Some residents in one California city are doing a little celebrating this week over a big box store that won’t be coming. Home Depot has suddenly pulled out of a project to construct a 128,000 s.f. store in Novato, California. The home improvement giant says the withdrawal was due to an inability to reach a “suitable agreement” with the property owner. Home Depot, however, left the door slightly ajar, telling the Marin Independent Journal that they might come back to Novato at a different site. “We would like to assure our supporters that we will continue to examine options near Vintage Oaks or at other appropriate locations in and around Novato,” a Home Depot spokesman told the newspaper. “The Home Depot is optimistic that we will find workable solutions that will lead to a new store to serve the Novato community.” The company would not disclose the specific reasons for its failure to reach a deal. “We don’t want to delve any deeper,” the company said. “There were various issues.” The original plan was to build a 102,284-s.f. store with a 25,658-s.f. garden center in a 19-acre marshy area just north of Highway 37. The proposal raised objections on economic, environmental and aesthetic grounds. Home Depot claimed the project would bring 100 jobs and an estimated $400,000 to $600,000 in tax revenues to the city, but these figures are before any offsetting losses at other businesses in the city, and before accounting for costs to the city for police and fire protection to Home Depot. City Manager Dan Keen apparently saw only the upside of the revenue coin. “There was a lot of misunderstanding in our community about where our money comes from that funds city services,” Keen told the Independent Journal. “We got a lot of comments and e-mails that suggested that Novato didn’t need the money. I gotta tell you, that’s a frightening thing to hear. We are really dependent on people shopping in Novato. The issue is still there – the city needs to build its revenue base.” There are already plenty of Home Depots in the area. Two years ago, Home Depot bought the 10-store Yardbirds chain, closed three of the stores, and converted two to regular Home Depots, and renovated the other five as smaller “concept” stores focused on high-end products for interiors. According to the newspaper, the five Home Depot Yardbirds hybrid stores, which reopened over the past two months, are in downtown San Rafael, Petaluma, Alamo, Concord and San Pablo. The site in San Rafael includes a 35,000 s.f. store and an 8,000-s.f. garden center. The fact is, consumers in Novato have plenty of options for home improvement merchandise — more and more of them now controlled by Home Depot.
In California, city officials chase after retailers because of the sales tax, which stays local. The property tax is usually no big deal, but sales taxes can be significant. This has led to what has been called “cash box zoning,” where cities and towns make land use decisions based not on good land use values, but on the economics of sales taxes. One town will try to outdo their neighboring town in order to steal away their sales taxes. As the Novato City Manager said, this is how they “build a revenue base.” Instead of regionally planning for retail growth, its every city for itself. The result has been over-building, dead malls, and cannibalization of one community by another. For retailers like Home Depot, it’s all about market share. Instead of adding value, new developments often just shift jobs and market share from one cash register to another. The state has even passed a law requiring a city that “steals” sales tax from another with a new mall, to share those revenues. That’s how bad over-supply has affected California.