Wal-Mart Threatens DC Pullout If Mayor Signs 'Living Wage' Bill

Washington, DC is one step closer to having the highest minimum wage in the country. Last month, in an 8-5 vote, the DC Council approved a $12.50 per hour “living wage” minimum. The bill, officially called the “Large Retailer Accountability Act” (LRAA), requires retailers with corporate sales of $1 billion or more and with stores of at least 75,000 square feet to pay workers starting salaries of no less than $12.50 an hour. The city’s current hourly minimum wage is $8.25. The federal minimum wage is $7.25 per hour.

It seems clear to many observers that the bill is targeted specifically at Wal-Mart, which announced nearly three years ago that it would enter the District and build six new stores ranging from 80,000-125,000 square feet in size. Interestingly, long-time unionized operators in the nation’s capital – Safeway and Giant – would be exempt from the potential new minimum wage.

DC Mayor Vincent C. Gray, who personally lobbied Wal-Mart officials at the 2010 International Council of Shopping Centers (ICSC) convention in Las Vegas to build stores in his jurisdiction, has not yet decided if he will veto the council’s decision or approve the bill.

At presstime on August 2, the bill had not yet reached Gray’s desk and there is speculation that it the DC Council may wait until after Labor Day, when all members are back from summer recess for the bill to be put in front of him. Once Gray receives the bill, he has 10 days to decide on a veto. If he does in fact veto the bill, the council then has 30 days to schedule an override vote, which requires the approval of nine of 13 members.

A day before the DC Council passed the bill (July 10), Alex Barron, Wal-Mart’s regional general manager who is responsible for about 90 stores and 30,000 associates in the DC area, including all stores planned for Washington, wrote in on op-ed in The Washington Post:

“For almost three years, Wal-Mart has worked on a plan to bring new stores to Washington, and we are close to opening our first location in the city. Unfortunately, the District may soon adopt legislation that discriminates against business and threatens to undo all that we have accomplished together.

“In November 2010, Wal-Mart announced a plan to bring more jobs, shopping options and fresh food choices to Washington residents. Just 12 months later, we increased our investment — from four stores to six and from 1,200 jobs to 1,800 — in an effort to expand access and opportunity to more underserved communities in the city.

“During this time, we also engaged in an open dialogue with residents, stakeholders, critics and elected officials. Our goal was to listen, share information about our company, answer questions about our plans and address any concerns.

“Residents told us that they wanted good jobs and more affordable grocery options in their neighborhood. We also heard about issues such as local hiring, competitive wages, an inclusive construction process, local products and support for community nonprofits.

“Through these conversations, it became clear that most residents thought Wal-Mart could be part of the solution in Washington, a sentiment supported by our polling, which showed that 73 percent of residents were ‘in favor’ of Wal-Mart.

“We thought it was important to document what we heard – a Community Partnership Initiative -and share it with the city. At the time, Mayor Vincent C. Gray said that ‘this agreement represents an unprecedented, citywide commitment from a retailer…Wal-Mart is showing what it means to be a good corporate neighbor, and I encourage other firms interested in doing business in the District of Columbia to show a similar level of commitment to our residents.’

“The document was particularly unique because it was voluntary – Wal-Mart was not accepting any tax incentives, even though some of our projects qualified for government assistance. Still, our agreement spelled out our plans to stock local products, allow space for local retailers, provide good jobs, ensure an inclusive construction process, fund transportation measures, create a citywide job-training program and support nonprofits to help fulfill unmet needs throughout the city.

“Today, three of our six planned stores (New York Ave. & Bladensburg Rd., NE; Georgia Ave. & Missouri Ave., NW; Riggs Rd. & South Dakota Ave., NE (Fort Totten); 801 New Jersey Ave., NW); East Capitol St. & 58th St, NE (Capital Gateway); and Good Hope Rd. & Alabama Ave, SE (Skyland) are under construction, with the first two (New Jersey Ave. and Georgia Ave.) expected to open this fall.

