by Steve Herum, Herum Crabtree, Stockton, California

Today you receive four very different perspectives about the problems and potential solutions to the circumstances present in California’s Central Valley. To start with let me make clear that I respect the genuineness and concern expressed by each of my fellow panelists. I do, however, part company with them regarding our perspectives and approaches to the existing problems.

In particular I believe a lack of quality, family wage jobs that promotes citizen stakeholders in the community is a major obstacle toward economic growth, opportunity and justice in the Central Valley. In the past policy makers have not dealt in depth with the importance of creating family wage jobs for Central Valley residents. This omission allows a recent United State Congressional report to declare the Central Valley as the “New Appalachia”.

To state the issue slightly differently, the Central Valley has become economically polarized from the remainder of the state and especially from the adjoining San Francisco Bay area. Affordable housing, prisons and agriculture dominate the economy, and these activities are incapable of sustaining the growth experienced by other parts of the State. We have created two Californias. A more recent economic phenomena, the Wal-Mart Supercenter, is actually detrimental to economic progress in the Central Valley.

Pertinent statistics put a finer point on this economic polarization. An important study by the San Jose Mercury News described the area as a “hidden ghetto” and if the region broke off from California, “its population would be larger than that of 21 other states, but it would be the second poorest, after Mississippi.” The report reveals that the “San Joaquin Valley’s annual per capita income reached a milestone in its two-decade-long drop, falling to half of the Bay area’s income. It is now the poorest region in the State.” For instance in Modesto, where Ms. Whiteside once served as mayor, the local school district no longer qualifies students for the free hot meal program. So many children qualified for free lunches that it was easier to provide all children with the lunches instead of preparing the eligibility paper work.

Education remains a significant challenge. Only 13 percent of San Joaquin Valley workers have a college degree, compared to 31 percent in the Bay area. Indeed the Central Valley transports its educated workers out of the area. The Altamonte Commuter Express, a commuter train that connects Stockton to San Jose on weekdays, is generally full of workers heading to the East Bay. A key feature of these workers according to a recent survey is that each commuter earns an average of $100,000 per year, or approximately four times more than the average Central Valley family. Thus, San Joaquin County subsides a rail service to export its best educated and best trained workers out of the area.

A chain of events magnifies the economic polarization between the Central Valley and the rest of California. A lack of high quality jobs and a lack of a well educated work force compels better educated workers to commute long hours to higher paying jobs. The higher paying jobs, of course, are located in areas that cannot afford to house these workers. Hence the Central Valley is called upon to house workers, educate their children and provide all of the essential social services while the Bay Area enjoys the tax benefits of the employment. These commuters clog highways, contribute to air pollution and, due to the physical and psychological debilitating stress of commuting are less involved with their families and community. The answer is self evident: the jobs should be located closer to the worker’s homes, but our present three prong response misses the mark by a great distance.

1. A failure to blend economic development in general planning discussions, growth limitations and serial litigation.

Central Valley communities have embraced “Smart Growth” concepts and are proposing projects featuring greater density and more amenities. While this is commendable, it fails to address the need to create family wage jobs that qualify for the homes proposed for construction. Indeed there seems to be a negative correlation between the density of a Central Valley community and the ability to create more family wage jobs. According to the Bookings Institution Modesto enjoys the tenth highest urban density in the United States and Stockton is right behind Modesto with the thirteenth highest urban density. Yet there is no positive correlation between implementing this basic Smart Growth feature and improving the job outlook. And, critically, as Central Valley communities review their general plans the evaluation routinely omits a discussion of meaningful policies to expand economic opportunities.

To the same extent nearly every Central Valley community has some type of growth limitation adopted for the purported reason to preserve the community’s quality of life. Yet these growth limitations thwart economic development. According to the Governor’s Commission of the 21st Century Report, entitled “Growth Within Bounds”:

“In fact what we learned from academic research on growth limitations is that the four most significant consequences of growth limitation measures is: (1) the growth simply moves to the closest nearby community; (2) the cost of housing within the city adopting the growth limitation increased by 20 to 40 percent; (3) the city adopting the growth limitation is no longer able to provide affordable housing; and, (4) low and middle income workers are driven from the community where they work to outlying communities and face significant commuter issues.”

In short growth limitations benefit the “haves”—those with good jobs and expensive homes—and hinders efforts of the “have nots”—those striving to enjoy the American dream.

