BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 667 HEARING: 6/26/13
AUTHOR: R. Hernández FISCAL: Yes
VERSION: 5/20/13 TAX LEVY: No
CONSULTANT: Lui
ECONOMIC IMPACT REPORTS FOR SUPERSTORES
Requires a city or county to make a specified finding based
on an economic impact report for superstores.
Background and Existing Law
To attract vital sales tax dollars, cities and counties
compete to attract land uses that generate local revenues,
like retail centers, and resist land uses that need
expensive public services and do not raise revenues. This
fiscalization of land use distorts local land use decisions
when sales tax revenue considerations supersede traffic,
air quality, open space, and affordable housing effects.
Some retailers ask local officials for subsidies as
inducements to locate in their communities. Placing fewer
demands on public services compared to the resulting sales
tax revenues, these companies ask local officials to spend
public dollars to gain more sales tax revenues. Some
companies are aggressive, playing one community off of
another, hoping to attract higher subsidies. State law
bans counties and cities from subsidizing big box retailers
or vehicle dealers to relocate within the same market area
(SB 114, Torlakson, 2003).
Some communities have local policies to discourage or
prohibit big box retailers. They decry the loss of
well-paid jobs when superstores enter the grocery business
and compete against chain grocery stores with unionized
employees. Governor Davis vetoed a bill that would have
imposed a statewide ban on big box retailers (AB 84, Floyd,
1999). The 2004 Bakersfield Citizens appellate decision
noted that a superstore's economic or social effects are
not significant environmental effects in an environmental
impact report (EIR) under the California Environmental
Quality Act (CEQA), but that physical changes may require
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EIRs to address urban decay. Since that decision, several
EIRs on superstore projects have included urban decay
analyses
Many local governments rely on analyses to allocate scarce
public resources to promote economic development. A
cost-benefit analysis quantifies the cost effectiveness of
different alternatives to see whether the benefits outweigh
the costs. A fiscal impact analysis compares a proposed
development's estimated and projected tax revenues with its
projected service demands.
Some cities, like Sacramento, have adopted local ordinances
that require economic impact reports before acting on
superstore projects. Other cities, like Turlock
(Stanislaus County) may require a conditional use permit
for superstores.
Proposed Law
Assembly Bill 667 requires a city, county, or city and
county to make a finding that a superstore will not
adversely affect the economic welfare of the impact area,
as defined, prior to permitting the construction of,
addition to, or alteration of, a superstore in an economic
assistance area, or where a superstore would receive over
$100,000 in financial assistance, as defined. The finding
must be based on information in an economic impact report,
information received or obtained by the designated agency
of the local government, and any other information received
before or at a public hearing as required by the bill.
AB 667 requires city and county governing bodies to provide
the opportunity for public comment on the economic impact
reports and its findings at regularly scheduled meetings
after the reports' completion but 30 days before issuing
any entitlements. The bill doesn't preclude cities and
counties from conducting more studies.
AB 667 authorizes a local government to prepare the
economic impact report or to contract with a private
entity, other than the permit applicant, or another public
agency to prepare the report. The bill provides that any
private entity or public agency contracted to prepare the
economic impact report must be qualified by education,
training, and experience to conduct economic and fiscal
AB 667 -- 5/20/13 -- PageC
impact analyses. The applicant must pay for the report.
An economic impact report must contain:
An assessment whether the proposed superstore will
meet the purposes of any designated economic
assistance area in which the superstore is proposed to
be located.
An assessment whether the proposed superstore will
negatively impact any retailer that receives benefit
from a program adopted in connection with an economic
assistance area in which the superstore is proposed to
be located.
An assessment of the extent to which the proposed
superstore's construction and operation will affect
employment in the impact area, including all of the
following:
o The number of persons employed in
existing retail stores in the impact area.
o An estimate of the number of people who
will likely be employed by the proposed
superstore.
o An analysis of whether the proposed
superstore will result in a net increase or
decrease in employment in the impact area.
o The effect on wages and benefits of
employees of other retail businesses, and
community income levels in the impact area.
