Posts Tagged ‘The Oregonian’

What might sustainable, local firms do with $49 mil?

In my vision of sustainable communities, I picture a thriving economy built around locally owned, independent businesses that embrace the triple bottom line: people, planet and profits. So it is that I have little patience for economic development practices prevalent in Oregon and around the country that emphasize national business recruitment over local business development. 

I believe we should be doing much more to take care of the businesses that are already here putting down roots, hiring local residents, keeping their profits local and multiplying as they circulate in the local economy and being run by owners who are active in their communities — because they live here, too.

Editors at The Oregonian lost an opportunity to underscore that point in an editorial on Saturday about last week’s announcement of the Hynix semiconductor plant closure in Eugene. The decision puts 1,100 people out of work, many of them paid well above the average Eugene wage. Hynix, like any number of tech companies wooed by Oregon officials in the past several decades, was given large state and local tax credit incentives to locate in Eugene some 13 years ago. 

Although the Hynix plant closure is an opportunity to question the wisdom of showering national or international businesses with tax breaks to locate in Oregon, The Oregonian editors say forget about it:



It’s not productive to second-guess the state’s wooing of Hynix and its use of tax incentives, as some in the Legislature have begun to do. A 2003 study by University of Oregon economics students Melinda Rowan and Jennifer Witt found that the $49 million in tax breaks and road enhancements used to lure Hynix resulted in a positive impact in taxes, wages and system development charges of more than $275 million over the first five years of its operation. Had the state not offered its incentives, Hynix wouldn’t have built its plant, employed 1,100 people and paid taxes.

Their argument against re-examining the Hynix recruitment strategy is hardly convincing. The editors conclude Hynix would not have come here without the $49 million incentive package, so the positive impact in taxes, wages and whatever system development charges would not have been realized. But that’s assuming the $49 million in incentives were not spent at all. 

What might have happened had the state and city pledged that same $49 million in 1995 for support of locally owned, independent businesses? Hynix received the equivalent of $44,500 for each of its current 1,100 employees from state and local government. What might 1,100 locally owned, independent businesses in the Eugene area been able to do with $44,500 each? Or what might 110 of the best locally owned, independent businesses in Eugene been able to do with $445,000 each?

We’ll never know the answer, but I’m not aware of any state or local economic development group even asking those questions. Businesses based and owned in Oregon are getting the short end of the economic development stick. They can only dream of government officials coming to them and saying, “We believe in you and want you to thrive in Oregon. Here’s a half-million dollar package to help you grow your business.” 

Can you imagine what a select group of Oregon’s most innovative, most environmentally and socially committed business owners and their employees could and would do to reward the citizens of this state for making a meaningful public investment in their businesses? Not all of them would succeed, of course, but I’m certain enough would to add at least the equivalent of 1,100 quality jobs. 

And most important of all, those successful locally owned, independent and sustainable businesses would keep repaying Oregon’s investment long after the 13-year life span of Hynix in Eugene.



Dick & Joe vs. Mom & Pop

“Dick vs. Joe!” the headline screamed in Sunday’s paper. As if we are supposed to care about the looming showdown in Oregon between national retail giant Dick’s Sporting Goods, Inc. and the Oregon retail fixture Joe’s Sports, Outdoor & More. Dick’s just opened a store in Portland last week, the first of perhaps 10 across the state. This could spell trouble for Joe’s, we are led to believe by The Oregonian. Coincidentally, this could also spell trouble for the newspaper if Joe’s starts advertising less because of lost sales to Dick’s, and Dick’s doesn’t make up the difference.

While the newspaper attends to the battle between big box retailers, the real victims in the retail wars are the remaining locally owned, independent sporting goods stores struggling to compete. Joe’s is not one of them. Joe’s founder Norm Daniels sold majority interest in his company last year to a private equity firm in San Francisco. The Oregonian says the firm told it a year ago “that it would sell off Joe’s in a few years.” It’s possible the next ownership group could be local, but I doubt it. The article speculated that Dick’s could buy Joe’s, although that was not considered likely. So look for Joe’s ownership to remain out of state.

Dick vs. Joe is simply a battle of two non-local chain retailers for sporting goods supremacy in Oregon. Since Joe’s got its start here, we still think of them as one of us. It would be natural to pull for them over Dick’s. But Joe’s is one of us in memory only. Joe’s majority owners are elsewhere now, and they control Joe’s future. Our choice to spend money with Joe’s may be only less bad than a decision to support Dick’s, from the standpoint of local economic benefit. Better, however, to skip both chains and shop instead at a locally owned, independent sporting goods store. That keeps more of our money in our community, instead of heading to Pittsburgh, in the case of Dick’s, or San Francisco, in the case of Joe’s. With a recession looming, this argument is stronger than ever.

