Retail politics are once again hitting the Castro, reminiscent of the fight over chain stores that convulsed the city's LGBT district more than a decade ago.

At that time the fight was over seeing national brands such as jean purveyor Diesel and home furnisher Pottery Barn open at the corner of Market and Castro streets, one of the gayborhood's most prominent intersections.

Today, as a string of chain stores seek permission to open along upper Market Street between Castro and Church, Castro residents are once again questioning if stronger rules on formula retail are needed.

Already a Verizon store, albeit locally owned, opened its doors at the corner of Market and Sanchez streets, kitty corner to a Chase bank. On the southeast side of the intersection Starbucks has plans to open a third Castro location.

At the other end of the block CVS is planning to open in the Market Noe Center in the ground floor space once home to Tower Records. And kitty corner to that intersection Bank of the West is seeking approval to open in the new building being constructed.

Whole Foods will anchor the large housing project under construction at the corner of Market and Dolores streets. Additional national retailers are expected to plant stores in the ground floor commercial spaces of nearly a dozen new mixed-used developments slated for the upper Market corridor.

Due to the size and modern amenities of the spaces, it is unlikely that smaller mom and pop stores will be able to afford the rents.

"This is a critical issue. The rents are going to be extraordinarily expensive," said Andrea Aiello , executive director of the Castro/Upper Market Community Benefit District, whose land use committee has begun to look at the issue. "There will be tons of formula retail proposed by developers all along Market Street."

Over the last decade the city adopted tighter rules on formula retail, requiring any company with more than 11 locations nationally to seek a conditional use permit in order to open a store in San Francisco. Last week the supervisors passed legislation that adds banks to the increased approval process.

It will make it harder for financial firms to open branches along the city's neighborhood commercial corridors. Residents and merchants complain such businesses do not attract shoppers and cause decreases in foot traffic at nights and on weekends.

"We have formula retail controls so that the neighborhood has a say," said District 8 Supervisor Scott Wiener , addressing Castro merchants at their monthly meeting June 7. "We have purposefully erected controls so you can't just put formula retail in."

In addition to new stores, the Market Street developments will add more than 1,000 new residents to the upper Market corridor, which should benefit the area's existing businesses, said Wiener. Anyone with concerns about the new commercial tenants, added Wiener, needs to be engaged in the permit approval process.

"There are going to be more people to shop in your stores," said Wiener, who lives in Duboce Triangle a block off Market Street. "People have to be engaged and speak up and say these things. You can't rely on other people to say those things."

The city's current regulations do not go far enough, argue some Castro residents and merchants, who wonder if an outright ban on formula retail, such as was enacted in Hayes Valley, is now needed for the Castro.

The topic will be debated tonight (Monday, June 11) at the monthly meeting of the Duboce Triangle Neighborhood Association. Under the heading "Formula Retail: How Much is Too Much?" the discussion will address if the current balance of large chain stores and smaller local businesses is the right one.

"I think the thing that concerns me is who is going to rent the bottom commercial spaces? The economics require a high square footage fee. It will not be accessible for mom and pops," said DTNA President Dennis Richards. "They are going for credit worthy tenants and that means formula retail."

The number of chain retailers in the Upper Market corridor from Church to Castro has increased in recent years. A recent survey by DTNA's Land Use Committee found that 28 percent of the businesses in that corridor are formula retail, with the mix varying from block to block. It marks a 3 percent increase since 2008, the last time DTNA did a survey.

In years past DTNA has advocated a site-by-site evaluation of the appropriateness of retailers. It supported both CVS and Verizon, while it raised a number of concerns regarding Trader Joe's coming into the area.

Now it is rethinking its piecemeal approach.

A recent unsigned article in its newsletter stated, "Given current development pressures, this site-by-site method may not be enough."

It asked DTNA members if they would favor a "cap" on the percentage of formula retail on Upper Market. It also questioned if members would oppose new formula retail "if not balanced with local, neighborhood serving businesses."

An outright ban on chain stores in the Castro area may not be the right approach, argued Wiener.

"There is some formula retail than can be appropriate and some may not. The problem is when you flood the neighborhood with formula retail," he said.

 

Bank application proves controversial

The issue turned the normally sleepy meetings of the Merchants of Upper Market and Castro into a heated exchange last week. The business group has rarely rejected supporting a business, whether it is locally owned or a national chain, from opening in the Castro.

It endorsed the Verizon store when it sought support last year, and despite some pointed objections, gave its approval to the Bank of the West for its eighth location in the city. (Full disclosure: Bay Area Reporter advertising director Scott Wazlowski, who sits on MUMC's board, voted in favor of the bank.)

Aiello cautioned that the merchant group might want to do more than address chain stores seeking Castro locations on a case-by-case basis.

"MUMC really should study and understand these issues and not jut have a two-minute proposal and vote on it," she said.

In the case of Bank of the West, developer Angus McCarthy said he had redesigned the 4,800 square foot commercial space after hearing objections from the neighborhood. Instead of taking the entire storefront, Bank of the West will use two-thirds of it, with street frontage on 16th and Market streets, while a smaller, 1,300 square foot space will be carved out with access from Noe Street.

"We do need a strong tenant. Bank of the West has been easy to work with," said McCarthy.

Twin Peaks resident Ed Martinez , the bank's representative, argued his company, which is a division of Bank BNP Paribas, focuses on working with small businesses.

"I know the area is under-banked," Martinez said of the Castro district.

Steve Adams, senior vice president and regional manager of Sterling Bank and Trust, spoke in support of the proposal.

"I support this as a banker. Other than us, Bank of the West is the only one doing loans," said Adams, president of the city's Small Business Commission.

Stating he could not take a position on the bank's application since it likely will come before the Board of Supervisors for a vote, Wiener said he was "glad" to see space allocated for a smaller store. Though he did question the merits of allowing a bank to open in the location.

"There is not a lot of distinction between a small bank and a large bank. The challenge with banks is they close at 3 p.m. and most weekends," said Wiener, who pledged to hold a meeting in his office with the developer and community groups to hammer out a compromise. "They do not add a lot of vibrancy and street traffic all times of the day."

Former MUMC president Patrick Batt, who has long demanded that national chains financially support Castro causes and local nonprofits in return for MUMC's support at City Hall, was aghast at seeing the merchant group vote on Bank of the West a mere week prior to its Planning Commission hearing.

"I think this is a huge mistake. They are long on desire but short on detail," said Batt, the owner of porn shop Auto Erotica. "We don't need a sixth bank in this neighborhood. It is the number one reason why this neighborhood is dying off."

The CBD's Aiello also criticized the short notice Castro groups were given about the bank's hearing date.

"There is not enough time for the community to respond on this," she said, noting that the CBD meeting will be this Thursday night. "It is just ridiculous."

McCarthy said if he could rework the commercial spaces so that the bank entrance was less prominent, he would. But he said such a design is not possible due to the constraints of the corner lot.

"I always put my best foot forward. If you don't want to accept it, vote it down," said McCarthy, president of the city's Building Inspection Commission.

In the end, MUMC overwhelmingly voted to support Bank of the West's application for a conditional use permit. Only six people voted to deny support.

The Planning Commission will take up Bank of the West's application Thursday, June 14. The meeting begins at Noon in Room 400 at City Hall.

DTNA meets tonight from 7 to 9 p.m. at the CPMC/Davies Hospital Gazebo Room.

Keep abreast of the latest LGBT political news by following the Political Notebook on Twitter @ http://twitter.com/politicalnotes.

Got a tip on LGBT politics? Call Matthew S. Bajko at (415) 861-5019 or e-mail m.bajko@ebar.com.