A projection of the costs of public services and
public facilities resulting from the construction and
operation of the proposed superstore and incidence of
those costs, including cost to the state, city, or
county of any public assistance that employees of the
proposed superstore will be eligible for based on the
wages and benefits to be paid by the proposed
superstore.
A projection of public revenues, and their
incidence.
An assessment of the effect on retail operations,
including the potential for blight resulting from
retail business closures.
An assessment of the potential for long-term
vacancy if the superstore vacates the premises.
An assessment of the superstore's effects on
affordable housing.
An assessment of any other impacts or blight.
An assessment of measures to mitigate adverse
economic impacts.
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AB 667 defines the following terms:
"Economic assistance areas" means existing economic
development areas, which may be amended by the
Legislature, including any of the following:
o An enterprise zone;
o A local agency's military base recovery
area;
o A manufacturing incentive area;
o A targeted tax area; or ,
o Any redevelopment area identified by any
successor agency to a former redevelopment
agency.
"Financial assistance" includes any of the
following that is $100,000 or greater:
o Any appropriation of public funds,
including loans, grants, subsidies, or the
payment for or construction of parking
improvements.
o Any tax incentive, including tax
exemptions, rebates, reductions, or moratoria of
a tax, including any rebate or payment based on
sales tax generated from the superstore.
o The sale or lease of real property at a
cost less than fair market value.
o Payment for, forgiveness of, or reduction
of fees.
"Impact area" means a five-mile radius surrounding
the proposed location of a superstore.
"Superstore" means a business that exceeds 90,000
square feet, sells a wide range of consumer goods, and
devotes 10,000 square feet or more of the sales floor
to the sale of items that are not subject to the state
sales tax. This definition includes buildings with
multiple tenants under the same roof. The definitions
excludes a discount warehouse or retail store where
more than half of the items are sold in large
quantities or bulk, and where shoppers must pay a
membership or assessment fee.
AB 667 declares that it applies to charter cities and
charter counties because the review and regulation of
superstores is a matter of statewide concern. The bill
includes findings and declarations to support its purpose.
State Revenue Impact
AB 667 -- 5/20/13 -- PageE
No estimate.
Comments
1. Purpose of the bill . When superstores bring lower
grocery prices to town, they can also bring lower wages and
benefits, part-time jobs, and traffic congestion. They can
be economic predators, crowding out established and small
businesses, and accelerating the fiscalization of land use.
Seduced by hopes of higher sales tax revenues, some local
governments initially embrace big box stores only to regret
the later effects. According to the author, "AB 667
protects the state, county, and city investments; allows
for a level playing field for all localities by requiring
the review of the economic impact; and, provides a useful
planning tool. A 2011 U.C. Berkeley study by the Center
for Labor Research and Educationfound that Walmart workers
earn an estimated 12.4 percent less than retail workers as
a whole, and 14.5 percent less than workers in large retail
in general. Walmart workers make greater use of public
health and welfare programs compared to retail workers as a
whole, transferring costs to taxpayers. <1>" To help
communities understand these costs and benefits, AB 667
requires local officials to commission economic impact
reports before approving superstores or granting them
$100,000 or more in financial assistance, and ensures that
local governments consider the report when making its
decision. It ties information regarding a superstore's
community impacts with responsible planning decisions.
2. Local discretion . Local officials can already
negotiate with a project applicant to pay for an economic
analysis. Cities and counties also can adopt ordinances
requiring fiscal or cost benefit analysis for specified
types of projects. Should the Legislature impose uniform
criteria for all 482 cities and 58 counties, given that
cities and counties have existing authority to require an
analysis in a manner that reflects local needs?
3. Consistency . Plato once said, "Treating equals
-------------------------
<1>
Jacobs, Ken. "Living Wage Policies and Big-Box Retail: How
a Higher Wage Standard Would Impact Walmart Workers and
Shoppers." U.C. Berkeley Center for Labor Research and
Education (April 2011).
AB 667 -- 5/20/13 -- PageF
unequally is injustice." Superstores with nonunion
employees may put competitive pressure on supermarkets with
union contracts, but other big chain stores also compete
with existing local businesses. Traffic congestion,
accelerated blight, and the hollowing out of older malls
and downtowns can result when big retailers come to town.
