Lessons from Walmart's foray into Washington, DC

Store window display in the Brookland neighborhood, 12th Street NE, Washington, DC.

I wish I had more time to write my definitive take on the Walmart issue in DC.

As part of the ANC4B review of the application to build a Walmart on Georgia Avenue, at the intersection with Missouri Avenue, on a block that used to be the home of Curtis Chevrolet, and is ringed on the perimeter by small apartment buildings, co-ops, and duplexes, I was the lead author of a review document (ANC4B Large Tract Review Report on Walmart, 5/2011; ANC4B Large Tract Review Report on Walmart, Summary Recommendations), which made a variety of points about the review process, the need to do economic impact analysis, and to provide for mitigation.

A big point I made in the document is that the animus about Walmart makes it very easy for Walmart and developers to use that anguish about Walmart, ranging from their anti-union stance to wage discrimination complaints and how execution of their business model tends to come at the expense of locally owned businesses and traditional shopping districts, to create noise that ends up constraining "the discourse" on issues that people can address, such as whether or not the building is designed right, if it's part of a mixed use project (this matters in cities), and the creation of a mitigation program to deal with the negative impact of Walmart store entry on independent businesses and business districts.

This point undergirds my take on events from the past week.

So yesterday's announcement, "Wal-Mart, D.C. strike community benefits deal" in the Washington Business Journal, and today's article, "Wal-Mart package for DC includes job-training program, $21 million in donations" in the Post, that Walmart is signing a community benefits agreement that was negotiated not with the Respect DC coalition, but with the Mayor's office, is interesting, and follows last week's announcement ("Wal-Mart plans to open six stores in the District" from the Post) that Walmart will now build 6 stores, not 4, in the city.

The new locations are at Fort Totten Square--this location is only 1.7 miles from the proposed Georgia Avenue Walmart location, so I wonder if it will actually be a grocery only operation, a Walmart Neighborhood Market--and at the Skyland Center, a polyglot collection of stores in Ward 7 that DC had marked for urban renewal type operations years ago, but still hasn't pulled the plan significantly forward.

Top photo: rendering, Fort Totten Square. Middle photo: Rendering, Proposed Walmart, Georgia Avenue Northwest, Washington, DC. Bottom photo: Walmart Neighborhood Market in Downtown Chicago.

In the summer when Mayor Gray "threatened" Walmart, stating he wouldn't approve their entry into the DC market if they didn't open a store in Skyland, I wrote ("Misplaced priorities: threatening Walmart if they don't open another store") that this was likely a kind of con job, that probably Walmart had already agreed to open a store at Skyland, either internally within the company or with the DC Government, but held back a public announcement as a bargaining chip, so that the Mayor would be in a position of being able to announce a victory later, like they did last week.

The location of a store at Fort Totten isn't surprising, since JBG bought into that center earlier in the year, and JBG already has agreements with Walmart for urban style stores in the NoMA District in DC and in Tysons Corner at the old Moore Cadillac dealership site, and for a store in an urbanizing area, Rockville Pike in Montgomery County, although it's not clear if the development is intended to be mixed use ("Wal-Mart plans to open store on Rockville Pike" from the Washington Post).

What interests me most is what are the lessons, for planners, elected officials, and citizens?

1. Walmart isn't driven by ethics, the decisions they make are business-based.

When people criticized Walmart's involvement in a healthy foods initiative involving First Lady Michelle Obama ("With praise from Michelle Obama, Wal-Mart announces healthy food campaign" from the Post), saying why would Walmart keep to the agreement, since they seem to pay women less than men and they are anti-union, etc.

I replied that people were missing the point, that the same decision making calculus that led Walmart to discriminate against women, unions, etc.--so that they could make more money and reduced costs--was in play with the healthy food initiative--they could make more money.

2. Walmart wants to be in the city, in "urban" markets, but they are agnostic about building and project form. If the site they want is what they want, they just want to be there, they won't push the developer to do an urban-appropriate or better project.

In DC, 2 of the 6 proposed Walmart projects are being done by JBG, a real estate developer known for its comfort and success with mixed use projects; 2 of the projects are being done by traditional shopping center developers having limited experience with mixed use projects; one is being done by a developer with mixed use experience, but limited exposure and concern about operating in DC (the Georgia Avenue store); and the other is being done by a nonprofit developer with a limited portfolio of experience.

So only 2 of the 6 stores will be truly "urban." The other four will be "suburban" for all intents, oriented to automobile-based consumers, but in the city.

3. Communities are in position to get their clocks cleaned, unless they have the right ordinances in place before Walmart comes knocking, and has already lined up support behind closed doors long before it's reported in the media.

