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Community & Economic Impact Review

States and municipalities have long evaluated the impact that large retail development projects may have on such things as traffic and the environment.  Some are now adopting policies that require that the economic and fiscal impact of these developments be considered as well. (Economic impacts include the effect on local businesses, jobs, and wages.  Fiscal impact refers to the impact on tax revenue and government costs.)

These policies usually have two key components:

• They require that an independent study of the economic and fiscal impact of the retail development be conducted by a qualified analyst selected by the municipality (or other reviewing authority) and paid by a fee assessed to the developer.

• They establish a standard (or multiple standards) that the project must meet in order to be approved. The policy may say, for example, that the planning board (or city council or regional planning commission) may approve the development only if it concludes, based on the data provided by the study and other evidence submitted, that the project will not have an undue adverse impact or that the benefits of the development will outweigh the costs.

Typically, these reviews are triggered when the proposed development exceeds a certain size. For example, the law may apply to all projects involving retail stores larger than 50,000 square feet or those that will generate more than 500 vehicle trips per day.  (See How Big is Too Big for a visual illustration of the size of different retail stores.)

Most of these laws spell out the types of impacts that the study must analyze and that officials must consider in determining whether to grant approval.  The list may include such things as the impact that the development will have on existing businesses, the vitality of the downtown, employment (jobs gained versus jobs lost), wages, tax revenue, and municipal costs.  Some laws also include community impacts, such historic and scenic resources, and environmental impacts. 

The advantage of an independent study is that it ensures that the city (or regional planning board) has objective information about the economic impacts of the project.  In the absence of such a study, the only information that local officials are likely to have are the rosy, and often misleading, job and tax revenue projections provided by the developer. 

To learn more about how these studies are conducted see A Guide to Retail Impact Analysis.  We’ve also posted some examples of actual impact studies of large-scale retail proposals in Bennington, VT; Gunnison, CO; Northneck, VA; and St. Albans, VT.

Most of these policies also stipulate that a public hearing must be held in order to give citizens an opportunity to testify on the findings of the study and to submit additional evidence regarding the impacts of the proposed development.

Below are examples of local, regional, and statewide economic impact review laws.

Local policies are those enacted by cities and towns.  Reviews conducted under these laws generally only consider the impact of the project on the local community.

Large retail developments often have impacts that are felt far beyond the borders of the city in which they are located, however.  In most of the country, there is no process for evaluating the regionwide costs and benefits of large-scale retail construction. Authority to approve or deny a development rests entirely with the host town, and any costs that fall on adjacent communities, such as loss of businesses and higher road maintenance costs, are generally not considered.

To remedy this, neighboring communities in a handful of regions have worked together to enact regional policies.  A good example is the Cape Cod Commission, established in 1990 by the fourteen towns that make up Cape Cod, Massachusetts.  Composed of representatives of each of the towns, the commission is charged with reviewing all development projects that are large enough to impact multiple towns.  The commission's review of these projects is in addition to any review and permitting required by the host municipality.

A significant advantage of implementing a regional approach is that it ensures that towns will not feel pressure to approve a harmful project out of fear that, if they reject it, the  development will simply locate in a adjacent town, generating many of the same impacts but without any local tax revenue or oversight. Regional cooperation offers a solution to this problem.

A growing number of states are considering and enacting statewide policies that make economic and fiscal impact studies mandatory for large-scale development proposed anywhere in the state.  Maine's Informed Growth Act, for example, stipulates that large retail projects must undergo an economic impact analysis and grants cities the authority to reject those developments that they determine will have an adverse impact.

Some of these proposed and enacted laws, including Maine's, require the municipality to evaluate and consider the impacts on the entire region and invite officials of neighboring towns to submit testimony, but still leave the final decision solely in the hands of the host community. 

Another approach, taken by Vermont, is to establish regional planning boards throughout the state that review and decide whether to approve large developments. These boards are composed of representatives from all of the towns in each region. 

