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Retail legislation only an economist would love

January 23, 2009

By Dr. Eric Fruits,
EconInternational,

Oregon HB 2388 is an economists dream. It requires a city or county to obtain and review a “comprehensive economic impact study” before approving or disapproving an application to construct a retail facility larger than 75,000 square feet. It also requires that the store pay a fee of $40,000 up-front to pay for the study.

Why would an economist like that?

It means people like me, who have done numerous retail economic impact studies would have a huge increase in work.  And, we would be guaranteed to get paid! 

Figure the local government will skim 25 percent for “administration and overhead,” and that leaves about $30,000 for the study.  That’s a nice chunk of change, but not enough for a rigorous study of all the things the legislation thinks should go into a “comprehensive” study.

What do they want in the study?

The study must include each of the following elements.

* The share of sales the proposed store would attract from existing stores
* The supply and demand for retail space
* The number and location of existing retail establishments in which there is overlap
* of goods and services offered
* Employment, including projected net job creation or loss
* Retail wages and benefits
* Sales revenue retained or reinvested in the market area
* The public tax revenues and other income generated as a result of construction and operation the store
* The number of trips to be generated by the large-scale retail development;
* The number of trip miles generated; and
* An estimate of carbon dioxide emissions
* The amount of public subsidies, including tax increment financing, required by the store
* The costs of public services and public facilities required as a result of the construction and operation of the store

How big is 65,000 square feet?

The bill is aimed at Walmart and other big boxes with stores that are well over 100,000 square feet.

Smaller stores, however, also will be subject to the legislation:  Costco, Fred Meyer, and some Safeway’s would need the comprehensive study.

What about competition?

The legislation mandates that the economic impact study examine the impact on other stores in which there is an “overlap” of goods or services offered.  Add to this the mandatory public comment period and existing stores will have a virtual veto over potential competitors.

  
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