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Just Saying No: Hank Rullhausen, owner of Almaden Chevron, says he'd have to lay off his staff of 23 mechanics if forced to open a convenience store.

Getting Tanked

If gasoline stations could sell groceries and alcohol, would it give them a competitive edge--or lead to a bureaucratic pileup?

By Allie Gottlieb

FOR SAN JOSE residents, driving up to a Chevron for a Pabst and a hot dog hasn't been a legal possibility since 1985, when a citywide ban forbid gas stations from selling groceries, including alcohol. Now, some City Council members are considering reversing the prohibition.

When the ban first surfaced in the mid-'80s, the City Council professed that a proliferation of convenience stores was creating too much traffic in residential neighborhoods. Officials were also responding to concerns that too many places were selling alcohol intoxicants.

These days, as a sign on a boarded-up gas station in west San Jose--"Closed to serve you better"--indicates, economic hard times and a corresponding rise in gas prices have not been kind to the average pump. Which is why owners of the North First Street 76 Station near City Hall and the Rotten Robbie station chain are arguing that reversing the ban on alcohol sales would be a big step forward for little business.

Currently, larger companies such as Costco sell both alcohol and gasoline within city limits because their lots are big enough to subdivide into separate parcels for gas pumps and grocery stores, allowing them to skirt the dual-use prohibition.

Councilmembers Linda LeZotte, Pat Dando and Forrest Williams have agreed to take a look at the issue and have directed staff members to report back by December on an analysis of the city's ban. However, a little digging finds that the issue is far more complicated than David vs. Goliath and that, in fact, the City Council may be overstepping its bounds.

Quickie Mart Economics

Steve Bartnek is one of 23 mechanics employed by station owner Hank Rullhausen at Almaden Chevron. Bartnek, a broad, cheerful man, likes the hands-on customer service of auto repair. He tells the story of the Cupertino paraplegic customer who has to call the town's Chevron station a day or two in advance to arrange for help filling up his tank. Since Cupertino ended its gas/grocery ban, the Chevron station there closed its repair shop, reducing the number of employees per shift to one on average, Bartnek reports. In effect, the resident can only buy gas on days that a second clerk works.

Bartnek implies that what happened in Cupertino foreshadows San Jose's future if the prohibition is lifted. "You are going to lose all the service that happens at these stations," he predicts, adding that he's most concerned for disabled customers.

He should be worried for himself, according to his boss. Bartnek has worked for Rullhausen for 22 years, but Rullhausen says with regret that he'll have to lay off all of his mechanics if the city reverses the law. In a letter dated April 21, Chevron Products Company told Rullhausen that should the law change, he will have to "reconstruct" his station, turning it into a "Hallmark 21" model--a convenience store without an auto repair component.

Chevron concedes that it plans to open minimarts instead of repair shops, nationally. Spokesperson Marielle Boortz says the company declines to take an actual position during the discussion in San Jose. "Of course, we're very interested in the ordinance," she admits. "Where we market, we find that our customers value having convenience stores ... as opposed to any other service. That is the trend."

Says Rullhausen of the trend, "We'll have about 200 more cookie stores in San Jose and about 200 less conventional service stations where you can get a tire repaired. We're not talking about just me. We're talking about every Chevron station. ... The Shell across the street."

Bartnek seconds Rullhausen's point. "This is huge," he exclaims. "It's not just us. It's a whole industry."

Bartnek notes that his toolbox contains about $150,000 worth of car repair tools bought from industry vendors. He also points out that the garage helps to keep wholesale car-parts businesses alive.

Mike Emley, who runs All Parts Auto Stores, confirms that "probably 40 percent of our business is people like Steve. It's trickle-down economics." Losing Rullhausen's business would "affect him, me, my warehouse supplier. ..."

Gas Pain

Councilmember LeZotte says Rullhausen is the only gas station owner she knows who opposes the repeal. Other owners of small gas stations have been bending her ear with reasons why doing business in this city tough.

She hears that selling gas alone doesn't cut it. Neither does running an auto repair shop. LeZotte takes the position that letting gas stations sell prepared food and drinks would, through the promise of a widened income stream, compel owners to pretty up their businesses.

"There's a lack of incentive in making an investment in the property if their profit margin is the same as it is," LeZotte says.

