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KOTIN. REGAN & MOUCNLY. Inc. � Real Estate Consultants 11611 San Vicente Boulevard Suite 700 Las Angeles, California 90049 310/820-0900 FAX;310/820-1703 ANALYSIS OF IMPACT OF PROPOSED WAL-MART DEVELOPMENT ON CITY OF CONCORD presented to City of Concord by Kotin, Regan & Mouchly, Inc, February 15, 1994 Table of Contents I. Executive Summary 1 II. Retail Impact in Concord 4 III. Fiscal Impact on Concord 15 KOTIN. RECAN & MOUCHLY. Inc. Analysis of impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 ANALYSIS OF IMPACT OF PROPOSED WAL-MART DEVELOPMENT ON CITY OF CONCORD I. EXECUTIVE SUMMARY Kotin, Regan & Mouchly, Inc. (KRM) was retained by the City of Concord to conduct a study of the impact of the proposed development of a Wal-Mart store and associated shops and restaurants in the City. The study had two primary objectives: I. Analyze the expected impact of the proposed development on the existing retail activity in the City. 2. Estimate the net fiscal impact on the City of that development and an alternative industrial land use based on the current zoning. The study will be utilized by the Concord City Council in its deliberations concerning a request for rezoning of the designated site. This analysis is based on information obtained from the City of Concord,.Wal-Mart's representatives, other industry sources and KRM's own research. The report is organized with an executive summary followed by two sections dealing separately with the retail and fiscal impacts. Project Description It is proposed that the project be built on three parcels of land totaling 22.75 acres at the corner of Monument Boulevard and Detroit Avenue. The Wal-Mart component of the project will be 146,000 square feet in size initially with provision for a 30,000 square foot future expansion. There would also be 18,000 square feet of separate retail shops and 11,500 square feet of restaurant space. The alternative development also addressed in the fiscal impact analysis would substitute 246,000 square feet of business/industrial space for the Wal-Mart store. Retail Impact in Concord With respect to the impact on retail activity in the City, the key findings and results of the analysis are as follows: 1. The City of Concord is a mature well served retail market with ample shopping opportunities within the City as well as in nearby jurisdictions in the trade area. It captures a significant amount of retail activity from residents outside the City although that proportion has been falling somewhat in recent years reflecting changing patterns of urbanization in the County. 1 KOT1N, REGAL & MOUCHLY, Inc. � Analysis of Impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 2. The population of the City and trade area from which Wal-Mart would attract its patrons is expected to grow at a moderate rate in the foreseeable future. 3. Given the already large number of retail outlets and the moderate population growth projections, it is considered likely that, for the most part, Wal-Mart's sales, will be transfers of sales already occurring at other retailers in the trade area (both within Concord and nearby jurisdictions). 4. Although Wal-Mart representatives have mentioned annual gross sales potential of approximately$270 per square foot or a total of$39.4 million for the initial phase, KRM is not aware of any standard size Wal-Mart outlets in California for which sales in excess of the low $30 million range are being generated. A number have lower levels of sales. Consequently, KRM considers an initial annual gross sales projection of approximately $225 per square foot or $32.8 million for this size store to be reasonable. 5. Giving consideration to the nature and location of its competition, it is estimated that approximately 43.0% of the gross Wal-Mart sales will be net new sales to Concord. These net new sales would be captured from competing retailers outside of the City. At the initial sales level, KRM estimates this would represent approximately $14.1 million in net new retail sales for the City. The remaining 57.0% of sales, or $18.8 million, would be drawn from the competing retailers within the City. 6. The total sales estimated to be transferred from retailers within the City represents approximately 3.3% of Concord's $563 million in recent annual total retail activity in the major product categories in which Wal-Mart competes. Fiscal Impact on Concord The projected annual net fiscal impact in 1994 dollars which would be generated by development of Parcel 1 with the two alternative use scenarios is as follows; Parcel_1 Wal-Mart Store Scenario KRM Sales Estimate $91,116 Wal-Mart Sales Estimate $121,666 Business/Industrial Park Scenario $4,143 2 KOTIN. REGAN & MOUCHLY Inc. Analysis of impact of Proposed Wal-,Mart Development on City of Concord February 15, 7 994 The development of Parcels 2 and 3 as planned, with both retail and restaurant space in both scenarios, is projected to produce the following net fiscal impacts: Parcels 2 & 3 Low Sales Estimate Retail $9,802 Restaurant $10,493 High sales Estimate Retail $9,802 Restaurant $13,425 The combined projections of net fiscal impact for Parcels 1, 2 and 3 for the two different development scenarios is as shown below. The "low sales estimate" incorporates KRM's projection of Wal-Mart's sales and KRM's conservative projection of sales on Parcels 2 & 3. The"high sales estimate" incorporates Wal-Mart's projection of Wal-Mart sales and KRM's more aggressive estimate of sales on Parcels 2 & 3. Parcels 1 ,2 & 3 Wal-Mart Scenario Low Sales Estimate $111,411 High Sales Estimate $144,893 Business/industrial Scenario Low Sales Estimate $24,438 High Sales Estimate $27,370 The planned 30,000 square foot Wal-Mart expansion on Parcel 1 is projected to produce the following net fiscal impacts: 30,000 square foot Wal-Mart Expansion KRM Sales Estimate $19,982 Wal-Mart Sales Estimate $251260 3 KOTIN. REGAN & NIOUCI-ILY. Inc. Analysis of impact of Proposes! Wal-Mart Development on City of Concord February 15, 1994 11. RETAIL IMPACT IN CONCORD Based on the existing retail market both in Concord and in nearby jurisdictions, the projected impact of the proposed Wal-Mart development on retailing in the City was analyzed. Project Description The proposed development would consist of two components. The first is a Wal-Mart department store to be built in two phases which will be constructed on approximately 18.99 acres of land with access from both Monument Boulevard and Detroit Avenue: The second component of the project will consist of retail and restaurant space on two parcels totaling 3.76 acres which front on Monument Boulevard. The initial size of the Wal-Mart store will be 146,000 square feet. Provisions will be made to allow a future expansion of 30,000 square feet. Current plans call for the development of the two parcels along Monument Boulevard to include two restaurants, one of 4,000 square feet and the other with 7,500 square feet. There would also be two retail stores, one of 10,000 square feet and the other of 8,000 square feet. Parcel 1 Wal-Mart Store 146,000 square feet initial phase 30,000 square feet eventual expansion Parcel 2 Retail 10,000 square feet Restaurant 4,000 square feet Parcel 3 Retail 8,000 square feet Restaurant 7,500 square feet The location at the corner of Monument Boulevard and Detroit Avenue places this development approximately one and three-quarter miles from access to Interstate 680. Major retail shopping centers including Sun Valley Mail, Park & Shop and the Willows as well as the downtown business district are approximately 1'/2 to 2 miles away. The property is not currently zoned for retail use. Therefore, a change of zoning is required in order to accommodate this development plan. Retail Overview The City of Concord and the surrounding cities are currently well-served with retail establishments. With Sun Valley Mall and several other shopping centers within its City limits, Concord is currently enjoying substantially higher per capita retail sales than Contra Costa County as a whole and its neighboring jurisdictions. This is not a result of the level of income in the City of Concord. Rather, it is attributable to retailers within Concord capturing a significant amount of retail sales from non-resident employees in the City and the residents of 4 KOTIN. REGAN & MOUCHLY. Inc. �j Y Analysis of Impact of Proposed Wal-Mart Development on City of Concord february 15, 1994 other cities, primarily Pleasant Hill, Martinez and Walnut Creek who make shopping trips to Concord. in recent years, Concord's share of County-wide retail sales has been declining somewhat. This is a result of additional retail development which has been occurring in other jurisdictions in the County. Because of the very limited number of potential locations for new retail development in the City of Concord, this trend is likely to continue into the future. Several of the major shopping centers in Concord have undertaken or recently completed renovation programs in order to maintain and enhance their competitive position in the overall marketplace. Trade Area The trade area from which a Wal-Mart development at this location would draw its customers would include virtually all of the City of Concord, most of the City of Pleasant Hill, the southeastern portion of the City of Martinez, and the northern portion of the City of Walnut Creek. East County cities such as Pittsburg and Antioch probably would not be a factor because there is currently a WakMart store operating in Pittsburg. Interstate 680, which runs approximately north-south through the market area, and State Highway 242, which branches off from Interstate 680, are the main transportation corridors by which customers from the outlying areas would gain access to the vicinity of the Wal-Mart store. Exhibit 1 illustrates two-, three- and five-mile radii from the site. The limit of the trade area is considered to extent to the five-mile ring. Demographic information was obtained from Urban Decision Systems for areas at two-, three- and five-mile radii from the site. Exhibits 2 and 3 present the complete demographic data. Within the three-mile radius, the total population is estimated at 138,900 with a per capita income of $22,251. At a five-, mile radius, the total population is approximately 239,300 with a per capita income of $24,95.2. To a large extent, this increase in the per capita income is attributable to the five-mile radius including more of the City of Walnut Creek, which has a more affluent population than Concord or Pleasant Hill. Over the next five years the population in the three-mile radius is expected to grow by approximately 1%, and the population within the five-mile radius is expected to grow by approximately 3%. Within this trade area, data indicates that the household size is smaller than the national average and there is a relatively high share of households which earn over $50,000 per year. White collar occupations dominate in the population and an above-average percentage of the adult population have college degrees. The unemployment rate is relatively low. In general, housing is expensive and mostly owner occupied. 5 _ tta u 1 � U 7"• w V �• G G CS + d 7 ', is G� ✓ '•� �+" " ... ••.... ,..... �q \, i. .++ " :~ '.G A4 i- per.. �• + f u 5111 v i� s1� J+F 4 ri !a4 ec Q � r• r Y^ � �,`{ U ; �• t�� rpt—' r � � C'��� ���` w ,f T+' ' pr" , ,�• +`ter pn t r � .W"A:Monument Blvd & Detroit Ave 11126/ 4 6 Mile Rings `, .2.00 Mile 3.00 Mile 5.00 Milan Ring Ring Ring POPULATION 1998 Projection 68,116 140,005 246,114 1993 Estimate 67,568 138,927 239,265 1990 Census 66,191 136,082 231,231 1980 Census 62,020 127,171 205,132 % Change, 1990-1993 2.1% 2.1% 3.5% % Change, 1980-1990 6.7% 7.0% 12.7% In group quarters, 1993 1.6% 1.2% 1.3% HOUSEHOLDS 1998 Projection 27,363 57,743 101',626 1993 Estimate 27,205 56,086 96,442 1990 Census 26,637 54,139 91,754 1980 Census 24,810 48,260 77,118 % Change, 1990-1993 2.1% 3.6% 5.1% % Change, 1980-1990 7.4% 12.2% 19.0% FAMILIES 1993 Estimate 16,797 35,757 62,852 RACE 1993 White 82.7% 84.5% 85.8% Black 3.0% 2.5% 2.3% Arrierfcan Indian 0.6% 0.6% 0.5% Asian or Pacific Islander 9.0% 8.9% 8.6% Other 4.7% 3.5% 2.8% Hispanic Origin 13.8% 11.1% 9.5% AGE 1993 0-5 8.3% 7.8% 7.7% 6-13 9.7% 9.7% 9.7% 14-17 4.3% 4.4% 4.5% 18-20 3.2% 3.1% 3.0% 21-24 5.2% 43% 4.5% 25-34 19.2% 17.9% 17.4% 35-44 17.3% 17.5% 18.1% 45-54 11.4% 12A% 13.4% 55-64 8.0% 8.8% 9.0% 65-74 7.5% 7.8% 7.4% 75-84 4.0% 4.0% 3.7% 85+ 2.1% 1.8% 1.7% Median Age 35.1 36.3 36.8 Male 33,6 34.8 35.4 Female 36.9 37.9 38.0 HOUSEHOLD 1 Person 26.8% 25.7% 24.7% SIZE, 9992 2 Persons 33.8% 34.6% 35.4% 3-4 Persons 30.2% 31.0°10 31.7% 5+ Persons 9.2% 8.7% 8.2% TENURE 1993 Owner Occupied Households 52.4% 60,3010 63.8% Renter Occupied Households 47.5% 39.7% 36.2% Source:1980,9994 Census,January 1,5993 UDS Estimates (XP5) Urban Otcislan Systems Inc 14676 Admiralty Way Ste 524 f Marina Del Rey,CA 90292 t(SOO)533-9568 301569 Exhibit 2 CA: Monument Blvd &Uelroil Ave 1126194 ;id 5 Miler Rings 2.00 Mile 3.00 Mile 5.00 Mile Ring Ring Ring AGGREGATE Total ($ Millions) $1,348 $3,091 '$5,970 INCOME, 1993 Per Capita $19,952 $22,251 $24,952 HOUSEHOLDS Total 27,205 56,086 96,442 1993 Average Household Size 2.44 2.45 2.45 HOUSEHOLD Under$5,000 2.1% 1.9% 1.6% INCOME $5,000-$9,999 5.8% 4.9% 3,9% 1993 $10,000-$14,999 6.0% 4.9% 4.1% $15,000-$19,999 6.2% 5.1% 4,5% $20,000-$241999 6.8% 5.6% 5.1% $25,000-529,999 6.9% 6.4% 6.0% $30,000-$34,999 7.1% 6.7% 6.310 $35,000-$39,999 6.9% 6.6% 6.3% $40,000-$49,999 14.1% 14.4% 14.2% $50,000-$74,999 23.2% 24.7% 25.3% $75,000-$99,999 9.4%• 11.7% 13.2% $100,000-$124,999 2.8% 3.9% 5.0% $125,000-$149,999 1.4% 1.7% 2.1% Over$150,000 1.3% 1.6% 2.4% Median Household Income $41,548 $45,567 $48,632 Average Household Income $48,806 $54,661 $61,323 FAMILIES Total 16,797 35,757 62,852 Average Family Size 3.12 3.07 3.04 FAMILY Under$5,000 1.6% 1.2% 1.1% INCOME, 1993 $5,000-$9,999 2.8% 2.2% 1.8% $10,000-$14,999 4.5% 3.4% 23% $15,000-$19,999 4.5% 3.6% 3.1% $20,000424,999 5.3% 4.0% 3.5% $25,000-$29,999 5.9% 5.2% 4.5% $303,000-$34,999 6.3% 5.6% 4.9% $35,000-$39,999 6.4% 6.0% 5.4% $40,000-$49,999 16.3% 15.310 14.4% $50,000-$74,999 27.5% 29.2% 29.5% $75,000-$99,999 12.0% 15.2% 16.9% $100,000-$124,999 3.6% 4.9% 6.4% $125,000-$149,999 1.8% 2.1% 2.6% Over$150,000 1.6% 1.9% 3.1% Median Family Income $47,834 $52,494 $56,404 Average Family Income $54,522 $61,571 $69,820 Source;1980,1950 Census,January 1,1993 UDS Estimates (XPS) Urban Decision Systems Inc 14676 Admiralty Way Ste 624 1 Marina Dat Rey,CA 90292 1(800)633-9568 301669 Exhibit 3 ,o"TI 1. REGAIN & MOlJCHLY. Inc. Analysis of impact of Proposed Wal-Mart Development on City of Concord February 15, 1993 The main categories of retail stores with which Wal-Mart competes are considered to be the following: 1. Apparel stores 2. Department stores 3. Furniture/appliances 4. Recreation products 5. Miscellaneous retail Based on information provided by Municipal Resource Consultants (MRC), the City's sales tax consultant, KRM has estimated that Concord enjoyed taxable sales of approximately $563 million in those categories during 1993. Making some adjustments to information from the California State Board of Equalization on. taxable retail sales in Martinez, Pleasant Hill and Walnut Creek for the same period, an estimate of $424 million in competitive sales for those categories in those cities was derived. Combining those two figures produces an estimate of $987 million for total trade area sales in the product categories which Wal-Mart carries. Characteristics of the Proposed Wal-Mart Store At 146,000 square feet, the proposed Wal-Mart store is larger than most of the Wal-Mart stores which have been established in California to date. Most of those stores are less than 130,000 square feet. This store also differs somewhat from most of the other Wal-Marts in that it is being constructed in a fully built-up metropolitan area as opposed to a suburban fringe or more rural location. It is also somewhat uncharacteristic for a Wal-Mart store in California to be developed in an area as well-served with retail space as is Concord. The product line for this store would be typical for a Wal-Mart which does not include a major grocery component. Representatives of Wal-mart have indicated that they expect the store to produce sales at approximately the company-wide average of $270 sales per Square foot. This would result in total annual sales for the initial phase of approximately $33.4 million per year. KRM has no information on any Wal-Mart, stores currently operating in California which produce sales at this level. No-information has been volunteered by Wal-Mart representatives of any specific instances of Wal-Mart stores in California producing that level of sales. KRM is familiar with a proposed Wal-Mart store of 127, 000 square feet for which the total annual sales are exl2ected to be in the range of $40 million. However, that store is in a market area which is virtually unserved by any large general merchandise retailers and suffers from an extraordinarily high leakage of sales. 