Monday, January 21, 2013

DON'T BELIEVE THE SPIN ABOUT WHY MAGRUDER'S CLOSED

The local media - with the latest example being a Washington Post article I read online this morning - is doing what it does best: controlling the narrative.  In this case, the issue is the closure announcement by local grocery chain Magruder's, including their Rockville store.

The "official" narrative promoted by this article and others, is that the demise of Magruder's was simply a matter of time and a "failed business model."

Can I take a moment to debunk the bunk?

First of all, these arguments are applying a national phenomenon of "big box vs. Mom-and-Pop" that simply doesn't apply in Montgomery County.

The Montgomery County Council has done everything in its power to keep big box stores - grocery giant Walmart above all - out of Montgomery County. There are only a handful of Target stores in the county.  And I believe the Wheaton Plaza Costco will be only the second in the county when it opens.

Snider's Super Foods in Silver Spring is still operating, and is in a similar business position to Magruder's. So if it's just a matter of big box stores, why is Snider's still going?

The facts are that the biggest pressures on smaller companies in Montgomery County are coming not from big box stores, but from developers and our own elected officials.

Property taxes are the highest in county history. As I mentioned the day Magruder's confirmed it was going out of business, the Rockville Magruder's was one of the specific businesses most demonstrably, and memorably, hurt by the devastating county Energy Tax. Does anybody think a 5¢ bag tax helps grocery store profits, and encourages customers to buy more?

As I also mentioned, the chain's flagship county store in Rockville Town Center was condemned and demolished - for private developer profit - by the City of Rockville a decade ago.  Personally, I don't believe the chain ever fully recovered from that blow.

Our county's congested roads are no secret.  But what you rarely hear from local media is the real impact the costs of driver hours, and fuel burnt, have on the price of goods you buy in Montgomery County. Our elected officials' failure to build the highways planners put on the books decades ago is directly responsible for the resulting costs and gridlock.

Compete on price with bigger chains? Try doing that under the county-specific financial burden described above.

But wait, there's more.  The shopping centers where most Magruder's stores are located are now eligible for rezoning for mixed-use redevelopment, under the new zoning code the council rammed through over citizen objections last year.

And, of course, Rockville rewrote its own city zoning code in recent years, making it more developer-friendly.

In fact, while Snider's is still in business in Silver Spring, the county and state have already quietly drawn up plans to redevelop the shopping center and neighborhood around it.

What happens then?

Rents go up and lease terms shorten. Magruder's is not commenting publicly, so I don't know the specific terms of its leases in Rockville and elsewhere.

But I do know that a Giant in Bethesda that once held a 99-year lease on its store signed a new one that expires a few years from now.

Did they do that because of big, bad Sam Walton? No. They did it because Ahold bought the Giant chain, doesn't have the emotional attachment to the brand Izzy Cohen did, and the store's shopping center was bought by Capital Properties. What did the new owner want to do? Redevelop the site as mixed-use under the then-pending zoning rewrite. So they did what? You guessed it - raise the rent, shorten the terms.

You can't tell me the College Plaza shopping center isn't being considered for future redevelopment by every developer in town, much like every strip mall up and down the Pike, Veirs Mill Road, and even Woodley Gardens. Didn't Giant quietly close at Wooten and Hurley a few months back? Does anyone really believe that site will be a grocery store 10 years from now?  Much like Woodley Gardens shopping center, developers are already rubbing their hands together at the thought of the unlimited possibilities.

Finally, there's the fact that Montgomery County forbids grocery stores from selling beer and wine, cutting off a significant profit engine for smaller grocery chains in particular.

The local media spin is understandable. Divert attention to a tired punching bag like Walmart. Divert attention away from the developers and politicians actually responsible for the demise of so many local chains and businesses.

No diversion in the world can mask the pathetic business environment in Montgomery County, nor the tax burden, failed leadership and crippled transportation system that ensure it stays that way.

5 comments:

  1. I mourn the loss of Magruder's and thank you for the truth!

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    1. You're welcome, and thanks for reading!

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  2. You are correct about the transportation system. Downtown Bethesda is a nightmare. The roads look and feel like dirt roads (so many pothole). WHERE IS OUR TAX MONEY GOING??

    The county controlling the sale of liquor,beer and wine severely limits what small stores can bring in as inventory because they set the prices.

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  3. Great article and unfortunately happening all over the U.S. in similar ways.

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  4. Must agree with all... the unbriddled development to fill county/city coffers for their executive salaries makes us the residents suffer/bear the burden on many fronts!

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