Why Big Box Suburban Development Is an "Economic Cancer"

[PonderInc]

I thought someone had posted this article before, but it's worth reading.  And it's critical to Tulsa's future.

http://www.salon.com/2013/11/10/walmart_an_economic_cancer_on_our_cities/

The concept is familiar: everyone gets all excited over a new commercial development and all the "economic development" it will generate.  The city bends over backwards for the developer.  The TMAPC bends over backwards for the developer.  The concerns of the neighbors are ignored.  Why?  Because of all that perceived "economic development" that will benefit the city.

Instead of bending over backwards, we need to think more critically about the difference between good and bad development.  We should examine the proposal as a farmer would, and think in terms of "yield per acre" (tax revenues and jobs).  

Here's what this sort of analysis will reveal:

(by Charles Montgomery, excerpted from the book, "Happy City.")
"Even low-rise, mixed-use buildings of two or three stories—the kind you see on an old-style, small-town main street—bring in ten times the revenue per acre as that of an average big-box development. What's stunning is that, thanks to the relationship between energy and distance, large-footprint sprawl development patterns can actually cost cities more to service than they give back in taxes. The result? Growth that produces deficits that simply cannot be overcome with new growth revenue."

If that statement interests you, here's a bit more detail.  After that, you should just read the whole article:

"To explain, Minicozzi offered me his classic urban accounting smackdown, using two competing properties: On the one side is a downtown building his firm rescued—a six-story steel-framed 1923 classic once owned by JCPenney and converted into shops, offices, and condos. On the other side is a Walmart on the edge of town. The old Penney's building sits on less than a quarter of an acre, while the Walmart and its parking lots occupy thirty-four acres. Adding up the property and sales tax paid on each piece of land, Minicozzi found that the Walmart contributed only $50,800 to the city in retail and property taxes for each acre it used, but the JCPenney building contributed a whopping $330,000 per acre in property tax alone. In other words, the city got more than seven times the return for every acre on downtown investments than it did when it broke new ground out on the city limits.

"When Minicozzi looked at job density, the difference was even more vivid: the small businesses that occupied the old Penney's building employed fourteen people, which doesn't seem like many until you realize that this is actually seventy-four jobs per acre, compared with the fewer than six jobs per acre created on a sprawling Walmart site. (This is particularly dire given that on top of reducing jobs density in its host cities, Walmart depresses average wages as well.)"

This is just one more reason why the status quo has got to change in Tulsa.  We can't keep making the same mistakes that we've made in the past.

[AquaMan]

Of course you make a good point. But, efficiency seems to take a back seat to a cities computation of which development is better. The "bottom line" is their business religion and the WalMart on 34 acres brings in 1.5 million in revenue while the Penneys brings in 1/3 million. The WalMart also has political glory attached to it. Jobs total. Votes total. Politics is now dominated by suburbans (as big as Tulsa thinks it is, we can't develop the river without the burbs)  which is why the churches locate there. Urban areas are more likely to be you and I, more likely not conservative Republicans.

Every part of their computation is related to the political gain, and the total dollar gain. The cities who succumb to this, pay more.

I heard a fellow say on the radio today that smart growth cities compare notes to see what is working and what isn't, then bring that info back to their home towns. Do we? Would we overcome the politics and bottom line type computations if we saw another city prospering by doing so? I'm doubtful.

[TheArtist]

 Now that I have a store I actually have a better reference as to what they mean with the "per acre" thing.  At first we were thrilled to find decent items to put in the store.  Now as things have filled out I realize that each shelf and wall space is money.  I can only put so much in the shop without it becoming a total cluster.  If an item or set of items is not moving well we mark it down to get rid of it and try to get something in that space that will sell better. This is one way we can look at our store and see ways to increase revenue.  We also need to consider what items are making more money per the space than others.  Of course those are not the only considerations.  Some items or ways of displaying them actually help you sell other items.  I have the huge "Skyport" painting taking up one large section of wall.  It may be there for several years but everyone who goes into the store goes "WOW!" then many of them pick up a print and purchase that.  Or you may have items that get people in the store and don't sell that well or make a lot of money, but do get people in the store because they make it interesting or fill an occasional desire/need and they then may stay, browse, and purchase more.  I suppose you could say Wal-Mart may act as a "Loss Leader" of sorts.  

