Analysis of Wal-Mart Supercenter's Economic Impact Passes Scrutiny

CP&DR Staff on
Aug 1, 2006

An environmental impact report for one of the first Wal-Mart supercenters approved in California has been upheld by the Sixth District Court of Appeal. The court ruled that the City of Gilroy did not have to prepare a new economic analysis in the supercenter’s environmental impact report because previous studies were adequate.

The court upheld the city’s reliance on a 1992 economic study and a 1993 EIR prepared for a 174-acre annexation and general plan amendment that included Wal-Mart’s eventual supercenter location. Those reports said that the annexation and proposed retail complex would have only a minor impact on Gilroy’s central business district.

“[D]espite the city’s refusal to commission further studies, the City Council had a fully developed picture of the economic impacts of the supercenter project,” the court ruled. “The whole record provides substantial evidence that urban decay was adequately considered in connection with the supercenter.”

Amitabh Barthakur, a senior associate with Economic Research Associates who works on studies to determine projects’ potential to cause urban decay, said, “The court didn’t really care about the means by which the urban decay impact potential was substantiated. The EIR built on previous economic studies and EIRs that had looked into similar issues.”

Barthakur, who was not involved in the Gilroy project, pointed to the court’s conclusion that “additional formal studies would not add information not already available to the City Council.”

The fight over the Wal-Mart Supercenter in Gilroy was a familiar one. Union grocery clerks and small business owners complained about Wal-Mart’s business practices and contended that the 220,000-square-foot store would cost the town better-paying jobs and locally owned business. Wal-Mart has had a store in Gilroy since the early 1990s, but the proposed supercenter was an issue in the 2003 City Council campaign. Wal-Mart supporters won and, in 2004, the City Council approved the project on a 5-2 vote. The supercenter, which has been in operation for nearly a year, replaced a 120,000-square-foot Wal-Mart that did not carry groceries.

After the council approved the project, a group composed primarily of unionized grocery store workers called Gilroy Citizens for Responsible Planning sued, alleging a number of deficiencies in the EIR. A trial court judge upheld the EIR, as did a three-judge panel of the Sixth District.

How local governments should address the potential for big-box stores to cause urban decay has become an issue during the last few years while Wal-Mart opponents have fought to prevent the company from building supercenters. In Bakersfield Citizens for Local Control v. City of Bakersfield, 124 Cal.App.4th 1184 (2004), the court rejected two environmental impact reports for two planned supercenters because the city failed to address the potential for the projects to cause urban decay or consider the combined impacts of the two closely situated stores (see CP&DR Legal Digest, January 2005). But in Anderson First Coalition v. City of Anderson, 130 Cal.App.4th 1173 (2005), the court upheld a supercenter EIR because there was an economic study prepared for the project and there was substantial evidence to support the city’s conclusion the project would have no negative economic consequences (see CP&DR Legal Digest, September 2005).

In Gilroy, the project opponents argued that the city should have completed an initial study before relying on a 12-year-old economic analysis; that the city’s tiering off previous documents was improper; and that evidence in the record indicated negative economic impacts could occur.

Regarding the initial study, the opponents noted that supercenters did not even exist when the 12-year-old analysis was completed. But the court ruled that no initial study was required because the city had already determined an EIR was required, the project was consist with existing zoning, and the project “did not require major revisions in a previously prepared EIR.”

As for tiering, the opponents said the city used a negative declaration as a first-tier document — and not an EIR — in violation of the California Environmental Quality Act (CEQA). The court disagreed, finding that the first-tier documents were the 1992 economic study, and the 1993 EIR for the area annexation and general plan amendment, which included the 1992 economic study. The court noted that the EIR also incorporated by reference the EIR for a revised general plan, with which the supercenter was consistent. “The Wal-Mart EIR clearly notified interested persons of its genealogy,” Justice Eugene Premo wrote for the court.

As for the contention that the city should have commissioned a new study of potential economic impacts, the court found instead that the City Council was fully aware of the supercenter project’s potential economic impacts.

The 1992 economic study of the retail project planned for the annexation area predicted that the retail project would modestly increase the shifting of the central business district (CBD) toward specialized retail, professional services and restaurants. The EIR for the annexation and general plan amendment was even more detailed and “concluded the CBD would not be protected by disapproving additional retail development in Gilroy.” This annexation and general plan amendment EIR, Premo wrote, “found the adverse economic impacts on the CBD resulting from the proposed project to be ‘small in comparison to the effects from competing suburban mall and retail services areas which have been constructed in the surrounding region in the recent past.’”

Additionally, the court noted, project opponents submitted two reports on economic impacts, and Wal-Mart submitted one, as well. The City Council was justified in finding that further study was not warranted, the court concluded.

The court also rejected arguments that the city violated CEQA in numerous other ways.

The Case:
Gilroy Citizens for Responsible Planning v. City of Gilroy, No. H028539, 06 C.D.O.S. 5639, 2006 DJDAR 7982. Filed June 22, 2006.
The Lawyers:
For Gilroy Citizens: William Kopper, (530) 758-0757.
For the city: Andrew Faber, Berliner Cohen, (408) 286-5800.
For Wal-Mart: Arthur Friedman, Steefel, Levitt & Weiss, (415) 788-0900,