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Making Book
Bar the Door: Capitola Book Cafe co-owner Gwen Marcum opposes the Borders store planned for the Redtree development.
Months after the collapse of Crown Books in Santa Cruz, Capitola is about to gamble that its bookshops can hold their own against a Borders
By John Yewell
IN A PACKED Capitola City Council chamber last July 29, citizens argued late into the night. At issue was a mall proposed by Redtree Properties for Bay Avenue. There was a lot of talk about traffic, about an environmental impact report and about something known as the "riparian corridor."
So absorbed were people in the moment that few reflected on how they had arrived at this point--at least not until Eric Schoeck reminded them. Schoeck had until recently worked for the Capitola Book Cafe as its events coordinator. Tucked away in a corner of Kings Plaza on 41st Avenue, the Book Cafe has, in its 19 years, achieved a national reputation as a venue on the tour circuit for authors.
In the summer of 1996, word leaked out that Redtree officials--who declined to be interviewed for this story--let slip that they were planning to bring superstore Borders Books and Music to their proposed "Capitola Crossing" development. Reaction was swift and negative. But as other objections were raised and the controversy dragged on, the Borders issue receded. Redtree stopped talking about tenants altogether.
The strategy had been effective, until Schoeck spoke.
There was, said Schoeck, "a basic, major flaw here: to not know who the tenants are beforehand." Would anyone support this, he implied, if they knew Borders, whose prospective tenancy had started the controversy, was coming back?
"If [the tenants] are known and are being kept quiet from us, why is that so?" he asked. "There's a great deal of suspicion there."
Redtree general partner Doug Ley deflected the question. "Regarding tenants," he said when his turn at the microphone came, "this is something that is not being addressed at this time. It will come up in the context of use permits which will be required for applications for tenants for this project and is something that we really can't address at this time because we don't know who the tenants will be."
Maybe they did, maybe they didn't, but for the time being the issue again faded in the glare of the task at hand. When the City Council approved the project two weeks later, it promised to review the conditional use permit required for each tenant.
Now, suddenly, the unexpected tenant is on the way, and that promise will be tested. On Jan. 5, a brochure was sent by the Redtree developers to Capitola residents announcing that Redtree had applied for a conditional use permit to make Borders its anchor tenant at Capitola Crossing.
A new petition is being circulated, letters from the famous and not-so-famous are being gathered and rallies are being planned against Borders. Opponents plan to show up at a Planning Commission meeting on the use permit Jan. 21 and a City Council meeting Feb. 11 at which the council will vote on the commission's recommendation.
A Cozy Setting
CARIN HANNA, who owns a shop in Capitola Village, described her husband, city treasurer Glenn Hanna, as shocked by the announcement. "I wasn't that surprised," Carin says. "This council got taken in. They trusted Redtree to do the right thing, and this clearly isn't the right thing." Stunned yet not surprised was the reaction of other Capitola residents as well.
Patrick Kearns, owner of Dogmatic Fine Arts on Stockton Street in the Village, had a similar reaction. "Absolutely not surprised," he says. "It's a slap in the face to the merchants here. If they really wanted to continue with this devastating blow, why not just get a huge store with everything?"
When told that, according to press reports, Redtree is also considering bringing a Pier 1 to the development, Kearns crumples. "Stunned," he says.
The reaction of many in Capitola was in awkward contrast to the upbeat newsletter from Redtree announcing the coming of Borders. "Over and over again during the last two years," the flier reads, "Capitolans have asked us to bring Borders Books to Bay Avenue." No mention is made of the 3,500 names on a petition opposing Borders that opponents gathered two years ago.
The brochure ignores the Book Cafe, claiming that opposition will come from Santa Cruz booksellers (presumably Neal Coonerty of Bookshop Santa Cruz) who "want you to have to drive to downtown Santa Cruz for a wider selection of books." The omission suggests an acknowledgment of peoples' sensitivity to the potential impact that Borders poses to area booksellers.
