February 19, 2007
A link in the chain | Formula and chain stores face heavy restrictions thanks to a new rule in Portland. But is the contentious ordinance good public policy?
By Brendan Hughes
In the early morning hours of November 21, the Portland City Council passed by a 5-4 vote a rule that amended the city's land use laws, restricting the number and proximity of certain types of chain businesses on Portland's peninsula.
The rule became known as the formula business ordinance, and immediately created deep divisions among the city's business owners, politicians and community activists. Ordinance supporters believe a chain-business onslaught is coming, and that an attempt to locate a Hooters restaurant downtown ˆ the event that arguably triggered the ordinance ˆ was just the beginning of a chain invasion. Supporters say it's better to protect a healthy, independent downtown business district before it's wiped out.
Opponents argue that downtown and the Old Port have not been subjected to an onslaught of chains, and aren't at risk from a chain invasion. They argue that a blanket formula business ban sends a negative message about doing business in the city, and that the ordinance could damage ongoing economic revitalization of Portland, which is hardly in a position to dictate who can and cannot do business in the city's downtown.
The only thing the two sides agree on is that the ordinance, as it is written now, needs to be changed. In January, City Councilor Ed Suslovic introduced a so-called "sunset provision" that would have repealed the formula business restrictions and established a panel to study the problem of proliferating formula business. The provision was defeated, but the council plans to discuss the ordinance and Suslovic's sunset provision again on February 21.
Meanwhile, a group of local businesses calling itself PortlandWorks has formed to combat the measure and lobby for its repeal, and a former city councilor is preparing to challenge the ordinance in court. At least one business owner, characterizing the ordinance as a "slap in the face" to downtown business owners, has announced he's leaving town. Mark Robinson, spokesman for PortlandWorks, says that if things don't change, Portland can expect more merchants to leave. "[The ordinance] sends a horrible message to the region that Portland is anti-business," Robinson says. "If you go back to the origin of the ordinance, I think it's a little disingenuous of the proponents to claim that this is a pure debate of tackling a problem of too many formula businesses."
Hooters or bust?
A common complaint from ordinance opponents is that the future of Portland's downtown is in jeopardy simply because a handful of city councilors didn't like the idea of a Hooters mixing hot wings, cold beer and skin-baring waitresses on Congress Street.
The city council's late-night session in November was the zenith of three months of hysteria surrounding the August announcement that Michael Harris, the owner of The Stadium, a Congress Street sports bar, was making a bid to bring Maine its first Hooters franchise. On August 23, Harris sent an email to officials at the Portland Downtown District informing them of his plans. The email quickly found its way to a number of media outlets, including Mainebiz. "I am sure there will be a handful of people who will be hesitant in the beginning," Harris wrote. Still, he was confident the community would come around "once they see that this is nothing more than a restaurant."
Harris could not have been more wrong. On September 18, the Portland City Council, after quick and vocal outrage from local citizenry, approved a temporary moratorium on chain restaurants to prevent Harris from moving ahead with the franchise. The city also charged the Community Development Committee with the task of recommending permanent restrictions, which were eventually adopted in the November 21 ordinance.
Around the same time, a group of concerned business owners and citizens formed Keep Portland Real to lobby for permanent regulation of chain retailers in Portland. Paul Seidman, a Portland resident and one of the group's founders, says that their goal wasn't to bar all formula businesses. Instead, he says, Keep Portland Real aimed "to try and get an ordinance in place that was both hospitable to formula restaurants and local business."
Members of Keep Portland Real insist that the Hooters fiasco was not the group's sole motivator. "Hooters was just one example of what Portland could become," says Seidman, "and it took Portland in a direction that virtually every Portlander that I talked to didn't want it to go in."
City Councilor James Cloutier voted for the ordinance. A member of the council's Community Development Committee, Cloutier believes the measure will protect Portland's "unique character," and bolster the local economy. "Franchise businesses have a growing market share, but when a dollar's worth of sales occurs at a franchise you see a certain proportion of it stay in the community, and then the rest of it leaves," he says. "At local businesses, when you spend a dollar you see the profits retained in the community ˆ the difference is in the range of 30%-40% of sales."
In sharp contrast is Orlando Delogu, a former city councilor who thinks the measure spells economic doom. He cites the Maine Real Estate and Development Association's estimate of 83,000 sq. ft. of vacant ground floor commercial space within the area governed by the ordinance. "I think that this ordinance was not properly thought out," says Delogu, who taught for 40 years at the University of Maine School of Law in Portland, and who is working with attorneys to mount a possible legal challenge to the ordinance. "Portland has too much empty [commercial] space. I think you need to be wary when your empty space gets to that level, and I certainly don't think we ought to be picking and choosing who we'd like to come into that space."
