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wal-mart & tax incentives (article)

GeogPlanner

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i know there are haters out there b/c people think that walmart runs out small businesses, but is the community also at fault?

Wal-Mart Incentives: Is This Economic Development?

i have had this discussion on the empire zone program with others who say, "hey, it's jobs!" and they are glad to do what they can to facilitate a walmart.

Most people assume that local retailers are being beaten fair-and-square by companies that offer consumers a better deal...
but how fair and square is it and when do you draw the line in economic development? do you offer incentives to competitors that will significantly impact another business in the same sector? when is it competition and when is it favoritism? how do you say "no" in economic development when wal mart comes looking to site a new store, contributing taxes and jobs (albeit, low paying). to many, its taboo to build a walmart on the backs of a traditional downtown, but is it ok to sacrifice strip malls for other types of retail development? and how much benefit is there really to subsidizing a walmart? what is really the story to these corporate subsidies?

Moreover, under the terms of the subsidy, Denver will not see a dime of new revenue until 2016.
 
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There was an article in Planning magazine (plus a few threads here) about the St. Thomas Hope VI Redevelopment plan that included a Walmart Supercenter in New Orleans. The city gave the developer a TIF and other incentives to locate in this dense, urban neighborhood. The city won't see a dime of sales tax revenue for at least 15-20 years. I don't understand how huge companies are awarded such incentives when small business owners have to bear the brunt of taxes. It's corporate welfare, not economic development.
 

giff57

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The problem, at least in Iowa, is the need for new taxable valuation. Cities do not get much sales tax revenue. During an economic downturn, taxable valuation is decreasing and the cost of government is increasing, the only thing that keeps you going is growth. A new walmart assessed at 2-3 million looks pretty good, even if you give them an abatement for x number of years.
 

GeogPlanner

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Planderella said:
There was an article in Planning magazine (plus a few threads here) about the St. Thomas Hope VI Redevelopment plan that included a Walmart Supercenter in New Orleans. The city gave the developer a TIF and other incentives to locate in this dense, urban neighborhood.
is that more forgivable though? i think it would depend on the level of services before the walmart and the level of services after. at least there was some return in that case.
 

Rumpy Tunanator

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This is ridiculous. How can they justify giving tax breaks to Sprawl-mart and at the same time give the boot to existing businesses who pay taxes?

GeogPlanner said:
i have had this discussion on the empire zone program with others who say, "hey, it's jobs!" and they are glad to do what they can to facilitate a walmart.
-This just happened here with Geico. They were given tax breaks and incentives to move into the suburb Swampherst which has already been accused (and convicted) of using unfair tax incentives to lure businesses out of the city (illegal in NYS).

-Thing is Swampherst doesn't have any empire zones because it is not a economically depressed area of the region. Its the land of stip malls and "campus like" office parks as well as home to the "sinking home" problem. It had to borrow 5 acres from The Town Next Door (tm) which has designated empire zone areas. This defeats the whole purpose of what the program originally intended to do, help economically depressed areas.

-Geico was quoted as saying they have nothing against urban settings, although most of the employees will be coming from the inner-city via mass-transportation to work low paying jobs. Nothing like continuing to add fuel to the fire in a region where the population continues to decline and sprawl keeps on growing.

Sorry if I went off topic, but this is another large company that wanted tax breaks when they really don't need them. They're also are the largest donators of radar guns to law enforcement agencies across the country, so the cops can give you tickets to fill their coffers and so the insurance giants can raise your premiums and fill their pockets. Fight the system!
 

Big Easy King

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Planderella said:
There was an article in Planning magazine (plus a few threads here) about the St. Thomas Hope VI Redevelopment plan that included a Walmart Supercenter in New Orleans. The city gave the developer a TIF and other incentives to locate in this dense, urban neighborhood. The city won't see a dime of sales tax revenue for at least 15-20 years. I don't understand how huge companies are awarded such incentives when small business owners have to bear the brunt of taxes. It's corporate welfare, not economic development.
That case of "corporate welfare," for the most part, drove Planderella, myself and other planners away from the City and into the private sector. Our hard work and recommendations on that project were shafted by local officials.
 