6 0ENTIFIED'RETAIL'E'RS IN COIvVn'TTT1ON Wni-i nomsm wA&-MtmKT CITY OF CONCORD OTHER CONTRA COSTA COUNTY SUN VALLEY MALL MARTINEZ Macy's Price/Costco J.C. Penney Sears COUNTY Emporium Sam's Club Shops PLEASANT HILL PARK & SHOP Best Ross Target Levitz Mervyn's Shops K-Mart Montgomery Ward WILLOWS Whale Earth WALNUT CREEK Cost Plus Target REI Shops VINEYARD K-Mart McCaulous Shops DOWNTOWN Shops STAND ALONE Price/Costco KOTIN, REGAN & MOUCHLY, INC. Exhibit 4 File: CRD508 t,,,...w,,,t,,,,.,. •• � x f �� ��.arf f f "'fib `� ,�--.d' g ,y,"�f" '�(`� �*�'' /y,i u. sd-'t}NrrR t� � a �w,c";°i' , �{illi' a+. ;�,�" T"` •.� lea S � Av S. s:'•'`�'.�� ti ,7' � C �1�f 1Y'" '� � P r � �` w wn,� - G A �t+crr ui uv`` . -•�.w r i ''i rte wt.'l• t ? ,}•vim asR. w .'FIELD ..`� 9 -•. � o L s � �a r ,�c •_'� r§ caaft0}rnsa;cw�+,=' s 4���,„ 1 � a>. � ,,�,cP \ ° 1 � W �y i 440}} PACHEC *�' ^ 4 1•'�, " s+w�.w n X41 ti ♦�Ff 1 rwr � � Ak4 ,�,r � t03.�;"'��1`}ty � r'4r �r i wBv. c� F .it CS.1.A�. 9 u+i>srt Ct '¢r�' �� ~,� •f' Y Y ,�.a.� � '}wry'l � '�R.47 [ oA"`^"'c"'wf WtiCtili S" rri: tf ha. •ra` Ft� CL. � � •,w •1y0� �` ua '•. +f L++>yr. i d�� u Cy;y4� ` muit�fn. * � � 'f� .1�br SFE�.`�' `� �• ".'` '�sre�,. 1L �, � tZtlig w L094.0. #' Do CL31i.ESE p� aa.l "' � �• ''` ri a�, �*'a+-"� 'a •'°�•,#f'{ " �`"a t •,�4e' .. t~ o� d' d•t-�a y � LEASANT tstKs. �y�! Af} � 1! � #���,R C• .t�` 1 ,� `��i� ��`r ,�iat' "Q. If t '�`x..lyl,�' Yom..._._....._ #1 tt �`L� �} .� ( � �,i}' ? 11 „f•iii 4'ix s+ � ! ,�,,•*i"� � '4 1� ,�f rrr'W.-: :'A au JE3%N( aR. 1! itY£RL'} OIL R a +a / 4 q�A� C 4 .KNNF. apt. e" �KAINutN ae. *._ a4Rn 8 an. sar� °oma `�,-�.. .J`�}-+�+ s► ,oR.'�.� Crw- �^-- �p -_ �,r� --�-- �4 1+ AILVA + k3RGif ( aA 0►- ''1 } i .�+t ,.�. � Li; *n 4aus i# #�sto} `bt j a ° ctia. ITA is .,+ s3tNMN4. AWN aR, 11 �a,bww�.on+�. ,4,, # ast at �, i OR. 3 t.MAN OR MIA OAL a tY aA `y C w YYY aswaxm 7C Ak}LIIAR a .A NANCY Lk j Yw3E. wa ffi eu,R aaL .`a gP S r i rnYY },I. + N t 1, Wal-Mart w #Ic 2. Downtown , 3. Park & Shap /A g;s �aRwswrftj, USAIN. 4. Willows ACN}iWV 5. Sun Valle Mall ' sLiw+s S w,+w / ♦�` r r, ; 1 9..wrw.,c 6. Mervyn's 11" i3tK g„ •L g e ,!e `fir.Ai,yy,' 7. Best rLATR113 Lt}}}} W63i[aN m A4.r j!i 8. {ti-Ma t Ra. a hs«u.aba } 9. Target N+x",M➢iwt r"frafrs "�`}vvuwt{is baA}v }i i n,wA ' 10. Sam's Club �.. b1.yKf ePiY.io,r I it}Rp 7aNa LN. , ` LAYMw r NYn 11, Montgomery Ward a { ICNUfJ"""--, "°mt f� Ca�fiWs , - ��i t '4.J'tf\4l`"~ ��Js � f+?i.}7b'!`� '1��•> 3C}R .: tti' YAL tri-••�,A.+rc }r.+w;,ei�e�t � °'s,,a°�� � C rN• ¢„rj"3,�,� ���,�. �" +�*' � �,o''°%r✓~ AYS`4x N L .7}L}xA A ..w'- r�i I � d+ t1f' t y, �•., ty4{,��i•r �x3LLtr sv srx .T ,�i wtl.irr 6A / q� � ttt �y�.{" V' 4 (j[)! +� ,t a 'r4 �:.. �•Y. ,r{ LLLSTCN a}LY. a � ,mow r� 4v� 4�tM.. �,�li �'rw. 2. 1. T .fitly• G•1;..•. L+��" ..._.... Exhibit 5 analysis of Impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 KRM is familiar with several Wal-Mart stores operating in California for which it is believed the sales experience is in the upper $20 million to lower $30 million range. Those stores are standard 126,000 square foot facilities. This yields average annual sales in the $200 to $250 per square foot range. On this basis, and in the absence of any independently verifiable information on the level of sales at other Wal-Mart stores in California, KRM believes it is reasonable to expect the initial level of sales for this store will be in that range. Therefore, KRM recommends utilizing an annual $225 per square foot annual sales projection which would represent a total of $32.8 million for this store. If sales at a higher level on both a per square foot and store total basis can be documented, KRM can make appropriate adjustments to the analysis. Competitive Retail Activities The proposed Wal-Mart store will face competition from three main types of retail activities. The first are the anchors and shops at several major shopping centers and the downtown area, the second group consists of the several large retailers not situated in major shopping centers, and the third are the small retailers in the areas of the City outside of the downtown area. The competitors in each of these categories will be discussed separately. Exhibit 4 identifies the competing shopping centers and major retailers by name and location. Exhibit S locates the identified competitors closest to the proposed Wal-Mart site. The Target store in Walnut Creek, the Vineyard shopping center in Concord and the two Price/Costco stores are located outside of the area shown in Exhibit S. Major Shopping Centers and Districts The largest of the competing shopping centers is Sun Valley Mall. It is in fact the largest enclosed mall in the Bay Area, with 1,405,000 square feet of retail space. It is anchored by Macy's, JC Penney's, Sears, and Emporium department stores. In addition, it has more than 500,000 square feet of shops. It is located at the extreme western boundary of the City of Concord adjacent to Pleasant Hill. The Park & Shop center is located on Willow Pass Road near State Highway 242. It is anchored by a Ross department store and a Levitz furniture store. In addition, there are approximately 176,000 square feet of shops. The Willows shopping center is located on Willow Pass Road between Interstate 680 and State Highway 242. It is anchored by Whole Earth, Cost flus and Recreational Equipment, Inc. {REI} stores. With its additional shop space, it has a total of approximately 278,000 square feet available. The Sun Valley Mall, the Willows and Park & Shop centers are all within two miles of the proposed Wal-Mart location and lie within the City limits. The Vineyard shopping center is also within the City of Concord and has K-Mart and McCaulous department stores plus approximately 45,000 square feet of other general retail space. Being in the southeast area of the City of Concord, the Vineyard Center is approximately four miles from the proposed Wal-Mart development. 7 AOT1N. RECAN & MOUCHLY hic. Analysis of impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 The downtown area of Concord will be considered a distinct shopping center for the purposes of this analysis. it is defined by the Concord Redevelopment office as approximately that area bounded on the north by Pacheco Street, on the west by Vista Terrace, on the south by Oak Street and on the east by Port Chicago Highway. MRC provided information on existing retail sales activity in the area. Total gable sales in that:district for..the four quarters ending in September 1993 were $58.7 million. After subtracting the automobile sales, restaurant sales and other components not competitive with Wal-Mart merchandise, sales of $12.2 million remained. To avoid understating Wal-Mart's potential impact on the downtown area, it was assumed that all of those sales would be in direct competition with Wal-Mart. It should be pointed out that those stores are already in competition with merchandise similar to that carried by Wal-Mart in the form of the Target and K-Mart stores two miles to the west in Pleasant Hill. Broadway Plaza in the City of Walnut Creek lies at the limit of what would be considered the market area for the proposed Wal-Mart store. It is anchored by Nordstrom, l Magnin, and Emporium department stores. Those anchor tenants plus the general merchandise shop space total approximately 671,000 square feet. Because of its distance from the proposed site and the nature of the anchor tenants, this center and its customers are unlikely to be in direct competition with the proposed Wal-Mart development. Other Major Retailers These other major retailers fall into two categories. The first consists of discount and department stores, and the second of membership warehouse clubs. Can the eastern boundary of Pleasant Hill near the Interstate 680 corridor, there are five discount and department stores which will offer significant competition for the Wal-Mart development. These consist of a Montgomery Ward approximately two miles southwest of the proposed Wal-Mart, as well as a cluster comprised of Target, Best, K-Mart and Mervyn's situated along Contra Costa Boulevard to the north of Sun Valley Mall. These stores on Contra Costa Boulevard are a little more than two miles driving distance from the proposed Wal-Mart site. There is an additional Target outlet located in Walnut Creek to the south approximately four miles from the proposed Wal-Mart site. The membership warehouse stores which will also constitute some competition for the Wal-Mart store consist of a Price/Costco within the City of Concord and approximately four miles north, a Sam's Club just outside of the City limits near Buchanan f=ield approximately two miles from the site, and a Price/Costco in Martinez approximately five miles from the proposed Wal-Mart site. The Martinez Price/Costco is the oldest and best established of these three membership warehouse stores. The Sam's Club store is a recent conversion of what was formerly a Pace membership warehouse store which was acquired by the Wal-Mart organization, owner of the Sam's Club chain. 8 :r N IN. kEGAN & MOIJCI`1Y Iric. Analysis of Impact of Proposed Wal-Mart Development on City of Concord February 15, t 994 Smaller Retailers In addition to the shopping centers, large retailers and membership warehouse' stores, a Wal-Mart store at this site will be in competition with a substantial number of smaller retailers elsewhere in the City of Concord. Information on the relative amount of retail activity in the City of Concord which is attributable to the shopping centers, the larger retailers and the membership warehouse stores indicates that the smaller retailers constitute approximately 34.4% of the retail market for the product types in which Wal-Mart will be competing. Concord's recent total annual sales in those product categories is estimated at $563 million. The sales from the identified centers and retailers are estimated at $369 million with the remaining $194 million being attributable to the smaller retailers. For the purposes of this analysis, it will be assumed that the proportion of Wal-Mart's competitors which is composed of small retailers not located at any of the identified shopping centers in the City is that same 34.5%. The remaining 65.5% of Wal-Mart's competition will be assumed to come from the identified retailers and centers. Trade Area Attributes The extent to which the market area is presently very well-served with retail outlets, and the projections of relatively moderate population growth suggest that the development of a new, large retailer such as Wal-Mart is likely to result mainly in a redistribution of existing sales as opposed to a recapture of sales which are currently being lost to retailers outside of the trade area. This is not to say that there is no potential for the City of Concord (a porti6n of the trade area)to gain net new sales at the expense of,the trade area which lies outside of the City limits. The main point is that it is unlikely that this mature trade area will enjoy a significant increase in overall sales as a result of the establishment of a new Wal-Mart store. As part of this investigation, KRM was given access to the individual sales tax revenue information for certain retailers and shopping centers within the City of Concord. While this information has been used in this analysis, it is confidential and cannot be publicly disclosed. Therefore, the derivation of the sales projections in this analysis can be disclosed only in summary form. For those competing retailers which lie outside of the City limits, KRM relied upon estimates of total sales based on the known size of the outlets and typical industry averages for sales per square foot. Based on the total estimated retail sales in the relevant categories in the trade area and the estimate of the sales associated with specific retail centers or identified retailers, it will be assumed that approximately 43.5% of Wal-Mart's competitors in the Concord, Martinez, Pleasant Hill and Walnut Creek portions of the trade area consist of smaller retailers not located in one of the large shopping centers. 9 ,j 111N. � t rat tvtti,tt r�.t +e t, er iti. analysis of impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 Methodology and Results Wal-Mart outlets, by nature, are Competitive-price operations that carry a wide range of household-type goods in the categories defined earlier. In rural markets, or urban/suburban areas which are under-served by discount retailers, a Wal-hart may generate net new sales for the area (e.g. an inflow of previously lost sales from residents and non-residents alike)• However, as explained earlier, the City of Concord exists in a mature trade area with well established competitive outlets. Therefore, it has been assumed the sales generated by the introduction of a Wal-Mart in Concord will be a reallocation of existing retail sales in the trade area from both inside and outside the City. The extent to which an existing store's sales will be transferred depends on both its relative position as a direct competitor with Wal-Mart, and its physical proximity to the Wal-Mart site. For example, if a store is a primary competitor of Wal-Mart (such as a K-Mart or a Target) and is located within two miles of the proposed Wal-Mart site, it will lose a greater proportion of its sales to Wal-Mart than a third-order competitor (such as a Price Club) which is located 4 miles away from the Wal-Mart site. in the analysis, large-scale retail competitors of Wal-Mart that currently exist within the trade area were identified and their locations were mapped. These include stores located inside the City of Concord as well as stores in Pleasant Hill_and Walnut Creek. Actual current gross annual store sales were obtained from MRC or estimated by KRM using industry standard sales per-square-foot for the particular stores. Each store was categorized for its competitive position by comparing its merchandise and pricing lines with those of Wal-Mart. In addition, the distance between the competitor and the Wal-Mart site was determined. Based on those two attributes of each competitor in combination with the stores' actual or estimated sales, a computer model was utilized to compute the expected transfer of sales from each of the competitors to a new Wal-Mart store. Two estimates of the dollar amount of transfer were computed. One assumed initial annual sales of $32.8 million for the Wal-Mart store which KRM considers to be most realistic. The second assumed initial annual sales of $39.4 million which has been mentioned by Wal-Mart's representatives. As stated earlier, it is assumed that 43.5/0 of Wal-Mart's competitors from which it will capture sales will be smaller retailers not in one of the specifically identified shopping centers or retailers. Because of the location of the proposed Wal-Mart site relative to the several cities in the trade area, it was further assumed that that competitive share will be equally divided between small retailers situated in the City of Concord and outside of the city limits. Consequently, 21.75°/ of the Wal-Mart gross sales will be transferred from small Concord retailers and 21.75% will be net new sales to the City transferred from small retailers outside the city limits. After computing the expected transfer of sales, and by separating the stores into those which are either inside or outside of the City, it is'possible to arrive at an estimate of the extent to 10 AOTIN. RECAN & MOUCHLY. Inc. Analysis of impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 which net new retail sales for Concord will be captured from those competitors. For both levels of projected gross sales, theep rcent which constitutes net new sales to the City is approximately 43.0%. Put more simply, KRM's analysis indicates that somewhat less than half of the gross sales which Wal-Mart can be expected to generate at either sales level are likely to be captured from retailers outside of Concord. The summary results of this analysis of the potential for transfer of. retail