A building moratorium to halt new construction is a policy decision imposed by cities, towns, and/or the court system. For example, when I lived in Pennsylvania, the township had a moratorium on new residential development.
The principal reason for this was a lack of infrastructure. For example, many of the local roads did not have storm-sewer or sanitary-sewer connection, the water tower was near capacity, and so forth.
Moratoriums are sometimes directed at commercial developments such as car washes. According to ceveland.com, after approving a six-month moratorium regarding new car washes coming to the city of Parma, OH, the city council recently extended the ordinance by three months.
Councilwoman Kristin Saban said the moratorium was put in place because there’d been an influx of car washes that were basically popping up everywhere.
“We’re all about economic development but we want to make sure we’re not just limiting ourselves to these car washes that seem to be really, really popular.”
What’s currently on the table is limiting the number of car wash uses permitted in the city by restricting zoning districts. The latter tentatively include “Car Wash, Conveyor” and “Car Wash, In-Bay” categories.
The issue came to light after a seventh car wash recently opened. Economic development director Erik Tollerup said the city was reaching a saturation point. “Three of the four quadrants of the city are adequately covered by car wash operations….” Tollerup said. “Further car wash development would over saturate the market. Parma is not alone on this issue. Area communities are watching us so that they can balance car wash development in their cities.”
In Pico Rivera, CA, the city council approved a 45-day ban on new car washes to give city staff time to draft restrictions on where car washes can go (September 2021).
According to city manager Steve Carmona, “Car washes do not generate sales taxes for the community. We have limited space we can bring certain types of uses the community desires,” he added. “This is an attempt to address those concerns for our vacant land and discourage this type of development.”
In most cases, municipalities have the power to enact planning and zoning laws for health, safety, and welfare of citizens including restricting areas used for businesses and trades pursuant to their state’s constitution.
Municipalities may approve an ordinance that specifies what zones a business can or cannot be built and the intensity of business. The ordinance may also include regulations related to things such as noise restrictions, environmental requirements, building size, hours of operation, and more.
In terms of intensity, Parma’s director of economic development determined that one car wash per 10,000 residents was a fair compromise between the free market and municipal zoning. Moreover, any future new car wash in Parma will have to go in an area where one can argue a need exists.
In Pico Rivera, the fleet was described as consisting of three automated (washes) and three that are self-operated. Based on a population of just over 60,000, Pico Rivera has about one car wash per 10,000 residents.
Here, the director of community and economic development plans to discourage car wash development by bringing back an ordinance that would provide sufficient buffer space between residential areas and car washes.
However, are such policies a fair compromise between free market and municipal zoning? Here, free market refers to the notion of a business helping advance a community economically whereas municipal zoning refers to local government’s approach of how land should be used.
For example, a car wash business may not generate sales tax but it does generate jobs as well as property tax. Moreover, car wash owners have a long history of giving back to their community by sponsoring local teams, participating in fundraising, and so forth.
Based on data published by the International Carwash Association and IBISWorld, we estimate the threshold population for a car wash may be somewhere between 5,000 and 6,000.
Consequently, a threshold of 10,000 implies an area may be underserved in terms of the number of supportable car wash locations. Moreover, the intensity of business does not speak to market share relative to sales.
For example, if we take Parma’s assertion, an eighth wash would oversaturate the market. This would imply a fair share is 14 percent (1 / 7). If the total market is $5.6 million, a fair share would be sales of $787,000.
However, if we assume four small stores are each pulling down maximum sales of $175,000 and four large stores are each generating $787,000, the market would have unmet demand of $1.75 million.
This situation is described as retail leakage. Leakage occurs when local people spend a larger amount of money on goods than local businesses report in sales usually due to people traveling to a neighboring town to buy goods.
Retail sales leakage occurs when there is unsatisfied demand within the trading area. The locality should provide extra store spaces for such types of businesses.
Moreover, when shoppers have to travel to a neighboring town to buy a car wash service this also gives them the opportunity to buy other goods and services they might otherwise have purchased locally.
Pundits opine the process of compromising needs to be deliberative if a fair balance is the goal. The deliberative process provides for mutual understanding and is therefore a necessary condition for achieving a fair compromise.
Arguably, a fair compromise between the free market and municipal zoning requires more than naïve approaches such as the ones we discussed.