RULES:

LOCAL:

• Community and Economic Impact Review - Benicia, California
  In June 2007, Benicia, a town of 27,000 people located about 40 miles northeast of San Francisco, enacted the following law, which stipulates that retail stores larger than 20,000 square feet will not be approved unless they meet half a dozen criteria.
• Community and Economic Impact Review - Bennington, Vermont [repealed]
  In January 2005, the town of Bennington, home to 9,200 people and located in the southwest corner of Vermont, enacted an ordinance that bans stores over 75,000 square feet and requires proposals for stores over 30,000 square feet to submit to a community impact review conducted by an independent consultant chosen by the city.  The law was repealed four months later in a referendum financed by Wal-Mart and an Ohio-based shopping center developer.
• Community and Economic Impact Review - Brattleboro, Vermont
  In October 2006, the select board of Brattleboro, Vermont, approved the following ordinance.  It requires all proposals for retail stores in excess of 65,000 square feet to undergo an economic and community impact analysis. 
• Community and Economic Impact Review - Carbondale, Colorado

  In November 2003, after three years of debate and a voter referendum that demonstrated strong opposition to sprawling shopping centers, Carbondale, Colorado, enacted an ordinance that requires the town's planning staff and Board of Trustees to weigh the community and fiscal impacts of a large-scale retail proposal before deciding whether to approve or deny the project.
• Community and Economic Impact Review - Cranston, Rhode Island [proposed]

  Among the most comprehensive of the municipal impact review laws, this proposed ordinance in Cranston, Rhode Island, would apply to all development projects involving retail stores of 75,000 square feet or more. It stipulates that these projects must undergo an independent economic impact analysis.
• Community and Economic Impact Review - Greenfield, Massachusetts

  Greenfield, Massachusetts requires new retail stores to undergo a special review if they exceed 20,000 square feet or generate more than 500 vehicle trips per day. Impact studies are paid for by the developer and consider the project's impact on traffic, municipal services, public revenue, the environment, the local economy, and the community. The community component includes potential impact on historic and scenic sites, the character of the town, and the downtown business district.
• Community and Economic Impact Review - Homer, Alaska

  After two years of consideration---including a review by a city council-appointed task force, numerous public hearings, and a voter referendum---the city of Homer, Alaska, has capped the size of retail stores at 25,000-45,000 square feet and adopted a community impact review process for proposed retail developments over 15,000 square feet.
• Community and Economic Impact Review - Los Angeles, California
  In October 2004, after months of debate on the consequences of big-box development, the Los Angeles City Council enacted a law that requires proposed superstores to pass an economic impact review in order to obtain approval to build. The law applies to retail stores larger than 100,000 square feet that devote more than 10 percent of their floor space to food and that are seeking to locate in economic assistance zones.
• Community and Economic Impact Review - Middletown, Rhode Island

  In determining whether to approve or deny proposals for large-scale development, the Middletown Planning Board evaluates the project's impact on traffic, municipal services, the environment, and the character of the community. The town requires that developers submit detailed impact statements and pay a fee to cover the town's cost of hiring consultants to review the impact statements and offer independent analyses. For shopping centers and other commercial development, the fee is $100 per 1,000 square feet of gross floor space.
• Community and Economic Impact Review - Mt. Shasta, California

  In March 2005, the City Council of Mount Shasta, California, voted 3-2 to enact the following ordinance, which caps stores at 50,000 square feet and requires proposals for stores over 20,000 square feet to undergo an economic impact review and obtain a conditional use permit.
• Community and Economic Impact Review - Santa Cruz, California

  In October 2000, the Santa Cruz City Council voted unanimously to adopt an ordinance requiring new retail stores over 16,000 square feet to obtain a special permit. Only stores that add to a balanced and diverse mix of downtown businesses are allowed. "The continued establishment of large square footage retail businesses in the Downtown, if not monitored and regulated, may frustrate the Downtown Recover Plan goal of establishing and maintaining a diverse retail base with a 'unique retailing personality,'" the ordinance states.
• Community and Economic Impact Review - Westbrook, Maine

  In 2005, following a heated debate over a proposed big-box store, the town of Westbrook, Maine, adopted a zoning provision that require retail projects of 10 acres or more to undergo an economic impact analysis.

