Eight Days of Truth - Day Eight

We return to the Northwest to wrap up Eight Days of Truth. Bozeman, MT is a town demographically very similar to Pullman. Bozeman, the home of Montana State University, is also a small, rural college town. Its population of 32,414 makes it slightly larger than Pullman. Bozeman, like Pullman is growing strongly, due in large part to a burgeoning high-tech sector, leading to a very strong real estate market. Also, like Pullman, the average resident of Bozeman is young and household incomes are lower due to the large student population.

Unlike Pullman, however, Bozeman is not a border town and it is the retail center for a large area of Western Montana. Bozeman has a Wal-Mart, Costco, Target, Home Depot, K-Mart, a mall, and several large national chain grocery stores such as Safeway and Albertson's. It's the equivalent of taking the retail of Pullman, Moscow, Clarkston and Lewiston and combining them all in one city.

In letters to the editor, PARD members Greg Hooks and Cynthia Hosick have touted the economic impact study Wal-Mart conducted in Bozeman and the $500,000 Wal-Mart paid the city of Bozeman as reasons why Pullman should require the same of Wal-Mart here.

However, as Paul Harvey would say, now it's time for the "rest of the story." And the rest of the story about Bozeman shows just who much PARD stretches and outright breaks the truth. And for all the PARDners taking notes, this story is going to be told soon to a much larger audience. You ran out the rope, now I'm going to hang you with it.

There was already a smaller Wal-Mart in Bozeman back in 2000 when Wal-Mart announced plans to expand the store into a Supercenter. The city government of Bozeman was rabidly anti-growth and passed a temporary moratorium on stores of more than 50,000 square feet. Bozeman dropped the restriction when Wal-Mart agreed to pay for an economic impact study. This study, conducted by Bay Area Economics and released on February 1, 2001, found the following:

Wal-Mart was likely to draw additional grocery shoppers to Bozeman from outside the local trade area.

The greatest potential impacts of the proposed Wal-Mart expansion were going to be to the large chain grocery stores and K-Mart.

Impacts would be less significant for existing Bozeman general merchandise stores.

Downtown retail stores offered a shopping experience very distinct from Wal-Mart’s offerings, and were unlikely to be negatively impacted by the Wal-Mart expansion.

Base wages at the proposed Supercenter are in a range similar to that of existing supermarkets.

The benefits packages offered by Wal-Mart and the local unionized supermarkets offer many similar provisions in medical/dental coverage, leave time and vacations, and life/disability insurance offerings.

Obviously, the anti-growthers didn't like what they heard from this study. So, they seized on one recommendation from the study sugesting the town request contributions from Wal-Mart to promote sales at existing stores as well as setting up a shuttle between downtown and Wal-Mart.

In September 2001, the Bozeman City Council voted to allow Wal-Mart to expand contingent on it paying the city for the "economic damage" it would inflict. The bill? $25 million dollars. That's not insurance. It's extortion, pure and simple. For good reason, Wal-Mart refused to pay up.

So Bozeman enacted another temporary big-box moratorium in 2002, this time for stores in excess of 75,000 square feet. This ordinance was made permanent in February 2003. The only way retailers can exceed this limit is to negotiate special terms with the city. Wal-Mart finally paid the "blood money" in the amount of $500,000 and their new Supercenter in Bozeman opened on May 5, 2004.

Here's what the Bozeman Daily Chronicle reported on February 28, 2005:

New report downplays fears about big-box stores
By WALT WILLIAMS Chronicle Staff Writer

Big-box stores like Wal-Mart may not be the threat to Bozeman's economy that some people have suggested, and the city probably has no legal basis for treating them differently than other stores, a draft report commissioned by the city has concluded.

An early version of the report was given to the city in mid-December and has since been sent back with questions and comments from city commissioners and others involved in the process.

A final report is coming, but the city has yet to hear back from the research firm that put it together, Assistant City Manager Ron Brey said Thursday.

Bozeman currently has a moratorium on any retail store more than 75,000 square feet in size.

The only way retailers can exceed this limit is to negotiate special terms with the city, as Home Depot and Wal-Mart have done, both putting up a combined $950,000 to offset the alleged impacts of their stores.

But the city has stood on shaky legal ground by targeting such a narrow group of businesses for fees higher than what other stores pay.

As a result, the Bozeman City Commission voted last year to spend up to $74,000 to hire Economic and Planning Systems Inc. of Denver. It wanted the group to study the impact of big-box stores on Bozeman and see if there was any legal basis for treating the retail giants differently.

EPS couldn't find any legal justifications.

"The level of impact fees recommended by the (city's) Big Box Task Force would likely not pass the legal tests of rational nexus and rough proportionality," EPS concluded.

Big-box opponents will still find things to like in the report.

