If any state lives up to its motto, it is the Green Mountain State of Vermont. While citizens elsewhere in America often are more influenced by the economy than the environment, Vermonters won't compromise their lush green surroundings for the kind of green that stuffs their wallets.
In accordance with Mother Nature, the state outlawed billboards and banned rooftop HVAC units. Not surprisingly, proposed retail deals are also intensely scrutinized. In fact, retail is such an unfavorable commercial project, it is a low priority even within the economic development community, says Richard Angney, executive vice president of the Central Vermont Economic Development Corp. in the state capital of Montpelier. Angney says his organization targets firms that provide better jobs than retailers. “The retailers seem to find us anyway,” he says, pointing out that businesses flock to places where good paying jobs are being created.
With only 600,000 residents, the state is comparable to a medium-sized city like Austin, Tex. Despite Vermont's small size, retailers and developers find the market appealing because of the relatively high level of disposable income of its citizens. Median family income in the state is $48,625, and the cost of living is 10 percent below the national average. By comparison, Los Angeles has a median family income of only $39,942, yet the average cost of living is 2 1/2 times the national average.
Though Vermont's market is so lucrative, state and local governments make it nearly impossible for developers to break ground.
On the local level, big boxes present the most pressing issues for Vermonters, says Ernest Pomerleau, president of Burlington, Vt.-based Pomerleau Real Estate, a commercial developer, brokerage and property management firm involved primarily in community and neighborhood centers. “With Wal-Mart back on the scene, all sides are fired up, creating a raging but healthy debate,” he says.
Wal-Mart currently has four stores in Vermont, three of which moved into existing facilities. Construction of a new store is underway in Saint Albans, and another is proposed for Saint Johnsbury, according to Angney, who notes that the most controversial issue related to big boxes is traffic.
Vermonters react badly to the concept of a “carbon society,” says Pomerleau, referring to communities where urban sprawl has created total dependence on autos, resulting in near gridlock traffic. Some local Vermont governments are implementing zoning changes that promote mixed-use development inside city centers, and state lawmakers are considering legislation that would create incentives for development inside centers and disincentives for outside growth, Pomerleau says.
He notes, for example, that South Burlington has revisited its entire urban center concept to embrace high-density, mixed-use development to include education, office, retail and residential space.
Pomerleau points out, however, that the desire to keep retail in downtown centers requires a sensitive balance, because “the intrigue to Vermont is its downtowns are unique, and big boxes don't keep with that context. The smaller the community, the more sensitive that balance is.”
Generally, local governments require projects to be scaled to a size appropriate for the community. These projects must aesthetically fit the community's character, use minimal signage, provide adequate drainage, and mitigate potential traffic congestion, notes Roger Kohn, principal in the Hinesburg, Vt.-based law firm of Kohn & Rath LLP. He believes there's a good chance that a project will eventually be approved, but he explains “it's a question of what type of modifications will have to be made to get it approved.” Retail developers, he says, “must be prepared to spend money on development and permits and have patience.”
Retailers attempting to enter Vermont must be willing to make compromises, says Angney, noting those concessions usually mean scaling back on sizes that may be standard for other areas.
“Don't expect to build cookie-cutter facilities like elsewhere in the country,” he adds. “The big issue is how it fits into the environment — how to put it into the setting so that it's less intrusive.”
Sometimes development doesn't go exactly as planned. Pomerleau explains that Maple Tree Place, a 350,000-square-foot power center now being built in Williston by Connecticut-based Starwood Ceruzzi, is on a site that was supposed to get a mall 20 years ago.
In addition to unforeseen developmental frustrations, retailers should expect the unexpected, especially in rural communities. Home Depot discovered this when city fathers in a rural Vermont town requested that a proposed store include a vegetation-covered roof where cows could graze, because they thought it would be environmentally friendly and cut the heat given off by the building. Home Depot politely withdrew.
