Local officials who welcome Wal-Mart to town, love to praise the taxes---but the giant retailer hates to pay the taxes. In fact, Wal-Mart's corporate mantra appears to be "low, everyday taxes -- always."
A report released this week by the non-profit group Good Jobs First, concludes that Wal-Mart methodically works to lower its taxes by challenging the assessed value of its stores and distribution centers. Just as the company has become legendary for shaking down its vendors---so the retailer shakes down cities and towns for tax rebates.
The nonpartisan research center in Washington, D.C. documented in an earlier study how Wal-Mart has benefited from billions of dollars in public subsidies to build its stores and site infrastructure. Their new analysis, Rolling Back Property Tax Payments, charges that although the financial take is not as large as its public welfare subsidies---Wal-Mart "drains vitally needed funds from communities by regularly challenging the valuation put on its properties by public officials." According to Philip Mattera, research director of Good Jobs First, "When the company succeeds in one of these challenges, it diminishes the funds available to pay for education, police and fire protection, and other essential services provided by local governments."
Good Jobs First reviewed a national sample of Wal-Mart stores and all of its distribution centers open as of the beginning of 2005. Wal-Mart has filed assessment challenges at more than one-third of its facilities around the country. At many facilities there have been appeals in multiple years. Overall, Good Jobs First estimates that Wal-Mart filed more than 2,100 property tax challenges nationwide. "These systematic property tax challenges are part of a larger pattern of state and local tax avoidance by Wal-Mart," Mattera explained.
Property assessment disputes pit Wal-Mart's legal team against local assessors. Such battles are an intimidating financial club wielded by Wal-Mart to lower its cost of doing business. If local assessors balk at giving relief, Wal-Mart just takes their case to a state appellate board, tying up local staff and resources.
Yet Wal-Mart's success rate in such appeals is as low as its prices. "We were surprised to find that Wal-Mart, despite its enormous resources, loses more assessment challenges than it wins," said Greg LeRoy, of Good Jobs First. "Even when it wins a reduction, it often fails to get as much as it wanted, meaning that the overall dollar amount of Wal-Mart's tax reductions is far below what the company sought."
The Good Jobs First report found that the company's win rate in assessment challenges is just under 50%, and that it has won a total of about $30 million from those appeals over the past decade. Good Jobs First found significant variation in the frequency of assessment challenges from state to state. The largest numbers, both in percentage and absolute terms, were found in Texas. More than 80% of the Texas stores had at least one tax challenge. Other states found to have high appeal rates were Colorado, Kansas, California, New Hampshire and Georgia. While Texas has the most appeals, the company's success rate in the state has been only 43%, far below the 82% success rate in Florida, for example. In California, the state where Good Jobs First found the second largest number of appeals, its success rate has been even lower: 25%.
Although Wal-Mart's overall tax abatement campaign has drawn mixed results, the company has won big tax cuts in some towns. In 2004, Wal-Mart's distribution center in Tomah, Wisconsin was lowered from $43.6 million to $31.4 million, and the company clawed back $300,000 for each of three years--a total of $949,000.
I have been writing about Wal-Mart's tax abatement campaign for at least eight years. Back in 1999, Wal-Mart dragged the small town of Wilton, New York to court over its property tax bill. Wal-Mart disputed its property valuation in Wilton for 4 years, and ultimately sued the town in the New York State Supreme Court. Wal-Mart wanted Wilton to slash its discount store assessment from the $7.5 million in valuation, to $3 million--a 60% tax reduction. The taxpayers of Wilton had to hire a special attorney to argue the case, and spent $2,250 in tax dollars to have a special appraisal done. Because of the expense of defending itself against the Wal-Mart litigation, the town had to call on the School District in Saratoga Springs, and Saratoga County to come up with the cash to defend against Wal-Mart---because the county and the school district stood to lose revenue if Wal-Mart's property taxes were slashed. That same year, Wal-Mart bragged that it paid $28 million in local and state taxes in New York state.
In 2006, the company picked the same fight with Geneva, New York. Wal-Mart sued to get its assessment more than halved, from $4.8 million to less than $2.3 million. Wal-Mart charged that their store's assessment was too high, because property in the town was assessed at 65% of full value. Wal-Mart eventually dropped the lawsuit, saying "the town has been working well with Wal-Mart on the supercenter...It was a business and policy judgment, in view of the high degree of cooperation. Even though we still object to the store's assessment, we'd rather go forward with what's being done on the supercenter." A local citizen's group fighting the Geneva superstore, questioned the timing of the retailer's lawsuit, because it was filed only five weeks after the chain announced its supercenter expansion plans, and just as the permit process was beginning. The lawsuit put pressure on the town to act favorably on the superstore. The citizen's group charged that Wal-Mart used the lawsuit as "a bargaining chip" to get its supercenter built. The Town's Supervisor acknowledged that Wal-Mart had unsuccessfully tried to lower its assessment for years, and that Wal-Mart had filed similar lawsuits against municipalities across the New York state. The Town Assessor in Seneca Falls, New York admitted that Wal-Mart files lawsuits against municipalities where supercenter projects are pending and they have existing stores on the real estate market. It's easier to sell an existing store if it has a lower assessment, she said. Wal-Mart's lawyer admitted his company had been "very successful" in getting cities and towns to lower their assessments.