Phrase after phrase speaks in terms that seem to apply to the Book Cafe and other local bookshops and yet is crafted to make the case for Borders: "a cozy setting where parents can bring their children to discover the pleasures of reading"; "the type of use that makes for a real community center"; "committed to serving its local community."
The language does not sit well with Leslye Lawrence Nead, co-owner with husband Kip Nead of Seeds of Change, a children's bookstore in Capitola Village.
"I feel resentful," she says. "As much as [Borders] says they care about the community, they can't possibly care as much as we do. It's not fair competition."
Gwen Marcum is one of the Book Cafe's owners. Marcum has worked at the store since six months after it opened in 1980. After many years of running it, she and her three co-owners--Marcia Rider, Judy Stenovich and Kathy Kitsuse--bought the 5,000-square-foot store outright in 1993.
"We built this place," Marcum says. "We have over 100 events a year; some are small events. There's art from local artists on the walls. For Borders, it's the same pictures everywhere. To them, it's all just marketing."
Since the announcement, Marcum says the store has received plenty of support. Her customers say they'll stand by her, and thanks to a mention in former San Francisco Chronicle book editor Patricia Holt's online newsletter, support has also poured in from other independent booksellers around the country.
"Some customers are very angry, others are sorrowful," she says. "I'm feeling threatened."
John and Pam Sallee have been coming to the Capitola Book Cafe since 1982. Their son Nathan even worked there for a time. "We'll be loyal," John says. "I won't boycott Borders, but I won't make any major purchases there as long as I can get it here."
Still, he supports the Redtree application.
"How can the council say no?" he asks. "Where do you draw the line about what business to protect? I think they should approve it, but I hope it fails."
Site Lines
BORDERS IS A $2.5-BILLION corporation with 250 locations, and more opening every month. The proposed Capitola store will be five times larger than the Capitola Book Cafe and carry more than 200,000 book and music titles, compared to the Book Cafe's 60,000.
Besides its larger stock, Borders' marketing clout with publishers could rob the Book Cafe of its ability to book many of the leading authors who used to read there. It's ironic, Marcum thinks.
"At first, we couldn't get anyone to come to Capitola," she says. "Now Borders is going to piggyback on our success.
"We're not afraid to compete," continues Marcum, who, like Rider, coaches girls sports. "But it's not a level playing field."
Santa Cruz author James Houston has noticed this phenomenon as well: Borders will sometimes come into a thriving book market and take it over.
"We have a lot of good bookstores here, a couple with great national reputations," Houston says. He cites the example of a Borders that recently opened on Kauai, which provides a service on that Hawaiian island that didn't exist before, to emphasize that his concerns about the Capitola store are site-specific.
But these concerns may turn out to be the least of folks' worries: another potentially more serious competitor, Internet sales, is growing stronger every day.
Signing Event: Customer Cristen Miller signs an anti-Borders petition at the Capitola Book Cafe.
Takings
UNFORTUNATELY FOR Marcum, most of her support has been moral. Political and legal support will be much harder to come by. City Attorney Richard Manning throws cold water on the notion that the council's promise to review use permits will amount to anything beyond considerations like parking and hours of operation.
"If anybody held out the hope that the city would prevent a certain business through its regulatory mechanism," says Manning, "that is false."
But for Marcum, the assurances went beyond process. Marcum says that last year, then Mayor and current Councilmember Stephanie Harlan told her that Borders would not be a tenant in the new development. Harlan, who was quoted in a press report two days after the Jan. 5 announcement supporting the Borders use permit, did not return several phone calls requesting comment.
Opinion on whether the city has any options other than approving the permit leans heavily in favor of Redtree and Borders. Even local attorney Bill Parkin, who is awaiting a Feb. 8 court date on a challenge filed against the project as a whole, says the odds against stopping a use permit are long.