“But despite the consensus among DC stakeholders about the economic value that our stores would bring, some members of the DC Council are advancing an eleventh-hour effort to try to undermine our efforts and change the way businesses like Wal-Mart must operate in the city. New legislation – the Large Retailer Accountability Act (LRAA) – would require that a few large employers pay a starting rate that is more than $5 per hour above the minimum wage.

“From day one, we have said that this legislation is arbitrary and discriminatory and that it discourages investment in Washington. We have gone to great lengths to have thoughtful conversations with council members about why the LRAA would result in fewer jobs, higher prices and fewer total retail options. Most shopping dollars would stay in the suburbs, unemployment would remain in the double digits in some neighborhoods, and underserved communities would continue to have disproportionate access to affordable groceries.

“For months, we have chosen to use hard facts, statistical evidence and common sense — instead of idle threats — to educate the DC Council about the negative consequences of the LRAA.

Our stance has been echoed by The Washington Post’s editorial board, residents, small business owners and groups such as the Retail Industry Leaders Association, the National Retail Federation, the DC Building Industry Association, the International Council of Shopping Centers, the DC Chamber of Commerce, the Greater Washington Board of Trade and the Restaurant Association Metropolitan Washington.

“Unfortunately, this diverse chorus of opposition to the LRAA has fallen on deaf ears among council members, and the final reading of the proposal is scheduled for Wednesday.

“Like any business, we have a responsibility to our customers, employees and shareholders to reevaluate our options when it looks as if local rules may significantly change. The LRAA would clearly inject unforeseen costs into the equation that would create an uneven playing field and challenge the fiscal health of our planned DC stores.

“As a result, Wal-Mart will not pursue stores at Skyland, Capitol Gateway or New York Avenue if the LRAA is passed. What’s more, passage would also jeopardize the three stores already under construction, as we would thoroughly review the financial and legal implications of the bill on those projects.

“This was a difficult decision and one we arrived at after considerable contemplation.

There is no question that Wal-Mart has surpassed the community-relations efforts of other retailers seeking to come to Washington. In response, some members of the council are fast-tracking a game-changing piece of legislation that challenges our ability to deliver.

“While we will continue to engage with the council leading up to Wednesday’s vote, we urge Mayor Gray to veto this discriminatory legislation, as it runs counter to every economic development platform that his administration has identified as a priority for Washington.”

Wal-Mart spokesman Steven Restivo also noted that less than one-half of one-percent of Wal-Mart’s store associates earns the hourly state or federal minimum wage. According to Restivo, the vast majority of Wal-Mart store level employees earn considerably more.

“Most of our workforce is full-time and we post the average, hourly full-time wage for every state where we operate stores.” (According to Wal-Mart’s website, in Maryland, the Bentonville, AR-based retailer employs nearly 19,000 associates, the average hourly wage is $12.04. In Virginia where the world’s largest retailer employs more than 41,000 associates, the average hourly wage is $12.39). He continued, “About 75 percent of our store management teams across the country started as hourly associates, and their average pay is between $50,000 and $170,000 a year. Our highest earning store manager last year earned more than $250,000.”

One DC official who believes that the passage of the living wage bill would send a chilling message to other businesses, too, is Victor Hopkins, deputy mayor for planning and economic development.

“What they’re doing is, they’re killing the golden goose,” Hoskins told The Washington Post, noting that 3,000 permanent jobs, 1,000 construction jobs and untold tax revenue would be lost over the next 18 months should the bill pass. He added that despite the belief of some lawmakers that Wal-Mart will not follow through on its decision to reduce its footprint in DC or withdraw from the market altogether, he believes that Wal-Mart would stick to its ultimatum.

Another potential new retail entry to the city would also be impacted by the living wage bill should it be enacted. Rochester, NY-based Wegmans, which has enjoyed great success in the Washington area since it entered the market in 2004, has eyed the now-closed Walter Reed hospital site (16th Street, NW) as a possible store location, which would be its first in Washington DC proper.