Wulf9

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There is an anecdotal report (news article) that says a city loses three jobs for every two created by Wal Mart.

The problem is one of local funding sources. A lot of local funding comes from sales taxes, not employment. Cities will gladly destroy the employment base to get revenues.
 

GeogPlanner

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Wulf9 said:
There is an anecdotal report (news article) that says a city loses three jobs for every two created by Wal Mart.
Do you have a link to that report? I'd love to see it. I've heard that number kicked around before but have never seen it on paper.

RUMPY: I've read about the Geico project. It's an interesting one. It's also interesting that the Buffalo zone catches more flack for its restuarants and such it has certified in the city. But from what I've seen, Geico hasn't gotten as much criticism. Correct me if I am wrong of course.

Rumpy Tunanator said:
How can they justify giving tax breaks to Sprawl-mart?
Maybe BEK can shed light on how it went down in the "City"? Is it justified by sales tax generation as Wulf suggested? Interesting how one can a.) give breaks and incetives to large retail at the expense of tax payers and b.) attempt to make up by increased sales tax revenue on the back of the locals...double dipping?
 

Rumpy Tunanator

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GeogPlanner said:
RUMPY: I've read about the Geico project. It's an interesting one. It's also interesting that the Buffalo zone catches more flack for its restuarants and such it has certified in the city. But from what I've seen, Geico hasn't gotten as much criticism. Correct me if I am wrong of course.
Your right on one restaurant that is getting benefits from the empire zone, McDonalds. Yep, I couldn't believe it either when I found out about that one.

Geico hasn't gotten criticized because the owner of the Buffalo News is also a major stockholder in Geico.

This is just another example of how a program that was aimed at helping economically depressed areas in the state redevelop brownfields and abandoned buildings and create new jobs is being abused.
 

SGB

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It's a sad statement on the status of municipal politics and finances when communities/regions/states battle over who can provide the biggest subsidies to the largest and most profitable retailer on the planet.

OK, people. Say it with me: MYOPIA.
 

Wulf9

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Article where job cost of a wal mart is stated. As I said - "anecdotal" statements. No source given.

http://www.postwritersgroup.com/archives/peir1208.htm

I think there is a growing awareness that Wal Mart is being heavily subsidized. Local governments pay them to come to town. Health care generally comes from an employed spouse, Medicare, or unpaid visits to the emergency room. Retirement comes from social security or a spouse. Food stamps provide food. Government housing programs provide housing for low income workers. Suppliers often sell goods at below normal markup so other customers to make up the difference. (The Levis you buy at Macy's have a cost component that subsidizes the Wal Mart Levis.) I suspect that some of America's bankruptcies have resulted from "selling too low" to Wal Mart, so the stockholders and creditors have subsidized those goods. I would guess that foreign governments have manipulated their production and monetary policies to give Wal Mart an advantage.

I suspect we will see either antitrust legislation, some form of mandatory benefits legislation, or unionization within the next few years to level the playing field.
 

giff57

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I have the answer. Let's ban every employer that fits these categories:

Does not supply health insurance
Does not pay the average regional wage
Does not offer a retirement plan
Is able to buy enough supplies to earn a discount from suppliers
 

Richmond Jake

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giff57 said:
I have the answer. Let's ban every employer that fits these categories:

Does not supply health insurance
Does not pay the average regional wage
Does not offer a retirement plan
Is able to buy enough supplies to earn a discount from suppliers
I'm 4 for 4. You just padlocked my business.
 

Wulf9

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RichmondJake said:
I'm 4 for 4. You just padlocked my business.
There is a difference between your business and Wal Mart. Your business is a part of the free market that has kept this country strong for decades.

Wal Mart and similar market dominators use a variety of techniques to assure that they do not operate in the same free market forces.