Slightly off tangent is the notion that some items are prone to "shopping online".  We purchased some high priced models to sell and then looked online to see what they were going for only to discover that people were selling them for perhaps only a few dollars more than what we could get them for wholesale, and with free shipping.  I was actually more mad at the company for allowing this to happen for many companies will expressly say that you can't sell an item for below such and such a cost or they won't sell to you anymore.  What's happening is some internet company that doesn't have a brick and mortar store simply acts as a "shuffle through" and skims off a few dollars with each sale (they are not paying rent or labor, etc.).  They order it wholesale then have it shipped to the customer for a few dollars more (even if it's an item that is several hundred dollars they are content to make only a couple of dollars).  Meanwhile, it's on my shelf taking up money, aka space, and I act as the place where someone "discovered" the neat item, that because it is a higher priced one, they then do some research to find it for less online lol.  Needless to say our company will not buy from that wholesale company anymore cause I am not going to waste valuable shelf space acting as their showroom.  Again, the point is, each space whether it be acre, shelf or wall counts over all in order to be competitive and make money versus losing it.  

[Red Arrow]

Income per acre is a good concept as long as you have enough "acres" to cover the fixed costs.

[heironymouspasparagus]

Another big box is a sorry excuse for economic development - even as much as I like Costco, and the way they actually pay their employees a real wage, it still isn't like having a manufacturing facility of the same square feet.

[TheArtist]

Another big box is a sorry excuse for economic development - even as much as I like Costco, and the way they actually pay their employees a real wage, it still isn't like having a manufacturing facility of the same square feet.

Reminds me of a high school economics lesson.  Selling the raw materials doesn't make as much money as the company designing and selling the finished product.  One example was cotton.  You don't make a lot of money picking or selling the cotton compared to the company who designs and sells the cotton T-shirts for $15 or $50 each. It's that "value added" thing.  Though not always true per say.

One example found online...
The Bangladeshi factory makes 125,000 shirts per day, of which half are sold to H&M, the rest to other western retailers. One worker at the factory, earned just 1.36 euros per day, based on a 10-12 hour day. The machine she works with produces a target of 250 T-shirts per hour.

About 95 cents covers labour costs, power costs, the cost of materials needed (other than cotton), depreciation of machinery and other items, plus a margin for the local manufacturer's profit. A reasonable estimate would be that the average labour cost to produce one T-shirt is around 10-15 cents.[v] In that case, H&M's profit margin is four to six times what is paid to the workers in Bangladesh making the T-shirts.

However, what is just as striking in the details is the fact that a large chunk of the revenue from the selling price 4.95 Euros, goes to the state in taxes and to a wide range of workers, executives, landlords and businesses in Germany.

Another example...
In the case of the iPhone 4, total supplies per unit, including flash memory and processing chips, are reported to have cost around $188, while labour assembly costs in China (at the infamous Foxconn factory) were less than $7 per unit.[ii] Yet the iPhone was retailing in the US at $600. The remaining $400 or so is 'value added' by Apple.

[PonderInc]

...smart growth cities compare notes to see what is working and what isn't, then bring that info back to their home towns. Do we? Would we overcome the politics and bottom line type computations if we saw another city prospering by doing so? I'm doubtful.

I can't tell you how many times I've seen great ideas proposed in public meetings, corroborated by success stories in other cities, that are shot down by a single person saying "That's [insert name of other city here].  This is Tulsa. Tulsa is different.  It won't work here."

They never have to justify why it won't work, they just have to declare that it won't.  Then everyone votes the good idea down, content that they did the right thing for Tulsa.  (Actually, I don't know what they think.  Or if they do.)

It's basically a way to say "Shut up, sit down, stop making people think.  We want everything to remain just the way it is, b/c it works for us old geezers, and that's the way we like it."  

Weirdly, this always works!

What I find astonishing is how incredibly stupid this argument is.  ("That fancy water treatment stuff may work back in Boston, but we're different.  The only thing that works here is drinking untreated water that contains fecal matter...")  

The smartest people I know do not need to smash their own fingers with a hammer to learn that it's a bad idea.  They can simply watch someone else smash THEIR finger with a hammer, and say: "Let's learn from that person's experience."  Similarly, smart people can study and learn from the great ideas of others who come before them, and apply these lessons to their own lives.  (I think there's a word for this...oh yeah, "education!") (Or is it "intelligence?")

I continue to hope that Tulsa can rise above these small minds that continue to hold us back.
</ end cynical rant>

[heironymouspasparagus]

It's basically a way to say "Shut up, sit down, stop making people think.  We want everything to remain just the way it is, b/c it works for us old geezers, and that's the way we like it."  

HEY!!  I'm an old geezer and I don't think that way at all!!  I want everyone to START thinking - it's been way too long!!


What American needs is MORE free speech!!!!     And fewer corporate "persons"....

[heironymouspasparagus]

This applies across several posts across the board...we tend to get all caught up in the minutiae and details sometimes, but there are solutions to every development and zoning type issue if one is willing to just move forward and do it!!  In addition to land use solutions, light rail and a vibrant commercial district....it's only 43 seconds long, but should give us an excellent perspective!!

https://www.facebook.com/video.php?v=599729786718506