If a superstore leaves, that large parcel could remain
vacant and blighted for years. AB 667 doesn't apply to all
big retailers -- only those that stock in bulk and devote a
significant amount of their sales floor to nontaxable items
(mostly food). The bill also doesn't apply to discount
warehouses or membership stores, even though those stores
have similar land use, traffic, air quality, or economic
effects. Proponents explain their rationale for an
exemption: membership stores serve as a retailer for small
businesses to buy merchandise in a manner unlike other big
box retailers. The Committee may wish to consider amending
the bill to require an economic impact report for all
superstores. Alternatively, the Committee also may wish to
consider using the existing statutory definition of "big
box retailer" (75,000 square feet) set by the Torlakson
statute.
4. Unintended consequence . Almost no one disputes the
wisdom of knowing about a project's environmental effects
before local officials make a decision. That's why CEQA
requires public officials to prepare environmental impact
reports (EIR) on projects that may have significant,
adverse environmental effects, but some builders complain
about CEQA and EIRs. They say that opponents who can't
convince public officials to deny projects turn around and
file lawsuits over procedural problems. AB 667 creates an
additional process parallel to the CEQA process that could
create a cause of action. Does the bill introduce
opportunity for litigation targeting the prepared economic
impact report?
5. Unintended consequence #2 . The bill sets a high
threshold for a local government to meet before approving a
permit to construct or alter a superstore in an economic
assistance area, or providing $100,000 or more to a
superstore. AB 667 specifies criteria in an economic
impact report, ranging from "the number of employed persons
in an existing store within a five mile radius of the
superstore" to "a projection of costs to the state, city,
or county of public assistance a superstore employee may be
eligible." It is unclear how accurate an assessment may
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be, given that dynamic studies are often difficult to
conduct, especially at a localized level and without
existing data points. As a result, it may be impossible to
determine that no adverse or negative impact will occur in
a five mile impact area for dense, urban areas. To
circumvent the difficulty in making that finding,
developers and local officials could locate big box
retailers or superstores on the peripheries of cities or
counties, where there is no development within a five mile
radius. Could AB 667 promote suburban sprawl and
development?
6. Economic assistance areas . Proponents note that the
bill is narrowly construed to impact superstores located in
economic assistance areas. But the definition of "economic
assistance area" is broad enough that it could impact
hundreds of neighborhoods in across the state. Figure 1
(below) is a map by the Department of Housing and Community
Development that shows California's economic development
areas, as of June 2012, which includes California's 58
counties, seven local military base recovery areas, Tulare
County's Business Incentive Zone (a targeted tax area), two
manufacturing enhancement areas in Brawley and Calexico,
and forty enterprise zones. The map does not include areas
of the 400 former redevelopment agencies. This map roughly
shows the several cities and areas in the state that would
qualify as an economic assistance area under this bill.
7. State mandate, local fees . The California Constitution
requires the state to pay for the costs of new state
mandated local programs. By authorizing cities and
counties to prepare economic impact reports on superstore
projects, AB 667 creates a new state mandate. The bill
disclaims the state's responsibility for reimbursement,
citing local officials' ability to charge processing fees
that will offset their costs. Although Proposition 26
(2010) defined many local charges as "taxes" that require
voter approval, the constitutional amendment specifically
excluded charges for "the reasonable regulatory costs to a
local government for issuing licenses and permits." If the
local charges for the new economic impact reports don't
exceed the reasonable costs of preparing and using those
reports, those charges will be the kind of local fees that
Proposition 26 recognizes.
8. Charter cities . The California Constitution lets
charter cities control their municipal affairs. The 121
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charter cities must follow statewide laws for issues of
statewide concern. The courts, not the Legislature,
interpret the Constitution, and ultimately determine what
constitutes a municipal affair and what's considered an
issue of statewide concern. AB 667 inserts specific
declarations that the Legislature considers the review and
regulation of retail and commercial facilities a matter of
statewide concern. For superstore projects that receive no
state subsidy, what's the statewide concern to regulate
local retail and commercial facilities?
