Monday, March 24, 2014

San Francisco study evaluates economic effects of formula retail controls

San Francisco has some of the most restrictive formula retail land use controls in the country.  It also is in the midst of considering amending those controls.  Entering into the fray is a February, 2014 report from the city's Office of Economic Analysis.  Read the full report here.  

Here are the report's "main conclusions":

• This economic impact report was prepared in response to a proposed ordinance (item #130788), introduced by Supervisor Mar in the Summer of 2013, which would expand formula retail controls in San Francisco. Formula retail controls limit the growth of chain stores within San Francisco.
• The proposed legislation would both expand the definition of formula retail, and require the Planning Commission to consider an independent economic impact report detailing how a proposed chain store would affect existing businesses.
• Formula retail controls primarily affect the economy by changing the retail prices paid by consumers, the amount of local spending by retail businesses, commercial rents and vacancy rates, and perceptions of neighborhood quality.
• In general, chain stores charge lower prices, but may spend less within the local economy, and can be unpopular with some residents because they can be seen to diminish the character of the neighborhood. On the other hand, limiting chain stores can reduce commercial rents and raise vacancy rates.
• Research by the Office of Economic Analysis suggests that local retailers may spend up to 9.5% more within the local economy than chain stores, but charge prices that average 17% more. On balance, the economic benefits of greater local spending by non-formula retailers are outweighed by higher consumer prices.
• Accordingly, the report concludes that expanding the definition of formula retail in the city will not expand the local economy. Moreover, while the proposed independent report would document the impact of chain stores on existing businesses, a new store could benefit the economy without benefitting existing businesses, by offering lower prices to consumers, for example.
• The OEA therefore recommends that the report instead consider the relative prices and local spending by proposed chain stores and existing businesses. In addition, the report recommends the Planning Commission explicitly consider the views of residents, and whether a proposed store could prevent blight.

Well worth a read for anyone interested in formula retail land use controls.

Stephen R. Miller

http://lawprofessors.typepad.com/land_use/2014/03/san-francisco-study-evaluates-economic-effects-of-formula-retail-controls.html

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