sales within the City at the two different assumed levels of initial annual sales 'are presented below with figures shown in millions of dollars. Per Square Foot Sales 5225 X270 Initial Crass Wal-Mart Sales $32.8 $39.4 Net New Sales in Concord Shopping Centers & Major Retailers 6.9 8.3 Smaller retailers 7.1 8.6 % of Cross Sales 43.0% 43.01/1- Transfers 3.0%Transfers from Concord retailers Shopping Centers & Major Retailers 11.7 14.0 Smaller Retailers 7.1 8.6 % of Cross Sales 57.0% 57.0% At the same two levels of sales per square foot, the eventual 30,000 square foot expansion of the Wal-Mart would result in approximately an additional $6.7 million to $8.1 million in gross sales (in 1994 dollars). Assuming the impact of the expansion sales on existing retail activity inside and outside the City is the same as the sales in the initial phase, they would result in net new sales for the City of approximately $2.9 million to $3.5 million. The remainder at each sales level ($3.8 million and $4.6 million respectively) would represent the amount of sales captured from other Concord retailers. To better.understand the impact of the proposed Wal-Mart on Concord retailers, it is possible to place the projected amount of sales transferred to Wal-Mart from other Concord retailers in a different perspective. The total amount of annual sales which are estimated to be initially shifted to Wal-Mart range from $18.8 million to $22.6 million. This is equivalent to a shift of from 3.3 % to 4.0% of the estimated total recent annual sales in Concord of $563 million for the product categories in which Wal-Mart will be competing. At the low and high projected levels of sales for Wal-Mart, the impact on the retailers in the defined downtown district was computed at a reduction of $1 .4 million and $1.7 million 11 KOTIN. RECAN & MOUCHLY Inc. Analysis of Impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 respectively. This is equivalent to reductions in sales of 11.60/a and 13.9%. This assumes that all of the downtown retailers in the identified merchandise categories are direct competitors and make no adjustments upon the opening of Wal-Mart. To the extent some of those retailers are not direct competitors in terms of merchandise and price category, the impact would be less. As a percentage of all taxable retail sales in the defined downtown area less automobile sales, the transfer percentages are 4.1% and 5.0%. If it were assumed that Wal-Mart captures none of its sales from its natural nearby competitors outside of the City (i.e. retail sales at competitors in Pleasant Hill, Martinez and Walnut Creek were entirely unaffected), all of its sales would constitute transfers from other retailers already in the City of Concord. in this extreme maximum impact case, the transfer of existing sales as a proportion of total Concord sales in the relevant product categories would range from 5.8% to 7.0%. Impact of Retail Activity on Monument Boulevard Parcels The developer's current plans call for two restaurants and two small retail buildings on the two parcels on Monument Boulevard. Although the zoning of the parcels does not currently explicitly permit retail activities, that is the most plausible use and would likely be the eventual use regardless of whether a Wal-Mart store is developed on the adjacent site. Therefore, the development of retail activity on those parcels should be,analyzed in terms of the extent to which its nature or performance may differ with or without an adjacent Wal-Mart. If the Wal-Mart is developed, there will be a larger amount of traffic drawn from outside the City than with an alternative. This being the case, the development of a Wal-Mart . on the proposed site is likely to result in a greater proportion of sales on those parcels being net new sales in the City. The exact nature of the retail shops and restaurants which would locate on parcels 2 and 3 has not yet been revealed and in fact may not be finalized at this time. Nevertheless, KRM has computed the amount of retail activity which might reasonably be expected from those outlets based on estimates of probable sales per square foot for the two types of tenants. These sales figures are in keeping with the observed..performance of similar small retail centers. For the retail shops, it was assumed that they will generate approximately$180 per square foot in taxable sales per year. For the restaurant, it was assumed that annual taxable sales would range from$250 to $300 'per square foot. This would produce total annual taxable retail sales for Parcels 2 and 3 ranging from $6.1 million using the lower range of sales for the restaurant component, to $6.7 million per year at the higher level of sales for the restaurant component. it is reasonable to assume that there will be a high correlation between the proportion of sales which constitute net new retail sales in the City of Concord at the Wal-mart store and on Parcels 2 and 3. Consequently, KRM believes it is reasonable to assume that 45% of gross retail sales for Parcels 2 and 3 will be net new retail sales in the City of Concord with the presence of the Wal-Mart store on the adjacent site. Without a Wal-Mart store drawing in that 12 Y; KOTIN, REGAN & MOUCHLY Inc. , Analysis of Impact of Proposed Wal-Mart Development on City of Concord February 75, 7994 significant percent of patrons from outside of the City, the proportion of the retail sales generated on Parcels 2 and 3 would certainly be less. However, determining how much less would be very problematic for a retail development of this small size. Literature on impact of Wal-Mart Having projected the impact of a new Wal-Mart store entering the Concord market, it will be informative to review observations which have been made_based on Wal-Mart entering other markets. Empirical analyses of the impact of new Wal-Mart stores on individual retail markets are scarce. One study which is often quoted was performed on fourteen Wal-Mart stores in towns in rural Iowa during 1988. In that,rural setting, in markets which were not well served by large competitors, several generalized observations were made. 1 . An increase in overall sales revenue and taxes occurred, with Wal-Mart generating most of the additional business; and 2. A decrease in sales revenues and taxes from retailers selling the same kinds of goods occurred, with local retailers and those in neighboring communities losing business. Businesses not competing with Wal-Mart generally experienced sales increases while those that sell the same goods generally lost business. This same study found that towns within a 20-mile radius of the Wal-mart stores saw total retail sales decline by 25.4% after five years. And even towns outside the 20-mile radius had retail sales decline by 17.6% after five years. It should be noted, however, that these findings apply to areas with a relatively static retail market in isolated and fairly self-contained small towns. With a growing population or if current retail sales are already being lost to retailers outside the community, the effect of a new Wal-Mart would be different. There are several factors that influence whether and to what extent the arrival of a Wal-Mart will affect the economic vitality of an existing community. These include: 1. The Size of the Community - Smaller towns with fewer stores and little previous competition often have a harder time adjusting to the arrival of a Wal-Mart than bigger towns with more seasoned retailers. 2. Existing„leakage"to Retailers Outside the Town - If local consumers are already going outside the town to buy consumer goods, then the arrival of a Wal-mart might lure them back to their town, and improve local business without harming existing retailers. Wal-Marts can also draw in shoppers from outside the town. 3. Proximity of the Wal-Mart to the Old Downtown - Wal-Mart stores located on the outskirts of towns will draw local consumers away from some Main Street 13 KOTIN. REGAN & MOUCHLY. Inc. Analysis of impact of Proposed Wal-Mart Development on City of concord February 15, 1994 businesses. Conversely, a Wal-Mart in or near a decaying downtown can have a revitalizing effect, giving a boost to existing and new businesses. 4. .Ability of Existing Businesses to Adjust and Change - By changing their merchandise, finding new market niches, improving service, and working collectively with other merchants, the downtown businesses have been able to ameliorate the impact of competition from a Wal-Mart, and even benefit from is generation of a higher overall level of retail activity. It is uncertain the extent to which sophisticated central County consumers who already have an array of shopping choices will be drawn to Wal-Mart, particularly in lieu of the local outlets which they already patronize. When a Wal-Mart does come to a town, there are measures local merchants can take to survive and even thrive after its arrival. These include: 1 . Do not sell the same merchandise competing head-to-head with the price-cutter. Consider upscale merchandise and target higher-income customers. 2. Identify market niches and carry what Wal-Mart does not. Fill the voids. 3. Improve customer service, make customer relations a priority and extend operating hours. 4. Promote the merchants' associations, work to standardize hours and organize special events to attract patrons. 14 KOTIN. REGAN & MOUCHLY. Inc. Analysis of Impact of Proposed Wal-Mart Development on City of Concord February 15, 7 994 Ill. FISCAL IMPACT Having projected the gross and net retail sales for the proposed Wal-Mart development, the net fiscal impact on the City can be estimated based on the various municipal revenue and expense categories which pertain in Concord. Description of Alternative Development Scenarios Parcel 1 which is 18.99 acres in size was analyzed based on two different development scenarios. The first alternative is the previously described 146,000 square foot Wal-Mart store with a provision for 30,000 square feet of expansion space. The second alternative is a business/industrial park development. The Concord Planning Department indicated that, according to its land use standards and guidelines, a typical lot coverage ratio for business/industrial development on such a parcel would be approximately 0.30. This suggests approximately 248,000 square feet of development of that type would be reasonable for Parcel 1. Current plans call for the development of Parcels 2 and 3 along Monument Boulevard with retail and restaurant components. This would include two restaurants, one with 4,000 square feet and the other with 7,500 square feet plus two retail buildings, one with 10,000 square feet and the other with 8,000 square feet. Wal-Mart Scenario Parcel 1 Wal-Mart Store 146,000 square feet initial phase 30,000 square feet eventual expansion Parcel 2 Retail 10,000 square feet Restaurant 4,000 square feet Parcel 3 Retail 8,000 square feet Restaurant 7,500 square feet Business/Industrial Scenario Parcel 1 Business/industrial 248,000 square feet Parcel 2 Retail 10,000 square feet Restaurant 4,000 square feet Parcel 3 Retail 8,000 square feet Restaurant 7,500 square feet 15 . KOTIN, REGAN & MOUCHLY. Inc. Analysis of Impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 Revenues Municipal revenues which are relevant to the fiscal impact of real estate development can be divided into two major categories; 1) one-time fees or charges paid to the City and Z) recurring revenues from sources such as taxes. For the most part, development associated fees such as those for plan checks, building permits and inspections are considered to be reimbursements for services provided and actual costs incurred. Others fees or one-time revenues may be reimbursement for capital expenditures made by a municipality in connection with providing necessary infrastructure items. That will be assumed to be the case with any fees or other one- time charges paid in the course of the development of the three parcels under both land use scenarios. Therefore, any such non-recurring fees or charges were excluded from this analysis. Sources of recurring revenues for the City of Concord from development of this type would fall into several categories. Of those, the most significant are property taxes, sales taxes and business license fees. The following sections present the derivation of the estimates of revenues which the different development elements could be expected to generate for the City. Revenue,categories such as fines and forfeitures, intergovernmental transfers, rents and certain service charges are unlikely to be affected significantly by either development scenario. Property Taxes The development of these parcels will cause new property tax revenues to flow to the City from two sources. The first source would be the extent to which the land may be revalued upward upon a change of ownership associated with the development of the property. It should be noted that in the current real estate environment, it is not unheard of for the assessed value for a parcel of vacant land to be reduced following a transaction which occurs at a value lower than the assessed value at which the land is carried. on the tax roles. KRM has been advised that a change of ownership of all three parcels will occur with the development of the property. Therefore, the extent to which the transaction value is greater than or less than the current assessed value of the parcels will result in either an increase or a decrease in the property tax revenues received by the City. Wal-Mart's representatives provided KRM with an estimate of the value of the three parcels which would appear on the tax roles under the Wal-Mart land use scenario. For the alternative Parcel 1 land use scenario, KRM estimated the land value based on information obtained from local brokers. The present assessed value of the parcels was provided by the City. The computed difference between these assessed values is presented in Exhibits 6 and 7. The second source of property tax revenues to the City based on the development of the property will result from the increase in assessed valuation resulting from the added value of the improvements which are constructed. Those improvements,which will add to the assessed value of the property, include the building shell, tenant improvements, and the site work necessary to prepare the overall parcel for development. 16 CONCORD REVENUES& EXPENDITURES ANALYSIS KRM Projection of Wal-Mart Sales Conservative Projection of Parcel 2&3 Sales Wal-Mart Other Retail Restaurant Industrial Parcel Size(Acres) 18.99 2.23 1.53 18.99 Parcel Size(Sq Ft) 827,204 97,139 66,647 827,204 Floor Area Ratio 0.18 0.19 0.17 0.30 Bldg Sq Ft 146,000 18,000 11,500 248,161 Bldg Shell Cost PSF $40.00 $40.00 565.00 $30.00 Bldg TI Cost PSF $6.00 $15.00 $35.00 $10.00 Site Work Cost PSF $2.68 $5.00 $5.00 $4.00 Site Work Cost $2,220,217 $485,694 5333,234 $3,308,818 Property Tax Rate 1.00°x6 1.00°x6 1.000/0 1.000/0 City Share of Prop Tax 10.40% 10.40°x6 10.40% 10.40°,6 Sales PSF $225 $180 $250 50 Taxable Portion 1000/0 100% 100% 0% Transferred Sales 56.5°x6 55.0°x6 55.0% 0.0% Annual No.of Police Calls 257 30 21 48 Cost per Gall $206 $206 $206 $206 Other Expend as%of Police 38% 38% 38°x6 38°x6 REVENUES Change in Land Assessed Value ($92,906) $43,570 529,894 ($1,499,154) Improvement Assessed Value 8,936,217 1,475,694 1,483,234 13,235,270 Assessed Value Increase 8,843,310 1,519,264 1,513,128 11,736,117 Prop Tax increase 88,433 15,193 15,131 117,361 City Share of Increase 9,197 1,580 1,574 12,206 Total Sales $32,850,000 $3,240,000 $2,875,000 $0 Taxable Sales 32,850,000 3,240,000 2,875,000 0 Gross Sales Tax 328,500 32,400 28,750 0 Net New Sales Tax 142,898 14,580 12,937 0 Business License tax $12,081 $2,170 51,951 $5,583 TOTAL $164,176 $18,330 $16,462 $17,789 EXPENDITURES Cost of Police Calls $52,942 $6,180 $4,326 $9,888 Cather Expenditures $20,118 $2,348 .