Recent litigation illustrates that an intra-Central Valley economic polarization exists. For instance, the Port of Stockton has probably created more blue collar family wage jobs that any other public entity. Presently efforts to expand the Port as a vehicle of economic opportunity is directly tied to dredging the Stockton Deep Water channel. However, neighbors on the north side of the channel, living in multi-million dollar homes built decades after the Port started operating, have repeatedly sued to declare the Port’s operations a nuisance. Although they have failed in these efforts, the chilling effect of the continuous and expensive litigation impedes significant economic opportunities to the greater San Joaquin Valley. The situation is literally the haves trying to thwart the have nots.

To the same extent repeated litigation obstructs other job creation efforts. A classic example is the River Islands project in Lathrop, California. The project is a major mixed use employee centered development. In fact, the project pays an ad hoc “job creation” mitigation fee. Outside environmental groups filed three lawsuits against the project and these lawsuits visited the appellate court three times and the supreme court once. However, the challenges were rejected on the merits on each occasion. Now, seventeen years after the City of Lathrop first approved the EIR (there was a subsequent EIR prepared and certified later) a new group, NRDC, who was never involved in the earlier administrative process, now challenges the project after an approval issued by a responsible agency. The point is straightforward: increasingly we are finding projects creating family wage jobs are challenged by economic elites who wish to stop economic progress and economic opportunities for those less fortunate. This is a new twist to the symptom uncovered by MIT Professor Bernard J. Frieden in his important book, “The Environmental Protection Hustle”.

2. A failure to realize that agriculture does not have the inchoate resources to create significant family wage job opportunities.

Due to our firm’s representation of many of the major growers and farmers in San Joaquin County I am keenly aware of the critical role agriculture plays in the Central Valley’s economy. However, at the same time we need to realize that our agricultural economy is not designed and does not operate to significantly expand the number of family wage jobs.

The Mercury News reported, “dependence on agriculture, a seasonal industry that rarely pays more than minimum wage, is the main reason the area remains trapped in poverty.” Indeed the facts are inescapable. According to the UC Davis Agricultural Issues Center just 6.6 percent of California’s income and 7.4 percent of California’s jobs come from farming. Yet in the Central Valley one-third of the income and thirty-seven percent of the employment is agricultural related.

As Carol Whiteside remarked, “Agriculture will not provide sufficient employment for our growing population. The public policy question for the valley is how can we provide economic mobility and have agriculture at the same time.”

Unfortunately the public policy response has been modest, largely consisting of public agencies exacting agricultural land mitigation fees to purchase development rights. This approach does nothing for job creating and very little for the agricultural community. As one prominent farmer told me, “these people want to save farmland but not farmers.”

3. An emphasis on job creation that harms rather than enhances the quality of the Central Valley job opportunities.

Unfortunately a major economic development effort has focused on introducing Wal-Mart Supercenter big box stores into the Central Valley. According to an August 31, 2004 internal memorandum, Wal-Mart intends to add 40 Supercenters to California over five years and ultimately 150 Supercenters statewide. A great majority of this growth is focused on the Central Valley: Since October 2004 nine Supercenters have opened in the Valley (Stockton, Hanford, Dinuba, Dixon, Sacramento, Roseville, Marysville, Yuba City, and Anderson) and approximately 23 additional stores are either planned, pending, or approved in the Valley. Thus of the 40 Supercenters immediately planned for California, at least 32 (or 80%) are slated for development in the Central Valley.

Not surprisingly, these retail uses are very controversial, and now form a special area of land use law. Indeed Supercenter proposals have become so controversial that Wal-Mart has begun to attempt to hide Supercenters’ identities from the public until after land use approvals have been granted. In an October 30, 2003 to the City of Woodland arguing prior shopping center project approvals were intended for Supercenter development though “Supercenters” were conspicuously absent from the list of appropriate uses, Wal-Mart explained:

The absence of a specific reference to a Wal-Mart Supercenter in the Condition is easily explained. After the DEIR was circulated, there was significant opposition to the proposed Wal-Mart store. Therefore, when the revised and recirculated Draft EIR was released, all references to a Wal-Mart store were deleted.

Failing to identify the Wal-Mart Supercenter as the eventual retail use, however, contaminates the CEQA process at either the initial environmental review stage or when determining whether supplemental environmental review is required for a previously approved commercial development. Nevertheless it is not unusual for a Wal-Mart footprint to appear on a site plan while the developer and city blandly state that the eventual retail use/user is still unknown.

