Saturday, April 18, 2009

Competitor News: Wal-Mart Close to Clearing First Major Hurdle For its 1.1 Million Square-Foot Regional Distribution Center in Merced, California

Upcoming New Markets Special Report: Northern California - Central Valley

Wal-Mart Stores, Inc. is close to clearing its first major hurdle towards gaining approval to break ground on its proposed mega-1.1 million square-foot regional distribution center in Merced, California, which is located in the Northern Central Valley in California.

In late February of this year, Wal-Mart released its Environmental Impact Report (EIR) on the proposed Merced distribution center. The EIR was prepared for Wal-Mart by an outside consulting firm that specializes in land planning and development projects like the facility.

The report is currently in what's called the public comments phase. This is a 60-day period required by law for such projects.

Residents, businesses and organizations have until April 27 to submit letters, pro or con, to the city of Merced planning department regarding the distribution center and its potential environmental and related (traffic, ect.) impacts on the City of Merced, Merced County, and the surrounding region.

Once all the comment letters are in, Wal-Mart's contracted planning firm is then required by law to reply to each letter. That could take a matter of weeks, or months, depending on how many letters are received by the city of Merced by April 27.

The City of Merced's Site Plan Review Committee will be holding a public meeting regarding the proposed Wal-Mart distribution center on Thursday, April 23, 2009 at 1:30 p.m. in the City Council Chambers at the Merced Civic Center at 678 W. 18th St, Merced. The Site Plan Review Committee is a staff committee comprised of the city's director of development services, the chief building official, and the city engineer.

According to the city, The only action being considered by the Site Plan Review Committee on April 23 is whether to refer the Site Plan Review Application to the Merced Planning Commission for a public hearing.

The committee will not be reviewing the Wal-Mart distribution center project itself or the Environmental Impact Report (EIR) at the meeting.

Wal-Mart plans to break ground on its proposed 1.1 million square-foot distribution center, assuming it gains approval by the city of Merced, in early 2010.

Plans call for the Merced distribution center, which is key to Wal-Mart's Northern and Central California growth strategy as we wrote about previously in this February 11, 2009 news and analysis piece [Tesco's Fresh & Easy Isn't the Only Food & Grocery Retailer With its Eyes on Bakersfield: Wal-Mart's Bakersfield Push and Central Valley, CA Strategy], to operate 24-hours a day, seven days a week.

The proposed regional distribution center -- which will distribute everything sold in a Wal-Mart Supercenter, which includes food and groceries (and clothing, electronics, furniture and much more) -- will likely serve all of Northern California, the vast Central Valley, and into Southern California. It also likely will serve Wal-Mart stores in nearby states if needed.

Wal-Mart says the planned 1.1 million square-foot Merced facility will employ about 1,200 full-time workers.

There are organized groups both for and against the proposed Wal-Mart distribution center in Merced.

The pro-Wal-Mart distribution center group is called the Merced County Jobs Coalition. The group against the distribution center calls itself the Stop Wal-Mart Action Team.

Tough economic times in Merced

Merced County, which the city of Merced is the county seat of, along with being its largest city (about 80,000 population), has one of the highest unemployment rates in California.

Figures just released by the government for March show Merced County's jobless rate at a whopping 20.4%. Next door Stanislaus County isn't fairing much better. It's March 2009 unemployment rate was at 17.5%

Just three counties in California had March unemployment rate percentages higher than Merced County did. Those three counties are: Colusa County, north of Sacramento (25.7%); Imperial County, near San Diego in the southern part of the state on the Mexican border (25.1%); and Trinity County (21.9%), in far Northern California.

Considering that at the height of America's Great Depression in the 1930's the national unemployment rate was about 35%, the current unemployment numbers for these four California counties are rather ominous.

California's unemployment rate for March 2009 was 11.2%, making it the fourth-highest jobless rate in the U.S. Only Michigan, Oregon and South Carolina had higer unemployment rates than California for March, according to data released by the U.S. Bureau of Labor Statistics on Friday, April 17.

Merced County also has been one of the top three (and frequently number one) U.S. counties in terms of having the highest rates of housing foreclosures for nearly the last two years, according to data published each month by the real estate industry research firm RealtyTrac.

Despite economy there are numerous positives in Merced

Despite experiencing severe economic problems, there are numerous positive things happening in the city of Merced, which is located about 50 miles from Fresno and about 35 miles from Modesto (Stanislaus County), where as we've previously reported Tesco's Fresh & Easy neighborhood Market has plans thus far to open three of its small-format grocery and fresh foods markets. [Read our most recent story - March 31, 2009: Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California.]