EPS concludes that Wal-Mart -- with its notoriously low pay and strong anti-union stance -- may drag down retail wages if other national chains in the city are forced to seek out compromises with their unions to remain competitive.

It also finds the retail giant could make a huge dent in the grocery market, perhaps causing other stores to lose as much as 20 percent of their sales.

But ironically, locally-owned grocers like Heebs East Main Grocery and the Community Co-op may be the least affected by Wal-Mart, since they have years of experience competing with national chains.

It's the chains -- Albertsons, Safeway and Van's County Market -- that are likely to be hardest hit.

Still, EPS concludes that the impacts of large retailers are only marginally greater than those of the many smaller retailers not covered by the city's moratorium.

It can't find sufficient justification to charge big-box stores higher fees than other stores, and says that the cap on building size really doesn't do much to address the problem.

City Commissioner Marcia Youngman said Friday she was "mostly disappointed" with the draft report. She was looking for more analysis of the data and wanted recommendations on legal strategies the city could pursue to tackle the issue.

"Just don't say what we can't do," she said. "Say what we can do."

Commissioner Lee Hietala wasn't impressed with it either. Among other things, he believes EPS got the city's growth projections over the next 15 years wrong. What the firm says is years down the road the commission is already looking at, he said.

"I don't think they tell the whole story," he said.

He also believes the firm simply concluded "that the stores that are displaced are those stores that will probably be displaced sometime in the future, and this process (of big-box development) expedites it."

EPS' early conclusions are already being used to justify the addition of another big-box store in the city. Lowe's Home Improvement Warehouse has put in an application to build a 292,000-square-foot retail building and office complex on North 19th Avenue between Baxter and Tschache lanes.

Lowe's has tried once before to locate in Bozeman, but it gave up after the city erected several roadblocks spurred on by fears of the store's impacts on the local economy.

Now, in their application, the project's developers point to EPS' conclusions as a justification for letting them exceed the city's 75,000-square-foot cap.

An informal hearing on the project by the city commission is scheduled today.

One reason EPS downplayed the impact of large retailers is that Bozeman has already taken in about all the big-box stores it can absorb.

There are now five stores in the city exceeding 75,000 square feet in floor space, according to the report.

But population growth in the region over the next 15 years will support probably only two or three more big-box stores.

EPS expects most new retail will be in the form of "category killer" mass merchandisers: national chains that cater to a specific market and are usually between 20,000 and 40,000 square feet in size, well below the city's size cap. One example is Borders Books and Music.

Big-box stores have only marginally more fiscal impact on city services than multiple smaller stores, the research firm concluded. However, one important difference could be seen as a positive impact for the city: a big-box store 125,000 square feet in size would generate twice the amount in impact fees for fire services than would five 25,000-square-foot stores.

One downside is that retailers of all sizes generally don't pay their employees enough to own homes in Bozeman. And since growth in retail and other low-paying jobs is expected rise faster than the city's overall employment rate, the affordable housing gap in the city will continue to grow.

However, EPS found that the city's current affordability gap isn't severe when compared to other regional markets.

And while special fees could be levied on retailers to fund an affordable housing program -- as has been proposed in Bozeman -- the research firm warns this could have an "unintended impact on local businesses wanting to expand or create new establishments."

Some people have also expressed worries that big-box stores would harm downtown businesses on Main Street by driving away customers. This was a pitch, but not the only one, for building a downtown parking garage to provide more customer parking.

But the report concludes that downtown stores have already absorbed most of the economic impacts caused by Wal-Mart and other big-box retailers by specializing in markets those retailers don't touch.

And while big-box stores have far more money to advertise their goods, downtown businesses have countered with a successful organizational effort that allows them to pool their resources.

Still, EPS cautions that the city will need to continue street and parking improvements to keep downtown competitive.

The only real warning in the report is for the Gallatin Valley Mall, which the firm says will face stiff competition in the next 15 years as new apparel and home furnishing stores move into the city.

The EPS report is the second the city commission has received that downplayed big-box stores' impact on Bozeman's economy. The first was paid for by Wal-Mart when it was still trying to convince city commissioners to let it expand its existing store into a supercenter.

Commissioners questioned many of the conclusions in that report -- some of which were similar to what EPS found -- and allowed Wal-Mart to build a supercenter after the retailer agreed to pay $500,000 to the city.

As Laura McAloon, the Pullman city attorney has pointed out, Pullman would be on shaky legal ground to treat Wal-Mart any differently than a smaller retailer by requiring an economic impact study, squeezing out payments from Wal-Mart, etc.

Do we want Pullman to be as business-unfriendly as Bozeman? Retailers have had to play by Bozeman's restrictive rules because they have no choice. Retailers coming to our area have many other towns to choose from.

Let's reject the Bozeman model and hope Moscow adopts it instead.