$1,644 $3,757 TOTAL $73,060 $8,528 $5,970 $13,645 NET REVENUES $91,116 $9,802 $10,493 $4,143 KOTIN, RECAN&MOUCHLY, INC. Exhibit 6 File: CRO506W CONCORD REVENUES& £XPENOITURES ANALYSIS ,m? � Wal-Mart Projection of Wal-Mart Sales Aggressive Projection of Parcel 2&3 Sales Wal-Mart Other Retail Restaurant industrial Parcel Size(Acres) 18.99 2.23 153 18.99 Parcel Size(Sq Ft) 827,204 97,139 66,647 827,204 Floor Area Ratio 0.18 0.19 0.17 0.30 Bldg Sq Ft 146,000 18,000 11,500 24.8,161 Bldg Shell Cost PSF $40.00 $40.00 565.00 $30.00 Bldg TI Cost PSF $6.00 $15.00 $35.00 $10.00 Site Work Cost PSF $2.68 $5.00 $5.00 $4.00 Site Work Cost $2,220,217 $485,694 5333,234 $3,308,818 Property Tax Rate 1.00% 1.00% 1.00% 1.00% City Share of Prop Tax 10.40% 10.400/6 10.40% 10.40% Sales PSF $270 $180 $300 $0 Taxable Portion 100% 100% 100% 00/0 Transferred Sales 56.5% 55.0% 55.0% 0.0% Annual No.of Police Calls 257 30 21 48 Cost per Call $206 $206 $206 $206 Other Expend as%of Police 38/6 38% 38% 38% REVENUES Change in Land Assessed Value ($92,906) $43,570 529,894 ($1,499,154) Improvement Assessed Value 8,936,217 1,475,694 1,483,234 13,235,270 Assessed Value Increase 8,843,310 1,519,264 1,513,128 11,736,117 Prop Tax Increase 88,433 15,193 15,131 117,361 City Share of Increase 9,197 1,580 1,574 12,206 Taal Sales $39,420,000 $3,240,000 $3,450,000 $0 Taxable Sales 39,420,000 3,240,000 3,450,000 0 Gross Sales Tax 394,200 32,400 34,500 0 Net New Sales Tax 171,477 14,580 15,525 0 Business License tax $14,052 $2,170 $2,296 $5,583 TOTAL $194,726 $18,330 $19,395 $17,789 EXPENDITURES Cost of Police Calls $52,942 $6,180 $4,326 $9,888 Other Expenditures $20,118 $2,348 $1,644 $3,757 TOTAL $73,060 $8,528 $5,970 $13,645 NET REVENUES $121,666 $9,802 513,425 $4,143 KOTIN, REGAN&MOUCNLY, INC. Exhibit 7 File: CR0506X `T KOTiN, REGAN & MOUC:HLY. Inc. Analysis of impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 KRM obtained estimates of the construction costs for the Wal-Mart, retail and restaurant improvements from representatives of Wal-Mart. KRM also conducted an independent survey of developers familiar with this type of construction to verify the unit prices which were obtained from Wal-Mart. The independent sources suggested construction costs somewhat higher than the Wal-Mart projections. Therefore, the higher than those obtained from the Wal-Mart representatives were used. KRM also obtained cast estimates for the construction of business/industrial improvements on Parcel 1. The computation of the increase in assessed valuation which will generate new property tax revenues for the City is illustrated on Exhibits 6 and 7. in those exhibits, both the square footage of improvements involved and the unit construction costs are indicated. The dollar amount of the revenues which the City will receive on the basis of the change in the property's assessed value is dependent on the basic tax rate and the percent of the basic tax which the City receives for its general fund. In this analysis, it is assumed that the basic tax rate is the 1% of assessed valuation established by Proposition 13. Consultations with the City Finance Department indicate that the City will receive a 10.4% of the Proposition 13 property tax total. To the extent property values increase over time, Preposition 13 permits up to a 2% annual increase in the assessed valuation and, therefore, property tax revenues. The City's general fund revenues would benefit from such an adjustment to the extent it occurs. The table below summarizes KRM's projection of the initial increase in property tax revenues which the City would enjoy based on the development of the three parcels under the two different scenarios. Wal-Mart Scenario Parcel 1 $9,197 Parcels 2 & 3 3,154 Total $12,351 Business/industrial Scenario Parcel 1 $12,206 Parcels 2 & 3 3,154 Total $15,360 Sales Taxes The extent to which the development of these parcels is expected to generate both grass and net new taxable retail sales in Concord has been examined in our first memorandum. In that study, the effects of two different levels of projected sales at the Wal-Mart store and the restaurants were analyzed. The low sales estimate of $32.6 million per year in initial sales for the Wal-Mart store is KRM's estimate. The Wal-Mart representatives have suggested sales at a level. which would produce approximately $39.4 million in annual sales in the initial year. 17 _ __ ........... _. KOTIN. RE-GAN & MOUCHLY. Inc. �- Analysis of Impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 Sales for the retail shops on Parcels 2 and 3 were projected at $3.2 million per year. Annual sales for the restaurants on Parcels 2 and 3 were projected at two different levels. The lower projection is $2.9 million and the higher projection is $3.5 million. When the different levels of projected sales for the parcels were analyzed in the context of the overall retail activity in the trade area, it was estimated that approximately 50.:2°/a of the gross sales would constitute net new retail sales in Concord. This is attributable to that portion of the sales being captured from competing retailers outside of the City. The other 49.8% of sales would be transferred from retailers in the City. Since the objective of this analysis is to estimate the net fiscal impact of the parcels' development and business activity, it is appropriate that only sales tax revenues from sales which are net new sales in the City be considered in any computations. To calculate the amount of net new sales tax revenues which would be generated, the projected gross sales tax revenue figures are multiplied by the 50.2% of sales which are not transferred from other retailers in the City. There is no assurance that any of the occupants of the of the alternative business/industrial development on Parcel 1 would engage in any retail sales from the premises. Therefore, it is assumed that no taxable sales activity will occur on Parcel 1 in that scenario and no sales tax revenue will be generated for the City. The computation of the net new sales tax component of the City's projected revenues is presented in Exhibits 6 and 7 and summarized below. As mentioned before, the "low sales estimate" incorporates KRM's projection of Wal-Mart's sales and KRM's conservative projection .. of sales on Parcels 2 & 3 while the "high sales estimate" incorporates Wal-Mart's projection of Wal-Mart sales and KRM's more aggressive estimate of sales on Parcels 2 & 3. Parcels 1,2 & 3 Wal-Mart Scenario Low Sales Estimate $170,415 High Sales Estimate $201,582 Business/industrial Scenario Low Sales Estimate $27,517 Nigh Sales Estimate $30,105 Business License Fees Concord collects business license fees from businesses which are based in the City. Fees are based on different parameters for different business activities. Parameters range from amount of annual gross receipts to number of employees. For all the retail operations, it would be 18 K©TIN, RECAN & MOUCHLY, Inc. " Analysis of impact of Proposed Wal-Mart Development on City of Concord February 15, 1994 appropriate to use the gross receipts schedule to determine the annual fee. The gross receipts fee schedule is configured with incremental steps for which there is a base fee and to which is added a percentage of all receipts above the step, up to the amount of the next higher step. The amount of the gross receipts for the different retail components is presented in Exhibits 6 and 7. For the business/industrial development option for Parcel 1, estimating gross receipts for the purpose of computing business license fees would be infeasible. As an alternative, the per employee fee schedule will be utilized in conjunction with the assumption that the manufacturing fee rate classification applies. An employee density of one employee per 5507 square feet which would be reasonable for light manufacturing or incubator use applied to 248,000 square feet of space yields a total of 451 employees. If it is further assumed that the average size firm in the development has 15 employees, the average employee business license fee will be $12.38. This would produce total annual business license taxes of $5,583. The total projected business license taxes produced by the different scenarios is projected as follows: Parcels 1 ,2 & .3 Wal-Mart Scenario Low Sales Estimate $16,2012 High Sales Estimate $18,518 Business/industrial Scenario Low Sales Estimate $91704 High Sales Estimate $10)10)49 Total Revenues The total projected revenues from the three primary sources described above are presented below in summary form: Parcels 1.2 & 3 Wal-Mart Scenario Low Sales Estimate $198,968 High Sales Estimate $233,451 Business/industrial Scenario ' Low Sales Estimate $52,581 High Sales Estimate $,55,514 19 ,0TIN, REGAN & M UCHLY. Inc. � Analysis of impact of Proposed Wal-Mart Development on City of Concord February 35, 1994 Expenses Municipal expenses associated with real estate development can be divided into two major categories; 1) one-time capital costs associated with the provision of necessary infrastructure and 2) annual expenditures for the provision of services and maintenance of public facilities. KRM is not aware of any request by Wal-Mart, or offer by the City, for public funds to be spent for the construction of any new infrastructure which would be required as a result of the development of any of the parcels. The traffic study recommended that some minor roadway and traffic signal improvements should be made to maintain service levels. The cost of those improvements and other off-site mitigation measures necessary because of the development of the site would normally be paid by the developer. Consequently, it is assumed that the City would incur no un-reimbursed capital costs in connection with the development of the parcels. There are a number of categories of annual or recurring expenses which are candidates for examination when evaluating the fiscal impact of real estate development. In Concord, these major expense categories are general government, public safety, public works, parks, leisure services, housing and community services, debt service and miscellaneous. It should be noted that the City of Concord does not have the responsibility of providing fire protection services within the City. Of those major expenditure category identified, the categories which are pertinent to developments of the type under examination are public safety, public works, and general government expenses. The other categories identified are not likely to constitute financial burdens on the City given the nature of the development. Public Works With any development of previously unimproved land, or with the change of land use, the question arises as to whether or not the new use will generate additional burdens in the public works sector. For instance, will new development generate a need for additional traffic control devices which will require an annual maintenance expenditures, or will the new traffic generated constitute such a significant increase that the amount of street maintenance needs to be increased to preserve and maintain the road system. In the case of the proposed Wal-Mart development, the public works department is familiar with the amount of additional traffic which may be generated by virtue of having reviewed a traffic study prepared during the summer of 1993. That study indicated while there would be increased traffic resulting from the development of a Wal-Mart store, the increase would not be so large as to materially decrease the service level provided by the existing road system. There were several minor improvements recommended to accommodate the traffic at the intersection of Monument Boulevard and Detroit Avenue. Discussions with officials in the Public Works Department indicate that they consider the additional amount of traffic to be generated by the Wal-Mart and Parcels 2 and 3 development to constitute an insignificant additional financial burden on their overall maintenance program. 20 OTN. REGAN & MUCHLY. hic. t , ,Analysis of impact of Proposed Wal-Mart Development on City of Concord February 15, 7 994 Police Services The Concord Police Department was contacted to determine the extent to which the different development scenarios for the parcels would constitute an additional service burden for the City. The Police Research and Development Department undertook an investigation of the incidence of police calls which have occurred in several districts similar to the two land uses under consideration. The number of calls resulting in official incident/crime reports were totaled and divided by the land area of the parcels within the district where they occurred. This produced a factor which could be applied to the parcel area of new development to compute the number of police calls which could be expected to be generated. For retail developments, the Police Department estimates that there is approximately one police call per year for every 3,200 square feet of retail parcel. The figure is approximately one police call per,year for each 17,200 square feet of industrial parcel. At relatively small incremental units of development such as is the case with the three parcels in this development, police calls and their direct cost are considered to be the best measure of the incremental cost to the Department of serving the area. To obtain a unit cost per police call, the most recent police field operations budget was divided by the total number of actual police calls. This yielded an average cost of $206. To determine the total incremental cost of the 'police service for the development, the projected number of Police calls is multiplied by the pro rata $206 cost. Exhibits 6 and 7 illustrate the computation of the service costs. They are also presented below: Parcels 1, 2 & 3 Wal-Mart Scenario $63,448 Business/industrial Scenario $20r394 General Government Expenditures There is a general government expenditure component in the City's general fund budget. This category of expenditures covers items which do not readily fit into the other defined categories. The typical approach in determining the fiscal impact of a real estate development on this category is to assume that the proportional relationship between such less well defined expenditure categories and those which are more well defined is the same for individual development projects as it is for the City budget in general. In this analysis, police services are the only government expenditure category for which an explicit burden has been computed. Therefore, the relationship between the general component of the City expenditure budget and the police service component will be utilized to compute a general government expenditure burden of the entire development area for the 21 CONCORD REVENUES& EXPENDITURES ANALYSIS Wal-Mart Expansion Only KRM Projection of Wal-Mart Sales Wal-Mart Other Retail Restaurant Industrial Parcel Size(Acres) 0.00 0.00 0.00 0.00 Parcel Size(Sq F0 0 0 0 0 Floor Area Ratio 0.00 0.00 0.00 0.00 Bldg Sq Ft 30,000 0 0 0 Bldg Shell Cost PSF $40.00 $0.00 $0.00 $0.00 Bldg TI Cost PSF $6.00 $0.00 $0.00 $0.00 Site Work Cost PSF $0.00 $0.00 50.00 $0.00 Site Work Cost $0 $0 $0 $0 Property Tax(tate 1.009b 0.00% 0.000A 0.00% City Share of Prop Tax 10.40% 0.00% 0.00% 0.00% Sales PSF $225 $0 $0 $0 Taxable Portion 100% 00/0 0°/ 0°A Transferred Sales 56.511/0 0,011/0 0.0°h 0.0°A Annual No.of Police Calls 53 0 0 0 Cost per Call $206 $0 $0 $0 Other Expend as%of Police 38% 096 0% 0% REVENUES Change in Land Assessed Value $0 $0 $0 $0 Improvement Assessed Value 1,380,000 0 0 0 Assessed Value Increase 1,380,000 0 0 0 Prop Tax Increase 13,800 0 0 0 City Share of Increase 1,435 0 0 0 Total Sales $6,750,000 $0 $0 $0 Taxable Sales 6,750,000 0 0 0 Gross Sales Tax 67,500 0 0 0 Net New Sales Tax 29,363 0 0 0 Business License tax $4,251 $0 $0 $0 0 TOTAL $35,049 $0 $0 $0 EXPENDITURES Cost of Police Calls $10,918 $0 $0 $0 Other Expenditures $4,149 $0 $0 $0 TOTAL $15,067 $0 $0 $0 NET REVENUES $19,982 $0 $0 $0 KOTIN, REGAN&MOUCHLY, INC. Exhibit 8 File: CRD506Y _ ......... _. . ..................................................... CONCORD REVENUES& EXPENDITURES ANALYSIS Wal-Mart Expansion Only Wal-Mart Projection of Wal-Mart Sates Wal-Mart Other Retail Restaurant Industrial Parcel Size(Acres) 0.00 0.00 0.00 0.00 Parcel Size(Sq Ft) 0 0 0 0 Floor Area Ratio 0.00 0.00 0.00 0.00 Bldg Sq Ft 30,000 0 0 0 Bldg Shell Cost PSF $40.00 $0.00 $0.00 $0.00 Bldg TI Cost PSF $5.00 $0.00 50.00 $0.00 Site Work Coit PSF $0.00 $0.00 $0.00 $0.00 Site Work Cost $0 $0 $0 $0 Property Tax Rate 1.00% 0.00% 0.00% 0.0014 City Share of Prop Tax 10.40% 0.00% 0.00% 0.000/0 Sales PSF $270 $0 $0 $0 TaxablePortion 100% o% 0°,6 0n,6 Transferred Sales 55.5% 0.0% 0.0% 0.0% Annual No.of Police Calls 53 0 0 0 Cost per Call $205 $0 $0 $0 Other Expend as%of Police 38% 00,6 0% 0% REVENUES Change in Land Assessed Value $0 $0 $0 $0 Improvement Assessed Value 1,380,000 0 0 0 Assessed Value Increase 1,380,000 0 0 0 Prop Tax Increase 13,800 0 0 0 City Share of Increase 1,435 0 0 0 Total Sales $8,100,000 $0 $0 $0 Taxable Sales 8,100,000 0 0 0 Gross Sales Tax 81,000 0 0 0 Net New Sales Tax 35,235 0 0 0 Business License tax $$,555 $0 $0 $0 0 TOTAL $41,326 $0 $0 $0 EXPENDITURES Cost of Police Calls $10,918 $0 $0 $0 Other Expenditures $4,149 $0 $0 $0 TOTAL $15,067 $0 $0 $0 NET REVENUES $26,260 $0 $0 $0 KOTIN, RECAN&MOUCHLY, INC. Exhibit 9 File. CRD506Z _. .. .. .................................... -KOTIN. REGAN & MOUCHLY. Inc. Analysis of Impact of Proposed Wal-Mart Development on City of Concord February 75, 1994 two different development scenarios. General government expenditures constitute 38% of the expenditures for police service in the City budget. Therefore, it will be assumed that the general government expenditure burden for the two different scenarios will be equal to 380/0 of the computed police service burden for the two scenarios. On this basis, the general government expenditure component for the two development scenarios would be as follows: Parcels 1-,_,2 & 3 Wal-Mart Scenario $24,110 Business/industrial Scenario $7,750 Total Expenses The total of the expenses in these two principle categories are presented below in summary form: Parcels 1 2 & 3 Wal-Mast Scenario $871558 Business/Industrial Scenario $28,143 Wal-Mart Expansion The 30,000 square foot expansion will involve the City receiving new revenues from property taxes, sales taxes and business license taxes. The City can also be expected to incur additional costs in the form of police services and general administrative expenses. The derivation of the net impact of the expansion space (in 1994 dollars) is presented in Exhibits 8 and 9 and summarized below: 30,000 square foot Wal-Mart Expansion KRM Sales Estimate $19,982 Wal-Mart Sales Estimate $26,260 The new property tax revenues will be a function of the cost of constructing the expansion space. The additional sales tax revenues will be a function of the net new retail sales which the store will generate. The new business license taxes will be based on the additional gross sales receipts. The City will incur additional expenses for police services based on the increased patronage and traffic which will result from the expansion of the store. it is assumed that cost will be proportional to the cost per square foot of the initial store. similarly, the general administrative expenses will be assumed to be proportional on a per square foot to the costs for the initial store configuration. CAF IL EMCR0931\WfICK02.2 S.FtSs.ji 22 NOW's, i The National Organization for Woren,' its Beard cif: Direc- tors, and its members have received numerous complaints :.rega"-d- ! ing workplace environment and :mplc ymenf practices at,. al'-' Mart sures, distribution centers, regional and corporate offices. We have considered the extensive public record on cases, filed Iagainst Wal-Mart and found the allegations disturbing: They are sex dis- j. crimination in pay, promotion, and .,compenati ri, wage abuse,, ex- clusion of contraceptive coverage in insurance 'plans, vi6latidrt -bf child labor laws and the Americans with Disabilities:Act,-11 'iid;-A is- crimination on the basis of ,.sexual orientati6n uses have also. x . been filed regarding firing pro-union -workers-,_eliminatingjobs.=once workers joined unions, and discouraging vvor ers',#roi- uziidnizir . In addition, Wal-Mart continues to refuse to: dispense Prevent the "morning-after pill:' Consistent with the goals of NOW's Women Friendly Work- place Campaign, NOW names Wal-Mart a ,Merchant af',Shair e. Wal-Mart's dismal record contradicts the worker-friendly] image they project to the public. ,join NOW in its campaign to demand changes in Wal-Mart's unfair practices. ` Contra Costa. N.O.W. P.4.Box 4794 Walnut Creek, CA. ,� �� il! 925-952-2012 gb National Organization for Women ffi �� � 733 15th Street.NW,2nd Floor,Washington,DC 20005 u A T a p n n www.now.org 202-628-8669 � Nor�k 8 f • The EEOC is suing Wal-Mart over allegations of sexual harassment of female employees in Alabama. # • Nearly three-quarters of a million women work as"sales associates"in Wal-Mart stares. On average these women earn $6.10 per hour, or $12,688 per year if they are permitted to work full-time. This wage puts many of their families below the poverty level--half even qualify for federal assistance under the food stamp program. ** • Current and former employees in California are suing Wal-Mart for sex discrimination in pay, promo- tion, and compensation. This will be the country's largest sex discrimination suit against a private em- ployer if it is granted class-action status. • Wal-Mart's health insurance plan excludes contraceptive,coverage. A suit,which is seeking class ac- tion status, has been filed in Georgia regarding this exclusion. * • Women who make pants in El Salvador earn IS cents for each pair;Wal-Mart sells these pants for $16.95 in its U.S. stores. Also, contractors in El Salvador force workers to take pregnancy tests. ** • According to Brandeis University Professor Ellen 1. Rosen,Women in Central America who make clothes for Wal-Mart live in shacks lacking running water or plumbing while women in China live nine to twelve to a room in government-provided dormitories. Some of Wal-Mart's workers in the U.S. spend their nights in trucks or motel rooms without cooking facilities.** • The Maine Department of labor ordered Wal-Mart to pay the largest fine in state history for violat- ing child labor laws. The Department of labor discovered 1,436 child labor law infractions at twenty Wal-Mart chains. • lawsuits pertaining to Americans with Disabilities Act (ADA) violations have been filed in Missouri, Arizona, California,and Arkansas.* • Employees from Wisconsin, Michigan, Ohio, Washington, Illinois, Iowa, and West Virginia have sued Wal-Mart for underpaying its hourly workers. Employees from Missouri and Kansas have filed class- action suits alleging"acts of wage abuse." These acts include neglecting to pay workers overtime, preventing rest and lunch breaks, and forcing them to"work off the clock."* ` . • A former employee in New jersey reported being harassed and fired after telling his boss that he was undergoing a sex change. He won the case, and Wal-Mart was ordered to pay him $2 million.* • The National labor Relations Board (NLRB) has filed suit against the New Castle, Pennsylvania Wal- Mart for unfair labor practices. It alleges that Wal-Mart illegally discouraged workers of the Tire and Lube Express department from joining a union.* • The NLRB also filed a suit against the Jacksonville, Texas Wal-Mart for unfair labor practices. It al- leges that Wal-Mart threatened meat cutters, interrogated them regarding their union sympathies, and fired those who are pro-union. The United Food and Commercial Workers Union had filed a complaint with the NLRB alleging that 2 workers were fired because of their union organizing activi- ties. • Following a vote in favor of union representation by the butchers in Jacksonville,Texas,Wal-Mart an- nounced that meat cutting would end at 180 stores.* • In 2000, Wal-Mart's assets totaled more than the CDP of 155 of the 192 countries in the world, with annual sales of more than $137.6 billion. ** • In the video Behind the Label, Wal-Mart is featured as one of the retailers which contract with "sweatshops" in Saipan for the manufacturing of garments sold in their stores. Sources * Current Legal Developments Concerning Wal-Mart(online).2001,httpJlwww.wal-martlitigation.conVcun-entd.tittn Rosen,Ellen l.,The Women Who Work for WakMart opt!a Z , f ffrr i f f CBf: f Yx l .. 4. v 1 f �} $E 5 Cv t ------------------.:... - r� RON A r i} } IA Ar"t, -1 r � a f 7.S i i W V � W Z O 00 00 (9N — _ W 0') O O c9 I-•C Ln �t W Q (n I Cn u1 U} <C ___j W I W U) , U-) WWW � � C� Cn > WWIWI l W C2 u dN QrQ < O w n � � J <L `� <C <C Q n1 U- 75c C 0 q 2- O (n �} CS7 Cn Cn U) O n 1- I- �- <C � Cfl C/7 CIS U� U- O rz r � O c� tet- 0 , 0 W Ln �' �? ac O r-- DoLL, r h O — W F— OQ:� � U -� �7 d N O ` f C o C�f 00 Z � 0 W> O W Q C�1 Ln o W > O ( W Qd Q I Q ;n �— < C Q o vi w nI CL o � o d D WU-), a � Y J� `� W nm Co E W CJ f W < Ln 00�< CL (� CL - U) W m (f� U W u < z z < < U� ry LY_ t_.) <C I �' d CL (� 0 � X cn rn � � W lW < � � C_7 n � Q- � --i Z o 0- 0 z Li z3: U(f) z < 0(D W Q f xZ - 00 (� M< Q — I ?' � J <C z w � " a C� C ? _ Q u} C_.) < a. CL c w -� —� < Cn u i I SwF- O � v < Wf- � C ) d 2 n <C u ryI U) <c rd �01 '1 — I 71�n�il � �~ -► ` ldC- t i .r 17 IT, 1 € s W 'wm d p 41 ( " / ct Lcri " Ot dil U .-I LLL 85 r.. J j `<w 'I Fa H,6rIT-IFFITTW1 �0 �s •iliiiiiiii ik" — : r► �30Q I ! W I i i �d� g 1 � .d� r► I 1 i ' BZ " V ' lois sne 030W81 PM 3: GML~C May 13,2003 _ MAY 2 2 2003 Contra Costa County Board of Supervisors CLERK BOARD OF SUPERVISORS CONTRA COSTA CO. County Administration Building 551 Pine Street Martine, CA 94553 RE: Ordinance relating to approvals for lame retail stores To the Members of the Board: We understand that the Contra Costa Board of Supervisors is considering adoption of an ordinance that would prohibit approval of any retail store that exceeds 90,000 square feet that devotes more than 5%of its total sales floor area to the sale of non-taxable merchandise. In its current form,the proposal would not prohibit a Costco Wholesale operation because the proposedd ordinance excludes wholesale clubs that charge membership fees. however,we are opposed to the passage of the proposed ordinance because it is absolutely the wrong approach to regulate business and would set a terrible precedent. If special interests succeed in getting government to ban their competitors, targeting a particular company,or a particular style of business,the door will be open to every other special interest having difficulty competing in an open marketplace. They will seek your intervention through land use legislation to protect them from their competitors. It is clear that the intent of the proposed ordinance is anti-competitive and protectionist, and is aimed at one specific business. Wal-Mart is a major competitor of Costco, and is many tunes our size economically. Yet we are able to compete effectively without govenunent help by delivering value;to the consumer. The consumer makes the choice to shop with us in an open marketplace,not in response to legislative action at the request of special interests. This proposal would likely result in higher retail prices for consumers in Contra Costa County, thereby not only penalizing citizens financially,but also potentially penalizing the County itself by the loss of sales to nearby jurisdictions where pricing is open to competition. The proposal does not prohibit retail developments of more than 90,000 square feet. It prohibits only applicable single business establishments. Therefore,this proposed ordinance couldn't logically achieve its stated objective. A new shopping center of 90,000 square feet, containing a food store, a drug store, and a hardware store, for example,will remain perfectly legal under this proposal, even if the aggregate area dedicated by the three merchants to non- taxable sales greatly exceeds 5%. The impacts on public resources,traffic, and pollution would be at least as great as a result of the three-tenant shopping center as those resulting from one O S 999 Lake Drive « Issaquah, WA 98427 • 425/81,3-8100 • cvstco.car» L-no 00.0 u s I 0- Db 660 Contra Costa County Board of Supervisors May 13, 2003 Page 2 store of 90,000 containing the same merchandise. Illogically, the first would be permitted while the second would be prohibited. It is clear, therefore,that the ordinance would have only one passible result: to benefit merchants (including ourselves at present)whose format is compatible with the ordinance,while barring those whose format is not compatible. The consumer would be the loser. As a matter of principle, Costco opposes any protectionist,anti-competitive legislation. We believe that the free marketplace should be allowed over time to detennine which formats are most efficient. The citizens of Contra Costa County should be allowed to shop wherever they can to find the best value. We ask the Board of Supervisors to consider carefully the precedent this ordinance proposal would set if it is adopted. Using land use regulation to arbitrate commercial differences between constituents places the County in the position of deciding which among several business formats is most desirable. This alters the marketplace so companies would no longer be free to compete in Contra Costa County as they are elsewhere. On principle,Costco strongly opposes this ordinance. Sincerely, COSfiCO WHOLESALE j T Sineg al {. esident&CEO h'p �l J/ f t 0 taalifornia Labor Federation AFL-(alb) d i { 1 .THE STORY Wal-Mart Feces 4 BIG STORE History + Hundreds of towns court Wal-Mart. The megastores bring low prices ; P •ct and convenient shopping to rural =: sines areas and small towns.They create Practices entry-level jobs and added revenue � r to local treasuries. Critics say that 4 SMALL TOWN Wal-Mart creates net job loss in communities,because most of its sales are transferred from existing 4 TALKB,ACK merchants,resulting in little or no 2000, Wal-Mart Stores, Inc. economic gain to the host T14E FILM community. 4 RESO ROES • In the United States,close to 100 million shoppers patronize Wal-Mart t FOR TEACHERS stores every week. Its scope of operations uses the world's largest computer(surpassing the Pentagon's)and the world's largest fleet of trucks. -ite.Maps. • Wal-Mart's rate of expansion is so rapid that every two days It opens a Br4a0_c..a5t.5chqd1A1e megastore,and by 2004 it plans to open a store every day.These stores measure over 200,000 square feet in size,include groceries among their 50,000 items and are often open 24 hours a day. In addition,the Wal-Mart [life Corporation owns smaller Wal-Mart discount stares and SAM'S Clubs. View a matrackina Wal-Mart's expansion pattern across the U.S.A. • Wal-Mart is the largest employer in the United States after the Federal government with over 925,000 employees. Each year,the company hires 550,000 more employees-three times the number of people the U.S. military recruits every year-replacing those lost to rapid turnover and replenishing its workforce.Read more about .Wal-Mart's emplove"olic,i� andSractices. • In spite of its large volume of sales,Wal-Mart's corporate contributions are small.Wal-Mart ranked last among major discount retailers,donating four- tenths of a percent of its earnings,well behind its competitors(U.S. corporations average just over one percent).A cornerstone of the company philosophy is that it"gives something back"by keeping prices low. • Despite a well-publicized"Made in the U.S.A." campaign,85 percent of the stares'items are made overseas,often in Third World sweatshops.Read more about sweatsho4, a P . Wal-Mart and other U.S.retailers. , ti S' • Wal-Mart demands that hundreds of recording " artists, primarily alternative rock,hip-hop and Ipi lq ilii, rap musicians"clean up"their lyrics as ai p? condition of distribution, imposing what amounts to cultural censorship,and bans all music carrying a warning label.It also pulls magazines off the shelves that are considered too provocative. Read more about Wal-Mart censorshir�. top. Wal-dart's CD section bottom: Hip hop CID featuring "clean" label G � E *« WAL-4JART COPIES TO TOWN STORE WARS " w14Em .THE STORY Big Store 4 BIG STORE • l story h ,.y "Mliro all working together;that's the •Facts secret.And we'll lower the cost of i living for everyone,not just in `r"'S g` fh+3 s Business za Arnerica,but we'll give the world an Practices opportunity to a4l4►what it's like to +w SMALL TOWN save and have a better lifestyle,a 4 SPRAWL pi b+ett*r life l"or all.W'e're proud of what 4 TALKBACK r :, we've aceornplish*d;we've just begun." 