The two counties -- Merced and Stanislaus -- are located right next to each other. Many of the cities in each county share borders with one another. If creating counties was a geographical rather than a political process in the U.S., the two counties would logically be one, from the perspective of geographic proximity. Stanislaus County has a population of about 530,000, making the combined population of the "twin" counties nearly 800,000.

Some of the positive happenings in Merced, despite the economic problems, include the city being the home of the newest campus of the University of California.

That University of California at Merced campus opened in 2005 and is growing in student numbers, new buildings and facilities development, and programs each year.

There hasn't been a new, planned major research university built in the U.S. other than UC Merced in many years. And until opening UC Merced, the University of California system, the largest state system of its kind in the U. S., hadn't opened a new campus since the 1960's, when it opened the University of California at Santa Cruz, in Santa Cruz, California, on the Northern California coast. Getting such a campus is a big deal for Merced, or for any California city for that matter.

The campus is getting much publicity at present because First Lady Michelle Obama is going to be the commencement speaker for the graduating class of 2009 in May. The city is going all out for the event, holding a huge "Town & Gown" festival in its downtown, along with other related activities in partnership with the University.

Downtown Merced is another overall positive for the city. Compared to the downtown areas of many similar-size and larger cities, Merced's is attractive and functional, despite some retail store and other business closings, resulting in some empty buildings, due to the recession.

But accept for the relative few vacant buildings, when walking around the downtown, which is rather vibrant, it's hard to believe the city has a 20.4% unemployment rate and is sufering from the recession in a major way. Although when talking to residents you can feel it in no time flat. Many people are seriously hurting, as local jobs are extremely scarce.

And of course, depending on which side of the issue you are on, a new 1.1 million square-foot Wal-Mart distribution center, which comes with 1,200 new full-time jobs, could be a very positive upcoming development for Merced, particularly with its current (and growing) 20.4% unemployment rate.

We think the long term prospects for business, including food and grocery retailing, is good in Merced, due largely to the establishment of the University of California campus in the city, which is slated to become a major research as well as teaching campus, just like all of the other UC campuses.

UC campuses historically spin off all sorts of private sector businesses. Berkeley helped create Silicon Valley and the Bay Area's biotech business sector. Davis virtually is the California agricultural and wine industry's in-house research arm. Scores of its graduates have gone on to start their own farms, food companies and wineries. Some of the most promising work in electric car technology also has and is coming out of the Davis campus. There are similar examples from every UC campus.

And already less than four year old UC Merced is conducting major research in alternative energy technology, biomedical research and in other scientific fields. There's a move on to build a medical school on the campus. And plans already are set to open a graduate school of management in the next couple years.

There's not one California city -- Berkeley, Davis, Los Angeles, San Diego, Irvine, Riverside and the others -- where a University of California campus has been put, and allowed to grow over a number of years, that hasn't benefited dramatically from the University's presence.

For example, the city of Berkeley in the San Francisco Bay Area was literally built around the University of California at Berkeley campus, the system's oldest and its flagship campus. Today (and for many years prior) UC Berkeley is one of the top research and teaching institutions in the world, and number one, two or three globally in a number of academic and professional areas.

In Southern California, the hip community of Westwood, full of housing, shops and other commercial activity, was built and became what it is today because of the existence of the UCLA campus in Westwood, which is the centerpiece of the entire community.

And back in Northern California, the city of Davis, California, home to the University of California at Davis, which started out as an agricultural campus but today is one of the top-ranked Multi-University's in the world, has and continues to serve as the hub of what has grown from a sleepy little city of a couple thousand residents -- Davis -- to what is considered one of the most innovative and livable cities in America, with a population of about 70,000. Davis is located 12 miles from Sacramento.

It will take a number of years, but Merced, like all of the other University of California cities, will benefit in enormous ways from being home to the University of California system's newest campus, and the only planned major research University that has been built in the U.S. in a couple decades.

City of Merced: Letters mostly pro-distribution center so far

According to the city of Merced, the letters coming into its planning department so far are currently mostly in favor of the Wal-Mart distribution center. A city spokesperson says the letters are currently running at a ratio of about nine-to-one in favor of approval of the mega-distribution center in the city.

It appears it's all about jobs, which isn't a surprise with a county unemployment rate of 20.4%, which residents in the city and county tell us they expect will continue to climb over the next few months.

