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� � �e +°�search r-eporc, TF,rt Imperct of Big �t Groters on Southem � :� r�r��, Wages, and Municipal Finances, was prepared for the �>rangeCounty BusinessCouncil by Professors Marlon Boarnet {Uni- �rcrs9cy of California, Irvine) and Randal) �r� (University of Califomia, � a� Angeles) The author is publish broadly in the areas of local eca �7�m�� dsveiopment, land use, and municipalfiscal policy. The Orange �'owi�� usiness Council also has a long-standing interest in both the �oscas �mpacts of local land use issues and the economic impacts of �ov�rnmrenc decision-making and tl�e changing California business dimaoe. �� h+s report they examine the enormous. and ever-growing retail grocery business, and the many changes occurring this industry. One of the most important developments is the combination of big- box discount retail and grocery sales into a single store known � a supercenter. Several discount retailers, including K-Mart and Target. have exper�menced with the supercenter formac, but Wal-Mart has t�,een �kt fastest growing developer of supercencers in the past de- ��d� '��It K-Mart and others have experimented with retail grocexy �}�i�s ir recent years.Wal-Man has quietly become the second largest �rac�r �� the country by adding large grocery stores to their retail -��-p3 to form supercentersthat are often as large as 220,000 square �aEr For that reason. this research focuses on the potential impacts of t}�e entry ofWal-Mart supercentersinto the Southern Californiamar- ket Yec Sht analysis is intended to illustrate some of the impacts of s�,percenters more generally, while usingthe case ofWal-Mart as an t=xampie of a potential near-term entrant i nto the Southern California .�tid f{ti�d �iusiness �ia �rudv =s des�gned � an aid to public decision-making regarding ,�pee-��cers, which have negative � well as positive impacts. Neither e ��vvays _.Yl�.ir��,�rgr�{�,� ,�r POLICY QUESTIONS •-� �i••� �r:,��. .• �� ,r,� The nature of the grocery business has changed �,,v€ q��i : ace fo r dramaticallyin some areas. with conventionalgro- cery stores having difficulty competing on wages. .5�ss '•k� revenue �'"""'��t '�'� "-�¢r� Cities, swrved for sales tax revenue but also �'*' ��t protective of their existing retail base, are un- � r�� 4��r��s '�� sure of how these big-boxes will affect either �-��M1n�tr. r�n� �f their economic structurc of �heir fiscal bottom �'�'',"' rt�°'' ��'"� Iine.This study is designed mainly � an aid to '�"'��' °�' "'�{�' publicdecision-makingregardingsuchprojecu, �°r �}r� a'�r 'nb which have negative as well as positive impacts. �rr � r*t "��;+� Neither are aiways well understood, or consid- ��'' `'�s" '�'�"' ered. in the municipalrace for sales tax r+ev�enue. I:/�'��1►1�71►[�� � The aggressive entry ofsupercencers such as those operated by Wal•Marc into the Sout�ern California grocery business is ex- pected to depress industry wages ar-id ber�efia at an esdrraced irnpacc rangi^8 from a low of;500 million to a high of almosc $1.4 billion per y�r: potentially affecting 250,000 grocery industry employees. � The full economic impact of those lost wages and benefitsthroughoutSouthem Californiacouldapproach�?8 billionp� Y� � Discount retail chains that operate supercenters, induding Wal-Mart. cypically offer much less comprehensire healch � coverage shan major Gufornia grocery chains. One negative economic impact of Supercenters caufd be adramatrc re�uction i n health coverage fo r most o f the 250.000 grocery employees in Califomia. This can lead to lower quality of care for grocery �r�a�x whose health insurance benefi�s are reduoed. � The fiscal benefits of wpercencers, and of discount retail more generally, are often much more complex. and lower. than they first appear.This is particularly crue when big box retailers dose existing scores to move i nto larger quarterselsewhere, when they expand an existing store into iood. and++r#�en recailers reconfigure an existing store to sell food wichouc expansion. I n �ch case the addidonal tax revenuesgen- erated will in part come from existing businesses elsewhere in the ciry i n the form of lost market share. � Supercenters, especially Wal-Mart wperca,cas, �.n often comersfons � eac- isdng discaunc recail ��ni,Thrr� local o€- ficials �d ar�uily coruider tt�e pod�- iq of afucure comersion to a wpencencer, and any accendanc negative economic. Bs- cal. or land use Impacls. when approving b� box discount reail pro)eca, evpn when the proposes land use does not include immedixce phns forgrocery safes. � � s ' T O F B I G B O X G R O C E R S O N S O U T H E R N C A L I F O R N I A