There are two ugly guys in the fight between the City of Hercules, Calif., and Wal-Mart. It's a classic tale of Big Government versus Big Box, and both sides are prepared to use big guns.
In the last round, the City Council voted unanimously to use the awesome power of eminent domain to seize 17 acres owned by Wal-Mart. Wal-Mart vowed to use its awesome resources to fight back. As Hercules sees it, Wal-Mart is the rude guest that won't leave. Attorney Gale Connor, who represents the city, noted that Wal-Mart bought the property in 2004, despite considerable opposition to the retail giant's proposal. "Why did they go ahead and purchase the property to begin with?"
This is a hot story, Connor understands, because of the "confluence of two very controversial subjects." The Bay Area has its share of Wal-Mart haters who see the chain as pure evil.
I see using the power of eminent domain for private development as evil. In 2005, the U.S. Supreme Court ruled that municipal governments have the right to use eminent domain to seize property for "public use" -- even if that "public use" entails the government taking land from homeowners to give to a private developer. It was downright un-American for the Big Bench to determine that the city of New London, Conn., could evict homeowner Susette Kelo and her neighbors to make way for a tony private waterfront development.
Wal-Mart is no Susette Kelo. Be it noted that Hercules is not evicting a homeowner or small business -- it is seizing an empty lot. In essence, the city is using eminent domain as a proxy for strict zoning rules.
The big irony is, as Connor noted, "part of the reason eminent domain has such a bad name" is that "historically" big retailers -- including Wal-Mart -- have used it to take other people's land. Last month, the Orlando Sentinel reported, Wal-Mart threatened homeowners that if they didn't sell to the retail giant, it would ask local authorities to take the land by eminent domain.
Wal-Mart spokesman John Simley acknowledged as much. "There's no question," he said on the phone Wednesday. "We've benefited from some degree from eminent domain decisions." Simley contends the difference is that Wal-Mart was able to use eminent domain to counter blight. Of course, blight is in the eye of the beholder. Citing blight, cities have used eminent domain to seize the homes of blue-collar owners to make way for upscale housing.
Many Northern Californians consider a brand-spanking new Wal-Mart to be blight.
Still, Hercules residents should ask themselves if it is worth the money it will take to fight this case. The legal bills could be huge. As Connor noted, "Wal-Mart is entitled to just compensation for their property," and if the chain doesn't think the city is offering enough, it is "entitled constitutionally" to seek a jury trial for more money.
Should taxpayers foot the bill for a fantasy? Many residents in the East Bay conclave long to be too tony for Wal-Mart. Hello. The site of the battle is near I-80 and surrounded by an industrial park. The only nearby homes -- separated from the lot by a creek -- are new and quaint, if crowded, with porches in front, garages in back and small parks in lieu of yards. Planners envision an old-fashioned village with small shops by the bay.
But a city can't just pass a law and turn itself -- with homes there selling at a median price of $475,000, according to the Economic Development Alliance for Business -- into Sausalito.
"Hercules is a high-income enclave in a larger lower-income trade area that is currently underserved by retail activity," says an economic review of Wal-Mart's proposal that was written for the city and plays to the pretensions. The report shows that other Wal-Marts in the East Bay attracted fast-food restaurants, in one case a check-cashing outlet and in another a "a low-end coffee shop." Oooh. Not Starbucks.
But if the area is as high-end as planners say, Wal-Mart should attract better companion outlets.
Vocal Wal-Mart foes believe they have a right to decide who sets up shop in their town, and the right to keep out shops that might attract lower-income shoppers. This is just class warfare. While Wal-Mart haters are free to not shop at Wal-Mart, they want to wield the club of government so that others don't shop at Wal-Mart.
Bert Gall of the Institute of Justice, which opposes using eminent domain for private development, warned, "If something like this can happen to Wal-Mart, it really can happen to anyone." And, "It just illustrates that what the Supreme Court unleashed in Kelo was the ability of government to play favorites."
Hercules could end up with no retailer interested in the site. "The market already demonstrated that there wasn't much interest in what the city had in its general plan there," said Benjamin Powell of the Independent Institute. If Wal-Mart wants in, and Retailers for the Rich aren't banging down the door, that should tell Hercules residents something.
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