4 THE FILM `$ -- Wal-Mart founder Sam Welton . � t'f8f8-f99x 4 RESOURCES FOR TEACHERS Sam Walton was the shrewd businessman behind the world's largest retailer.After working his way through the University of Missouri as a newspaper delivery boy, he Site mop got a job in Des Moines, Iowa as a management trainee for J.C. Penny at a salary of$75 a month.Walton borrowed some money from his father-in-law and opened a Broaast sc.s, d...u...le. variety store after serving as an Army captain in World War II (mostly spent in California and Utah because he was declared unfit for service due to a heart sproblem}.A chain of drugstores followed. le went into business with his brother [ tV3 Bud, and by 1960,the Waltons' 15 stores were taking in$1.4 million a year. But Walton soon saw a challenging new competitor arise-the discount store. The Walton brothers opened their first Wal-Mart in 1962-in Rogers,Arkansas. Specializing in name brands at low prices,the chain of Wal-Mart stores sprang up across rural America. Inspired by workers he saw in a tennis ball factory in Korea,Walton introduced the famous"Wal-Mart Cheer"to employees, whom the company refers to as "associates."Walton's management style was popular with employees and helped to spur growth in the 1980s amidst complaints that the superstore was squelching traditional mom and pop stores.Sales grew to$26 billion by 1989,compared to$1 billion in 1980. By 1990,Wal-Mart was the largest U.S. { retailer,with 1,700 stores.One year later Wal-Mart entered the international market for the first time with the opening of a unit in Mexico City.Within five years,Wal-Mart would enter Puerto rico,Argentina,Brazil and China.Since then,Wal-Mart has built stores in Canada,Germany,Korea and the United Kingdom.Sam Walton remained active in managing the company as C.E.O. and president until 1988, and chairman until top: utal-Mart associates his death at the age of 74 in 1992. bottom: Wal-Mart executives Wal-Mart currently opens a new megastore every two business days and has expanded,on average,into one new country each year. In 2000,Wal-Mart launched a revamped ecommerce site,but it remains to be seen whether its brick and mortar success will translate into Internet sales. Some analysts think that the aggressive strategy to place large stores in underserved areas that has served Wal-Mart so well may not translate to the online PBS - STORE WARS: Wal-Mart Business Practices 4/29/2003 " STOREKQJ�,PO f, WHEN A �THE STORY Business Practices Pages: 1. 1 z 4 BIG SORE •History I People are surprised that Wal- Mart would even want to locate "facts a store at Ashland, with• Business another one 1.0 miles away' But ¢'�' �' ano Practices that's part of the Wal-Mart saturation strategy.They place t SMALL TOWN their stores so close together that they become their own 1 SPRAWL ' competition. Once everybody else is wiped out, then they're TitLKf3ACK free to thin out their stores. Wal-Mart has 390 empty stores THE FILM .=, on the market today.This is a 4 RESt URGES Wal-Mart lawyer Jay Weinberg at Ashland company that has changed town council meeting stores as casually as you and I 4 FOR TEACHERS change shoes. ite.fa.p Empty Boxes -Al Norman, Sprawl-Busters roa¢ca�t_ .4.h.. dule. Wel-Mart stores are often the size of four or five football fields-huge in scale compared to many of the small communities that they neighbor.Criticized for deserting stores that under-perform,Wal-Mart has left behind more than 25 million square feet of unoccupied space across the country (May,2000).The company claims it tries to sell these properties, but the only potential buyers are other big retailers,and Wal-Mart will not sell real estate to its competitors. In one Kentucky town,an empty Wal-Mart was torn down at the taxpayers'expense. Censorship With its roots in the Southern Christian heartland,Wal-Mart ana CD believes that being a"family"store is the key to their mass � Cover vveerr appeal.They refuse to carry CDs with cover art or lyrics Co deemed overtly sexual or dealing with topics such as abortion, homosexuality or Satanism.While Wal-Mart is the world's largest CD retailer,and in some regions the only place in town to purchase music entertainment products represent only a fraction of their business.However,it is a different story for recording artists.Because Wal-Mart reaps about 10 percent of the total domestic musi KQEDO) EM MI TORE .THE STORY Business Practices Pages: 1 2 t BIG STORE �» �� t �r ,• r - � n • History K Y ✓ •Facts r Practices -au v.` t SMALL TOWN < SPRAWL Wal-Mart employees at grand opening celebration TALKBACK Wal-Mart employs more people than any other company in the United States + THE FILMoutside of the Federal government,yet the majority of its em,pioyees with children live below the poverty line."Buy American"banners are prominently placed i F ESOURCES throughout its stores;however, the majority of its goods are made outside the U.S. and often in sweatshops.Critics believe that Wal-Mart opens stores to saturate the A FOR TEACHERS marketplace and clear out the competition,then closes the stores and leaves them sitting empty. Freedom of speech issues also come into play, Musicians are at the $ite-Ma,p._ mercy of Wal-Mart's stringent content rules,forcing many to create"sanitized" Broadc.ast Schedule versions of their albums specifically for the discount chain. The sentiment behind Wal-Mart founder Sam Walton's promise of a"better life for all`belies questionable business practices-many that have been challenged by employees, unions,environmentalists,recording artists and human rights organizations. Working for Wal-Mart Forbes magazine,polling business executives(not employees)has ranked Wal-Mart among the best 100 corporations to work for.Yet the employees on average take home pay of under$250 a week.The salary for full- time employees(called"associates")is$6 to$7.50 an hour for 28-40 hours a week,which is typical in the discount retail industry.This pay scale places employees with families below the poverty line,with the majority of employees'children qualifying for free lunch at school. When closely examined,this amounts to a form of corporate welfare,as the taxpayer subsidizes the low salaries.One-third are part-time employees-limited to less than 28 hours of work per week-and are not eligible for benefits, The company is staunchly anti-union, New employees are shown videotapes explaining that instead of unionizing, they benefit from the open door policy, allowing them to take their complaints beyond the supervisors to higher management,When the United Food and Commercial Workers tried to organize workers across the country, labor experts were brought In for"coaching sessions"with personnel who support unionization.Employees complained that these were intimidation sessions.Many such complaints are currently on file with the National Labor Relations Board. Whereas Wal-Mart employees start at the same salary as unionized employees in similar lines of work,they make 25 percent less than their unionized counterparts after two years at the job.The rapid turnover-70 percent of employees leave within the first year-is attributed to a lack of recognition and inadequate pay,according to a local workplace laws and that there is no illegal child labor or forced labor.Wal- Mart also works with independent monitoring firms to randomly inspect these factories to help ensure compliance. In fact,we conduct more than 200 factory inspections each week to ensure these facilities are being run legally and ethically. Viewa_chart profiling Wal-Mart and other U.S. companies`working conditions in Chinese factories. Story I Small Towns j,Riq.5Lorqa I rawl Taikback{ ilrrr i Resources y For Teachers ITVS The following 1501 communities have either voted to reject a big-box retail development at least once,or pressured the developer to withdraw. (May,2001) Chandler,AZ Lake in the Hills, IL Olivette, MO Lower Gwynned, PA Gilbert, AZ Wheaton, IL Rock Hill, MO Milford, PA Glendale, AZ New Albany, IN Warsaw, MO Mount Joy, PA Mesa, AZ Manhattan, KS Lincoln, NB Warwick, PA Phoenix, AZ Overland Park, KS Asheville, NC West Hempf€eld, PA Tucson, AZ Wichita, KS Durham, NC Barranquitas, PR Eureka, CA Fort Wright, KY Hickory, NC Utuado, PR Grass Valley, CA Henderson, KY Hailey, ID Claremont, NH Middletown, RI North Auburn,CA Evergreen Park, IL Peterboro, NH Clemson, SC San Juan Capistrano, CA Lake in the Hills, IL Stratham' NH Arlington,TX Santa Rosa, CA Wheaton,IL Walpole, NH Cooleyville,TX Santa Maria, CA New Albany, IN Deptford, NJ Fort Worth,TX Simi Valley, CA Manhattan,KS Englewood, NJ Kennedale,TX S. San Franisco,CA Overland Park, KS Hamilton, NJ Murphy, TX Yucaipa, CA Wichita, KS Manalapan, NJ R€chardson, TX Colchester,CT Fort Wright, KY Albuquerque, NM Layton, UT Plainville, CT Henderson, KY Tijeras, NM Taylorsville, UT Orange,CT Barnstable, MA Reno, NV Accomac, VA New Milford,CT Billerica, MA East Aurora, NY Ashland,VA Old Saybrook,CT Boxboro, MA Aurora, NY Charlottesville, VA Tolland, CT Braintree, MA Buffalo, NY Fredericksburg,VA Fort Collins,CO Easthampton, MA Cazenovia, NY Roanoke,VA Jefferson County, CO Greenfield, MA Hornell, NY Warrenton, VA Silverthorne, CO Lee, MA Hyde Park, NY Williamsburg, VA Woodland Park,CO Northboro, MA Ithaca, NY Gig Harbor, WA Rehobeth, DE Plymouth, MA Lake Placid, NY Port Townsend, WA Bonita Springs, FL Reading, MA Leeds, NY Brookfield, WI Clermont, FL Saugus, MA New Paltz, NY Menomonee Falls, WI Hallandale, FL Somerset, MA North Greenbush, NY Racine, WI Lake Forest, FL Westford, MA New Rochelle, NY Waukesha, WI Naples,FL Yarmouth, MA Saranac Lake, NY St. Albans,VT St. Petersburg, FL Accokeek, MD Beavercreek,OH St,Johnsbury,VT Temple Terrace, FL Gaithersburg, MD Broadview Hts. OH Willison, VT Atlanta, GA Kent Island, MD Highland Hts, OH Brampton, ONT Athens, GA Rockland, ME Lorain, OH Guelph, ONT Athens, GA Bangor, ME North Olmstead, OH Oakville, ONT Hawaii Kai, HI Wells, ME Ottawa, OH Waterloo, ONT Mason City, IA Fenton, MI Strongsville, OH Surrey, BC Halley, ID Buffalo, MN Yellow Springs, OH Park Royal, BC Evergreen Park, IL Burnsville, MN Westlake, OH PBS - STORE WARS: Sweatshop Profiles 412912(}03 NAN Company/Label Factory in China Wages Per Hour Hours Per Week Conditions Wal-Mart/Kathie Lee Liang Shi Handbag Factory$0.13 to$0.23 60-70;10-hr shifts No factory fire exits;dirty,cramped dorms.1 handbags 6-7 days a week to a room;for 70 hours a week,warehouse workers earn$3.44;no benefits;no legal we contract;workers have never heard of a Coc of Conduct Wei-Mart/Kafhle Lee Ya Li Handbag,Ltd. $0.16 to$0.28 60;plus overtime up to 16- Forced overtime-stiff fines for refusal;overtir handbags hour shifts premium of 2 112 cents an hour;some work( not paid 3-4 months;12 to a dorm room;no benefits,no work contract;never heard of a Code of Conduct Wal-Mart/Kathie Lee Li Wen Factory $0.20 to$0.35 84;12-hour shifts 7 days a Forced overtime,severe fines for refusal to week;mandatory 24-hour comply;no benefits,no overtime rate;no fir( shifts during rush times exits in dormitories;no work contract;worke have never heard of a Code of Conduct Wal-Mart Tianjin Yuhua Garment $0.23 60 Wal-Mart is putting out of this factory and ott Factory large publicly owned plants in the north to relocate its work to unregulated lower-wage privately owned sweatshops in the south of China Ann Taylor and Preview Kang Yi Fashion $0.14 96;7 days a week Workers have never heard of a Code of Manufacturers 7 a.m.to midnight Conduct;6 to 10 workers in dorm rooms Ralph Lauren,Ellen Iris Fashions $0.20 72-80,12-to-15 hour shifts; No union;workers paid a$0.06 an hour Tracy/Linda Allard 6 days a week premium for overtime;paid$0.02 for each si collar sewn Esprit Label You Li Fashion Factory $0.13 93;7:30 a.m.to midnight;7 No overtime pay;no benefits;sometimes (Esprit Group) days a week employees need to work 24-hour shifts;6 to people to a dorm room;dorm is dark and dir workers afraid;under constant surveillance; never heard of a corporate Code of Conduct Liz Claiborne and Shanghai Shirt 2d Factory $0.25 66;8 a.m.to 8 p.m.;6 days Employees fined if they don't work overtime; Bugle Boy a week union Liz Claiborne Shanghai Jiang District Silk$0.28 60-70;11.5-hour shift;6 Fashions Ltd, _ days a week J.C.Penney Zhong Mei Garment $0.18 78;11-hour shifts;7 days a No union;no benefits;workers have never week heard of J.C.Penney Corporate Code of Conduct Kmart Shanghai No.4 Shirt $4.28 70 Factory Cherokee Jeans Maiming Garment Factory $0.24 60-70 No benefits;workers have never heard of monitoring;8 to a dorm room Sears Tianjin Beifeng $0.28 60 Sears is pulling out to relocate its production Garment Factory lower-wage,unregulated sweatshops in the south Structure/ Aoda Garment Factory $0.32 70 No union;6 workers to a dorm room The Limited Nike Athletic Shoes Welico Factory $0.16 77-84;11 -to-12 hour Workers fined if they refuse to work overtim( shifts;7 days a week overtime rate not paid;hour shifts;most had httpJiwww.pbs.org/storewars/sweatshops.html page I of PBS - STORE WARS; Sweatshop Profiles 4/29/2003 legal contract;humiliation,screaming,some corporal punishment;arbitrary fining of pregnant women and older{25 years old an( up)women;fines if talking at work; approximately 10 children in the sewing section,most workers have never heard of Nike's Code of Conduct Nike and Adidas Yue Yuen Factory $0.15 60-84 Forced overtime,no overtime premium paid; Athletic Shoes excessive noise pollution,fumes in the facto no worker had heard of Nike or Adidas Corporate Code of Conduct Adidas Garments Tung Tat Garment $0.22 75-87.5;12.5-hour Shifts;6 Employees fired if latetrestinglfound talking; Factory or 7 days a week forced morning calisthenics;8 workers to a dorm room Source:"Company Profties/Working Conditions:Factories in China Producing Goods for Export to the U.S.," "Made in China:Behind the Label,,.Charles Kemaghan of the National Labor Committee,March 1998.Wages are in U.S.dollars. http.//www.pbs.org/storewars/sweatshops.html page 2 of 2 IN ' alifis t #-- AFL-CIO i `s i f. i i Council AB 226 (Vargas and Koretz) Banning Dead Peasant Insurance Purpose Employers are allowed to purchase life Employers benefit not only from the insurance for their workers and name death of the employee under COLI themselves as the beneficiaries. Greedy policies, but also benefit by borrowing corporate executives have used against the policies, with interest paid insurance benefits as a way to shield being tax deductible. themselves from taxes and some have used it to fund executive severance and Better than Gold. According to articles bonus packages. This bill would prohibit in The Houston Chronicle and The Watt the corporate purchase of "dead Street Journal (WSJ), at least 100 large peasant insurance." U.S. corporations boost their profits by taking advantage of the tax-shelter Background features of this life insurance. Many large employers are engaged in Corporations also earn tax-free the financial practice of taking out life investment income on these policies as insurance policies on thousands of their they increase in value. The insurance industries market COLI policies as an rank-and-file workers. These policies "attractive, off-the-balance-sheet „ , called by the industry corporate- asset." According to a February 19, owned life insurance" (COLI), but 2003, WSJ article, COLI cost taxpayers commonly known as 'Dead Peasant' insurance, are entirely separate from $1.9 billion in cost revenue each year on a federal basis. This is more than what it the life insurance many employers provide to workers as part of their costs #o provide tax deductions for interest paid on student loans. benefits. `Dead Peasant' policies list the company as the beneficiary, often without the knowledge of the workers or I# is often low-wage employees who are their families. covered under these policies, whose families are in the worst position to deal with the financial repercussions of the Throughout the past two decades, Toss of a wage earner. According to the employers have taken out insurance policies on top executives, middle April 28, 2002, SF Chronicle, Wal-Mart managers, and rank-and-file workers to Stores, Inc. took out COLI policies on protect the company from the untimely more than 350,000 of its workers in the death of key executives, to pay retiree 1990s. Wal-Mart has recently dropped medical benefits and executive its policies, but only after running into deferred-compensation programs. difficulties with the IRS and being sued by a victim. The IRS disallowed interest California Labor Federation, AFL-CIO • AS 226 Fact Shut + Pagel 0peiu3af1-cio(3l)sm deductions on the retailer's dead What this Bill Does peasant insurance - which no longer made the insurance a profitable financial tool. Vicki Rice is suing Wal- This bill prohibits an insurer from issuing or Mart in federal court in New Hampshire delivering a life insurance policy that is after the company made $300,000 off purchased by a California employer, the death of her husband, a Wal-Mart that designates the employer as the worker. Mrs. Rice and her two children beneficiary of the policy, and that received no proceeds. insures the life of a California resident who is the employer's current or former Millions of corporate serfs have policies employee. It applies only to non- placed on their lives by fortune 500 exempt employees. It provides that magnates. Other examples of policies prohibited by the bill that are companies cited by the April 19, 2002, purchased on or after the effective Wail Street Journal, holding COLI date of the bili are void. policies on their employees include: • Nestle USA - 18,000 