Typically local citizen groups contest the Wal-Mart application on the basis of urban decay, traffic and air quality. However, cities frequently rely on tax revenue projections and approve the store over the citizens’ opposition:

“When it needs land use approvals, Wal-Mart often obtains them without a fuss from local officials eager to accommodate big box retailers …. Wal-Mart has frequently organized local elections, supporting its friends and punishing its foes. The threat alone deters some local elected officials from antagonizing Wal-Mart.”

Furthermore, Wal-Mart typically spends tens of thousands of dollars to boost support for its Supercenter proposals, including substantial political contributions and inducing senior citizens to take bus rides to the city hall chambers on the night of the hearing:

Whether spending in excess of $1 million on a failed ballot initiative in Inglewood, CA in 2004 or hosting ‘steak fry’ dinners and then busing attendees to city council meetings in Central California, Wal-Mart battles aggressively and the examples are legion. However, the potential proliferation of Super Wal-Marts into the Central Valley contains a misunderstood or ignored economic component. Often Wal-Mart advances a cavalier and incorrect ad hominem argument that the opposition is merely a “front” for union activity.

This approach disguises that fact that Wal-Mart brings in low paying jobs without benefits and drives out high paying jobs with benefits. It constitutes an economic development form of Gresham’s Law of Currency. Indeed, a plethora of economic studies conclude that each low paying job created by Wal-Mart drive one to three higher paying jobs with benefits out of the local economy. Moreover, the host community indirectly subdizes Wal-Mart operations. As one report explains, increased Supercenter employment would be no boon for the Valley:

Suggesting that the economy would be in a better condition were grocery workers to earn only one-half of what they currently earn, as is the case for discount retail workers, ignores the huge advantages of an economy having a work force capable of purchasing homes or renting decent housing – both of which problems would be greatly exacerbated by additional low-wage workers pursuing a limited supply of affordable housing – and when its working class can purchase cars, furniture, and appliances. The economy further benefits when its workers are able to send their children to college, pay for their own health care costs, and provide a decent standard of retirement living. Supercenters do not advance any of these societal benefits.

Moreover, the community indirectly subdizes Wal-Mart operations. As the PBS documentary Store Wars:When Wal-Mart Comes to Town explains: [Wal-Mart] employees on average take home pay of under $250 a week…This pay scale places employees with families below the poverty line, with the majority of employees’ children qualifying for free lunch at school. When closely examined, this amounts to a form of corporate welfare, as the taxpayer subsidizes the low salaries. One-third are part-time employees – limited to less than 28 hours of work per week – and are not eligible for benefits.

Due to the company’s health care policy each Wal-Mart worker is projected to cost a the public between $250 to $1,300 per year in unreimbursed medical expenses at public health facilities. Additionally, Wal-Mart Supercenter traffic is typically underprojected, meaning that it does not pay it fair share for needed traffic improvements.

Often Wal-Mart leaves empty buildings directly within its wake. According to the Wall Street Journal Wal-Mart is the largest owner of vacant retail space in the nation: “Wal-Mart, because of its rapid expansion, probably has left behind more space than anyone else.  It plans to add 50 million square feet of retail space this year around the world, a good chunk of that replacing existing stores is now considers dated…it still has about 152 vacant stores, or about 13 million square feet, across the nation.” According to Wal-Mart’s spokesman Bob McAdam, Wal-Mart refuses to release vacant space to potential economic competitors. Since Wal-Mart sells virtually everything this limits the universe of potential substitute retailers and this trend is evident in my hometown of Stockton. Wal-Mart opened its first northern California Supercenter in Stockton in October 2004. The 200,000+ sq. ft. Supercenter was a relocation of the 100,000+ sq. ft. “Discount Store” located across the street.  Once the Supercenter opened, the vacant Discount Store building was left vacant, destroying the viability of the retail side shops.  Approximately one year later, the building was painted and partially reoccupied by “Lifestyle Furniture” – a marginal home furnishings store. Unfortunately, Lifestyle Furniture’s partial re-tenancy of the vacant Discount Store was short-lived. By August of 2006, the store had announced its “Going out of Business Sale”.

In short the ability of the Central Valley to create family wage jobs and shrink the present economic polarization between the Central Valley and the rest of California may depend to a significant degree upon local government promoting economic opportunity that promotes family wage jobs and discouraging out of state retailers that suppress the development of family wage jobs and a diversified economy.