November 1, 1999

The Honorable Eugene Butler

Mayor, Town of Easton

14 South Harrison Street

Easton, Maryland 21601

Dear Mayor Butler:

I am in receipt of Chris Kehoe’s October 8^th memorandum to the Easton Town Council, Planning Commission, City staff and yourself. Mr. Kehoe has done an excellent job of summarizing many of the pertinent points raised during the past several months with regard to the existing moratorium and providing a set of questions to be answered during the 90-day moratorium period. On behalf of Lowe’s, a longtime business resident of Easton and the only big box retailer presently located in town and actively seeking to expand in Easton, I would like to take this opportunity to comment from Lowe’s perspective on several questions raised by Mr. Kehoe.

I will not attempt to address each question posed by Mr. Kehoe; clearly, there are many questions raised which must be addressed by the Town as a whole. But Mr. Kehoe does raise several questions upon which I feel compelled to comment.

With regard to the present and future need of big-box retailing in Town, Mr. Kehoe asks, "Who defines our ‘needs’? Residents? How should their views be determined?" Clearly, the Town of Easton is made up of a large number of residents. It is important to recognize that "residents" can and do include individuals, families, civic and cultural organizations, and businesses. It would be unfair to exclude any of these groups from providing their input toward determining what a desirable future in Easton will include. Is Easton a desirable place to live and raise a family? Yes it is! Is Easton a desirable place to conduct business? Absolutely! In fact, many of the same attributes that make Easton a desirable place to live make Easton a desirable place to do business. I hope that the Town recognizes this fact and will solicit input from all of its stakeholders in trying to define our needs. Perhaps a fair and scientific polling, commissioned by the Town, will help to define those needs.

Mr. Kehoe also asks, "Can design and landscaping standards answer some of the concerns of the public?" Yes! And these standards are already contained in Easton’s newly revised zoning ordinance. The new ordinance provides an extraordinary degree of control over the aesthetics of large commercial and retail developments. The newly revised ordinance provides a set of very specific criteria against which new commercial and retail establishments can now be measured. Lowe’s is committed to meeting the intent of the newly revised ordinance.

Mr. Kehoe writes "What are (the) current big box retailers in town? What has been our current experience with big box retailing? How can we learn and improve from our experience?" There are eight retailers already located within the Town who operate stores in excess of 25,000 square feet. Lowe’s is one of those retailers, and we have one of the longest established histories of operating a "big box" store in town. We have successfully operated a store in Easton since 1977 and have been a good corporate resident during that time. In fact, we have provided jobs to hundreds of Easton residents, contributed tens of millions of dollars toward the local payroll and tax base, and contributed more than $250,000.00 toward local charitable and educational activities. It is evident that Easton has identified a number of issues relating to big box stores that require improvement-and the newly revised zoning ordinance represents the means by which these issues can finally be resolved.

Mr. Kehoe writes, "What mechanisms can the Town use to give clarity to developers regarding the big box requirements?" The big box design requirements have been in place since August of this year. The requirements give the Council an extraordinary degree of control – so much so that there is an inherent uncertainty about the status of approval for any pending application, even if all the design requirements have been met and Town staff and Planning Commission approve of an application. At a minimum, the confusion regarding commercial development that is described in the Comprehensive Plan should be resolved. From that point onward, the consistent use of these requirements is by far the most beneficial mechanism the Town can use to provide developers, and in Lowe’s case, owners, with a clear understanding of the big box requirements.

Mr. Kehoe writes, "If the Town decides we want big box retailing, what limitations do we want to impose upon developers as far as location, and other physical characteristics of the big box." Again, the newly revised zoning ordinance provides an extraordinary degree of control over the appearance and layout of big box and other large retail developments. Use the new zoning ordinance.

Mr. Kehoe writes, "What, if any, costs related to infrastructure improvements should the town require developers to pay?" From Lowe’s perspective, we are prepared to bear all infrastructure improvement costs associated with our proposed development. That seems only fair, considering that it is our desire to build a new store that is driving the need for infrastructure improvements. If the Town wishes to assess all new development a special "impact fee" to help pay for future infrastructure improvements, let’s work together to determine how that fee can be structured.