In the months since the ordinance took effect, at least one formula business has called it quits on Portland. Bar Harbor-based Cadillac Mountain Sports announced in January that its three Portland stores would close in March. Owner Matt Curtis at the time told Mainebiz the inhospitable business climate created by the ban was a prime reason to pull out of Portland.
Since January, the Portland City Council has taken up the ordinance twice, once to vote on a sunset clause that would have repealed the amendment and a second time to discuss adjusting the borders of the regulated zones. Further discussion has been postponed until the council's February 21 session, when the members will again consider the sunset clause.
The limitations of local
The ordinance regulates formula businesses in the Old Port and Arts District ˆ which the law calls the Extended PAD Overlay Zone ˆ and Portland's Bayside neighborhood, called the Formula Business Overlay Zone.
In the Bayside zone, a store is considered a formula business if it has 30 or more locations nationwide; while the ordinance regulates the total square footage of the business and its proximity to other chain stores, there is no limit to the total number of formula retailers that can reside inside the zone. The Old Port and Arts District zone is more tightly regulated. Formula stores are defined as businesses with 10 or more locations in the U.S. Such stores are limited in their total square footage and street frontage. Most significantly, the total number of formula businesses allowed in the zone is capped at 23 ˆ the number of chains presently in the zone. In both areas, however, grocery stores, drug stores, pharmacies, convenience stores, hardware stores, gas stations, banks and entertainment businesses such as movie theaters are exempt from the ordinance, essentially limiting the scope of the law to only retail clothing and restaurant chains.
For supporters, the ordinance is a precaution against those chains, says Stacy Mitchell, a senior researcher at the Minneapolis, Minn.-based Institute for Local Self Reliance and author of the recently published Big-Box Swindle, a book that argues chain retailers are rarely the economic saviors they're sometimes made out to be. (Mitchell also is a Portland resident.)
But opponents counter that local businesses aren't exactly making sections of downtown Portland hot-spot destinations. Nowhere is this more evident than along Congress Street, especially between Monument Square and High Street, a corridor that city officials admit is among the city's most persistently anemic commercial districts. Cloutier believes that most of the Overlay District's 83,000 sq. ft. of vacant commercial space is in that area ˆ a condition he notes has afflicted the area for at least 10 or 15 years. "The vacancy areas are not likely to attract anchor retail tenants," he says.
As a result, Cloutier thinks the city needs to take a more broad-based approach to economic development, a key component of which is bringing more residents into economically stagnant areas. Residents, Cloutier believes, will bring more foot traffic, and foot traffic means a better shot for retailers. He sees as good news the residential space planned for the Bayside area, as well as more downtown residences. "We're repopulating downtown Portland," he says.
But Delogu doesn't think foot traffic will materialize without chain retailers like the Gap or Pottery Barn anchoring the downtown Arts District. As a city councilor in the 1990s, Delogu was involved in the city's efforts to revitalize the downtown. Those efforts included convincing national retailers like Starbucks to fill long-vacant space. "Portland was dying, dying to get a CVS, dying to get Patagonia, North Face and Starbucks into the Congress Street corridor," he says. "We succeeded in bringing all of those stores and now they would be barred."
When Mary Allen Lindemann opened her first Coffee By Design location on Congress Street in 1994, vacancy rates for downtown Portland were hovering near 40%. But she doesn't credit the chains with sparking the city's resurgence. "The people who moved in and rebuilt the downtown were local businesses," says Lindemann, who also is a member of Keep Portland Real.
Double standard?
While no one on the city council can say for sure what the current ban may morph into, it seems likely that even if the measure is repealed, it will be replaced by a law that regulates "chains" ˆ however they may be defined.
PortlandWorks continues to fight for a total repeal of the ordinance and opposes any regulation of the downtown business district. "The proponents are going to point to Stacy Mitchell's book, and that's what they're hanging their hats on," says Mark Robinson, the group's spokesman. "I think the council will repeal the ordinance. The question is, what will they replace it with?"
Cloutier also predicts a repeal, but he doesn't think restrictions on formula businesses will disappear. "It's likely to be revised as it goes along," he says, "or to be repealed while a study group toils away at it."
If the ordinance is not repealed, says Delogu, it will almost certainly end up in court. Delogu's legal challenge is based on what he describes as a "double standard" at work in the ordinance. "I don't think that government has the power to favor local business over business from away," he says. "It does not have the power to impose standards on one group of people that it's not prepared to impose on another group of people."
Mitchell and Lindemann would like to see the council take a more measured approach. "As written, there needs to be some change," says Lindemann. "I think there should be more communication as far as how many stores is too many, as to who is actually considered a formula store."
For her part, Mitchell, who is not a member of Keep Portland Real but supports the ordinance, says the formula ban underscores a much larger issue of the state's economic development. "Retail isn't where our economy is at," she says. "Our advantage is our uniqueness in geography and natural setting, the fact that we've preserved our historic buildings and the fact that we have a bunch of unique businesses [like] nothing you'll find anywhere else. Those are becoming even greater economic assets."