"The development plan gives [Redtree] a blank slate," Parkin says. "The problem all along is that opponents feel it's too big. Unfortunately, individual uses aren't subject to the same scrutiny. My gut tells me there's probably nothing that can be done to stop it."
New Mayor Tony Gaultieri has not dismissed the idea of the council rejecting the application, although he finds that prospect slim. No member of the City Council or Planning Commission has come out in opposition.
"We always like to find out other information in hearings, such as what the traffic generation and parking situation will be," Gaultieri says. "But when it comes to competition, unless you can show some kind of direct harm, I don't think you can take sides."
Bookshop Santa Cruz owner Coonerty, a former mayor of Santa Cruz, disagrees.
"It's disingenuous to say, 'We want to get through this without identifying users,' then come back and say, 'You have to approve our tenants,'" says Coonerty. "I don't think the council should be put in that position."
And when it comes to a definition of harm, one person's mead is another's poison. Marcum and her partners are worried enough about surviving that they see this as a "taking" of their property. "Could I sell this store to anyone today?" Marcum asks rhetorically. "Not to anyone sane."
Coonerty goes a step further. "If you vote to approve a Borders location in Capitola," Coonerty wrote recently to the Capitola City Council, "you are voting to close Capitola Book Cafe."
On the other hand, Coonerty waged a successful three-year fight against Crown Books, which set up shop just across and down Pacific Avenue. He says the competition was good for his store and that Bookshop made several improvements. But Crown turned out to be a much weaker competitor: the Santa Cruz Crown store closed when the whole chain went bankrupt last year.
Houston thinks Borders will be a much tougher competitor for the Capitola Book Cafe than Crown was for Bookshop Santa Cruz. "Crown looked like an auto parts store," Houston says. "Borders has a more welcoming atmosphere."
Ann Binkley, a spokesperson at Borders' Ann Arbor, Mich., headquarters, says that because Borders increases book-buying traffic, it also increases sales for independents.
"I couldn't tell you if it's true that we put others out of business," says Binkley. "I don't know that that's a fact."
It Takes a Village
BORDERS SKEPTICS claim that the Capitola Planning Commission and City Council have the leeway to interpret the law broadly, particularly in light of what some people see as the disregarding of popular sentiment in regard to Borders.
A book titled How Superstore Sprawl Can Harm Communities, published by the National Trust for Historic Preservation, argues that municipalities have the leeway to make economic choices when the greater good is at stake. Government is not obliged to indulge a desire for profit, it argues, "if such indulgence alters the entire community's way of life or vision for its future." They have a right to "reasonable economic use," but not necessarily the most profitable use.
Such arguments are not much use without support from a city council willing to throw up the necessary legal roadblocks, such as zoning restrictions, in advance of development. Capitola is really two small towns in one: the Village and 41st Avenue, one where development has been encouraged, the other where it has been carefully controlled. Together, they demonstrate the council's schizophrenic record in regard to zoning. The stores along 41st Avenue are a consequence of Prop. 13, passed in 1978, which made cities more dependent on sales tax revenue than on property taxes. The problem is that rather than boosting sales tax revenues, many studies have shown that increased development is just as likely to take sales from other nearby stores.
It is the location that has made the Redtree development so controversial. Sitting as it does at the gateway to a quaint village by the beach, the Crossing project could change people's perspectives of Capitola. Pat Holt points out that the council would be up in arms if someone proposed building a Denny's for the village.
"The whole character of that area would be lost," Holt says. "Capitola would become just another anonymous beach town."
"A Borders there will not say 'village' to tourists," agrees Lee Duffus, co-owner, with wife Emily, of Bookworks in Aptos. "That will discourage people from coming."
Duffus also wants to believe that the process does not have a foregone conclusion. "Some members of the council have said we can't tell a developer what to do," he says. "But if you have a use permit system, then you have a choice; otherwise it would be carte blanche."