workers Policies purchased prior to January 1, covered 2004 are permitted to remain in effect • Pitney Bowes - 23,000 workers until the earlier of January 1, 2005, or the covered next policy renewal date, at which time • Proctor and Gamble - 15,000 they would become void. workers covered • Enron, American Electrical Power, Support AT&T, GTE, Basset furniture, Dow Chemicals, Diamond Shamrock, California Labor federation, AFL-CIO Olin, PPG Industries, Trans World (Sponsor) Entertainment, Winn-Dixie and Wait Disney. Contacts This practice, although legal in most states including California, is unjust and Peter Cooper, CLF repulsive. It is the workers' families who (916) 444-3676 ext. 13 need the benefits of life insurance, not rich corporations or their executives. Ermalinda Ruiz, Assemblyman Juan According to a December 30, 2002, Vargas' Office(g 16) 319-2079 Wall Street Journal article on COLI, after the September 1 1 th terror attack, some the life insurance pay-outs went to employers and not to the victim's families. Hartford Insurance Company alone paid out more than $2 million to employers relating to the attacks of September I11h. COLI life insurance covers death in the event of war as well, which, depending on the number of insured American lives lost in a war with Iraq, could further highlight this perverse tool of corporate finance. California labor Federation, AFL-CIO • AS 226 Fact Sheet Page 2 0peiu3of1-do(31)sm AMENDED IN ASSEMBLY MAY I, 2003 CALIFORNIA LEGISLATURE--2003-04 REGULAR SESSION ASSEMBLY BILL No. 226 Introduced by Assembly Members Varus and Koret ,Koretz, and Lieber January 29, 2003 An act to amend Section 10 110.1 of, and to add Section 10 110.4 to, the Insurance Code,relating to life insurance. LEGISLATIVE COUNSEL"S DIGEST AB 226, as amended, Vargas. Life insurance: corporate-owned policies. Existing law generally regulates the issuance and terms of life insurance policies. Existing law provides that an. employer has an insurable interest in the life of an employee. This bill would prohibit an insurer from issuing or delivering a life insurance policy that is purchased by a California employer, that designates the employer as the beneficiary of the policy,and that insures the life of a California resident who is the employer's current or former employee and who meets other specified criteria. The bill would provide that policies prohibited by the bill that are purchased on or after the effective date of the bill are void. It would allow policies purchased prior to the effective date of the bill to remain in effect until the earl of kftuafy 1,2W6,er the next policy renewal date, at which time they would become void, unless they fall within a specified exception for single premium policies. Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no. 98 F AB 226 —2— The people of the State of California do enact as follows: 1 SECTION 1. Section 10110.1 of the Insurance Code is 2 amended to read: 3 10110.1. (a) An insurable interest, with reference to life and 4 disability insurance, is an interest based upon a reasonable 5 expectation of pecuniary advantage through the continued life, 6 health, or bodily safety of another person and consequent loss by 7 reason of that person's death or disability or a substantial interest 8 engendered by love and affection in the case of individuals closely 9 related by blood or law. 10 (b) An individual has an unlimited insurable interest in his or 1 I her own life, health, and bodily safety and may lawfully take out 12 a policy of insurance on his or her own life,health,or bodily safety 13 and have the policy made payable to whomsoever he or she 14 pleases, regardless of whether the beneficiary designated has an 15 insurable interest. 16 (c) Except as provided in Section 10110.4,an employer has an 17 insurable interest, as referred to in subdivision (a), in the life or 18 physical or mental ability of any of its directors, officers, or 19 employees or the directors, officers, or employees of any of its 20 subsidiaries or any other person whose death or physical or mental 21 disability might cause financial loss to the employer; or,pursuant 22 to any contractual arrangement with any shareholder concerning 23 the reacquisition of shares owned by the shareholder at the time of 24 his or her death or disability, on the life or physical or mental 25 ability of that shareholder for the purpose of carrying out the 26 contractual arrangement; or, pursuant to any contract obligating 27 the employer as part of compensation arrangements or pursuant to 28 a contract obligating the employer as guarantor or surety, on the 29 life of the principal obligor. The trustee of an employer or trustee 30 of a pension, welfare benefit plan, or trust established by an 31 employer providing life, health, disability, retirement, or similar 32 benefits to employees and retired employees of the employer or its 33 affiliates and acting in a fiduciary capacity with respect to those 34 employees,retired employees,or their dependents or beneficiaries 35 has an insurable interest in the lives of employees and retired 36 employees for whom those benefits are to be provided. The 37 employer shall obtain the written consent of the individual being 38 insured. 98 -3— AB .226 1 (d) An insurable interest shall be required to exist at the time the 2 contract of life or disability insurance becomes effective,but need 3 not exist at the time the loss occurs. 4 (e) Any contract of life or disability insurance procured or 5 caused to be procured upon another individual is void unless the 6 person applying for the insurance has an insurable interest in the 7 individual insured at the time of the application. 8 (f) Notwithstanding subdivisions(a),(d),and(e), a charitable 9 organization that meets the requirements of Section 214 or 23701d 10 of the Revenue and Taxation Code may effectuate life or disability 11 insurance on an insured who consents to the issuance of that 12 insurance. 13 (g) This section shall not be interpreted to define all instances 14 in which an insurable interest exists. 15 SEC. 2. Section 10110.4 is added to the Insurance Code, to 16 read. 17 10110.4. (a) Except as allowed in subdivision(c), an insurer 18 may not issue or deliver a corporate-owned life insurance policy. 19 (b) "Corporate-owned life insurance policy" means a life 20 insurance policy that is purchased by a California employer, that 21 designates the employer as the beneficiary of the policy, and that 22 insures the life of a California resident who is a current or former 23 employee of the employer. 24 (c) This section does not apply to a policy insuring the life of 25 , or 26 27 , 2$ y 29 Rtly 1, 2002, as ameftded. 30 31 , 323 y or the 34 an 35 exempt employee. An exempt employee is art administrative, 36 executive, or professional employee who is exempt under Section 37 SIS of the Labor Code and the regulations adopted pursuant 38 thereto. 9s AB 226 —4- 1 --4--1 (d) Except as provided in subdivision (), it is a violation of 2 public policy for a California employer to purchase or hold a 3 corporate-owned life insurance policy. 4 (4� 5 (e) (1) A corporate-owned life insurance policy purchased on 6 or after the effective date of this section is void.-A ? (2) Except as provided in subdivision 69, a corporate-owned 8 life insurance policy purchased prior to the effective date of this 9 section shall became void on the ,or th 10 next policy renewal date. I I (f) A single premium corporate-owned life insurance policy 12 purchased prior to the effective date of this section shall continue 13 in force after the effective date of this section. However an 14 employer who has purchased and holds a single premium 15 corporate-owned life insurance policy shall disclose in writing to 16 the current or former employee whose life is insured by the policy, 17 within 90 days of the effective date of this section, all of the 18 following information: 19 (1) The existence of the corporate-owned life insurance policy 20 on the life of the employee, 21 (2) The identity of the insurer under the policy. 22 (3) The benefit amount under the policy. 23 (4) The name of the beneficiary under the policy. O 98 x r� V � � . to 1916 Ig ' 5.1 ip -- • ` cry� rel 0, Ito !a JD0 toC"C SD J!, � 0 e 5 a i u C1 E9 Xe ERA F OW - Ssr Zo 1 � fit''•' � a�r L�'r a< �'+� 1+ .,a- "�g � a c a} �` � I:stt wy NNW 7, � � � � z. � k t � � ., i ✓ts" ���� 3II L jM��`L Y 'i h�' n���,. a Y}�' .: !z' k,k y''1.'v} 1�.✓ � ✓.,i 5` ,Y.�:°:� T? K ,�15. L�' � �. Hyl 14, 01- Mme' w IN .............. ....................................................._............. - NOW Declares tial-Mart A Merchant of Shame Page 1 of 3 � �= N onai NQW T€mes >> Fall 2002 >> Article NOW Declares Wal-Mart A Merchant of Shame by Cristina Bull, Field Organizer/Volunteer Coordinator At NOW's annual conference on June 22, President Kim Gandy announced our latest Merchant of Shame in the Women-Friendly Workplace campaign: Wal-Mart. NOW took this step after receiving numerous complaints regarding workplace environment and employment practices at Wal-Mart stores, distribution centers, and regional and corporate offices. The extensive public record on cases filed against Wal-Mart, currently the most sued corporation in the United States, reveals disturbing allegations. These include sex discrimination in pay, promotion, and compensation, wage abuse, exclusion of contraceptive coverage in insurance plans, violations of child labor laws and the Americans with Disabilities Act, and discrimination on the basis of sexual orientation. Employees have also filed cases charging management with discouraging workers from unionizing, firing pro- union workers and eliminating jobs once workers joined unions. In addition, Waft-Mart refuses to dispense Preven, the "morning-after pill," in effect imposing a right-wing 'e political agenda on all of its shoppers. "Imagine telling a rape victim that the only pharmacy in town won't fill her prescription for emergency contraception," said Gandy. NOW is mounting a public pressure campaign to effect change. This is Wal-Mart's opportunity to be an z. . example of a good corporate citizen. "We're shining a spotlight on Wal-Mart's workplace abuses," Gandy said. lace From Peet to right: Gandy President Jahn sweeney, "The women and men of Wal-Mart deserve a workplace NOW President Kim Gandy and NOW Executive Vice that respects their rights." President Karen Johnson listen to Raquel Salazar,a former garment worker from El Salvador,speak at the For the top corporation on the Fortune 5013 List, Wal- Sept. 28 Wal-Mart action to Alexandria,Va. Mart boasts some truly embarrassing statistics. Women comprise 72 percent of Wal-Mart's hourly workers, but are only one-third of Its mangers and supervisors. Only 38 percent of Wal-Mart employees participate in its health insurance plan---the national average is 60 percent—because at Wal-Mart the premiums and deductibles are prohibitively high. This leaves six out of every ten employees (more than 425,000 Wal-Mart employees) with no company-provided health Insurance. Two-thirds of them are women. The complaints against Wal-Mart come from across the nation. Current and former employees in California are suing Wal-Mart for sex discrimination In pay, promotion, and compensation. This will be the country's largest sex discrimination suit against a private employer if it Is granted class-action status. In Washington state, former Wal-Mart employees have joined with employees from at least 12 other states to sue the company for not paying overtime. The former employees allege that they were http://wwty.now.org/nnt/fall-2002/Wahnart.html?printable 6/3/2003 NOW Declares Wal-Mart A Merchant of Shame Page 2 of 3 locked in the store for hours, without pay, while managers completed checks of every department. Workers say they compiled because of threats that they would be fired. In South Carolina, a I.0-year-old girl alleged being fondled by a store employee. When the woman and her daughter returned to the store to report the alleged assault, Wal-Mart's response was to give her mother a $25 gift certificate! The campaign launched on June 22 with a highly successful picket outside of a Wal-Mart in suburban Minneapolis. Over three hundred enthusiastic activists chanted, distributed information about NOW's latest merchant of shame and carried signs like "Always in Court, Always Wal-Mart." NOW activists all over the country participated in the Sept. 28 National day of Protest, making it another huge success in this ongoing fight. In an extraordinary act of commitment to economic justice and equal rights, activists made their voices heard at dozens of Wal-Marts across the country, handing out flyers and protesting workplace abuses. Chapters in larger cities like Philadelphia, Chicago, Syracuse, Boston, Portland and Alexandria, Va., as well as smaller towns such as Columbia, Mo., Colorado Springs, New Brighton, Pa., Portsmouth, N.N., and Morris County, N.J., brought attention to the issues at Wal-Mart parking lots and nearby sidewalks. In addition to these actions, activists are busy publicizing Wal-Mart's dismal record by writing opinion pieces and letters to the editors of their local newspapers. "NOW's Merchants of Shame are an important part of the Women-Friendly Workplace Campaign---a pro-active project demanding fair treatment for women workers," said Gandy. "NOW's campaign has already spurred Smith Barney, Mitsubishi Motors and other leading corporations to work toward creating truly women-friendly and family-friendly workplaces." "We ask every woman who has shopped at Wal-Mart, and every man who cares about fairness, to consider where they want their money to go, and what kind of business they want to support. This country's top employers need to get the picture that women-friendly workplaces aren't just good business, they're good for business," Gandy continues. "I hope Wal-Mart will look at this as an opportunity to do the right thing." Learn more about Wal-Mart and our Womea:�Fctita rkplace Camp online, or call 2072.628.8669 ext. 145 for more information. Hundreds of activists participated In a protest outside the local St. Paul,Minn.,Wal- Mart after NOW named the corporation Its latest Merchant of Shame.Photo by Lisa Bennett Copyright 1595-2003,All rights reserved. Permission granted for non-commercial use. National Organization for Women http://www.now.org/nnt/fall-2002/Walmart.html?printable 6/3/2003 Wal-Mart: The Facts Page l of 2 ' Wal-Mart: The Facts • The EEOC is suing Wa€-Mart over allegations of sexual harassment of female employees in Alabama. * • Nearly three-quarters of a million women work as "sales associates" in Wal-Mart stores. On average these women earn $6.10 per hour, or $12,688 per year if they are permitted to work full-time. This wage puts many of their families below the poverty level -- half even qualify for federal assistance under the food stamp program. ** • Current and former employees in California are suing Wal-Mart for sex discrimination in pay, promotion, and compensation. This will be the country's largest sex discrimination suit against a private employer if it is granted class-action status. * • Wal-Mart's health insurance plan excludes contraceptive coverage. A suit, which is seeking class action status, has been filed in Georgia regarding this exclusion. * • Women who make pants in EI Salvador earn 15 cents for each pair; Wal-Mart sells these pants for$16.95 in its U.S. stores. Also, contractors in El Salvador force workers to take pregnancy tests. ** • According to Brandeis University Professor Ellen I. Rosen, women in Central America who make clothes for Wal-Mart live in shacks lacking running water or plumbing while women In China live nine to twelve to a room in government-provided dormitories. Some of Wal-Mart's workers in the U.S. spend their nights In trucks of motel rooms without cooking facilities. ** • The Maine Department of Labor ordered Wal-Mart to pay the largest fine in state history for violating child labor laws. The Department of Labor discovered 1,436 child labor law infractions at twenty Wal-Mart chains. * • Lawsuits pertaining to Americans with Disabilities Act (ADA) violations have been filed In Missouri, Arizona, California, and Arkansas. * • Employees from Wisconsin, Michigan, Ohio, Washington, Illinois, Iowa, and West Virginia have sued Wal-Mart for underpaying its hourly workers. Employees from Missouri and Kansas have hied class-action suits alleging "acts of wage abuse." These acts include neglecting to pay workers overtime, preventing rest and