D.C.’s Living Wage Bill Puts Big Box Retail Development At Risk

In 2010 Wal-Mart entered into negotiations with the District of Columbia to bring its first Wal-Mart into the city of Washington DC. By the end of 2011, Wal-Mart made plans to open up 6 new stores in locations all across the city, hoping to execute on their national strategy of expanding beyond rural and suburban areas and into urban markets. To assuage some of the resistance brought forth by community organizations and organized labor, Wal-Mart held public meetings, hired lobbyists, agreed to develop a store in Mayor Vincent Gray’s neighborhood, and donated close to $6MM to local charities. Throughout this period Wal-Mart avoided binding agreements with regard to its future employees’ wages but stated “that most jobs would be full time positions and that rates would be above that of most union jobs offered.” When it became obvious that Wal-Mart was not willing to sign a binding labor agreement, community organizations put their support behind the Large Retailer Accountability Act (LRAA) introduced by Council Chairman Phil Mendelson in January of this year. The act targets Wal-Mart (and other large retailers) by requiring new retailers without unionized workers that have more than 75,000 SF of floor space and more than $1BB in sales to pay employees a minimum of $12.50 per hour. On the eve of the vote for the passage of the bill, Wal-Mart released a statement informing stakeholders that enactment of the law would result in a cancelation of the plans to build three stores at Skyland Shopping Center, Capitol Gateway and New York Avenue NE and would jeopardize the existence of the three stores currently under construction. Despite Wal-Mart’s threat, the bill was passed by the Council on July 10th by a vote of 8 to 5. The city now awaits a decision from Mayor Vincent Gray as to whether he will veto the bill. A veto from Gray could be overturned by 9 votes, but at least one of the Council members would be required to change their stance.

Although the LRAA exempts stores such as Giant and Safeway whose employees are subject to collective bargaining agreements, the bill has serious implications for other large retailers such as Costco, Target, Lowes and Wegmans, who are likely to be affected. According to Victor Hoskins, deputy mayor for planning and economic development, at least three other retailers have communicated that they will not bring their stores to D.C. if the LRAA becomes law. The success or failure of this legislation could very well be a watershed event for a city undergoing rapid growth that seeks to increase sales tax revenue and provide jobs, retail, and fresh groceries to underserved areas. Retailers should pay special attention to this dispute as it may be indicative of new factors to be considered by retailers in making development decisions in the future.

Related topics: Development, Retail