New Councilmember Dennis Norton shares many of the doubts and suspicions of Redtree opponents, even if he is doubtful the permit can be denied. He says he has received many calls, the majority of which oppose Borders.
"Opposition isn't just coming from people opposed to Redtree," Norton emphasizes. "People want to preserve the small village atmosphere here.
"I haven't come to any conclusions," Norton says, adding, "I would do anything to preserve the small-town feel of Capitola."
Parking Fine
NORTON CALLS the re-emergence of Borders "duplicitous," saying he has encouraged opponents to find a legal mechanism to deny the permit if they want to stop the store. "For example, what if all the uses add up to too much parking?"
The parking issue has raised some questions about the use permit. In its application, Redtree relies on a mixed calculation to come up with a need for 101 spaces for Borders out of the 860 shared-use spaces available. Determining parking demand is not an exact science, but there is some question about how many spaces the council can require for the bookstore.
The importance of the question lies in future demand placed on the parking lot. If, for example, a Pier 1 also comes in, the two stores combined could place great strain on the facilities, especially since no other information has been made available on what other tenants are under consideration. Rick Jones, chair of the Planning Commission, says that if Redtree comes in with one tenant at a time and commits all the parking facilities before the last tenant application is made, he will recommend all subsequent tenant permits be denied.
So Redtree has an incentive to low-ball the parking needs for each tenant, and it may have done so with its estimate for Borders.
City code requires one space per 240 square feet of space for retail outlets. At 25,102 square feet, Borders should require at least 105 spaces, but it could be more. Borders also includes a 1,600- to 1,800-square-foot cafe that, if it is similar to the Borders in Los Gatos, will serve things like pastries, hot soup, muffins and heated calzones in addition to espresso.
The developer considers that use "ancillary" to the bookstore. Ann Binkley of Borders would not release any figures on the proportion of cafe-to-books business or related parking demand, but she says the cafes are a powerful draw in their own right and have proven to be "very profitable."
"In urban locations in particular, those that open in early in the morning do significant stand-alone business," she says.
New Planning Commissioner Gayle Ortiz (owner of nearby Gayle's Bakery) says she believes the cafe should be treated as a restaurant, which, according to the municipal code, requires one space per 60 square feet. Keith Higgins, a Gilroy traffic consultant who did a study for the Sand Dollar shopping center in Sand City, which has a Borders, agrees.
"One way to do it would be to calculate the square footage of the cafe by the restaurant rule, and the bookstore portion by the retail rule, and then add them together," Higgins suggests.
A 1,700-square-foot cafe at 60 square feet per space, plus the remainder of the store at 240 square feet per space, would mean a parking requirement of 126 spaces. Borders also claims they will host as many as 30 special events a month. Event parking, says the code, requires one space per 40 square feet.
Regardless of code requirements, experts are divided on the real parking demands of such hybrid stores. "The burden of proof should be on Borders to provide data from other stores. It definitely more than just a retail use," Higgins says.
Marsha Anderson, a transportation consultant based in suburban Atlanta and a past international president of the Institute of Transportation Engineers, agrees with Rick Jones that the city must be careful not to overcommit the parking.
"When a plan is approved, it's subject to meeting development requirements," Anderson says. "If parking demand is too high, their choices are to apply for a variance or scale down the land use. Just because a density is approved doesn't mean they can build it."
That would seem to argue for not approving tenants one at a time, and others agree.
"It's real difficult to plan the parking with no other tenants planned," Councilmember Dennis Norton says.
"We need to look at the tenants as a group, especially if Pier 1 is a possibility," agrees Lee Duffus. "Let's get as much info about the whole picture as we can, rather than pieces of the puzzle."
James Jeffery, a Los Gatos traffic consultant, sees a potentially more hazardous problem: The lot itself as designed, he says, is unsafe.
"They're trying to shove 10 pounds into a five-pound sack," he says. "The parking circulation is unsafe, and the city is accepting a lot of liability there. My prediction is it's going to be a real circus."
