If several of this week’s Letters to the Editor are any indication, the suggestion of a big box locating to Pagosa Springs (as reported in last week’s edition of The SUN) may well be the assured demise of this community.
On the other side of the coin, local officials have touted a big box store here as a nostrum for an ailing economy, providing badly needed local jobs and preventing the majority of “retail leakage” — local dollars flowing out of the community and landing in places such as Farmington and Durango.
While there is virtue to some of the positions on both sides of the argument, there is also a tendency to inflate claims and allow emotion to override reason.
In fact, while some data suggests that big box stores have had a negative impact on some communities, other data suggests that many communities have not only thrived, but prospered, due to the introduction of a large chain retailer.
In fact, the exact impact a big box (all indications point to Wal-Mart) will have on Pagosa Springs and Archuleta County is far from known and will most likely not become evident for years to come. Conversely, certain aspects of the issue are self-evident.
One problem with both sides of the argument is the tendency to provide a false equivalency when pointing to the experiences that other communities have had with big box retailers.
“It’s a tough situation for small towns,” Joe Keck (former Cortez mayor and current director for the Small Business Development Center at Fort Lewis College) told SUN staff in an interview last week.
“The size of the facility is a consideration,” Keck said, adding , “In small communities that have a large tourism base, businesses survive better than small communities with a largely agricultural base.”
Keck knows the effect of a big box from direct experience — he was the mayor when Wal-Mart set up shop in Cortez (the original store closed several years later when Wal-Mart built a larger store in the town. The original store has been vacant ever since).
However, Keck was quick to point out that Cortez and Pagosa Springs, despite both towns largely benefitting from tourism, are miles apart in comparison.
For one, Cortez is roughly seven times larger in population than Pagosa Springs. More than that, Cortez hosts the majority of visitors to Mesa Verde — the third most travelled National Park in the U.S.
Cortez also serves several outlying communities, as well as three tribal communities that are either close by or are directly adjacent to the town.
While Keck concedes that Wal-Mart had a negative effect on several existing stores in Cortez — “It wiped out some pretty good businesses,” Keck said — he also said that the positive effect on the town was the increased retail traffic drawn by the big box. Keck said that increased traffic has led to increased sales for the businesses in Cortez that survived the introduction of a big box.
Keck said that many of the businesses that survived Wal-Mart’s presence in Cortez (business failures largely occurred within the first two years of the store’s opening) did so by changing how they did business, mostly offering goods that could not be bought at Wal-Mart.
A small business owner at the time, Keck said that his shop immediately began offering items that were lacking on Wal-Mart shelves, weathering an initial hit to his business, ultimately prospering as customers learned that his store carried merchandise that the big box lacked.
Nevertheless, Keck pointed out that his business retooled over a decade ago — a time when credit was much more available and banks were eager to provide small business loans.
Since the Wall Street crash of 2008, banks have largely been stingy with capital, preferring to place their cash back into Wall Street investments rather than providing loans to businesses, large or small.
To those ends, Keck said that several communities have been proactive in dealing with the effects of a big box, establishing loan programs specific to helping small businesses survive the impact of a large format retail store.
In fact, some communities have exchanged tax credits and other incentives for large format retailers for assurances that those companies will help fund those loan programs (or provide other community assistance).
Keck was nevertheless succinct in his evaluation of the ultimate impact of a big box. “Independent retailers will be affected, no doubt,” he said. “You can be sure that you’ll take a pretty good hit to the diversity of retail in your town.”
In fact, that became evident soon after Wal-Mart opened in Durango. However, in the proceeding years, many other businesses have since opened their doors in Durango, with a downtown core that can be accurately described as a thriving business center.
The comparison with Pagosa Springs and Durango is specious, however. With a local college, a population far outsizing Pagosa Springs and Archuleta County, and serving several outlying communities that rival Pagosa Springs in size, the question for Durango and its Wal-Mart is not why La Plata county allowed the store in, but what took so long.
Local officials probably ask that same question regarding Pagosa Springs, pointing to the need for jobs and retaining sales tax revenues currently lost to other communities.
It was to the latter that Pagosa Springs Town Manager David Mitchem appealed when he asked Town Council to scrap Land Use and Development Codes (LUDC) that the town had previously adopted that were specific to big box development.
At that time, Mitchem referred to a 2005 Economic Planning Systems (EPS) study commissioned by the town and Archuleta County. In that study, it was claimed that total retail leakage (sales conducted out of county) for the area was 47-percent, or $2,940,491, in potential sales tax revenues (sales tax revenues for the county in 2008 amounted to $3,315,873). Assuming that a large-format retailer would capture 75-percent of that leakage, sales tax revenues in 2008 could have been boosted by an additional $2,205,368.
Although Mitchem enthusiastically cites financial data from the 2005 study, he continually fails to mention that in their conclusion, EPS representatives Dan Guimond and Andy Knudtsen said that, while a big box retailer would capture the greatest tax revenue and would help curb leakage, it would come at too high a price. Ultimately, the EPS concluded that a big box retailer would severely damage the local retail environment and would negatively alter the socioeconomic fabric of the community.
Not strictly tied to the EPS findings from 2005, Mitchem also stated in 2009 that, with an easing of LUDC restrictions (creating a more favorable environment for big box development), a big box could potentially lead to the creation of as many as 200 jobs.
However, critics of big box retailers are quick to point out that the vast majority of those jobs will be low-paying, with the side effect being an added burden to social services (as workers seek to supplement a meager paycheck with food stamps, housing assistance, child care and home-heating assistance).
In fact, a body of research suggests that each Wal-Mart job puts an additional $2,100 burden on local social services for each employee. Furthermore, additional research indicates that closures of small businesses ultimately leads to the loss of 1.4 jobs for every job created by Wal-Mart.
However, with many jobs in Pagosa Springs being seasonal, tied to either spikes in tourism or weather warm enough for construction, many local workers would no doubt snatch up a low-wage position at a Wal-Mart if that job was permanent and not subject to the peaks and valleys of area employment.
No doubt, the next few months will see the airing of opinions on both sides of the big box issue. While many of those arguments will be couched in hard facts, the results of social and market research, too many will arise from gut feelings or preconceived ideas.
Hopefully, it will be the former and not the latter that guides the dialog that will inevitably take place during the start of 2012.
The Town Council meets next at 5 p.m., Tuesday, Jan. 3, at Town Hall.
jim@pagosasun.com
