What will go in Wal-Mart’s former spot? Atascadero weighs retail, business space

Road improvements will still be needed at the Del Rio Road-Highway 101 interchange even though Wal-Mart has canceled plans to build a store there.
Road improvements will still be needed at the Del Rio Road-Highway 101 interchange even though Wal-Mart has canceled plans to build a store there.

Atascadero officials are still picking up the pieces after Wal-Mart announced last week it will no longer open a store in the city after a decade of planning.

The project, which had dragged on since 2006, was expected to bring a $580,000 windfall in annual sales tax revenue to the city. But the process of opening the store was fraught with controversy and included resident lawsuits, concerns that small retailers would be driven out of business, and fights over road improvement costs. Wal-Mart said the decision, however, reflected the company’s shift toward online retail.

Now, city staff and elected officials are trying to figure out what a future without Wal-Mart will look like. Most agree that shopping-starved Atascadero needs retail, but the city now needs a new buyer for the Wal-Mart property at the corner of El Camino Real and Del Rio Road. A city news release said Wal-Mart wants to “work with the city to make this a viable project for other potential retailers.”

City Manager Rachelle Rickard said this week that both the city and Wal-Mart would be courting new buyers. To make the area into the commercial corridor the city envisions, Rickard said changes would still need to be made to the roadways to accommodate increased traffic.

That means the city will likely remain on the hook for its up-front share of road improvement costs, as long as any buyer retains Wal-Mart’s more than 123,000-square-foot development plan.

The city in 2012 developed a cost-sharing agreement with Wal-Mart and those developing The Annex — a shopping and dining center to be located nearby, now owned by Madonna Enterprises — to split $4.5 million in road work at the Del Rio-Highway 101 interchange. Wal-Mart was to pay 29 percent, The Annex 24 percent and the city was to put up 47 percent, which future businesses would pay back in development fees.

The two roundabouts slated for the interchange were needed to accommodate the traffic that studies anticipated would flock to the new commercial area. Wal-Mart alone was to pay for improvements and a roundabout on El Camino Real and Del Rio Road, which officials in 2012 estimated would cost about $5 million.

In 2014, the city found out the interchange work would actually cost about $12 million, meaning the city’s 47 percent share would be nearly $6 million, instead of the $2.1 million officials originally anticipated.

Phil Dunsmore, the city’s community development director, said this week that the cost-sharing formula is tied to the property, which means any new developer following Wal-Mart’s footprint would pay the same share and could use the entitlements the city approved.

The city could renegotiate costs if a new developer substantially modifies Wal-Mart’s plans by reworking the project’s square footage. Any such changes could also change traffic patterns in the area, Dunsmore said.

“Those percentages are still valid, assuming everyone follows the specific plan the way it’s approved today,” he said. “As it continues to evolve and change, which these always do, then those percentages will start to change.”

Councilwoman Roberta Fonzi, a supporter of the Wal-Mart project, said she’d still like to see retail come to Atascadero, because “we have nowhere to shop.”

Fonzi said she understood residents’ concerns about Wal-Mart but that the city was focused on landing a retailer in general, not a specific brand. In terms of the road improvements, she said the city will have to see what buyers take an interest in the property before determining who will pay what.

“We have a great leakage of people going to Paso or San Luis Obispo to shop,” she said.

Councilman Charles Bourbeau, who began his first term on the council in December, said he’d be interested in retail as well, but the city should be prepared to consider other options. He also said he’d like to get some input from Madonna Enterprises, which still plans to develop The Annex property, which has since been renamed the Del Rio Marketplace.

Bourbeau suggested using the area as space for businesses that would bring jobs to the area, such as technology companies, as an alternative.

“I think we need to be interested in something other than retail if we cannot attract that,” he said.

Councilwoman Heather Moreno said the first step is making sure Wal-Mart actually sells the property. She also said the addition of other businesses in the area could help the city raise tax money needed for road improvements: “I think that the cost, in the end, will be covered without incident.”

“It’s certainly not what we wanted to have happen,” Moreno said of the development. “But there’s still possibility.”

Lindsey Holden: 805-781-7939, @lindseyholden27