Brew for Two: Longtime Book Cafe customers Pamela and John Sallee enjoy the ambience.
Code Red
BORDERS HAS FACED local opposition to new stores several times in the recent past. Four months ago a 22,000-square-foot Borders opened in Davis, a city with plenty of bookstores, after a long fight that in many ways resembled the struggle in Capitola. The land was owned by a developer, and the city rezoned it commercial without knowing who the tenants might be, much the way Capitola quietly rezoned the Bay Avenue site in 1992 from "neighborhood commercial" to "regional commercial."
The Davis City Council ultimately approved the project because of the specter of legal action. Since then, according to the Friends of Davis group which opposed Borders, traffic is up and the business at the local independent bookstore a block and a half away, The Avid Reader, is down 18 percent. Another nearby bookstore moved away before Borders opened.
There was also another interesting result: The majority on the Davis City Council that approved the project was reversed in the next election.
Another fight took place over a Borders proposed for Union Street in San Francisco. A nearby independent bookseller, Solar Lights owner David Hughes, had a strong hand to play because Borders was asking for a variance to a zoning code: it wanted to build a 25,000-square-foot store in a space zoned for 2,500 square feet. Last November, the county Planning Commission voted 6-to-0 to deny the variance.
Locally, Borders opponents often point to the Santa Cruz Gateway area on River Street, the county's Commercial Way project, and the new Cooper House as examples of government acting to influence what tenants go into new developments in order to shield existing businesses.
Despite national chain stores at the first two, all three projects benefited from major public financial contributions or concessions that gave government negotiating leverage. In the case of the Santa Cruz Gateway and Cooper House, both included side agreements that they would not include a national bookstore chain.
Redtree and Borders say that if Capitola doesn't come through, a "backup offer" in downtown Santa Cruz is in the works. But according to real estate sources, Borders has considered only two other sites, only one of which is truly available--and that's owned by Redtree.
Suzie Walsh of CB-Richard Ellis real estate in San Jose says she wrote to Borders more than two months ago rejecting a possible deal combining the old Crown Books space on Pacific with the Blockbuster video on the other side of the theater.
"We told them we couldn't accommodate them," Walsh says. "We only had 14,000 square feet, and they needed more."
The only other development with the amount of space required by a typical Borders--and not prohibited from housing a national bookstore chain--is Redtree's development at the corner of Pacific and Soquel, according to Ceil Cirillo, head of the Santa Cruz City Redevelopment Agency. If Redtree is entertaining such a deal, it hasn't told anyone. The company could risk worse publicity than it is now experiencing in Capitola if it brought Borders to that building.
For all these reasons, many observers believe the possible threat of a Borders in downtown Santa Cruz is, for the moment, an empty one.
When Gwen Marcum runs all this through her mind, she is baffled.
"[Developer] Barry Swenson is from San Jose, but when he helped rebuild downtown Santa Cruz [after the earthquake] he brought in local businesses," Marcum says. "Yet the Ley family, which has been in Santa Cruz County for generations, is bringing in box stores. I just don't understand that."
Meanwhile, the city of Capitola has little leverage with Redtree, which is both the property owner and the developer of the Bay Avenue site, because there has been limited city financial involvement.
Coonerty, who voted for Costco as a member of the Santa Cruz City Council and says he is not against all chain stores, encourages Capitola to approve or disapprove Borders based on the issue of benefit to the community. But what if Redtree or Borders sues?
"So what?" Coonerty asks, suggesting it is partly a matter of political will. "Santa Cruz has a thousand ways to say no, while Capitola doesn't seem to know how to say no."
Pressing Matters
THANKS TO VARIOUS FORMS of new competition, the economic trends for independent booksellers are declining. Printers Inc. in Palo Alto recently closed, thanks to the combined impact of a nearby Borders and soaring Internet sales, primarily through Amazon.com. The Sand City Borders opened a year and a half ago, and booksellers as far away as Carmel say they are feeling the pinch. Two Clean Well-Lighted Place for Books stores, one in Cupertino and one in Marin County, recently closed, as did Gaia Bookstore in San Francisco.