9. Related legislation . AB 667 is not the first bill
seeking to require economic analyses for specified
projects.
SB 673 (DeSaulnier) would have required a city or
county to have a cost-benefit analysis prepared for
any proposed retail or commercial facility that
received $1 million or more in subsidies, as defined.
It failed passage on the Senate Floor.
SB 469 (Vargas, 2011) would have required cities
and counties to have economic impact reports on
permits for superstores. Governor Brown vetoed the
measure, citing local governments' existing ability to
assess whether these projects are in a community's
best interests.
Governor Schwarzenegger vetoed SB 1056 (Alarcón,
2004) and SB 1523 (Alarcón, 2006), which would have
required a city or county, including a charter city,
to have an economic impact report prepared, prior to
approving a superstore development.
SB 1641 (Alarcón, 2004) would have required a city
or county to contract with a private entity or public
agency to prepare a business impact report on a
proposed big box retail development. The bill died in
the Senate Local Government Committee.
Assembly Actions
Assembly Local Government:5-4
Assembly Appropriations: 11-5
Assembly Floor: 41-31
Support and Opposition (6/20/13)
Support : United Food and Commercial Workers, Western
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States Council; Adcock, Ahern, and Devlin; Alliance of
Californians for Community Empowerment; Al Ruvalcaba
Realty; Asian Americans for Community Involvement; Asian
Pacific American Labor Alliance; Asian Pacific
Environmental Network; AtoZ Printing; Burrell; Baldwin Park
City Councilmember Ricardo Pacheo; Baldwin Park City
Council Susan Rubio; Boss Tycoon Smoke and Fashion; Cable
Car Café; California Conference Board of the Amalgamated
Transit Union; California Conference of Machinists;
California Labor Federation, ALF-CIO; California Teamsters
Public Affairs Council; Cathedral City Councilman Greg
Pettis; Chinatown Community for Equitable Development;
Chinese Progressive Association; Clement Street Merchants
Association, San Francisco; Cole Hardware; Covina City
Councilmember Jorge Marquez; Down Two Liquor; East Bay
Alliance for a Sustainable Economy; El Farolito Taqueria;
El Monte City Mayor Andre Quintero; El Monte City Council
Norma Macias; Engineers and Scientists of California;
Filipino Advocates for Justice; Galli's Bakery; Gold Wood
Surf; Grand Avenue Hardware; Hacienda LaPuente School
Unified School District Boardmember Anthony Duarte;
Independent Insurance Agent; International Longshore and
Warehouse Union; J and J Market; Jobs with Justice; Joe's
Barbershop; Joyeria Deira; Kim's Market; Korean Resource
Center; La Puente City Council Dan Hollaway; Living Wage
Coalition of Sonoma County; Los Angeles Alliance for a New
Economy; Los Angeles City Councilmember Paul Koretz; Mama's
Hot Tamales; North Bay Labor Council, AFL-CIO; North Bay
Organizing Project; Neighborhood Market Association; Oasis
Wic Market; Orange County Communities Organized for
Responsible Development (OCCORD); Pomona City Councilmember
Debra Martin; Pomona City Councilmember Freddie Rodriguez;
Pomona City Councilmember John Nolte; Professional &
Technical Employees, Local 21; Regal Products, Inc.; Rodino
Associates; San Diego City Councilmember David Alvarez; San
Diego City Councilmember Marti Emerald; San Diego City
Councilmember Todd Gloria; San Diego Mayor Bob Filner; San
Francisco Supervisor Eric Mar; San Gabriel Valley Municipal
Water District Boardmember Raul Romero; San Rafael City
Councilman Damon Connolly; Services, Immigrant Rights and
Education Network; Siam Spoon Thai Cuisine; Small Business
California; The Smell; Sonoma County Conservation Action;
Sonoma County Go Local Cooperative; South City Grocery
Outlet; South City Shoe Service; The Topper; Transport
Graphics; UNITE HERE; Utility Workers Union of America,
Local 132; Upper San Gabriel Municipal Water Boardmember
Bryan Urias; A Vision for You Serenity Shop; Victorville
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City Councilmember Angela Villes; Warm Solutions, Inc.;
Working Partnerships USA.