That's why some type of response is necessary to restore free market forces. It's strange to think that intelligent government intervention is necessary to keep markets free - but that is the case. At the end of the nineteenth century, there was a need for anti-trust and anti-monopoly legislation to stop anti-competitive and anti-market behavior.
 

giff57

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Wulf9 said:
There is a difference between your business and Wal Mart. Your business is a part of the free market that has kept this country strong for decades.

Wal Mart and similar market dominators use a variety of techniques to assure that they do not operate in the same free market forces.

That's why some type of response is necessary to restore free market forces. It's strange to think that intelligent government intervention is necessary to keep markets free - but that is the case. At the end of the nineteenth century, there was a need for anti-trust and anti-monopoly legislation to stop anti-competitive and anti-market behavior.
So, any company is free to operate in the market until they reach a certain level of success, and then we change the rules?
 

Wulf9

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giff57 said:
So, any company is free to operate in the market until they reach a certain level of success, and then we change the rules?
Yep.
 

Wulf9

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RichmondJake said:
So my business partner and I shall strive for mediocrity
Nope.

Actually, my point is that the large monopolies in general, and Wal Mart in particular, have developed ways to transfer their business costs to government and other businesses.

It would be my goal that you and your business partner not be required to subsidize Wal Mart. The rules should change for businesses that are so large they can negatively affect local, national, and world economies. That's what antitrust laws do.

You and your business partner should not strive for mediocrity. Strive to become a business so large that antitrust laws will someday apply to you. Then we'll talk about you on a chat board.
 

GeogPlanner

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i wonder how successful a walmart or other large corporate employer could be in many areas of the nation without large subsidies to set up shop?
 

giff57

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GeogPlanner said:
i wonder how successful a walmart or other large corporate employer could be in many areas of the nation without large subsidies to set up shop?
They would do just fine without them. The subsidies come from the compitition between jurisdictions to land the tax proceeds. The big guys are just working the system.
 

Cardinal

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I've been reading this thread for a few days now and simply shaking my head. Do you really believe that communities out there are giving incentives to Wal-Mart (or even most companies) to come to their city? I have been working in economic development since the 1980's and I can count on my hands the number of companies that have recieved subsidies from the communities in which I have worked. Often enough, those have merely been loans that have been paid back with interest. Is it still a subsidy if the city makes a profit off of its incentive? That same argument may be extended to TIF.

I am not arguing that there are not the exceptions - the rare instances of municipal stupidity that allow some companies to profit at the public's expense. I would emphasize that these are extremely rare. I know of only one instance (often criticized by the NIMBY factor) of Wal-Mart receiving a subsidy in Wisconsin. This was not for a store, but for a distribution center employing hundreds.

Don't be blinded by your dislike of Wal-Mart and don't believe something merely because it fits with how you choose to percieve the situation. Take the time to research the issue (i.e., not simply reading a report by the Sierra Club) and find out the truth about incentives in economic development.
 

BKM

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But, Cardinal, I think you're missing one of the main point of the original posted article: A thriving (albeit ragged looking to middle class eyes) Asian business district is being replaced though the use of the public police power (eminent domain) by a WalMart. The City of denver may get more tax reveenues in the short term, but as the Wal-Mart hating threads elsewhere point out-at a significant cost.

giff: The chains will certainly do well without government intervention and subsidies. But, in dense urban locations or locations with large numbers of small. "marginal" properties, it often takes direct government action to assemble their sites for them. So, the issue of competition through government subsidy is not as cut and dried.

I see this kind of narrow, revenue-focused, chain friendly thinking all the time in economic development. It ain't good enough that our downtown, for example, has a local sandwich shop and a local coffee shop. We (the City) have to work eagerly behind the scenes to bring Starbucks and a chain sandwich shop downtown-even though said Starbucks and chain sandwich shop are elsewhere in the city (in the case of Starbucks, at four locations!-and the chain sandwich shop has another outlet less than two miles away).
 

