Costco seeks amendment to big-box ban

Other businesses watch to see if council vote will
allow expansions


Jerry McClellan, president of Hardware Sales, stands with family members outside their James Street location. “I don’t believe there should be a cap on any business,” McClellan said of the retail size limit. Hardware Sales has several buildings clustered at its James Street location.

This month the Bellingham City Council will consider a proposal to allow existing “big box” stores to expand by up 20 percent of their current square footage.

Some homegrown businesses are keeping their eyes on the proposal put forth by Costco Wholesale on Meridian Street, which occupies the city’s fourth largest retail building.

The request comes more than a year after the City Council approved a size cap that limits retail establishments to no more than 90,000 square feet. It also comes on the heels of a council decision in April not to rezone 10 acres of land to accommodate a new 89,000-square-foot discount grocery store on West Bakerview Road across from Fred Meyer.

The debate brings up an often asked question: is bigger really better for Bellingham?

“I don’t believe there should be a cap on any business,” said Jerry McClellan, president of Hardware Sales. “I believe in free enterprise. I don’t care if there’s a hardware store that wants to open up across the street from us.”

With roughly 33,000 square feet of retail space and 58,000 square feet of warehouse space, the total size of Hardware Sales adds up to 91,000 square feet, enough to keep the company from expanding under the current retail size limit.

However, McClellan said, he is unsure if the big-box ban applies to Hardware Sales, because the business is spread out over several buildings.

Senior Planner Marilyn Vogel said she is unsure if the limit applies to Hardware Sales, because the business hasn’t applied for permits under the new policy. It appears, though, that the rule would affect the business.

According to the policy approved by the City Council in February 2007, the gross floor area of a business includes the conglomerate of buildings that “are engaged in the selling of similar or related merchandise and operate under common ownership or management.”

“It was designed so that a big box store couldn’t split into separate buildings and skirt the law that way,” Vogel said.


Service trumps shop size

Contrary to popular belief, the presence of large retail stores in Bellingham has been a boon for Hardware Sales, McClellan said. For this reason, he said, he is in favor of allowing existing big box stores to expand.

“The big box stores are not a threat to us,” he said. “In fact, it works in reverse: The closer they build to us, the more traffic they draw and the busier we are. Our competition has been part of our success, as crazy as that sounds. The biggest threat would be if they move farther north away from us.”

One of the reasons McClellan said the business has survived the big box trend is by “gearing up” when competition came to town. Rather than seeking out a little niche of the market, McClellan sought to find the strengths and weaknesses of his competitors and then simply do a better job and offer better customer service.

“There’s always going to be a niche for the types of businesses that can do a better job than the box stores,” he said.

The ability to grow is important for a business. What was once a small hardware store 46 years ago is now a bustling business with 125 employees and an average annual growth rate of 10 percent to 15 percent. The numerous sales divisions and warehouses spread out over an entire block, which is a cause for concern for McClellan.


The current proposal

Costco Wholesale first applied to expand its 133,233-square-foot warehouse by approximately 2,000 square feet in December 2006 and was denied in February 2007 under the new size cap.

The company came back to the table in June 2007, this time with an amendment to the size-cap verbiage that would allow Costco and other existing retailers with more than 90,000 square feet to expand by a maximum of 20 percent.

In a letter to the city, Kim Sanford, Costco’s director of real estate development, stated that growth is critical for retailers and they must have the flexibility to adapt to changes in the market.

In a later presentation to the Planning Commission, Sanford said that although the size cap was intended to protect small businesses, it has impacted a corporate business that supplies those small businesses with the products they sell and use, according to meeting minutes.

Size caps are not new to Bellingham, nor to other cities in the state. Several Bellingham areas, particularly small commercial zones located within neighborhoods, have restrictions on building size.

However, the retail size cap is effective city-wide. A 2007 report by city staff said that such a broad limit on retail could negatively affect the city.

For example, a large retailer may avoid the size cap by simply locating outside city limits or in a nearby community. Bellingham would still feel the impacts from that business, such as traffic, but would not receive the tax benefits.

In Costco’s case, the company claims that allowing a 20 percent expansion of its warehouse space would reduce truck traffic needed to keep the store stocked.

After holding a public meeting and discussing the issue, the Planning Commission has recommended against Costco’s proposal,

According to Planning Commission’s conclusions: “An amendment to allow existing stores to further expand in size beyond the existing size limit is inconsistent with the purpose and intent of size-cap regulation as adopted by the City.”

As Costco’s proposal moves ahead to City Council, Hardware Sales is building a new 21,000-square-foot warehouse in Ferndale for its Internet sales division, which has seen tremendous growth in the last year, McClellan said.

The retail size cap was not a factor in choosing the location of the new warehouse, he said, but a lack of suitable existing warehouses near the James Street location was.

If the size limit becomes a problem in the future, though, McClellan said, it could force a difficult decision.

“When they tell me I can only grow so big here in Bellingham, I’m going to go somewhere else,” he said.


Large retail stores

According to city building-permit data, Bellingham has nine retail stores with more than 100,000 square feet. Three of these include a large grocery selection. Two of the stores are part of the Bellis Fair mall, which has a total area of approximately 780,000 square feet.


Macy’s, Bellis Fair mall 100,513 sq. ft.
Target, Bellis Fair mall 106,324 sq. ft.
K-Mart, East Sunset Avenue 116,182 sq. ft.
Fred Meyer, Lakeway Avenue 125,201 sq. ft.
Home Depot, Telegraph Road 129,921 sq. ft.
Costco, Meridian Street 133,233 sq. ft.
Lowe’s, East Sunset Avenue 154,129 sq. ft.
Wal-Mart, Meridian Street 159,679 sq. ft.
Fred Meyer, West Bakerview Avenue 166,919 sq. ft.


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