From 1991 to 1997, according to industry studies, chain store sales rose 58 percent, while sales at independents fell 27 percent. The independents' percentage of total book sales during the period fell from 33 percent to 17 percent. Meanwhile, membership in the American Booksellers Association, the independent bookseller trade group, fell from 4,500 to 3,300. And for every job a chain store creates in this country, says Edward Shils, head of the Wharton Entrepreneur Center at the University of Pennsylvania, one and a half jobs are lost. As with sales taxes, more books aren't necessarily being sold, they're just being sold in different places.
Along with the disappearance of the independent booksellers, Houston believes that the chains have also contributed to the decline in the number of small presses, which take interesting risks and often help launch promising writing careers. These small presses, who are lucky to do a print run of 5,000 books, don't have access to the promotion or distribution clout of the chains. Without small bookstores, small presses die.
"Small presses are where more adventurous work often gets published," Houston says. "Chains do huge bulk buys and get discounts small presses can't offer. The independent bookstores are more likely to give space to those books. To the extent that that gets undermined or choked off, we begin to lose something in our cultural life."
Those Are the Breaks
IF BORDERS IS as big a threat as independent bookstores and their supporters believe, can it, or should it, be stopped? Is it just smart volume business--winning on a level playing field--that accounts for the success of the chains over the independents? What's wrong with attracting customers with a greater selection? People tend to vote with their money, and on that score Borders is a clear winner.
According to the independents, long-standing and illegal business practices between publishers and the chain stores, especially Borders and the country's largest chain, Barnes & Noble, have been the real reasons for that success, which has resulted in the decline in independent bookselling.
In 1982, the Northern California Booksellers Association filed suit against two large paperback publishers charging they were giving national chains secret price breaks of 6 to 8 percent on each book. Unless the discounts are offered as compensation for greater efficiency, they are a violation of the Robinson-Patman Act of 1936, which prohibits "devices by which large buyers gain discriminatory preferences over smaller ones by virtue of their greater purchasing power."
The chains justified the breaks based on cheaper costs of doing business, but the trial failed to show any significant cost advantages. Publishers agreed to a consent order requiring them to follow the law, but in September 1997 the ABA won a $25-million judgment against Penguin Books for continuing the illegal practices.
Last March, the ABA filed suit on behalf of its California members against Borders and Barnes & Noble, alleging that they are parties to a continuing pattern of similar illegal deals. Several other similar suits by smaller groups have been filed against both Borders and Barnes & Noble.
Reg Steer, an attorney for Borders, says the claim that Borders can buy books on terms not generally available to other buyers is not true "so far as we can tell."
The independents also claim that Borders and Barnes & Noble profit from the publishers in other ways that are unavailable to them as small stores, such as charging for placement in the store on tables near the cash registers or in windows. Borders spokesperson Binkley tacitly confirmed this when she said that it was "not just window space a publisher can buy." but insists that how publishers promote books is up to their individual budgets.
Hand-Selling Job
SPECIAL DEALS AND EXTRA marketing dollars are not the only ways Borders and Barnes & Noble have taken control of the business. According to Holt and others, the large chains actually help dictate what gets published.
"It started out with not liking a book's cover," says Holt. "Then publishers paid for placement." With the chains' huge buying power, publishers eventually started courting their marketing expertise. "Publishers started showing buyers manuscripts prior to publication," Holt says.
Again, Ann Binkley, who used to head new press acquisition for Borders, acknowledged the practice. While saying that, to the best of her knowledge, the accusation of pre-screening books was "inaccurate," she contradicts herself a moment later, saying that, according to people in the company's marketing department, manuscript screening is "not a common practice."
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George Sakkestad
George Sakkestad
George Sakkestad