The rule became known as the formula business ordinance, and immediately created deep divisions among the city's business owners, politicians and community activists. Ordinance supporters believe a chain-business onslaught is coming, and that an attempt to locate a Hooters restaurant downtown ˆ the event that arguably triggered the ordinance ˆ was just the beginning of a chain invasion. Supporters say it's better to protect a healthy, independent downtown business district before it's wiped out.
Opponents argue that downtown and the Old Port have not been subjected to an onslaught of chains, and aren't at risk from a chain invasion. They argue that a blanket formula business ban sends a negative message about doing business in the city, and that the ordinance could damage ongoing economic revitalization of Portland, which is hardly in a position to dictate who can and cannot do business in the city's downtown.
The only thing the two sides agree on is that the ordinance, as it is written now, needs to be changed. In January, City Councilor Ed Suslovic introduced a so-called "sunset provision" that would have repealed the formula business restrictions and established a panel to study the problem of proliferating formula business. The provision was defeated, but the council plans to discuss the ordinance and Suslovic's sunset provision again on February 21.
Meanwhile, a group of local businesses calling itself PortlandWorks has formed to combat the measure and lobby for its repeal, and a former city councilor is preparing to challenge the ordinance in court. At least one business owner, characterizing the ordinance as a "slap in the face" to downtown business owners, has announced he's leaving town. Mark Robinson, spokesman for PortlandWorks, says that if things don't change, Portland can expect more merchants to leave. "[The ordinance] sends a horrible message to the region that Portland is anti-business," Robinson says. "If you go back to the origin of the ordinance, I think it's a little disingenuous of the proponents to claim that this is a pure debate of tackling a problem of too many formula businesses."
Hooters or bust?
A common complaint from ordinance opponents is that the future of Portland's downtown is in jeopardy simply because a handful of city councilors didn't like the idea of a Hooters mixing hot wings, cold beer and skin-baring waitresses on Congress Street.
The city council's late-night session in November was the zenith of three months of hysteria surrounding the August announcement that Michael Harris, the owner of The Stadium, a Congress Street sports bar, was making a bid to bring Maine its first Hooters franchise. On August 23, Harris sent an email to officials at the Portland Downtown District informing them of his plans. The email quickly found its way to a number of media outlets, including Mainebiz. "I am sure there will be a handful of people who will be hesitant in the beginning," Harris wrote. Still, he was confident the community would come around "once they see that this is nothing more than a restaurant."
Harris could not have been more wrong. On September 18, the Portland City Council, after quick and vocal outrage from local citizenry, approved a temporary moratorium on chain restaurants to prevent Harris from moving ahead with the franchise. The city also charged the Community Development Committee with the task of recommending permanent restrictions, which were eventually adopted in the November 21 ordinance.
Around the same time, a group of concerned business owners and citizens formed Keep Portland Real to lobby for permanent regulation of chain retailers in Portland. Paul Seidman, a Portland resident and one of the group's founders, says that their goal wasn't to bar all formula businesses. Instead, he says, Keep Portland Real aimed "to try and get an ordinance in place that was both hospitable to formula restaurants and local business."
Members of Keep Portland Real insist that the Hooters fiasco was not the group's sole motivator. "Hooters was just one example of what Portland could become," says Seidman, "and it took Portland in a direction that virtually every Portlander that I talked to didn't want it to go in."
City Councilor James Cloutier voted for the ordinance. A member of the council's Community Development Committee, Cloutier believes the measure will protect Portland's "unique character," and bolster the local economy. "Franchise businesses have a growing market share, but when a dollar's worth of sales occurs at a franchise you see a certain proportion of it stay in the community, and then the rest of it leaves," he says. "At local businesses, when you spend a dollar you see the profits retained in the community ˆ the difference is in the range of 30%-40% of sales."
In sharp contrast is Orlando Delogu, a former city councilor who thinks the measure spells economic doom. He cites the Maine Real Estate and Development Association's estimate of 83,000 sq. ft. of vacant ground floor commercial space within the area governed by the ordinance. "I think that this ordinance was not properly thought out," says Delogu, who taught for 40 years at the University of Maine School of Law in Portland, and who is working with attorneys to mount a possible legal challenge to the ordinance. "Portland has too much empty [commercial] space. I think you need to be wary when your empty space gets to that level, and I certainly don't think we ought to be picking and choosing who we'd like to come into that space."
In the months since the ordinance took effect, at least one formula business has called it quits on Portland. Bar Harbor-based Cadillac Mountain Sports announced in January that its three Portland stores would close in March. Owner Matt Curtis at the time told Mainebiz the inhospitable business climate created by the ban was a prime reason to pull out of Portland.
