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Capistrano to Pursue a Home Depot Deal

Land use: Despite concern over changing city's character, council votes 4 to 1 to negotiate sale of 13 acres for store.


Home Depot hopes to build a store in San Juan Capistrano, and to some officials that looks like a windfall: $9 million for the city-owned land the company wants, a sales-tax bonanza in the future. But hundreds of residents say it would be a disaster.

About 1,800 people signed a petition against the sale, saying it would destroy the character of the town, with its 150-year-old adobes and famous mission. What's more, they say, such a "big box" store would bring traffic that would clog roads, pollute the air and even block ocean breezes from a mobile-home park for senior citizens.

"If they build this, it will no longer be the same small town," said Trish Hodges, a resident of Capistrano Valley Mobile Estates, which borders the 13 acres Home Depot wants. "Businesses will move out."

More than 100 residents argued with officials into the night Tuesday over the plan to put the 131,000-square-foot store two miles from the historic downtown, with its one-of-a-kind shops, restaurants and taverns. After two hours of public comment, the City Council voted 4 to 1 to proceed with negotiations to sell the property.

"The proposition before you tonight is like a big bowl of spinach. You may not like the taste of it, you may not like the smell of it, but it's good for you," said Douglas Dumhart, an analyst for the city.

Because of the ferocity of the debate, the city hired a retail analyst to project the economic effect of what would be the city's second large retailer. The first, Costco, opened in 1988 on Doheny Park Road despite heavy opposition.

Alfred Gobar & Associates' report to the city economic development department last summer concluded that a Home Depot would take as much as $9.1 million in annual sales away from 27 small businesses, some of which would go broke.

The study also said the giant home-improvement company is determined to open a store in the area and will do so regardless of whether San Juan Capistrano agrees to sell it the 13 acres on Stonehill Drive near Interstate 5. That prompted some city officials to support the store, if for no other reason than to capture its sales-tax revenue.

"If it doesn't go here, it will likely go someplace very near here," said Councilman David M. Swerdlin. "We are already losing a great deal of our sales-tax base to these big boxes outside of our border."

Swerdlin said Home Depot is eyeing parcels just outside the city limits. If the company builds on one of those, he said, "it would have the same impact on our local businesses, with one additional impact: We wouldn't get the sales-tax revenue."

Economists call that "leakage," meaning tax dollars seep away to nearby cities. Gobar reported that San Juan Capistrano leaked about $14 million worth of taxable sales on home-improvement products in 2000. Among the beneficiaries were the Home Depot in Mission Viejo and the Lowe's in San Clemente.

"The citizens of San Juan Capistrano either cannot find all of the products and goods they need from local merchants, or perhaps they are finding better price points outside of the city's boundary," the report says. "Having a Home Depot in San Juan Capistrano would reverse that trend."

But opponents of the store say the report states that as many as 55 workers would be displaced by a local Home Depot, though they might apply for jobs at the store.

"These are people who have had businesses in town for a long time," said Councilman John Gelff, who cast the lone vote against the plan. "Their revenues may not be as big, but they have been here for the long haul, putting money into the community, and they are saying this will put them out. We have to draw the line in the sand here."

Gelff also questioned Home Depot's commitment to San Juan Capistrano, considering that it has a profitable store nearby. Other retail giants, among them Wal-Mart and Kmart, have closed stores across the nation as they refocused their business strategies. If that happened in San Juan Capistrano, Gelff said, "we could end up with a large boxy building that is empty and can't be used for anything else."

The Gobar report says a new Home Depot would be competing against the Mission Viejo store, so sales probably would be 25% lower than at the chain's typical location. That most likely reflects "a defensive strategy intended to preserve market share," Gobar wrote.

Those projections alarm Gelff and others, who fear the store would lead the list of locations to close if the company should have to scale back.

Home Depot officials called Gobar's projections low and said they expect tremendous sales growth at a San Juan Capistrano store.

"If it wasn't going to be a profitable area, we wouldn't build a store there," said Kathryn Gallagher, a spokeswoman for the company.

She also challenged the premise that small businesses would suffer.

"We find when we come into town, a lot of times it raises the general awareness of do-it-yourself culture, and local businesses benefit," she said. For example, she said, if the store offers classes on how to lay tile, customers might take the class there but buy their tile at a locally owned custom shop.

"We try to live in harmony," Gallagher said.

Some local merchants scoffed at that suggestion and said they are girded for battle and will survive.

"We've been there since 1972," said Ruth DeNault, an owner of DeNault's True Value Hardware near the historic mission.

"We will continue to be there, whether they come or not."

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