GeogPlanner

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the last thing i wanted to get into is a wal-mart hater discussion...

i wanted to talk about how far is too far for a community to become involved in attracting a corporate retailer...to what extent should the subsidies to a large retailer be carried by local retail? you could substitute the name wal-mart with another big name. i'd be appalled if target was gettting this kind of assistance (disclosure: big fan of the bullseye).

at the same time, i don't think that business profit due to public involvement is rare. i just think that it doesn't float to the top until it is a wal-mart that gets the bling bling. i don't think that public involvement is a bad thing. but i don't understand why a wal-mart gets help like this in denver.

BKM: i think that the chain-chasers are a feel good thing. for example, if you can get a fancy-pants starbucks in downtown, then it feels good and looks good, right? maybe not to the people that want only small coffee shops, but to the masses, to be able to attract a starbucks makes it seem as though someone is doing something right. in saratoga springs, everyone scoffed at the arrival of chains, but i think it's not such a bad thing. people like thier name brands. and sometimes, the chains attract others who wouldn't normally go to a downtown...like my mom and sister and girlfriend and etc...
 

giff57

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The subsidies of which I speak ....well in thinking about it and reading your post, it probably is the wrong word for it.

What I was refering to was the jurisdiction builiding infrastructure, giving tax breaks, and such.... and yes...some of these have been given to land a supercenter. Usually in the regional commercial centers.

One interesting case was in Mason City, where a super center was sited in a fringe area, but the city created a TIF district that had a corridor connection to their downtown, and the increment generated by the supercenter was used for downtown renovation.
 

GeogPlanner

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giff57 said:
The subsidies of which I speak ....well in thinking about it and reading your post, it probably is the wrong word for it.

What I was refering to was the jurisdiction builiding infrastructure, giving tax breaks, and such....
I'd consider those in the subsidy category...
 

Cardinal

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GeogPlanner said:
i think that the chain-chasers are a feel good thing. for example, if you can get a fancy-pants starbucks in downtown, then it feels good and looks good, right? maybe not to the people that want only small coffee shops, but to the masses, to be able to attract a starbucks makes it seem as though someone is doing something right. in saratoga springs, everyone scoffed at the arrival of chains, but i think it's not such a bad thing. people like thier name brands. and sometimes, the chains attract others who wouldn't normally go to a downtown...like my mom and sister and girlfriend and etc...
If they are chasing chains just because they prefer Starbucks to the local coffee shop, they are making a big mistake. The other reasons you point to are dead-on. Retail locates where there are names people know. For years, one of the tricks used by some chains was to look for Blockbuster. (Seriously!) This can work out well if it attracts customers that also help the local merchants.

The other factor in courting retail is that it takes a lot of work and time. Chains simplify things by having real estate / site selection representatives and by also having a well-defined demographic, product and format. It is far easier to work with a chain than to attempt to attract either a start-up business or expansion of a small local operation (i.e., the guy in the city one-over).

All that said, retail attraction in economic development plays a critical role in many of the types of developments people think of as ideal (for example, commercial district revitalization, new town centers, mixed-use development, etc.)
 

Wulf9

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I think the issue of "subsidy" is broad. Wal Mart has developed a way to transfer costs to others. That's one of the reasons their prices are so low.

When others pay for part of Wal Mart's operation, is that a subsidy? I think it is because of Wal Mart's dominance. So I think it is time to look at those issues and their broad influence on the national economy and job market.

There was an interesting article about a pickle company (Vlasic, I think), where Wal Mart insisted on a gallon jar at a ridiculously low price. The pickle company needed the Wal Mart account to survive. It is probable that they added cost to every other jar of pickles to sell to Wal Mart at the demanded price. So every jar sold at Safeway, Kroger, etc. had a Wal Mart subsidy cost added. (The pickle company subsequently went bankrupt. The news story did not indicate whether the Wal Mart deals were a cause of bankruptcy).

I am not a Wal Mart basher. I am concerned about broad policy and economic issues relating to the various monopolies and near monopolies in our current economy. Free markets become un-free when monopolies reach a certain level of power.
 
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