The Wal-Martization of Stockton: Are three Wal-Marts good for the city?

This summer, Stockton will celebrate the opening of a Super Wal-Mart in Spanos Park West. The store will be the city’s second Super Wal-Mart, the first on Hammer Lane near Highway 99. In Weston Ranch, there remain plans to include a Wal-Mart to anchor the planned Weston Ranch Towne Center project just off of Interstate 5. At one time, Wal-Mart was considering the construction of seven stores in the city. We do know for sure that Stockton will have three Wal-Marts in the near future.

Near by stores such as Target and Petsmart stand to lose business to the Super Wal-Mart opening up across the street in Spanos Park West

What can Stockton expect from three Wal-Marts? There are two very vocal sides when it comes to debating the pros and cons of the giant retailer. Advocates of the stores tout increased tax revenues, jobs and cheaper goods that all are supposed to come with a Wal-Mart. On the other hand, opponents argue that the presence of Wal-Mart brings higher crime rates, lower property values and drives other stores out of business. For the common bystander trying to form an opinion on the subject, it can be difficult to cut through the rhetoric to see exactly how a Wal-Mart could benefit or detract from your community. In Stockton, we are faced with the prospect of three Wal-Marts, so it is important to understand how these stores can affect neighborhoods and the city as a whole. This article attempts to provide real insight into the effects these Wal-Marts will have by presenting research done across the country on how Wal-Mart has changed other communities.

Jobs
Wal-Mart touts its stores as huge job creators. On the surface, this is true: Wal-Mart is huge and needs a lot of people to run it. In Weston Ranch, Wal-Mart officials claim the store will create 350 jobs. The Super Wal-Mart on Hammer hired about 800 and the store in Spanos Park West will hire a similar number. In a city with an unemployment rate hovering around 15%, any jobs should be welcome.

But despite these huge job numbers, several studies show the presence of a Wal-Mart does not create more jobs over time, with some studies suggesting that Wal-Mart actually depletes jobs in the long run.

A 2009 study on the opening of a Chicago Wal-Mart found that businesses located in close proximity to the store had a significantly higher probability of going out of business than those located in other parts of the city. The researchers found that while Wal-Mart directly hired workers, the eventual closing of other businesses and the resulting job losses created a zero-sum effect. For all the jobs generated by Wal-Mart, the stores that closed around it negated those gains.

Of course, this is just a case study. However, other research has reached similar conclusions. Research done by David Neumark in 2007 looking at county-level retail found that each Wal-Mart worker hired essentially replaced 1.4 retail workers elsewhere in the region. The analysis found that while Wal-Mart does hire a substantial amounts of workers, each store also leads to an average of 150 area workers eventually losing their jobs.

A Wal-Mart in Baltimore is the only tenant left at Port Covington

Some analysis shows that retailers near Wal-Mart that are not in the same retail market can see increases in business due to increased traffic. Good news for antique stores, bad news for Target, Kohls, Petsmart, and Lowes.

Crime
Obviously, crime is an issue in Stockton. Wal-Mart detractors claim with Wal-Mart comes more crime. Anecdotally, it is hard to argue against this. There have been plenty of case studies of small towns being overrun by service calls needed at the local Wal-Mart. One town in Pennsylvania saw misdemeanor crime jump 55% in the two years after its Wal-Mart opened.

Without doing a proper regression analysis (I don’t think one analyzing the link between Wal-Mart and crime exists. If I am wrong please correct me), we can’t say for sure that Wal-Mart causes increases in crime rates (though there has been a recent study done linking the presence of hate groups to Wal-Mart stores). However, the qualitative evidence is pretty difficult to ignore.

Since the start of May of this year, there have been roughly 40 reported crimes at Hammer Lane Wal-Mart in Stockton, according to crimemapping.com, a site the geocodes police service calls. A quick comparison of other areas of the city finds that this block of Hammer lane has garnered the most police attention of any address in Stockton. Some observers may see this as evidence that additional Wal-Marts will strain the already taxed police department.

Taxes
In a city as starved for cash as Stockton, opening a Wal-Mart that rakes in millions in sales doesn’t sound like such a bad idea. According to Wal-Mart, the Hammer Lane store brought in $2,150,000 in sales tax revenue in 2006. Take that times three, and Stockton’s money woes are solved!

Unfortunately, tax revenue is not created out of thin air. For every dollar someone in Stockton spends at a new Wal-Mart, a dollar that person would have spent at another Stockton store disappears. Whether that store would have been a mom and pop shop or a Target makes little difference in terms of tax revenue as all Wal-Mart has done is shift sales from one store to another. As you can imagine, there have been studies done that prove this theory. In Mississippi, researcher Kenneth Stone found that for every dollar spent at Wal-Mart, there was a corresponding loss for businesses in host counties.

Furthermore, building big box stores, such as Wal-Mart, are proven to be a less efficient means of collecting tax revenue, as discussed here in a previous blog post. Per acre, it makes more sense to invest in more dense retail and commercial property in older, established areas, such as downtown.

Property values
Opponents will sometimes make the argument that the presence of a Wal-Mart will bring down property values. Stockton suffers from a depressed real estate market, and adding Wal-Marts will do nothing to bring the values of our homes up. To the naked eye, it makes sense that most people don’t want to pay more to live near a giant, 24 hour retailer. However, most research shows no strong relationship between property values and Wal-Mart.

In New Jersey, a study of the effect of 30 Wal-Marts on property values showed no correlation. Some research actually suggests that a Wal-Mart could increase property values. A recent report released by the National Bureau of Economic Research concluded that homes within a half mile of a Wal-Mart saw an increase in home values from 2% to 3%.

Prices
If Wal-Mart does one thing right, it’s driving down prices. Randall Crane of UCLA found that Wal-Mart could potentially save shoppers millions per year in grocery savings once the store becomes a dominant grocery retailer. During these tough economic times, many may argue that Stocktonians could use some savings.
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Admittedly, the literature on the effects of Wal-Mart is mountainous. Countless reports and books exist on the subject, and I don’t purport to have read them all. There remain numerous other areas to explore when considering the effects of a Wal-Mart, such as the effect on the environment, traffic, obesity rates and questionable business practices. However, what I have presented here should give you an idea of how the addition of more Wal-Marts will change Stockton. For our city, it is important to consider that Wal-Mart may actually cost the region jobs in the long run and will probably not bring in any new tax revenue that is not siphoned off from other stores.