Bottom line: Oregon doesn’t need Dick’s. Dick’s needs Oregon, so it can keep satisfying shareholder demand for growth. Dick’s arrival here is part of the chain retail trend so well documented by Stacy Mitchell in her book, “Big-Box Swindle”:

Consider that in 1996, the top ten retail chains accounted for a remarkable 15 percent of consumer spending. Less than a decade later, in 2005, the top ten captured nearly 30 percent of the more than $2.3 trillion that Americans spend in stores each year. Two or three corporations now dominate each retail sector. As the chains have gained market share, tens of thousands of independent businesses have disappeared.

Dick’s is hell-bent on dominating the sporting goods category and Joe’s will do all it can to protect its turf. But the story isn’t Dick vs. Joe; it’s Dick & Joe vs. Mom & Pop. Local owners of independent, usually small, stores are the big losers in the battle of big box opponents. And so are the communities that watch these stores disappear. I’ll let Stacy Mitchell have the final words:

The effect of mega-retailers on local economies does not end with shuttered local merchants and their laid-off employees. Most local retailers buy many goods and services locally: they bank at local banks, advertise in local newspapers, carry goods produced by local firms, and hire a range of professionals, from accountants to Web designers. Every dollar spent at a locally owned store sends a ripple of benefits through the local economy, supporting not only the store itself, but many other local businesses, which in turn provide jobs — often the sort of well-paid positions that form the backbone of a city’s middle class and the core of its tax base. When chains displace local merchants, all of these economic relationships are severed. Money that used to flow through the community — from a local office-supply store that hires a local accountant, who in turn uses a local bank that lends money to a new entrepreneur, who stocks up at the local office-supply store, and so on — ceases to do so.


Making the wrong argument for sustainability

Call me a hopeless idealist, but I happen to believe we need no other motivation for living more sustainably than simply doing the right thing. I’m no fan of leading with competitive, economic or profit-based appeals when arguing for sustainability, as The Oregonian did earlier this week in their editorial, “Racing to stay ahead of the pack.”

The editors cautioned Portlanders that we can’t stop doing what has made us a world leader in sustainability because other cities worldwide are “hellbent on catching up”:

Daily we are reminded just how global, competitive and interconnected the modern economy has become. The consequence is clear: In this new world economic order, only the nimble will thrive. This fresh market reality places cities — not generally known for being light on their feet — in extreme peril. Those that have a clear sense of purpose and direction will flourish. Those lacking this trait will wilt.

Accompanying the written editorial was a cartoon of man in a meeting room pointing to a large poster of a dollar bill and telling his colleagues, “Actually there is one rather compelling ‘green argument’ for sustainability.”

The message was clear: There’s money to be made in sustainability, and if Portland loses its position as a global leader in sustainability, we will also lose out on the economic spoils that go to the victors in this race. Maybe so, but in looking at sustainability through the lens of economics we lose sight of the much greater social and moral imperatives for changing how we live.

The editors got it partially right when they concluded:

Current consumption patterns cannot endure. We all will have to use fewer resources, use them more wisely, reuse them, then recycle them. That is the core of sustainability. That is the manner of living Portland must role-model for the world.

The very fact that our global consumption patterns are unsustainable is all the motivation we need to live more sustainably. And Portland should be the role model for the world because the world desperately needs one. Period.

Let’s just keep doing the right thing. If our economy grows as a result, so be it.


Oregon law gives teeth to business sustainability

Oregon has opened its doors to a new kind of corporation. In a bill passed by the Oregon Legislature in 2007, businesses can state in their Oregon articles of incorporation they will operate with equal regard for environmental, social and shareholder impact. It appears Oregon is the first state to adopt such a law. And according to The Oregonian:

It’s not an empty gesture. One of the principles of business law is that corporations must act in the best interests of their shareholders. Some courts have narrowly interpreted that to mean companies must act only to maximize profits, even if the action runs roughshod over wider community interests.

It will be fascinating to see where this little publicized change in Oregon’s corporate governance laws will lead. Last spring, I heard a presentation from the founders of B Corporation, an organization whose aim is the widespread formation of corporations acting on behalf of all stakeholders (environmental, community, employee, supplier), not just shareholders. Oregon’s new law gives legal teeth to efforts such as this. According to Oregon Lawyers for a Sustainable Future, which drafted the legislation (HB 2826),

The statute makes it clear that anyone forming an Oregon corporation can include a provision in the
articles authorizing or directing the corporation to be operated in a sustainable manner. Moreover, any
existing Oregon corporation can take that step by amending its articles of incorporation, which will
then govern operations after the date of the amendment.

