After Wal-Mart's deal with city, questions on economic impact li - WDRB 41 Louisville News

SUNDAY EDITION | After Wal-Mart's deal with city, questions on economic impact linger

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LOUISVILLE, Ky. (WDRB) – The Walmart supercenter planned for Broadway and 18th Street promises jobs and neighborhood development, including a major retailer on a patch of land that has long sat vacant.

Hailed during an announcement last week as the largest western Louisville project in the past decade, the Walmart has been called a "major investment," a "game changer" and a "great thing."

But the supercenter's broader impact is unclear. Though the city expects the development to grow the overall tax base, no economic impact study was undertaken to validate that assumption, and some studies show that big-box stores have cannibalized their competitors elsewhere.

Wal-Mart has pledged that it will create at least 225 jobs – or risk losing $500,000 in Metro government incentives. The company's memorandum of understanding with the city doesn't specify how many of those positions must be full-time, and stipulates only that Walmart make a "good faith effort" to hire workers from "west Louisville" -- an area that is not defined.

Janet Kelly, director of the Urban Studies Institute at the University of Louisville, said she was asked by groups both favoring and opposing the Walmart about conducting an economic impact study for the new store. She told them such a request would be a waste of money.

"There is no economic impact," Kelly said. "Economic impacts, for the most part, occur when the activity that's in question will attract persons from outside the region as consumers."

That's not to say the Walmart couldn't have other "positive" impacts, Kelly said. For example, residents who might travel to other neighborhoods to shop might save money by staying closer to home, and the store could serve as an "anchor" for other development in the area.

"I honestly think that the situation in western Louisville is such that a Walmart has potential economic benefits and immediate noneconomic benefits that make the modest incentives offered justifiable," she said. "Reasonable people can, and do, disagree."

Wal-Mart, the Bentonville, Ark.-based retailer, is a lightning rod for critics who argue, among other things, that the company's discount, "one-stop shop" stores have wounded nearby small businesses and forced some to close.

There's no shortage of research on the effects of Walmart stores. A 2009 study by Loyola University of Chicago's Center for Urban Research and Learning, for instance, concluded that a Walmart on the city's west side led to a loss of 300 jobs near the store.

"These estimates support the contention that large-city Wal-Marts absorb retail sales from other city stores without significantly expanding the market," the study found.

A study commissioned by Walmart and published in January paints a different picture. It found that communities in California with Walmart supercenters saw increases in retail business permits – by an average of 49 percent – after the stores opened.

The western Louisville Walmart is to be built where tobacco giant Philip Morris operated a cigarette factory until 2000. In 2006, the city gave the land to Teresa and Frank Bridgewaters, co-owners of the Louisville construction company TMG, for $1. The Bridgewaters cleared several old factory buildings to prime the site for redevelopment.

The Walmart -- from the 157,000-square-foot store to the parking lot, bio-swales for drainage and other infrastructure -- represents a $25 million investment, according to Metro government.

Metro government is funding about 10 percent of the project, Mayor Greg Fischer said at the announcement on Monday.

The city is putting nearly $1.9 million toward purchasing additional land necessary to complete the site and giving Walmart a $500,000 "grant" paid in $100,000 installments over five years, according to a memorandum of understanding obtained under the Kentucky Open Records Act.

The deal obligates Walmart to "make a good faith effort" to build and open the store no more than 2 1/2 years after it buys the property; to have at least 225 jobs (full-time or part-time) upon the store's opening date; and to hire "unemployed or under-employed persons residing in west Louisville" -- though the neither the boundaries of the area nor the employment terms are defined.

A Walmart spokeswoman did not specifically answer how similar agreements have worked in other cities. She said she could not provide information about studies done by the company's real estate team.

"With any new store we seek to open a hiring center in the community and make our best effort to recruit local residents. This community will be no exception," Martin Laffoon, Walmart's Louisville market manager, said at last Monday's press conference.

Metro Council member David Tandy, whose 4th District includes the proposed Walmart site, said the city incentives are "skin in the game."

"I think there will be ample opportunities for people in the area to find employment, if that's what they choose to do," Tandy said in an interview.

At the Monday press conference, Tandy added that having a Walmart nearby will improve his family's quality of life by having more retail closer to their home in the Russell neighborhood.

"I and my family will no longer have to go across the river, over into Indiana, taking our tax dollars there, if we are looking to spend for retail opportunities. We can invest our money right here at home," he said.

But Attica Scott, a Metro Council member whose district borders the proposed Walmart, said the city's incentives need more oversight.

"For us to give $500,000 to the largest employer in the world without some real clear stipulations of how they will meet the parameters of that grant concerns me – and taxpayers should be concerned as well. We shouldn't hope and wish that Walmart will do the right thing," Scott said.

Scott also said she's skeptical of claims that the Walmart will help attract other businesses. She said a Walmart in her district, on Raggard Road, is located across the street from a strip mall where only five of 21 storefronts are inhabited.

The Walmart would be built roughly one mile east of a Kroger on Broadway, between 26th and 28th streets. A Kroger spokesman declined to comment on questions provided by WDRB about the Walmart's impact on its store, and whether the company agrees with the city providing public incentives to a nearby competitor.

Bonifacio Aleman, executive director of Kentucky Jobs with Justice, said the incentives are "despicable." Aleman's organization sought to have Wal-Mart agree to hire locally, pay workers a living wage and allow its employees to decide whether to unionize.

"We know Wal-Mart is this multinational corporation that doesn't need any incentives to come," he said, arguing that a better use of the money would have been for a mixed-use development including retail and small businesses.

But the taxpayer assistance was "necessary to make these financials work so this project could happen," Fischer said at the announcement last Monday. He credited Walmart with investing in an area that has long been neglected.

"They are taking the risk here, folks. This site has been empty for quite some time," Fischer said. "They have stepped up when others have had the opportunity."

The taxpayer money Metro government is committing to the Walmart deal is unusually generous for a retail project with low-paying jobs.

In fact, it's unlikely the Walmart would qualify for the joint city-state program under which incentives are normally awarded to new and expanding businesses. Those incentives are available only to the types of businesses that bring new money into the local economy -- such as manufacturing plants and corporate headquarters -- and not to retail businesses.

The program also requires that the new, full-time jobs pay an average wage of at least $10.88 per hour -- or $12.51 per hour when the value of benefits like health insurance is factored in.

The Walmart will create about 300 jobs with a $6 million annual payroll, according to the city. That's an average wage of $9.61 per hour, or $20,000 annually, assuming each employee works 40 hours a week.

"There's going to be some concerns about the rate of pay these employees will be paid," Metro Councilwoman Mary Woolridge said at last Monday's press conference. "But first we need to make sure we have some economic development … west of 9th Street. We need economic development in west Louisville."

WDRB.com reporter Chris Otts contributed to this story. Copyright 2014 WDRB News. All rights reserved.

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