Mr. Kehoe writes, "What economic impacts will additional big box retailing have upon the private sector economy in Easton?" A concern has been expressed during the many workshop and public sessions about the potential impact that additional big box retailers will have upon merchants located in Easton’s Historic District. I am in complete agreement that the historic district does deserve special consideration and protection. It is the focal point of Easton’s rich history and heritage and therefore should be protected. But the concern that additional big box retailing will destroy the economy of the historic district is not warranted. The historic district is unique, and the unique collection of eclectic specialty shops, financial and professional services, printing shops, bookstores, restaurants, and the services they offer cannot be duplicated by big box retailing.

Lowe’s is a national merchandiser. That means that much of the merchandise to be found in our proposed Easton store will also be available in our Saratoga Springs, NY, Burton, MI, and Austin, TX stores. Each new store stocks a tremendous variety of products - more than 40,000 in all. But by nature, we cannot stock every home improvement product made. Our national merchandising strategy means that we cannot efficiently merchandise locally produced items. Locally crafted birdhouses, patio furniture, and mailboxes will not normally be featured in our stores. It may be possible to order those items through our local store, but it would be simpler to visit the local merchant who manufactures and/or stocks those items of interest. Given the nature of the shops and businesses in the historic district and the nature of big box retailing, I submit that those businesses will not be impacted by additional big box retailing in Easton.

Mr. Kehoe writes, "What impacts will additional big box retailing have on property values on adjacent or nearby properties?" Depending on the nature of those properties and the aesthetics of the proposed big box development, the answer can vary widely. But one basic tenet should hold true; a well designed and pleasant looking property, be it residential, commercial, retail or industrial, will increase the value of neighboring properties. Conversely, a poorly designed, unkempt property will almost always decrease the value of neighboring properties. The newly revised zoning ordinance addresses in great detail the aesthetic appearance of big box and large retail developments.

Mr. Kehoe writes, "What effect (will additional big box retailing have) on unemployment? Are retailing jobs the kind of jobs Easton wants to encourage at this point? Are there sufficient persons in the labor pool to provide employees?" Additional big box retailing will provide additional job opportunities for the residents of Easton. Lowe’s currently employs 101 people in our Easton store. Our proposed new store will employ between 175 and 200 people. Therefore, we expect to hire between 74 and 99 new employees for the proposed new store. We anticipate that three-quarters of the 175-200 employees in the new store will be full-time employees.

There has been a great deal of criticism regarding the nature of employment at Lowe’s and other big box retailers. Big box jobs have been termed "low wage". But those criticizing the job opportunities Lowe’s provides should take a closer look into our opportunities. Yes, we have entry level jobs. But what employer does not? We also need inventory and merchandising specialists, zone managers, accountants, department managers, personnel training coordinators, receiving managers, assistant managers, inventory loss specialists, co-managers and store managers. The opportunities for advancement within Lowe’s are tremendous. Many of our corporate office personnel, even our President/CEO, Bob Tillman, began work at Lowe’s in an entry level position. And contrary to concerns expressed during public hearings on the moratorium, we do not "bus in" employees from the "Corporate Office" to staff a new store. Inevitably, there will be some positions that are filled by transfer. But the vast majority of positions will be filled by local residents. We recognize that the labor market is tight almost everywhere and that we will need to offer wages and benefits commensurate with the work performed. We are confident that we can locate and retain a sufficient number of local employees to staff the new Lowe’s store.

Mr. Kehoe writes, "What supporting development will big boxes encourage and does the town want these supporting developments?" Obviously, the Town will need to decide as a whole if (and what) supporting development it wishes to encourage. Typically, supporting development consists of other (smaller-scale) retail establishments, restaurants, movie theaters, etc.