Since January, the Portland City Council has taken up the ordinance twice, once to vote on a sunset clause that would have repealed the amendment and a second time to discuss adjusting the borders of the regulated zones. Further discussion has been postponed until the council's February 21 session, when the members will again consider the sunset clause.
The limitations of local
The ordinance regulates formula businesses in the Old Port and Arts District ˆ which the law calls the Extended PAD Overlay Zone ˆ and Portland's Bayside neighborhood, called the Formula Business Overlay Zone.
In the Bayside zone, a store is considered a formula business if it has 30 or more locations nationwide; while the ordinance regulates the total square footage of the business and its proximity to other chain stores, there is no limit to the total number of formula retailers that can reside inside the zone. The Old Port and Arts District zone is more tightly regulated. Formula stores are defined as businesses with 10 or more locations in the U.S. Such stores are limited in their total square footage and street frontage. Most significantly, the total number of formula businesses allowed in the zone is capped at 23 ˆ the number of chains presently in the zone. In both areas, however, grocery stores, drug stores, pharmacies, convenience stores, hardware stores, gas stations, banks and entertainment businesses such as movie theaters are exempt from the ordinance, essentially limiting the scope of the law to only retail clothing and restaurant chains.
For supporters, the ordinance is a precaution against those chains, says Stacy Mitchell, a senior researcher at the Minneapolis, Minn.-based Institute for Local Self Reliance and author of the recently published Big-Box Swindle, a book that argues chain retailers are rarely the economic saviors they're sometimes made out to be. (Mitchell also is a Portland resident.)
But opponents counter that local businesses aren't exactly making sections of downtown Portland hot-spot destinations. Nowhere is this more evident than along Congress Street, especially between Monument Square and High Street, a corridor that city officials admit is among the city's most persistently anemic commercial districts. Cloutier believes that most of the Overlay District's 83,000 sq. ft. of vacant commercial space is in that area ˆ a condition he notes has afflicted the area for at least 10 or 15 years. "The vacancy areas are not likely to attract anchor retail tenants," he says.
As a result, Cloutier thinks the city needs to take a more broad-based approach to economic development, a key component of which is bringing more residents into economically stagnant areas. Residents, Cloutier believes, will bring more foot traffic, and foot traffic means a better shot for retailers. He sees as good news the residential space planned for the Bayside area, as well as more downtown residences. "We're repopulating downtown Portland," he says.
But Delogu doesn't think foot traffic will materialize without chain retailers like the Gap or Pottery Barn anchoring the downtown Arts District. As a city councilor in the 1990s, Delogu was involved in the city's efforts to revitalize the downtown. Those efforts included convincing national retailers like Starbucks to fill long-vacant space. "Portland was dying, dying to get a CVS, dying to get Patagonia, North Face and Starbucks into the Congress Street corridor," he says. "We succeeded in bringing all of those stores and now they would be barred."
When Mary Allen Lindemann opened her first Coffee By Design location on Congress Street in 1994, vacancy rates for downtown Portland were hovering near 40%. But she doesn't credit the chains with sparking the city's resurgence. "The people who moved in and rebuilt the downtown were local businesses," says Lindemann, who also is a member of Keep Portland Real.
Double standard?
While no one on the city council can say for sure what the current ban may morph into, it seems likely that even if the measure is repealed, it will be replaced by a law that regulates "chains" ˆ however they may be defined.
PortlandWorks continues to fight for a total repeal of the ordinance and opposes any regulation of the downtown business district. "The proponents are going to point to Stacy Mitchell's book, and that's what they're hanging their hats on," says Mark Robinson, the group's spokesman. "I think the council will repeal the ordinance. The question is, what will they replace it with?"
Cloutier also predicts a repeal, but he doesn't think restrictions on formula businesses will disappear. "It's likely to be revised as it goes along," he says, "or to be repealed while a study group toils away at it."
If the ordinance is not repealed, says Delogu, it will almost certainly end up in court. Delogu's legal challenge is based on what he describes as a "double standard" at work in the ordinance. "I don't think that government has the power to favor local business over business from away," he says. "It does not have the power to impose standards on one group of people that it's not prepared to impose on another group of people."
Mitchell and Lindemann would like to see the council take a more measured approach. "As written, there needs to be some change," says Lindemann. "I think there should be more communication as far as how many stores is too many, as to who is actually considered a formula store."
For her part, Mitchell, who is not a member of Keep Portland Real but supports the ordinance, says the formula ban underscores a much larger issue of the state's economic development. "Retail isn't where our economy is at," she says. "Our advantage is our uniqueness in geography and natural setting, the fact that we've preserved our historic buildings and the fact that we have a bunch of unique businesses [like] nothing you'll find anywhere else. Those are becoming even greater economic assets."
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