Distribution center: Next steps

Once Wal-Mart's consulting firm responds to all of the letters submitted by the April 27 deadline, the city of Merced's Planning Commission will then begin hearings on the distribution center plan.

Once they've completed the hearings, the project then goes to the Merced City Council for a vote of approval or rejection.

it's all about jobs

We're told that a majority of the members of the Merced City Council support the Wal-Mart distribution center being built. According to local sources not one of the members has to date come out publicly against the project.

it's all about jobs.

There are of course other things that could happen between now and the end of the year regarding the project, such as lawsuits being filed by environmental groups, which happens often whenever Wal-Mart proposes to build its mega-Supercenters in parts of the U.S. and particularly in California. But that's changing. Many communities that didn't want a Wal-Mart Supercenter a few years ago are asking the retailer to come to town in this bad economy.

It's all about jobs.

But our sense is, based on talking to local residents in Merced, which we did this week while traveling in the Central Valley, that the vast majority of citizens and elected officials in the city and County want and need new jobs so bad that local supporters will fight any opposition by outside environmental or other groups attempting to block the 1.1 million square-foot Wal-Mart distribution center from being built in Merced. Two years ago, when the city and county were booming, it might have been a very different story. But all that has changed.

It's all about jobs.

Based on its desire to break ground on the distribution center in early 2010, Wal-Mart's objective is to get the facility's plan approved no later than by the end of this summer. A Wal-Mart source told us that based on what it is hearing at present, approval could happen far by then or earlier.

Local officials we talked to in Merced this week expressed similar feelings. We observed numerous people in the city's attractive downtown district wearing pro-Wal-Mart distribution center buttons, for example.

The general buzz we felt in town was in favor of the development. And the general reason for that we felt was that its all about jobs.

[If interested, you can download the complete Wal-Mart-Merced, California regional distribution center Environmental Impact Technical Report -- it's a whopper -- along with related documents and information on the project at the link here.]

Selected Related stories from Fresh & Easy Buzz:

>February 11, 2008: Tesco's Fresh & Easy Isn't the Only Food & Grocery Retailer With its Eyes on Bakersfield: Wal-Mart's Bakersfield Push and Central Valley, CA Strategy

>September 15, 2008: September 15, 2008: Wal-Mart Expanding its Discount Store-to-Supercenter Conversion Program As Part of its Strategy to Grab Even More Food and Grocery Sales Market Share

> December 29, 2008: Competitor News: Winco Foods to Expand in California and Nevada in 2009; Put Aggressive Focus on Central Valley, Northern California and Northern Nevada

>December 3, 2009: December 3, 2008: Tesco Opens its First Two California Fresh & Easy Stores Outside of Southern California in the Central Valley City of Bakersfield Today.]

>April 13, 2009: Despite Postponing its Northern California Launch Again Earlier This Year Tesco's Fresh & Easy Planning Third San Francisco Store; First Stockton Unit

>March 31, 2009: Despite Having Postponed its Northern California Launch Indefinitely; Tesco's Fresh & Easy Planning Third Store in Modesto, California

>November 12, 2008: Analysis: Hard Times at Fresh & Easy - Northern California Expansion to Be Postponed or Shelved Do to Economy; But its Only a Symptom Not the Cause

>May 14, 2008: Fresh & Easy Buzz Exclusive: Tesco's Fresh & Easy Neighborhood Market Plans to Open Five Stores In the Fresno, California Metropolitan Region

>May 15, 2008: Fresh But Never Easy: Tesco's Long But Rapid South-North March in the Nation-State of California

>November 20, 2008: Analysis & Commentary: Fresh & Easy Neighborhood Market and Tesco's Lowered Expectations

>September 29, 2008: Special Report: Wal-Mart, Inc. Studying Second Small-Format Food and Grocery Store Concept; the 'Bodega' or Modern Version of the Corner Grocery Store

>August 8, 2008: Analysis & Commentary: Wal-Mart's Marketside As Part Of it's Multi-Format Category-Killer Strategy Spells Trouble For Tesco's Fresh & Easy

>April 14, 2008: New Multi-Supercenter and Multi-Format Strategies Are Showing Wal-Mart to Be A More Agile Grocery Retailer in the U.S.

>November 19, 2008: Competitor News: Wal-Mart Lowering Prices on Holiday Items and Staples; New Formats Coming; Online Grocery Sales; Hundreds of New Stores FY 2009-2010

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