Under such a provision, corporate officers will be directed or authorized to make decisions that adhere to a triple bottom line (people, planet, profits). How this will all play out is anyone’s guess. Ideally, we will see businesses throughout Oregon adopting the triple-bottom-line standard for governance. And perhaps even a rush of out-of-state companies that want to incorporate here so they can legally act out of concern for more than maximizing shareholder return. But how long might it be before powerful investment groups challenge Oregon’s amended corporate code in the courts? Or an individual company is sued by shareholders for failing to act in their best interests while making decisions that benefit other stakeholders? Conversely, will the adoption of these sustainability provisions leave businesses vulnerable to lawsuits from other stakeholders who claim the business is failing its environmental and social responsibilities?

Legal issues aside, I’m anxious to see how companies that adopt these new governance provisions actually behave. Will their conduct be measurably different from shareholder-centric companies? When push comes to shove, will they make decisions that reduce short-term corporate profits or shareholder return out of an obligation to the environmental or social common good?

The Oregon lawyer group behind HB 2826 acknowledges “profitability is built into the DNA of a corporation.” The question for Oregon, and the rest of the country, is whether the truly sustainable corporation is even genetically possible. Thanks to the Oregon Legislature, we’re about to find out.


Someone’s idea of economic development

The Oregonian continues to cover the opening this week of the IKEA store near the Portland airport. Sunday’s article looked at what we might see happen here based on what has occurred in the year since IKEA opened in West Sacramento. Here are a few revealing excerpts:

• Ikea not only has delivered a tidy sales tax boost to West Sacramento…it also has attracted several big-name retailers that have provided further construction and retail jobs. In addition, the store has drawn shoppers from as far as Redding, Calif., and Reno — overnighters staying in local hotels and dining at restaurants serving dishes other than the store’s gravy-soaked meatballs.

• Within the first year, West Sacramento received $1 million in sales-tax revenue from the store, amounting to 7 percent of the city’s overall sales-tax proceeds, said Kay Fenrich, chief executive of the West Sacramento Chamber of Commerce. The figure does not take into account revenue from stores that have since flocked to be near Ikea. “Before Ikea, we had no retail,” Fenrich said. “You had to cross the bridge for furniture, sheets, a dress, anything. Once Ikea made their announcement about opening here, the other big-boxes couldn’t scramble here fast enough.”

• Ikea cites Target and Wal-Mart as competitors, but retail experts say independent discount furniture stores could at least briefly say goodbye to as much as 25 percent of the customer traffic, said George Whalin, a San Diego retail consultant who grew up in Sacramento and followed Ikea’s opening there. “Ikea impacts everybody who serves consumers who want inexpensive furniture,” Whalin said. “There’s not anybody that’s immune.”

• “They’re killing us,” said Haide Critcher, who, with her husband, opened Big Al’s Furniture in the 1960s. The large warehouse store in Sacramento, like Ikea, offers affordable furniture that sometimes comes boxed for customers to assemble.

• “Ikea put West Sacramento on the map,” said Diane Richards, West Sacramento’s economic development coordinator. “Everyone thinks you’re so much more fun and exciting.”

These observations and quotes are revealing in many ways. First, they underscore why municipalities, especially in states with sales taxes, like big boxes — they generate more sales tax receipts. From the first big box, then from the subsequent big boxes that follow magnets like IKEA. But the question is at whose expense? If people are traveling from Reno and Redding, they are not spending their money in those communities and those cities lose tax revenue as a result. Oregon does not have a sales tax, but IKEA will surely pull in shoppers from the region’s smaller communities whose business base will suffer as a result.

Second, what happens to West Sacramento tax receipts when Reno and Redding (or some other nearby city) gains an IKEA or some similar trendy big box to stay competitive in the retail arms race, as they most certainly will?

Third, even though national big box retailers tend to see other national big boxes as their competitors, it’s the independent locally owned stores that take the brunt of the competitive hit, such as Big Al’s in nearby Sacramento. Cities across Americas now share a soul-killing homogeneity as their retail landscapes are littered with the same chains. Meanwhile, the big boxes fight it out over who can extract a larger share of local incomes (and ship it off to who knows where).

Fourth, what does it say about our society when the arrival of a retailer is seen as putting a community “on the map” and making it “much more fun and exciting”? Public officials in towns across America still equate suburban strip-mall retail development with economic development and, in the case of West Sacramento, raising a town’s self-esteem. I can only shake my head.