Mr. Kehoe writes, Is (surface water runoff) different for big box retailing than for other types of development? More harmful or less harmful?" Generally, big box retailers enclose their products for sale within their building, or make provisions for containing runoff on site. Aside from the parking lot, the largest expanse of impervious area on a big box site will generally be the roof of the building. The relatively large expanse of impervious area on a big box site will typically generate a greater runoff volume by percent of land area than will a residential home site, which has a much lower percentage impervious area. But there is a crucial difference-unlike residential home sites, the runoff generated from big box sites flows over relatively inert surfaces. We do not apply fertilizers, pesticides and herbicides to our parking lots or rooftops. Big box development normally generates storm water runoff containing considerably less phosphorous, nitrogen, pesticide and herbicide compounds than residential development of the same size.

The Easton big box requirements provide an interesting point to consider. One may generally assume that commercial development maximizes the development of any given site. However, the big box requirements are much more restrictive with regard to open space and landscaping than are the requirements for smaller retail development. Consequently, a collection of small retail users with the same square footage of floor area as a single big box user will have a higher percentage impervious area than a single big box user.

Mr. Kehoe writes, "What effect will big box retailing have on noise, illumination, air quality and visual characteristics of the Town?" There is no question that any type of development, will have an effect on certain aspects of life in Easton. But it is unfair to single out big box retailing as the only new land use that will have an effect on noise, illumination, air quality and visual characteristics of the Town. Any new residential, entertainment, commercial, educational/institutional, retail or industrial facility will have an effect on all four of these factors. The goal of the Town should be to balance all of the quality of life issues associated with any proposed development and to make sure that appropriate guidance documents are in place to help govern how the new development will blend with the existing community. The newly revised zoning ordinance is the appropriate guidance document for the Town to use in balancing these issues.

Mr. Kehoe writes, Will the buildings in which big box retailing is located prove to be flexible in meeting changing needs and demands? Does the Town want to encourage/permit/prohibit this particular means to connect people with goods and services? Lowe’s buildings are extremely flexible with regard to their use and re-use. Lowe’s Corporate Headquarters is based in North Wilkesboro, NC. There are several older Lowe’s stores in town which have been converted for use by other tenants. One has been converted to a Farm and Family Store. Another has been converted to office space to house Lowe’s Corporate Credit and Accounting Departments. A third is being converted for two new retail users, J.C. Penney’s and Belk’s Department Stores. Our older stores are routinely adapted for other uses, including grocery stores and movie theaters. Our store managers have asked that our buildings be designed to accommodate flexibility. It is this flexibility that makes our buildings so attractive to other potential users.

Mr. Kehoe writes, What is the current life span for big box(es), particularly in light of the emerging alternate technologies for commerce? It’s easy to place a lifespan on how long our building and site improvements will last. We design our buildings and site improvements to last a minimum of 20 years before substantial maintenance will be required. It is much more difficult to place a lifespan on a concept. How long a lifespan did the designers of the LP and 8-track cassette tape predict? How about the designers of the phonograph or the trolley car? All are still in use, but not as widely as when they were cutting edge technology.

Lowe’s would be foolish to ignore the impact that the Internet can have on our business. There are facets of our business now that can be and are serviced by Internet sales. In fact, we have plans in place to further enhance our business through the use of the Internet. Do we intend to rely solely on Internet sales at some point in the future? Not right now. The reason is simple. Lowe’s caters to retail customers. Retail customers normally visit their local store with a particular need, looking for particular items for a particular project. And, if they’re ready to purchase, those retail customers expect to be able to take their purchase(s) home that day. If a toilet is leaking or they need a new refrigerator or a bag of cement today, why order it over the Internet and wait for your purchase to arrive? If you need the item right now, why not buy it right now? It is indeed the rare retail customer who uses the Internet to order items needed today, knowing that those items may not arrive for two, three, five or seven days. Unlike businesses that provide information to their customers as their finished product, we provide tangible products. We have not yet discovered a way to transmit a dishwasher over the Internet. And so, we intend to focus our Internet sales efforts on our commercial customers, and further adapt our business as technology continues to change.

