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Thursday, December 04, 2008

The Trader Joe's Conundrum for Davis

Over the weekend the Davis Enterprise reported that the deal between Trader Joe's and Radiological Associates of Sacramento (RAS) had fallen apart. The deal was in place whereby RAS would vacate their current premises in the University Mall so that Trader Joe's could occupy that spot.

Now those negotiations have fallen apart.

According to the Enterprise:
'It's not going to happen,' said RAS attorney Steve Boutin. 'We've been working hard to make this a win-win for the city. There's not much for us to respond to, because they've (Centro) just said no. What we're going to do is urge them to give this another thought, sign the agreement we've all negotiated.'

Boutin said that he, RAS representatives, Centro representatives and Davis Mayor Ruth Asmundson sat down together in October and hammered out a deal that everyone agreed on.

But last week, Boutin received an e-mail from Centro that said the deal was off.

'We got a letter out of the blue in which we got cold-cocked by Centro,' Boutin said. 'They very simply said the deal was no longer feasible. They didn't provide reasons or specifics, other than to say they were afraid of overriding market conditions.'
Part of the problem according to the article is that Centro may be having difficulty getting financing given the economy.

But this is only the beginning of the story.

The excerpt from the article quoted above indicates that RAS representatives, Centro representatives, and the Davis Mayor Ruth Asmundson met together in October to hammer out a deal. However, according to the Vanguard's sources, the city council never authorized the Mayor do this or even was informed that the Mayor would be doing this. The issue was never discussed at the council and the council never authorized any sort of negotiations.

Meanwhile the organization, DANG! (Davis Advocates for Neighborhood Groceries) is not happy either.

On November 19, 2008, they sent a letter to the Davis City Council and City Manager Bill Emlen.
"We have watched with great interest the reports that Trader Joe’s may locate at University Mall, provided that Radiological Associates of Sacramento (RAS) relocates to a location in West Davis. Further, we hear that the City of Davis is playing a role in facilitating this transaction possibly through providing various financial incentives to any or all of the four parties.

This alarming turn of events, if true, causes us great concern because it would mean that the city is assisting a very successful international corporation to locate in a part of town that is not in need of economic assistance. On the other hand, our distressed
shopping center in West Davis –which is in dire need of help from the city –continues to be ignored.

If incentives are being provided, we request that you state specifically what assistance, if any, the city is providing to facilitate the Trader Joe’s / University Mall / RAS transaction. And if the city is indeed helping, we further state that the city should provide a comparable level of support to DANG’s efforts to secure a market tenant in West Davis. As we are striving to find a neighborhood market tenant we'd like to add those possible city actions to our list of incentives for them to open up in Westlake Plaza."
Community Development Director Katherine Hess told the Vanguard that there is no financial arrangement with Trader Joe's. However, she later clarified that point understanding that the incentives that DANG refers to in their letter are a reduction in parking requirements. She suggested that the city would be open to doing the same at Westlake if that would make a difference.

However, this misses the point. According to the traffic and parking analysis, the building of Trader Joe's would require a larger number of parking spaces at the University Mall in order to accommodate the increased amount of customers using the facility. However, the expansion of the facility to accommodate Trader Joe's will actually result in a reduced number of parking spaces available. The city is not requiring Trader Joe's or the University Mall to provide for those additional spaces. Instead they are arguing that the parking lot is under utilized at it stands now and that they would simply increase the enforcement against people using the lot who live in adjacent apartment buildings.

My experience in that lot has been that they do enforce those laws. At various points in time when I used the RAK on campus and tried to park at the University Mall parking lot I found a notice on my car warning me that I could be towed if I did similarly in the future.

Moreover, parking is not an issue at Westlake. The parking lot there is underutilized. A new grocery store moving into that location would not need additional parking nor face that parking requirement. Therefore, DANG! has a point that Trader Joe's has gotten a financial incentive to move into the only location in town in which they were willing to move. The University Mall is currently occupied and bustling. The same is not true for either Westlake which has been without a grocery store anchor since May of 2006. East Davis Manor has similarly been without an anchor. The city has bent over backwards to accommodate Trader Joe's and get them to come into an already occupied location. Meanwhile, what has the city done to help Westlake?

Contrary to suggestions, Westlake right now stands a very good chance of finding a grocery store that would be willing to come into that location. The city needs to, especially given the current economic climate, prioritize bringing in businesses to existing vacant spots. Yet the city has to this point done very little to induce new grocers to occupy this empty spot that threatens the rest of the shopping center.

As I have mentioned many times, I have never believed the University Mall is a good fit for Trader Joe's, even without the issue of RAS. The lot there is too small to accommodate the number of cars. During the winter months, the birds are problematic with their excessive numbers and droppings. Finally, the area of Russell Blvd between Anderson and Sycamore is one of the most congested in Davis. You have one of the two major east-west arterials linking up with a major north-south connector. You have the university traffic coming into town and going onto the west side of campus. You have the major bike traffic from Sycamore. Now you want to put a market that is going to attract a huge number of customers from across the city to a location that is already congested? It doesn't make a lot of sense.

Trader Joe's has taken an arrogant position that they will only move into that location. That also doesn't make a lot of sense. They seem not to understand that Davis residents would go to wherever the Trader Joe's was located. In fact, given traffic congestion at that location, it may do better in other places.

Despite the bleak tone of the article in the Enterprise, it still seems likely that some deal will eventually be reached, but the economic situation is one well worth watching as Davis looks to find other business and commercial suitors in the next few years.

---David M. Greenwald reporting