The owners of the 76 Station two blocks up from City Hall on North First Street exemplify LeZotte's point. "We cannot survive without the groceries," says one of the owners, neither of whom would give their names. They run a small auto repair operation beside their minimart and gas station and say they aren't interested in selling alcohol. But they wouldn't make enough money without the conditional-use permit that allows them to sell packaged food outside of vending machines. And they don't think the city should bar others from selling alcohol.

Tom Robinson, owner of Robinson Oil Corporation and the Rotten Robbie stations, couldn't agree more. All year, he's been lobbying the city to repeal City Code Section 20.80.550, which prohibits "the concurrent sale of gasoline and the retail sale of food, grocery items and alcoholic beverages (excepting prepackaged soft drinks, cigarettes and snack foods from automatic vending machines)."

"If I don't have the beer to sell," he wrote in an April comment to the council's Driving a Strong Economy Committee, "I miss the whole purchase. With that said, my main motivation is to remove the onerous restriction on the sale of food and groceries."

Robinson contends that current city law discriminates against owners of small stations by giving an unfair edge to Costco, Wal-Mart, Safeway, Jack in the Box and other big companies that have started selling gas on a separate but adjoining lot because they can afford to.

"They can sell gasoline to compete against us," Robinson complains, "but we cannot sell food to compete against them. It's not right, and it's not fair."

Steve Lopes, owner of independent distributor Western States Oil Company in San Jose, echoes the Costco complaint. He references a price increase the Legislature made in July on the advice of the California Air Resources Board, raising the price of certifying a gas tank for use from $2,500 to $30,000. Ultimately, he says, groceries bring in a higher profit margin than gas, and that is the motivation for proponents of ending the prohibition.

Managers of two independently owned stations that lease the Chevron name, product and marketing, however, voice opposing concerns.

Mark Dorrell, who hopes to buy the Bascom Avenue station from his employer, notes the potential for market saturation. "You're going to have a ton of service stations that can sell liquor," he says. "Is it going to help me? I don't know."

Ron Chakarun, who manages the Blossom Hill Road station, says Chevron has repeatedly asked the owner to shut down his garage and build a minimart. He has refused, because the repair shop is lucrative. If the city ends the ban, and Chevron stops asking and starts demanding, "that would hurt us a lot," he says.

Station owners, on the other hand, could dissolve their more expensive workforces--comprised of mechanics--and build cheaper ones, made of cashiers. The California Employment Development Department lists the median income for a cashier in Santa Clara County as ranging from $7.50 to $17 an hour, depending on seniority and union membership. By comparison, auto mechanics earn a median income that ranges from $13 (a union member with no experience) to $31.50 an hour in the county. Employers of mechanics also pay to cover medical, sick leave, life insurance and vacation benefits a greater percent of the time than do cashier employers.

Dangerous Cocktail

Although the state doesn't let cities regulate alcohol sales separately from food, Councilmember Forrest Williams says the council isn't pushing for gas stations to sell liquor. He and his colleagues just want to grant independent stations the same ability to sell food that the corporate ones enjoy.

"It's just equity," he says, echoing his colleague LeZotte. "But we're concerned about [Mothers Against Drunk Driving]."

Ultimately, though, the city can't have it both ways. The California Constitution gives full control over alcohol sales and purchases to the state. The city's ban is an exception that's grandfathered in. Repealing the ban would remove "the most effective" way for the city to restrict alcohol sales at gas stations, according to a June memo to the council from the city attorney.

Jean Hamilton, principal planner with the city, calls the council's directions to staff "confusing." She explains that repealing the ban would erase the little control the city does have beyond land-use and zoning regulations (which include, for example, the authority to oversee how far an alcohol vendor must be from a school). In addition, a repeal of the ban wouldn't just let gas stations sell food and drink--it would permit Safeway to hawk gas, thus voiding the equalization effect, a concern that Councilmember LeZotte considers too hypothetical to entertain.

Hamilton also echoes the concern of people like Hank Rullhausen, who worry that Chevron would seize the opportunity to shut down its garages and dump a bunch of mechanics into the unemployment pool.

"It certainly presents a conflict with the mayor's objective," she says, "putting families back to work."

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From the November 27-December 3, 2003 issue of Metro, Silicon Valley's Weekly Newspaper.

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