Mr. Kehoe writes, What mechanisms should be imposed in the event that a big box becomes vacant? Guarantees? Bonds? How have other communities converted vacant big boxes to other uses?" It is difficult to imagine any lender providing a guarantee or bond against a big box vacancy. I know of no instance where such a guarantee or bond has ever been issued. The reason is simple-there are too many factors that could collectively contribute to such a vacancy. Lenders issue guarantees and bonds for specific reasons. Something very specific must be accomplished by a specific date. The construction of a roadway. The completion of a water or sewer line. The installation of a traffic light. But to guarantee against a possible vacancy? How long must the building be vacant? Why is the building vacant? Is the owner asking too much for rent or purchase? How much is too much and how is this value determined an unknown number of years down the road when this vacancy occurs? There are simply too many variables to make guarantees or bonding against a future vacancy a reality.

Other communities have and continue to convert vacant big boxes to other uses. Again here in North Wilkesboro, Lowe’s purchased the Wilkes Mall two years ago and has been converting the space to our new 1,500-employee Customer Service Center. In Virginia Beach, Virginia, the City School District converted a vacant strip shopping center to an alternative high school. The conversion of big box retail stores to other uses happens more often than the doomsayers predict. I have heard it mentioned several times during discussions in Easton that there are some 900 vacant big boxes in the United States today. How does that vacancy rate compare to the overall number of big box stores? Lowe’s alone has more than 540 operating stores. Wal-Mart has more than 1,200. Add in stores operated by Target, K-Mart, Meijer’s, Home Depot, Sears, J.C. Penney’s, Menard’s, Food Lion, etc. and I daresay the number of big box stores will very quickly add up to several thousand. How significant a number are those 900 vacant big box stores versus 5,000, 10,000 or 20,000 operating big box stores? Lowe’s property management group strives to keep the number of store vacancies at less than 5%. And we are quite successful at doing so. Typically, it takes Lowe’s two months less to sell an old store than to build a new one.

Mr. Kehoe asks, "What is appealing to retailers about Easton?" Many of the same things that attract people to reside in Easton attract retailers like Lowe’s to locate (or in Lowe’s case, to expand) in Easton. Easton is a pleasant community with a growing population base. Employers in Easton and its vicinity continue to grow and prosper. A large number of residents reflect our typical customer profiles. And, whether acknowledged or not, Easton is one of the hubs of economic activity on the Eastern Shore.

Mr. Kehoe asks, "What are the closest locations of stores of equal size to those proposed for Easton?" Lowe’s closest two stores of equal size are located in Glen Burnie and White Marsh, MD.

Mr. Kehoe asks "What are the big box retailers volume expectations in terms of the number of customers, now, in 5, 10 and 20 years? When would expansion be required? How would it be accomplished?" Lowe’s anticipates that 2,500 to 2,800 cars per day will visit our proposed store. There is no way to accurately predict when we will need to expand. We anticipate that the proposed Lowe’s will be adequate to address the Easton market’s needs for at least five years. Future expansion could be accomplished by building a new store within Easton to replace the proposed store or by building a new store somewhere else in the trade area.

Mr. Kehoe asks, Is it possible for the retail shopping opportunities that are offered by big box stores to be made available in Easton through other mechanisms, for example Home Depot’s ‘Village( Hardware) Concept’, or be retrofitted into existing shopping centers?" Again I cannot speak for the other applicants. From Lowe’s perspective, we cannot offer the same selection of merchandise, nor can we keep the same volume of merchandise in stock in a 30,000 to 40,000 square foot building, versus the selection and volume of merchandise we can offer in the 115,000 square foot store we have proposed for Easton. Our proposed store will not fit into existing shopping centers in Easton.

Lowe’s appreciates the opportunity to comment on the questions raised by Mr. Kehoe’s memo. Should you have any questions regarding any of our comments above, please feel free to contact me at 336-658-5316.

Sincerely,

F. Christopher Thalmann

Site Development Manager