This was definitely the case in DC, which doesn't have a "big box review ordinance" for large site retail. Such ordinances assess economic impact and provide procedures for mitigating negative effect or disapproval. DC's "Large Tract Review" procedure is pretty limited, and focused on coordination, not mitigation.

Walmart's real estate department learns from every engagement and they apply the total array of knowledge-learning from previous stores to each new store proposal.

Don't you think Walmart was very strategic, and chose locations where the zoning already allowed them to open a store, with very limited provisions, if any, for public review?

A typical community is like a deer in headlights by comparison, as the Walmart team brings the experience of 3000+ store openings and thousands of contentious interactions to the table, and by comparison, community representatives--be they elected officials, government employees in planning and transportation departments, or citizens--don't have near the knowledge base. It's a classic case of imperfect information.

The lesson for other communities is to get your ordinances in order, and have them in place before Walmart comes knocking...

-- Big-Box Ordinance and Conditional Use Permit (CUP) Tool-Kit, Midwest Environmental Advocates

4. The Respect DC Coalition acts as if they lost, but they really won, sort of..., as Walmart negotiated a community benefits agreement in DC, just that Respect DC wasn't part of the negotiation.

-- Walmart DC Community Partnership Agreement

Respect DC can and should be disappointed, but they also deserve credit because Walmart did do a kind of community benefits agreement, even though only 2 of the 6 locations may have triggered extranormal requirements for negotiation.

Little in the law forced Walmart to come to the table and they already had the support of key elected officials, even though they already locked up key lobbyists like David Wilmot, and in a town where trades unions representing semi-skilled workers are pretty weak (see "Selling of Walmart" from the Washington City Paper).

I have to believe that the Respect DC effort was essential to the creation of the agreement and they should take some credit for it.

From the Mike DeBonis District of DeBonis Washington Post blog:

Here are some of the big “gets” for the city:

— An effort to work with local small and minority-owned businesses to do construction work;

— a citywide workforce development program aimed at “low-income families, minorities, veterans, at-risk youth and formerly incarcerated residents”

— the “expectation of filling a majority of available positions” with city residents;

— $21 million worth of “charitable partnerships”over the next seven years;

— a commitment not to sell guns or ammunition in its D.C. stores and to attempt to provide space for locally sourced products;

— and an embrace of “transportation demand management measures,” including Capital Bikeshare stations, bus shelters, and electric car charging stations.

And here is what’s not in the agreement:

— Specific wage commitments;

— any wage or benefit concession that goes beyond what Wal-Mart would otherwise provide or what District law already requires;

— enforceable goals for the hiring of District residents.

Moreover, the agreement, signed by a Wal-Mart senior vice president, is “subject and contingent upon business conditions.”

And this was in DC, after Walmart played total hardball and beat the crap out of the City of San Diego City Council, so that after the Council passed a really great big box review ordinance, and maintained it after a Mayoral veto, Walmart organized a referendum campaign (it can't be proven that Walmart organized it but they likely did) to overturn the ordinance, and rather than go through with it, the Council backed down and voted to rescind the ordinance. See "Wal-mart buys San Diego" from Huffington Post. From the article:

Wal-Mart needed only 8 weeks and maybe thirty thousand dollars to scare the daylights out of the City Council in San Diego. One local official in San Diego, California called it a "dark day for democracy."

In December of 2010, the City Council voted to override a veto by the Mayor of a zoning ordinance that requires certain big box stores over 90,000 square feet to study their impact on the local economy, on wages, and on traffic. It was a watered down ordinance at best -- but there was one "citizen" who didn't appreciate the City Council vote. Wal-Mart began portraying the ordinance as an outright ban on superstores, and the corporation hired professional signature collectors to put the issue on the San Diego ballot. Wal-Mart knew that San Diego could not financially afford to hold a referendum, so all the folks in Bentonville had to do was throw a head fake. It worked.

Cash-strapped San Diego would have to swallow hard to come up with the $3.4 million cost of a referendum. Wal-Mart put the City Council neatly in a box. The City Council voted 7-1 to rescind the ordinance -- not because they had a change of heart -- but because fighting Wal-Mart was not worth millions of dollars to the Council.

5. A big lesson is that advocates should focus. If you don't, your opponents set the agenda.

When your demands include everything (also known as "all kinds of s***"), all kinds of stuff, and a lot of it not business related, and a bunch of stuff that they have to do anyway (under DC law new construction has to be environmentally sustainable), it makes it impossible to focus, and to get action on the most important concerns. You'll get some of what you want, but mostly not what you want, but Walmart (or other company's) can say they responded to the community.

From today's Post article:

The announcement did little, however, to temper the concerns of grass-roots organizations and unions that opposed Wal-Mart’s entry into the District without an enforceable set of requirements, as the document is not legally binding and does not contain any penalties if Wal-Mart fails to fulfill its promises. ...