But Act 250, a state law that requires an environmental assessment for any project on 10 acres, is by far the biggest headache for developers, says Pomerleau. Act 250 evaluates proposals on 10 criteria related to air and water quality; water conservation and drainage; waterway, shoreline and wetlands preservation; pressure on natural, social and public resources; and impact on the state's natural beauty and historic and aesthetics.
However, he points out that because the process requires that each public agency with jurisdiction over areas covered within those 10 criteria assess a project's impact and provide a letter of determination on the outcome, a project will undergo substantially more than 10 assessments. “When all is said and done, it's more like 40 letters to get a project through,” Pomerleau adds.
The state legislature recently enacted a bill altering Act 250 and the land-use permitting process, which was backed by business interests and was a priority of Republican Governor Jim Douglas.
The new law shifts appeals of permitting decisions from regional citizen appeal boards to the state's Environmental Court, which backers contend will result in more predictable decisions than with regional boards, which can be influenced by local pressures.
It also reverses an Act 250 provision guaranteeing project opponents participation, or “automatic party status,” in the appeal process, notes Pomerleau, contending that environmental activist groups have historically used Vermont “as a beachhead for their causes because of the very liberal environment.”
Two anti-development groups involved in Vermont's appeal cases, which may be affected, are the Conservation Law Foundation, an activist group focused on environmental issues in New England states, and Natural Trust for Historic Preservation, which recently included the state on its list of “most endangered historic places” after Wal-Mart announced it was planning to add stores.
Angney suggests, however, that this might be a case of “watch what you wish for, because you may not like what you get.” Even though the measure was approved last fall, the new guidelines still aren't available. Thus, while both groups claim victory, it is still unclear how the new law will impact development or anti-development interests.
There is also growing concern within the business community that the change in permit appeal jurisdiction might overburden the Environmental Court, which was originally set up to deal exclusively with zoning issues. Though the state doubled the court's judicial staff from one to two judges, Angney explains that there too few judges to handle the anticipated significant caseload increases.
Meanwhile, developers like Wal-Mart push ahead, anticipating they will eventually convince citizens and city leaders that big boxes and nature can coesist, providing jobs for the communities they serve and bargains for the residents of Vermont.
Although Vermont is home to only 600,000 people, median family income in the state is $48,625. The cost of living is 90 percent of the national average.
Retail appears to be the least favored commercial project, and is a low priority among state and local governments.
Northern Power Systems, a subsidiary of Distributed Energy Systems, recently added 40 engineering jobs to Montpelier's job base, says Richard Angney. Plus, Burlington will add nearly 200 jobs over the next five years, with the expansion of manufacturing operations at Twincraft Soap and the opening of a regional office by Massachusetts-based Ringmaster Software Corp.
McDonald's had to erect a Colonial-style building in one Vermont community, rather than its traditional design. Golden arches aren't visible from Vermont freeways.
BURLINGTON RENTS SOAR
Limited space makes lucky few big bucks.
Barriers to entry may seem formidable, but retail developers who manage to get their foot in the door can expect to reap the benefits in terms of low vacancies, reasonably solid rents and exceptional resale values due to a shortage of available space, says Ernest Pomerleau, president of Burlington, Vt.-based Pomerleau Real Estate. He says retail estate values within the Church Street Marketplace in downtown Burlington, the state's largest city with a population of about 40,000, have doubled over the past decade, rising from about $10 to $20 per square foot.
“This is a fairly dynamic market, and there's lots of interest in the area,” he says. “Because permits are not freely given out, we don't end up with huge oscillations in rents, and vacancy doesn't go up and down dramatically,” he continues, noting that only 145,000 square feet of new retail space will be delivered in Burlington by year's end, including a new power center, Maple Tree Place, by Connecticut-based Starwood Ceruzzi. Only about 50,000 square feet is expected to come on line next year. Pomerleau says that the overall vacancy rate is 5 percent to 6 percent. Of the city's 2 million square feet of retail space, only about 10,000 square feet is vacant. Space at the Church Street Marketplace brings the region's top rents at $20 to $35 per square foot, while triple-net properties fall in the $18 to $22 range.