lunch breaks, and forcing them to "work off the clock." • A former employee in New Jersey reported being harassed and fired after telling his boss that he was undergoing a sex change. He won the case, and Wal-Mart was ordered to pay him $2 million. • The National Labor Relations Board (NLRB) has filed suit against the New Castle, Pennsylvania Wal-Mart for unfair labor practices. It alleges that Wal-Mart illegally discouraged workers of the Tire and Lube Express department from joining a union. * • The NLRB also filed a suit against the Jacksonville, Texas Wal-Mart for unfair labor practices. It alleges that Wal-Mart threatened meat cutters, interrogated them regarding their union sympathies, and fired those who are pro-union. The United Food and Commercial Workers Union has filed a complaint with the NLRB alleging that two workers were fired because of their union organizing activities. * « Following a vote in favor of union representation by the butchers in Jacksonville, Texas, Wal- http://www.now.org/issues/Wfw/wm-facts.html?printable 6/3/2003 Wal-Mart: The Facts Page 2 of 2 Mart announced that meat cutting would end at 180 stores. . In 2000, Wal-Mart's assets totaled more than the Gds' of 155 of the 192 countries in the world, with annual sales of more than $137.6 billion. ** . In the video Behind the Labels: Garment Workers in U.S. Saipan, Wal-Mart is featured as one of the retailers which contract with "sweatshops" in Saipan for the manufacturing of garments sold in their stares. *Cu nt Lerai pevetagments Cgn ming Wal-Mari **Rosen, Ellen I., The Women Who Work for Wal-Mart Copyright 1955-2003,All rights reserved. Permission granted for non-commercial use. National Organization for Women (This was printed from http://www.now.org/issues/wfw/wm-facts.htmi) http://www.now.org/issues/wfw/wm-facts.html?printable 6/3/2003 Women's Enews: Wal-Mart Execs'Testimony Could Help Sex Bias Suit Pagel of 3 Wal-Mart Execs"Testimony Could Help Sex Bias Suit May 1, 2003 By Liza Featherstone, Women's Fnews Female plaintiffs in a major sex-discrimination class-action against Wal-Mart filed for class certification on Monday, before a San Francisco federal judge. [Depending on the outcome of a class certification hearing this summer, which will decide how many women can be included in the case, the suit could become the largest civil-rights class action In history. If the plaintiffs have their way, the class will include over 1.5 million women. One of the plaintiffs' lead lawyers, Joseph Sellers of Cohen, Milstein, Hausfeld and Toll, a law firm with offices in New York, Washington, D.C. and Seattle, says the pretrial testimony undercuts Wal- Mart's defense that the reports of sex discrimination were isolated incidents by renegade managers. Sellers says that the statements made under oath by Wal-Mart executives indicate that people running Wal-Mart have been aware of the company's "failure to promote women and they've done nothing about it." He adds the statements also show that sexism is a part of Wal-Mart's corporate culture, even "at the very highest levels." The lawsuit, !Jukes v. Wal-Mart, is named for lead plaintiff Betty Dukes, a 52-year-old African American woman who still works at Wal-Mart in Pittsburg, Calif. In the case, seven current and former employees are charging the nation's largest employer with discrimination In promotions, pay, training and hiring. A majority of the company's workers are women, but women fill only one-third of its management positions. The current plaintiffs, all of whom are from California, are supported by more than 104 detailed statements from women who worked in Wal-Mart stores in 30 states. Many women say Wal-Mart supervisors told them that men were paid more because they had families to support. Thomas Coughlin, chief executive officer of Wal-Mart Stores Inc. based in Bentonville, Ark., has also given testimony in the case. Questioned about diversity goals Wal-Mart sets for itself, Coughlin testified that he did not know what they were or whether the company was meeting them. In speeches to company managers, Coughlin has stressed the importance of winning the customer's trust. Plaintiffs' lawyer Joseph Sellers showed Coughlin handwritten notes for such a speech, in which, according to Sellers, the Coughlin had written that customers should feel as if they could trust Wal-Mart employees with "their wife and their wallet." Coughlin admitted those notes were his and that he gave this speech frequently. Sellers told Women's eNews he found Coughlin's use of the term "wife" revealing, as It suggested that he assumed he was speaking to a predominantly male group and because "it sure came across that you were trusting them with your chattel, your property." Personnel Chief Disavows Diversity Memos Coleman Peterson, executive vice president of Wal-Mart's "people division," as the company refers to its human resources department, has worked for the company since 1994. According to internal company memos obtained by the plaintiffs' lawyers, Peterson has, during his tenure, repeatedly let his Wal-Mart colleagues know that women are underrepresented in company management and offered suggestions on remedying the problem, including hiring a point-person to oversee diversity initiatives. In one memo, Peterson complained that Wal-Mart did not hold managers accountable for promoting more women and minority men. Under questioning from Sellers, Peterson distanced himself from the implied criticism in his statement, attributing it to a general spirit of perfectionism at the company. http://www.now.org/eNews/May2003/050103walmart.html?printable 51312003 Women's Enews: Wal-Mart Execs' Testimony Could Help Sex Bias Suit Page 2 of 3 j At Wal-Mart, he said, whatever the topic of conversation, the message sent by leadership is that "we can always do better." Pressed further, he said, "Part of my responsibility is to get everybody's attention," Sellers, referring to the statement in the memo, asked, "Well, was it a lie? Were you writing something that wasn't true?" Peterson answered, "Yes, I was." Minutes of Wal-Mart board meetings, provided to plaintiffs' lawyers, record that Peterson, on several occasions, reminded his colleagues that the company lagged far behind Its competitors in representation of women in management. He pointed out that, for example, Target, a competing retailer based in Minneapolis, 52 percent of managers are women. According to economist Marc Bendick, an expert witness hired by the plantiffs, 34 percent of the managers in Wal-Mart stores are women, while the company's major competitors boast 56.5 percent female management. Bendick, a partner in the private firm Bendick and Egan Economic Consultants, has analyzed employment data in more than 100 employment discrimination cases and has testified for both employees and companies. In April, Wal-Mart released competing analyses by its own experts, disputing those interpretations of its work-force statistics, maintaining, among other points, that women are promoted at Wal-Mart "at a rate that exceeds their rate of applying ... for those promotions," In the case, Wal-Mart has consistently argued in that competitors' numbers only look better because they count department managers, or supervisors who are paid by the hour, as managers, while Wal- Mart counts only salaried supervisors. Salaried managers earn significantly more money. A woman working as ars hourly department manager, for instance, makes on average $21,709 a year, while as an assistant manager--the lowest level of salaried management--she'd average $37,322. Salaried managers are also given much more responsibility. The majority of hourly supervisors are women, as are the majority of other hourly workers at Wal- Mart. Peterson claimed that when he raised the issue of female representation at meetings and cited other company's statistics, he always added this disclaimer about the hourly managers, but he was unable to explain why that disclaimer never appeared in the meetings' minutes, While Peterson repeatedly asserted that other large retailers count hourly supervisors as management, he was able to provide only a single example of a company that did this. Erratic Job Postings, Meetings at Strip Clubs The plaintiffs have also cited Wal-Mart's lack of systematic job posting as a barrier to women's advancement. Human resources experts agree that posting notices announcing open positions in places where employees can see them—break rooms, for example—tends to undermine favoritism and prejudice while promoting more fairness in a workplace. Peterson admits that posting salaried job openings leads to greater equality of opportunity, but also acknowledged that Wal-Mart doesn't enforce it in any systematic way, Asked about individual store managers' decisions not to post particular positions, he said "Frankly, it's not something I would look at or review." Nor, he added, would any of his staff in the "people division" monitor this. Some female managers have testified that business meetings with their male Wal-Mart colleagues have been held in strip clubs and Hooters restaurants, an Atlanta-based chain, in which the customers, 70 percent of whom are male, are waited on by attractive and scantily clad "Hooters Girls." (The motto on the company's Web site is "Men have different faces so you can tell them apart.") Coleman Peterson felt that strip club get-togethers on company time were not "something Wal-Mart culture would support and believe is okay." http://www.now.org/eNews/may2003/050103walmart.html?printable 6/3/2003 Women's Enews: Wal-Mart Execs' Testimony Could Help Sex Bias Suit Page 3 of 3 Asked about business meetings at footers, however, he reserved judgment. "It is conceivable in some small town that footers is kind of like the restaurant du jour, okay," he said, "and that it is viewed as one of the most elegant and really one of the best places to meet and eat." Wal-Mart has long required that employees be willing to relocate when promoted into management, a rule that has, according to plaintiffs, been a major barrier to women's advancement in the company. (In his autobiography, "Made in America: My Story," company founder Sam Walton acknowledged this problem.) A Resident Assistant program is intended to promote women and other employees who cannot relocate their families but wish to enter the ranks of management. When asked by Sellers about this program in a deposition, Wal-Mart boss Coughlin said he believed it was a dead end and hadn't helped to promote a single employee. Susan Phillips, international vice president of the Washington, D.C.-based United Food and Commercial Workers Union, and director of its Working Women's department, says If Wal-Mart doesn't start treating female workers better, female consumers may take notice. (The union has been trying for several years to organize Wal-Mart workers. No Wal-Mart workers currently belong to a union.) "Women spend about 90 percent of Consumer dollars," she says. The National {organization of Women last year gave its "Merchant of Sham-e" award to Wal-Mart and urges consumers to shun the company. Ellen Rosen, a Brandeis University professor of women's studies and author of"Making Sweatshops: The Globalization of the U.S. Apparel Industry" is now writing about Wal-Mart and female workers. She sees a connection between conditions in overseas factories where Wal-Mart clothing is made-- and where most of the workers are women--and those of women working in its U.S. stores. "To promote the bottom line at the home office," she says, Wal-Mart relies on "women workers, who are paid a 'women's wage.'This may be leading to a new kind of globally sanctioned gender discrimination." Giza Featherstone Is the author of"This Woman's Work: Poverty, Discrimination, and the Nati'on's Largest Private Employer,,"a bank about sex discrimination at Wal-Mart, which will be published by Basic Books In late 2004. Women`s Ens is a news service based in New York City. Copyright 1995-2003,All rights reserved. Permission granted for non-commercial use. National Organization for Women (This was printed from http://www.now.org/eNews/may2003/050103walmart.htmi) http://www.now.org/eNews/May2003/050103walmart.html?printable 6/3/2003 Always In Court, Always Wal-Mart: Legal Developments Page I of 2 - Always In Court; Always Wal-Mart: Legal Developments • In Georgia, a 22 year-old customer service manager, divorced mother of two, sues Wal-Mart over its health insurance plan which does not cover the cost of contraceptives. This violates federal regulations issued in 2000 by the EEOC which states that employers risk violating Title VII of the Civil Rights Act of 1964 if they fail to cover contraceptives but pay for other prescription drugs. The suit seeks class action status. • In California, Wal-Mart is sued for sex discrimination, allegedly showing inequality in women's pay, compensation, and promotion. Seventy-two percent of Wal-Mart's hourly workers are women, but only one-third of the managers and supervisors are women. • In Alabama, the EEOC sues Wal-Mart for violating a federal civil rights law when it failed to prevent the sexual harassment of women by a co-worker at the Mobile, Alabama store. • In Washington, former Wal-Mart employees have joined with employees from at least 12 other states to sue Wal-Mart for not paying overtime. Wal-Mart is accused of locking workers in the store for hours, without pay, until managers had completed checks of every department. Workers say they complied because of threats that they would be fired. • In San Francisco six women filed a sex discrimination law suit against Wal-Mart. Wal-Mart filed a motion to get the case moved to Arkansas because they claim the case "has no merit, and that even if it did, it should be heard in the court where Wal-Mart is headquartered." This would make it harder on the women who filed the suit, and move the case to an area where residents and judges most likely hold Wal-Mart stock. • In Minnesota three black shoppers sued Wal-Mart after they were mistaken for robbers and arrested outside the store after making their purchase. They were handcuffed, forced on the ground, and searched for weapons. An employee had called 911 to report "suspicious black males." The three men were totally confused and feared for their lives. • In Arixona, Wal-Mart was fined $250,000 for violating the AGA after denying AGA rights to deaf applicants. • In Texas, meat cutters voted to create Wal-Mart's first unionized U.S. labor group. The NLRB filed a lawsuit against Wal-Mart for threatening and firing members. Wal-Mart then started selling prepackaged meats so as to eliminate the need for in-store meat cutters. • In California, Wal-Mart was caught in a violation of the AGA for pre-screening applicants. Wal- Mart was forced to pay $6.8 million to settle the lawsuit which was filed by the EEOC. • In Arizona, a woman with diabetes was fired from her job. The EEOC sued Wal-Mart for violating the ADA by failing to provide reasonable accommodations for her. The inconvenience caused Wal-Mart to send her on forced leave, and then they fired her. She says she was harassed by supervisors about her disability. • In Missouri and Kansas, two class-action lawsuits were filed against Wal-Mart for underpaying hourly workers. Wal-Mart allegedly forced employees to work off the clock, failed to pay them overtime wages, and prevented them from taking rest and lunch breaks. Wal-Mart allegedly encouraged its managers to keep costs down by convincing workers not to record all their time. • In Milwaukee, a class action suit was filed against Wal-Mart for allegedly forcing its employees, using threats, to work without pay. Three employees say they were denied meal http://www.now.org/issues/wfw/wm-legal.htrnl?printable 5/3/2403 Always In Court, Always Wal-Mart: Legal Developments Page 2 of 2 and rest periods. . In 'Texas, Wal-Mart conceded: "We should have offered a memo on risks to shoppers." Nine suits were filed against Wal-Mart involving attacks in Wal-Mart parking lots in Beaumont, Houston and surrounding areas. • In Pennsylvania, Tire and Lube Express workers wanted to unionize and were Illegally discouraged by Wal-Mart from doing so. The NLRB filed a suit against Wal-Mart for unfair labor practices. Source: Current Legal DeveloDments Cin er ing Wal-mrd, 2001. Copyright 1995-2003,All rights reserved. Permission granted for non-commercial use. National Organization for Women (This was printed from http://www.now.org/issues/wfw/wm-legal.htmi) http://www.now.org/issues/wfw/wm-legal.html?printable 6/3/2003