The Way I See It!

Is a 100,000 sq ft or larger zoning ordinance coming to Cudahy? Part 2

Posted by Randy Hollenbeck on July 6, 2009

Cudahy, Development, Taxes

Now let’s look at indirect 100,000 sq ft or larger zoning ordinance called a “Big Box” ordinance.

Don’t forget from part 1

Let us theorize for a little bit.  A few things just to presume.

Let’s suppose you want a concerted effort to block Wal-Mart from coming in.  This is the single most successful BUSINESS ever but some Cudahy officials’ want to block them from getting in out of hatred for Wal-Mart for various reasons.

Let’s say Shopko is looking at both parcels in Cudahy (Iceport/Meyer property and Pennsylvania/Layton) but won't go if Wal-Mart gets in.  (How will that look if big box Shopko ends up on the Iceport?  This is a dangerous precedent, would a lawsuit be far behind if Shopko does?)  State law mandates that a city cannot discriminate in its zoning.

Our City Council members CANNOT enact a zoning change against the public will.

Let’s say someone is posturing to support a “Big Box” store of less than 100,000 square feet.  This size fits Shopko but precludes Wal-Mart.

Let’s say that Wal-Mart is still interested in Cudahy, but the SuperCenter store is still 138,000.  This size is the size of the future.  Remember that exceeds the artificial limit of 100,000 sf .  The idea that Wal-Mart would leave a 138,000 sf store is laughable.  Also, remember that in the business conditions you can place clauses in that would make Wal-Mart pay to take the building down or find a new tenant for the building. 

A missed point someone emailed me on about Part 1 - For a store just to buy a product, Mom and Pop are at a disadvantage.  The middleman, called distributors, have layered pricing on their products.  Buy above a certain dollar amount and you pay less for the items they distribute.  Buy even more and you pay even less.  Have more than one store?  Now you really get the buying power.  Become so big that you no longer need to buy from a distributor and you really make the money.

So how could an ordinance be done indirectly?  Well an ordinance per se cannot unless it is an unintended consequence and one could say very shortsighted.  If it is aimed at Wal-Mart what are the unintended consequences.  Keeping out an Ikea?  Keeping out a huge car parts warehouse that could employ hundreds?

So let’s say someone commissions a retail market analysis.  This market analysis is going to look at what Cudahy is losing as of leakage dollars.

Now on the merits the marketing analysis is a good thing.  But if someone wanted to draw false conclusions from it and make assumptions it would be VERY EASY to trick people into going a certain way or to block someone.

Yeah, it would be like finding a gray area.  In some areas, people work in the gray areas a lot.  You're trying to find where the holes are in the rulebook and make them applicable.

So let’s say you wanted to keep Wal-Mart out of Cudahy and needed the data to back that up.  You could say that with the size of a store Wal-Mart wants to build, Cudahy could not support it.  But you then could turn around and say, but a generic discount store of 100,000 sq ft would work.  Would that not be an easy way to block Wal-Mart?

When you hold the ruler, you can measure things as you see fit.

Let’s look at the process of the Market Analysis and some possible flaws.

It was nice to see some preliminary data, but I worry that false conclusions could be drawn.  To say Wal-Mart might not be able to be supported in Cudahy might be a jump of the gun.

You cannot let suspicions write the story!

If the premises are false, then the conclusion that follows must also be false.

Let us look at a few things first.

Does not fit and will not work are not the same thing.

Cudahy is a blue collar, low to medium income community.  A good segment of the Cudahy population is older.

The study has preliminary data.  The market analysis consultants have only completed phase one – which was to determine the market area.  They did this by meeting with brokers, developers (including Continental - not confirmed) and shopping center owners.  The information is preliminary and based on the market that was defined by the consultants.  A multi-level market analysis will be done in that it will not solely be relying on the data. 

The problem is that everything can be based on capricious estimates of the values of assets.  Were there any rules or directions placed upon the consultants?

It was in no way specific to Kohls, Wal-Mart or any other specific business.  Each retailer uses their own modeling and generally retailers will use a 1, 3 and 5 mile radius - this not always the case, but generally.  If not specific to Wal-Mart can the conclusion Wal-Mart will not work be truly drawn?

The study is using a 1, 3, 5 mile working model.  I do think stores such as Kohls as a department store use a 3, 5, 10 mile area just as Grocery stores use a 1,2 mile model.  So having a catch all model doesn’t fit for all.  It is generally speaking.

This study is a reference tool not gospel. 

Nothing substitutes for vigilance

Just looking at the numbers doesn’t tell the whole story.  Just because it shows Cudahy is missing out on ‘Coats’ for example doesn’t mean that Burlington Coat or another competitor who might use a 3, 5, 10 mile model would want to come to Cudahy since they have a store in Milwaukee within that model radius. 

It looks at just leakage from Cudahy outward and doesn’t factor in inbound traffic from surrounding communities.

Either way radius studies don’t paint the best picture of Cudahy because it picks up “blank” areas like the lake and the airport. 

Questions to keep in the back of your mind

Why is this study so different from the ones Continental had?

Wouldn’t developers want to do their own study?  Most will.  This is just a guide to help pursue businesses and show them results in hopes of convincing them to come.  This by no means will make them come.

What is the shelf life of the study?  One would think as a single change happens in Cudahy, the domino effect would happen.  I was told the shelf life of retail market studies are generally about five years.  You could feasibly do annual data updates, but only if development was fast and furious.  Even then, it takes about two years for an impact of a new store to show up on the data.