So Walmart just builds in the town right next door. The clever leaders of Hercules lose out further growth generated by the Walmart anchor, and they lose any share of sales taxes that the neighboring town will now enjoy. But what do the leaders of Hercules care but for their self-righteousness?
Bingo.
No, the clever leaders of Hercules preserve the small town character of their "new urbanism" redevelopment plan, and will enjoy a more durable and desirable mix of property and sales taxes generated from it. They also get a boatload of free publicity for their city by standing up to the Big Box and winning. Hard to see the downside of their decision.