In small town after small town, Wal-Mart has picked the same tax fight. In places like Coolbaugh, Pennsylvania, or Saukville, Wisconsin, Wal-Mart promises a tax revenue bonanza, but as soon as they get in, they try to nickel and dime their taxes down. In Coolbaugh, Wal-Mart challenged the assessment on its 208-acre site for a large distribution center. The County Commissioners in Monroe County, along with Coolbaugh officials, and the Pocono Mountain School District, had to raise $6,000 just to hire an appraiser to review the site's value.
In Saukville, Wal-Mart attempted to lower its store assessment by $1 million. According to the editor of the Ozaukee Press, the abatement would lower Wal-Mart's tax bill by $21,306. The tax cut would have stripped $11,469 from the Port Washington-Saukville School District---an amount, said the newspaper, "that far exceeds the value of the store's well-publicized Teacher of the Year award." The editor of the County newspaper wrote a column criticizing Wal-Mart's move. "Never mind the fact that the value of almost every property--commercial, industrial and residential--went up this year as a result of a village-wide reassessment; the corporation doesn't want to pay what the village says is its fair share of taxes." The editor added, "No matter how hard the store tries to give the impression that it is a concerned member of the business community, the truth is it is part of a chain whose interest in Saukville is, at best, fleeting, and over which the village has little influence."
The Good Jobs First study demonstrates once again that taxes are just another business expense for Wal-Mart to try to force down---any way possible. In this case, the losers are the very same officials that opened their arms to the retailer.
When this tax dodge study came out this week, instead of assailing the message, Wal-Mart went after the messenger. Study author Phil Mattera told me that Wal-Mart initially did not know how to respond to the Good Jobs First study. "When contacted by the New York Times, which ran the first story on the report, the company was not willing to comment, Mattera said. "Then they reverted to their common practice of union baiting. When reporters contacted Wal-Mart, their public relations people apparently thought that calling Good Jobs First a labor-supported group would discredit our findings. Actually, since our founding, we have received less than 5% of our funding from unions--and most of that has been for consulting work, not donations. Nearly all our money comes from foundations."
Mattera says that Wal-Mart claims it evaluates each tax assessment on its own merits. "But it is hard to believe that assessors have made serious errors at more than one-third of all of Wal-Mart's facilities," he notes. "As for the results themselves, what we have been trying to get people to focus on is Wal-Mart's hypocrisy. When the company is trying to get into a community, it makes great claims about economic benefits. Yet when they later look for assessment reductions, they have to argue in effect that property values have declined."
A colleague of mine says that all major corporations try to push down their property tax costs. "I sit on a tax board of review in small town," he writes. "The Wal-Mart landlord came in last year to appeal their assessment. Long story short -- he is 'connected' to local family of businessmen who presented us with an appeal 'we can't refuse.' Wal-Mart never stepped foot inside that meeting. They came in without an appointment and walked out as the only business to get their assessment lowered. They presented no evidence other than they just wanted to have it lowered. It came down to my vote to break the tie. I voted for it because the assessor recommended we do so. It came down to a matter of $20,000 of tax breaks a year for Wal-Mart. It would cost $20,000 of village funds to fight them in an appeal. We all knew that voting no could mean a world of hurt for us personally. It makes it so someone doesn't even want to serve on these boards."
This coming year, as many as several hundred communities will receive such a visit from Wal-Mart's lawyers regarding a tax abatement. But enthusiasm for Wal-Mart at the local level continues unabated. Four weeks ago, when Wal-Mart opened up its new supercenter in the small southern Oregon community of Eagle Point, Mayor Leon Sherman was front and center at the ribbon cutting. "We've been working for three or four years to get this supercenter," the Mayor said, "and we're really happy that they're here. Not only will the store bring extra jobs, but it will also provide an additional tax base for the city as well as the school district."
Mayor Sherman is in for a big, supercenter surprise.
Al Norman is the founder of sprawl-busters.com, and author of the book, "The Case Against Wal-Mart."