REGIONAL:

• Community and Economic Impact Review - Cape Code Commission
  The Cape Cod Commission was established in 1990 by voters in the 14 towns that constitute Cape Cod.  Concerned about the impact of sprawl on the character of the region, they endorsed the creation of this regional planning body.  Under the law, all proposals for new construction larger than 10,000 square feet and changes of use for commercial sites that exceed 40,000 square feet must undergo review and win approval from the commission. The review process involves a public hearing and focuses on the project's impact on the environment, traffic, community character, and the local economy.

STATEWIDE:

• Community and Economic Impact Review - Maine - Informed Growth Act

  Enacted in June 2007, this law requires a comprehensive economic impact study for proposed retail stores larger than 75,000 square feet (roughly half the size of a typical Target or Home Depot), and stipulates that such a store may be approved only if the city concludes, based on the study and evidence submitted at a public hearing, that the development would not have an undue adverse impact on the community and surrounding region. 
• Community and Economic Impact Review - California [proposed]
  In August 2006, the California legislature passed legislation requiring cities to commission an economic impact study prior to approving any store larger than 100,000 square feet.  The bill, however, was vetoed by Gov. Schwarzenegger.  Had it been enacted, cities would have been required to assess the impact of a proposed big-box store on existing businesses, jobs, wages, retail vacancy rates, the cost of public services, and the number of vehicle miles consumers in the region travel for shopping.

• Community and Economic Impact Review - New Jersey [proposed]
  This bill would require cities to conduct a regional economic impact analysis before approving stores larger than 130,000 square feet that contain more than 25,000 stockkeeping units (i.e., items for sale) and derive more than 10 percent of their total sales from the sale of nontaxable merchandise (i.e., groceries). The analysis must weigh the impacts not only on the host municipality, but also on adjacent municipalities and the county. The bill also gives neighboring municipalities a voice in the process.

• Community and Economic Impact Review - Oregon [proposed]

  This bill stipulates that cities and counties may not approve proposals for retail stores larger than 100,000 square feet until an economic impact study has been completed and a public hearing on the study's findings has been held.

• Community and Economic Impact Review - Vermont — Act 250
  Enacted in 1970, Act 250 requires developments of regional impact to obtain approval from both the host town and one of nine regional commissions. In most cases, commercial developments require Act 250 review when they encompass ten or more acres of land. Act 250 approval depends on meeting several criteria in the law that focus on the project's environmental and fiscal impact.
• Community and Economic Impact Review - Vermont [proposed]

  This bill was introduced in 2006 and passed the Senate, but not the House. It would have established a statewide store size cap of 50,000 square feet.  Cities and towns would have been allowed to lower or raise the size limit within their jurisdictions provided that they adopt comprehensive plan provisions that address the impacts of big-box retail; limit big-box stores to designated areas; establish design standards; and require an economic impact review for projects over 30,000 square feet. (This legislation differs from Act 250 above in that it applies only to retail development, affects projects smaller than 10 acres, requires review by the town rather than a regional body, and focuses on economic, rather than environmental and fiscal, impacts.) 

More:

• A Guide to Retail Impact Studies — This guidebook is designed to give municipal officials and citizens an understanding of how economic and fiscal impact studies of large-scale retail projects are conducted and what types of data they provide.
• Examples of economic and fiscal impact studies of large-scale retail proposals from Gunnison, CO; Northneck, VA; and St. Albans, VT.
• Answers to Common Questions about Maine's Informed Growth Act — A Q&A that describes how the law works and addresses common questions about it.
• Resources to Assist Towns in Implementing Maine's Informed Growth Act — Includes sample forms and other documents to assist communities in implementing the Informed Growth Act.
• Informed Growth Act a needed tool for Maine communities — Op-ed by Stacy Mitchell, published in the Maine Sunday Telegram, May 20, 2007
• Protecting Locally Owned Retail: Planning Tools for Curbing Chains and Nurturing Homegrown Businesses — by Stacy Mitchell, Main Street News, February 2004. (c)National Main Street Center, National Trust for Historic Preservation.  All rights reserved.
• Big-Box Sprawl and How to Control It - by Constance E. Beaumont with Leslie Tucker, Municipal Lawyer, March/April 2002
• Key Studies — Concise summaries and links to the best available research on the impact of large-scale retailers on jobs, wages, local businesses, taxes, and more.