Facts on: 1. Taxes and Budget 2. The Local Economy 3. Traffic 4. Zoning Regulations
Prepared by GCRD, Guilford Citizens for Responsible Development
1. Taxes and Budget
Although many towns assume that the development of big-box stores will yield a financial windfall, the tax benefits often prove to be a mirage.
When evaluating a retail development proposal, developers and town officials often focus on only one side of the equation: the amount of new tax revenue that the project will generate. It’s easy to overlook the fact that retail development also creates new costs and often leads to a decline in tax revenue from existing commercial districts.
Two costs that towns commonly overlook in evaluating the financial impact of large-scale retail development are:
1. Declining property tax revenue from existing business districts and shopping centers – Neighborhood and town-center business districts, as well as older shopping centers, are often harmed by new big-box retail development. As these areas lose sales and experience growing vacancies, the value of the property declines and, with it, the tax revenue.
2. New costs for providing public services to the development – Big-box development also creates substantial direct costs for the town, including the expense of maintaining roads, inspections and regulatory compliance, and police and fire services.
One case study in Barnstable, Massachusetts, found that the annual cost of providing city services to traditional downtown and neighborhood business districts was $786 per 1,000 square feet of retail space. Big-box stores were 30% more costly, requiring $1,023 in services per 1,000 square feet.
Because big-box stores generate substantial car traffic and typically increase the number of road miles that residents travel for shopping, towns end up having to spend more on road maintenance. Although developers may offer to pay for new traffic infrastructure (turn lanes, signals, etc.), the real issue is ongoing operational costs.
Big-box stores also require substantial police services. This is partly because the added traffic generates more accidents and necessitates more policing. It’s also due to the fact that big-box stores generate large numbers of police service calls–far more, on average, than local retailers do on a per square foot basis. Many of these calls are for shoplifting or theft from parked cars.
The bottom line for towns: The Barnstable case study found that not only did main-street retail produce lower services costs, it also generated more property tax revenue per square foot, because these retailers occupied higher-value, often historic, buildings. The net result was that main-street retail produced an annual tax surplus of $326 per 1,000 square feet, while big-box stores cost the city $468 more per 1,000 square feet than they contributed in tax revenue.
2. The Local Economy
Big-box stores are not a form of economic development. A newly constructed superstore cannot increase the amount of money that local residents have to spend. As a result, studies show that sales gains at these stores are invariably mirrored by an equivalent drop in revenue at existing businesses.
As smaller businesses are forced to downsize or close, the resulting job losses typically equal or exceed the number of new jobs created by the big-box store. For example, a large-scale study of 3,094 counties across the U.S. conducted by the Public Policy Institute of California found that the opening of a Wal-Mart store led to a net loss of 150 retail jobs on average. (Guilford’s Wal-Mart is the smallest in the U.S. and is about half the size of the proposed Costco.)
In their quest for market share, big-box chains have built far more retail space than the market can support. Flooding towns with an excess of retail space makes it easier to capsize small businesses and grab market share from competing chains.
Trading independent retailers for big-box chains weakens the local economy. This is because local stores recycle a much larger share of their sales revenue within the local economy, while chains siphon most of the dollars spent at their stores out of the community, funneling them back to corporate headquarters or to distant suppliers.
A study conducted in Chicago’s Andersonville neighborhood found that spending $100 at one of the neighborhood’s independent businesses created $68 in additional local economic activity, while spending $100 at a chain produced only $43 worth of local impact. The difference was due to four factors:
- The locally owned businesses spent a larger share of their revenue on local labor (29 vs. 23 percent), because they carried out all management functions on-site, rather than at corporate headquarters.
- The local retailers spent more than twice as much buying goods and services from other local businesses. They banked locally; hired local accountants, attorneys, designers, and other professionals; advertised in local media; and sourced inventory from local firms.
- Because their owners live in the area, a larger portion of the local retailers’ profits stayed within the local economy.
- The local retailers donated more on average to local charities and community organizations than the chains did.
Added dollars circulating in the local economy translate into a larger number and wider variety of available jobs.
The implications of the “local premium” for how towns approach economic development are significant. Not only do big-box stores eliminate more retail jobs than they create, but they reduce local economic activity and job creation in other sectors. Conversely, expanding local businesses generates substantially greater economic benefits.
3. Traffic
Big-box stores generate large volumes of traffic–much more than most other land uses. The larger the store, the larger the geographic area from which it pulls customers and thus the higher the traffic count. According to the Institute for Transportation Engineers, a 150,000-square-foot warehouse club (the size of the proposed Costco) typically generates 7,000 car trips every weekday and significantly more on Saturdays.
