal of building 20 stores in the Windy City. Could Wal-Mart spite San Francisco just like it did Chicago?

Since 2004, San Francisco has operated with the Formula Retail Ordinance, designed to preserve “the city’s goal of a diverse retail base.” This isn’t an outright ban, but it makes the application and review process more arduous for formula retail. The ordinance defines formula retail as any chain with 11 or more outlets that offer standardized services or mimic one another in decor, architecture, and practices (like Starbucks, the Gap, and Wal-Mart, to name an infamous few).

The relevant legislation, Section 703.3 of the Planning Code, reads like it was penned by a Norman Rockwell acolyte and cites such businesses as generally undesirable, granting neighborhoods the right to be notified of potential chain store proposals. While the legislation allows neighborhoods to create their own stricter legislation, it also grants them the right to accept a chain into the fold, which is a pretty big loophole.

So far, most neighborhoods haven’t been welcoming. A battle in North Beach over Home Depot resulted in an outright ban of all formula retail in the neighborhood. Hayes Valley followed suit. Conditional use permits in western SoMa, Cole Valley, and Divisadero from Haight to Turk add an extra layer of scrutiny to the planning process when a Starbucks or Target want to set up shop. Potrero Hill–Showplace Square is the next in the trend, with a 12-month interim conditional-use period and a more permanent restriction on the way. That restriction was introduced by Sup. Sophie Maxwell, approved by the Land Use and Economic Development Committee, and headed to the full Board of Supervisors for initial approval Sept. 19 after Guardian press time.

Maxwell’s legislation could become moot this November if voters approve Proposition G, the Small Business Protection Act, which would extend conditional-use permitting to the entire city, making any proposal from a chain store subject to public hearings and an arduous Environmental Impact Review at the expense of the applicant, not the city.

Dozens of counties and municipalities have enacted similar ordinances around the country in response to the track records of megaretailers. Public criticism is mounting against corporations such as Wal-Mart and Home Depot for drawing the shopping masses by reducing prices to quash smaller competitors and for pulling profits out of communities instead of keeping them local, as small businesses tend to do.

But the chain stores aren’t just rolling over.

“It’s happening in enough places that it’s reached a point where they’re feeling nervous about how it’s affecting their growth,” Mitchell said about the retail giants. Her organization has been assisting communities for several years in drafting legislation against formula retail and is seeing some of that legislation undercut by voracious chain stores. Wal-Mart, the most notorious foe, dumps thousands of dollars into local election races. The tactic is especially evident in California.

“Wal-Mart spends more in California than anywhere,” said Nu Wexler, spokesperson for Wal-Mart Watch, a Washington-based organization with hawk eyes on the company. “They have active lobbying in all 50 states, but California is a particularly important market for them.”

He attributes that to the state’s status as the sixth-largest economy in the world. In 2002, Wal-Mart promised to open 40 supercenters in the state within four to six years. As of October 2005, only six had been opened. “They’re fighting expansion battles all over the country, but they’re having an especially difficult time in California,” Wexler said. Inglewood, Turlock, and Hercules have all recently dodged Wal-Mart.

But several other cities have not, despite protective measures, and in the last year 12 more supercenters have opened in California, bringing the grand total to 19.

Contra Costa County, apropos of no immediate threat, passed a 2003 ordinance prohibiting “big box” stores over 90,000 square feet. In response, Wal-Mart dumped more than $1.5 million campaigning for a measure overriding the ordinance on the next available ballot. In 2004, the ordinance was overturned by 54 percent of voters.

Four years of fighting in Rosemead resulted in two city council shake-ups, with a recall election of two council members set to be decided this week; a possible Brown Act violation when city officials approved a permit for Wal-Mart during a meeting when it wasn’t on the agenda; and multiple lawsuits from both sides. Wal-Mart spent $200,000 campaigning and dropped another $100,000 in local charities to spread some good cheer. It worked: doors opened at a new supercenter Sept. 18.

Last August, a Wal-Mart opened just across the bay in Oakland even though the city already had a ban on big-box retail larger than 2.5 acres. Spurning the city’s provincial laws, Wal-Mart found real estate regulated by the Port of Oakland — which, similar to San Francisco’s port, is outside the city’s jurisdiction and not subject to local ordinances.

“It was passed in a backroom deal with the port before the city could have any public hearings,” said Adam Gold, a spokesperson from Just Cause Oakland, a local group that opposed the store. “It made it difficult to resist it. It had already been approved.”

At the state level, Governor Arnold Schwarzenegger recently vetoed Senate Bill 1414, introduced by San Francisco’s state senator Carol Migden, which would have required employers with more than 10,000 workers to put 8 percent of total wages toward health care. Not a surprise: Wal-Mart’s Walton family dropped more than half a million dollars into electing the governor, with a most timely donation of $250,000 last year on the very day he vetoed legislation aimed at Wal-Mart that would have required businesses to disclose when employees use public health care services.

Two other bills, SB1523, requiring environmental impact reports and public hearings for the construction of stores larger than 100,000 square feet, and SB1818, allowing cities to recover legal fees when sued by big-box retailers, sailed through the legislature but are currently festering on the governor’s desk.

Is it all enough to protect San Francisco? Can the city keep mom and pop on the corners and resist the commercialism that has made a city like Emeryville the mall that it is today?

Maxwell, who pushed the recent legislation for Showplace Square and Potrero Hill, hopes so. “I’d rather have the position of them on the offense than the defense,” she said of potential retail applicants. When asked if the city codes are strict enough, she said, “If not, I’d be willing to put forth the legislation that is.”

As for the idea of Wal-Mart coming to town, the District 10 supervisor was nothing if not firm: “No, no way. Not in San Francisco.”

Originally published September 19, 2006 in the San Francisco Bay Guardian