Opposition : Asian & Pacific Islander American Scholarship
Fund; Asian Business Association; Asian Business
Association of San Diego; Association of California Cities
- Orange County; Associated General Contractors; Antelope
Valley Hispanic Chamber of Commerce; Barstow Area Chamber
of Commerce; Black Chamber of Commerce of Orange County;
California Building Industry Association; California
Business Properties Association; California Chamber of
Commerce; California Contract Cities Association;
California Grocers Association; California Retailers
Association; Cathedral City Chamber of Commerce; Cathedral
City Mayor Kathleen DeRosa; Central City Association; Chico
Chamber of Commerce; Chinese Chamber of Commerce of Los
Angeles; City of La Palma Mayor Steve Hwangbo;
Coachella-Imperial Valley Strategies Group/PAC; Cities of
Adelanto, Agoura Hills, Barstow, Cathedral City, Chula
Vista, Cloverdale, Culver City, Cypress, El Cajon, El
Centro, Fontana, Fortuna, Fremont, Garden Grove, Grass
Valley, Hesperia, Highland, Laguna Niguel, La Habra, La
Palma, Moorpark, Murrieta, National City, Newport Beach,
Oceanside, Ontario, Palmdale, Palm Springs, Pismo Beach,
Rancho Cordova, Rancho Cucamonga, Ridgecrest, Riverside,
Rosemead, Santa Rosa, South San Francisco, Torrance,
Tulare, Tustin, Upland, Ventura, and Visalia; Coachella
Valley Economic Partnership; Commercial Real Estate
Development Association; Construction Employers'
Association; County of Los Angeles and San Bernardino; Kern
County Supervisor David Couch, 4th District; Department of
Finance; Elk Grove Food Bank Services; Escondido Chamber of
Commerce; Fullerton Chamber of Commerce; Garden Grove
Chamber of Commerce; Greater Bakersfield Chamber of
Commerce; Greater Desert Hot Springs Chamber of Commerce;
Greater Riverside Chambers of Commerce; Industry
Manufacturers Council (Industry Chamber of Commerce);
Inland Empire Economic Partnership; Irvine Chamber of
Commerce; International Council of Shopping Centers; Kern
County Taxpayers Association; Kern Economic Development
Corporation; Lake Elsinore Valley Chamber of Commerce;
Lancaster Chamber of Commerce; Latin Business Association;
League of California Cities; Long Beach Area Chamber of
Commerce; Los Angeles Area Chamber of Commerce; NAIOP
Commercial Real Estate Development Association - Inland
Empire; NAIOP Commercial Real Estate Development
Association - Southern California; National Latina Business
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Women Association - San Diego; Nobell Energy Solution, LLC;
North of the River Chamber of Commerce; Oceanside City
Councilmember Jack Feller; Oceanside City Deputy Mayor
Jerome M. Kern; Orange County Taxpayers Association; Placer
County Food Bank; Rancho Cordova Chamber of Commerce;
Rancho Santa Margarita Chamber of Commerce; Retail Industry
Leaders Association; Ridgecrest City Vice Mayor Marshall
"Chip" Holloway; Ridgecrest City Councilwoman Lori Action;
RSM Chamber of Commerce; San Diego County Taxpayers
Association; San Diego East County Chamber of Commerce; San
Diego Regional Chamber of Commerce; San Diego Regional
Economic Development Corporation; San Gabriel Valley
Economic Partnership; San Ysidro Business Association; San
Ysidro Chamber of Commerce; San Ysidro Education Vanguard
Foundation; Second Harvest Food Bank; Simi Valley Chamber
of Commerce; Southwest Council Legislative Counsel; South
Orange County Regional Chamber of Commerce; Town of Apple
Valley; Temecula Valley Chamber of Commerce; Valley
Industry and Commerce Association; Vietnamese American
Chamber of Commerce of Orange County; Western Electrical
Contractors Association; Wildomar Chamber of Commerce; 3
individuals.