Most developers and big-box store representatives get their traffic estimates from one company, an organization whose primary source of income is large developers and retailers. Independent studies, including one at Loyola University, have shown that this company uses techniques and data that underestimate customer traffic by as much as 40 percent.
In addition, the estimates provided by this company do not account for truck traffic. Costco is a huge warehouse operation that requires a steady stream of delivery trucks to keep its many departments stocked. For example, the gas station at Costco’s Milford store is the second-largest gas station in Connecticut (the largest being Costco’s Hartford area store) and is serviced by three large tanker trucks every day.
The DDR/Costco proposal indicates that nearly all car and truck traffic will access the store from Exit 57 on I-95, therefore having little or no effect on other Guilford roads. However, this contradicts their claims that the proposed store would serve a large regional market area extending from East Haven to Durham to Old Saybrook.
- Many customers from Madison and Branford would obviously choose to use Route 1 instead of the highway because it is more convenient.
- Customers from Durham, Middlefield, North Madison, and Killingworth would use Route 77 and feed into Route 1. Some would use local roads as well.
- Customers from North Branford and Northford would use Route 22, which feeds into Route 1 from the west.
Neither the on- or off-ramps at Exit 57, nor the intersections with Route 1, are designed to handle the flood of car and truck traffic that a mass-merchandise, warehouse-type store would generate. At peak periods, we could expect major congestion on both Route 1 and I-95. As a result, the Connecticut Department of Transportation could well decide to widen Route 1 all the way through Guilford.
The implications of this proposal for traffic in Guilford and neighboring towns are too great to take lightly. Citizens need to have all the facts before the town makes any decisions. It is not adequate to depend on the stock numbers provided by a traffic firm hired by the developer. The public needs an independent, professional assessment conducted by experts chosen by a citizens’ committee. If the developer believes its numbers to be accurate, it should be willing to pay for such a study.
4. Zoning Regulations
Twelve years ago, thousands of Guilford residents voted through surveys and/or at a Town Meeting to ban big-box stores and discourage the development of regional shopping centers. This consensus is reflected in Guilford’s Plan of Conservation and Development, which states that economic development shall “utilize architectural and landscape design that is in scale with surroundings, and be compatible with the Town’s cultural history, rural character, and unique topography.”
As a result of this restriction, the Planning and Zoning Commission set a maximum size for one store in the Rock Pile zone at 25,000 square feet (with one store up to 40,000 square feet by special permit). The developer claims that amending the zoning code to permit a 150,000-square-foot warehouse store on the site will not result in other big boxes coming to town because the Rock Pile is a retail zone unto itself and any other proposals for such development elsewhere on Route 1 would have to be separately approved.
This argument is highly misleading. In fact, changing our zoning regulations to accommodate a big-box store in one zone would almost inevitably open the floodgates in other zones. Costco is considered a bellwether for the retail industry. Every other national chain, and dozens of real estate marketing firms, closely track its store-location decisions precisely because of Costco’s enormous drawing power. It’s no accident that big boxes and other chain stores always cluster around each other, to the eventual exclusion of almost every other kind of economic activity.
Once a single, “isolated” exception to the town’s longstanding big-box ban is approved, the political (and possibly legal) pressure for accommodating other such stores will be practically unstoppable. Property owners along Route 1 will be contacted by other big-box stores, which will be in a position to argue convincingly that they are being discriminated against if their proposals for increasing store-size limits are denied.
Guilford residents need to understand that the issue is much bigger than a decision about one Costco store. It is not a simple matter of amending the zoning code to permit a single big box. The developer’s proposal would necessitate other far-reaching changes that affect both our quality of life and the character of our town. Among other things:
- The Town Plan of Conservation and Development would have to be changed.
- The Town Comprehensive Plan would have to be changed.
- The environmental review for the Rock Pile would have to be conducted again because of potentially increased waste, water runoff, and the addition of an environmentally hazardous activity (a large gas station).
- The number of gas stations allowed on Route 1 would have to be increased.
The fact sheets above summarize the results of professional studies conducted over the past decade by academic researchers and public-policy organizations around the country. Much of this information has been made available by the Institute for Local Self-Reliance, a well-respected nonprofit organization that addresses a wide range of community-development issues.
Since 1974, the Institute for Local Self-Reliance has been working to enable communities with tools to increase economic effectiveness, reduce wastes, decrease environmental impacts and provide for local ownership of the infrastructure and resources essential for community well-being.
More Resources:
You can contact us by email to help, provide information, or ask questions:
You can find the Institute for Local Self-Reliance on the web at:
Guilford Citizens for Responsible Development 