But Respect D.C., a coalition of activists that collected 3,000 signatures requesting that the store sign a binding agreement, called the Wal-Mart deal a “sham benefits agreement” and a “backroom deal.”

Mackenzie Baris, lead organizer for the not-for-profit DC Jobs With Justice, which has coordinated protests of Wal-Mart’s plans, said the coalition considered the document more of “a statement from Wal-Mart about their intentions.”

“It is in writing and it is signed, but it is not a binding document of any kind,” Baris said.

Victor L. Hoskins, deputy mayor for planning and economic development, said that Wal-Mart had already begun to meet its commitments and that he believed the city could hold the company to its promises without a legal document.

Hoskins is right, there is no reason to believe that Walmart won't follow the agreement. Respect DC is missing the point. Walmart made a business decision to make this agreement.

6. Setting the agenda for negotiation is key and it should be focused on the long term best interest of the city and impacted neighborhoods, not anything else.

I don't give a damn that Walmart is going to pay out $21 million to charities.

a. What matters to me is the research that says for every job that Walmart creates, 1.5 jobs is lost.

So is it the case that Walmart will create 1,800 jobs at the cost of 2,400 jobs, for a net loss of 600 retail sector jobs?

Is it the case that businesses will close?

-- note that there is some disagreement about this, at least in an urban market in Chicago, Wal-mart funded research claims that more businesses opened than were closed. I think this might be true, but the research did not address fundamental changes in the mix of businesses between locally owned and chain establishments. Chains spend less money in a community and therefore the economic impact of new business can be muted. In any case, sales tax receipts did not increase in the Austin neighborhood, despite the opening of the new Walmart store.

Is it the case that vacancies in our traditional commercial districts will increase?

-- note that with the exception of store proposed for Georgia Avenue, most of the Walmart stores will be located in areas in the city where local retail options are quite limited, and so it is possible that there won't be significant negative impact, except in Wards 1 and 4, proximate to the Georgia Avenue and Fort Totten locations.

Plus, while not relevant to DC, the shopping center at Eastern Avenue and Riggs Road, just across the border in Prince George's County is probably gonna get its clocked cleaned and eventually close, although it then becomes a good candidate for redevelopment and transit proximate redevelopment.

Instead of monies paid out to charities, mitigation of the potential negative impact of Walmart on independent businesses and commercial districts should have been the foremost priority of any financial "contributions" by Walmart.

The charitable contributions allow Walmart to buy support, but it doesn't mitigate the potential negative impact of their entry, and is therefore a misuse of funds and a derailing of the community benefits process, which is supposed to be focused on mitigating negative impacts, not enriching some groups and stakeholders.

b. The other thing that matters to me is whether or not the stores will support urbanism and appropriate urban design.

The Georgia Avenue store could have been a mixed use project, like the JBG projects at New Jersey Avenue NW and in Fort Totten.

But JBG isn't doing the Georgia Avenue site, Foulger-Pratt is, and Foulger-Pratt doesn't care about urbanism in DC (in fact the better they do development in DC comes at the expense of the success of their considerable investment in Silver Spring, Maryland, just across the DC-Maryland border), just maximizing the present value of the property while minimizing costs.

If the elected officials had pushed Walmart on this, Walmart could have pushed the developer, and a better project could have resulted

But by focusing on jobs issues, and money for charities, substantive urban-related issues end up getting completely ignored.

Since the impact of these projects will last for generations, getting it right from the outset is essential. Getting it wrong dooms communities to 20-40 years of lost opportunity. So Fort Totten benefits, because the Walmart project there is being done by an enlightened developer, while the Georgia Avenue community will languish, because of an unenlightened developer.

AND THAT'S MY LAMENT ABOUT THE PROCESS.

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I am agnostic about Wal-mart. I don't have to shop there. People who want to can. And plenty of DC residents go out to the suburbs to shop at Walmart.

Walmart's entry will likely lead to a competitive response by other retailers like Safeway and Giant to lower their prices and that can be advantageous to consumers whether or not they shop at Walmart. Plus, people want lower prices. (Although note Walmart tends to rank lower on customer service based on national surveys.)

And Walmart's entry into certain submarkets in the city will help catalyze and drive forward new projects and improvements in those areas, and in most of those areas (New York Avenue, Skyland, East Capitol, Georgia Avenue, Fort Totten) the communities have languished for years, even while the core of the city is improving.

But the negative impacts should be mitigated, and for all intents and purposes, mitigation of Walmart's negative impact on Washington's urbanism, independent businesses, and traditional commercial districts has been completely ignored by DC's elected officials.

That's a failure that should not be covered up, in the hype and hysteria over a community benefits agreement and $21 million of loot for charities.