THE BLOG

Warren Buffett, Waltons Get Welfare From Wisconsin Taxpayers

04/03/2013 08:54 am ET | Updated Jun 03, 2013

Two of the richest families on the planet -- the Waltons and the Buffetts -- have taken public welfare from taxpayers to help clean up a contaminated land that will soon sprout a Wal-Mart superstore.

On April 10th, the Walton Family will open another superstore on a piece of property left polluted by a company Warren Buffett acquired. This ribbon cutting would not have been possible without a financial "gift" to the billionaires -- courtesy of the taxpayers of South Milwaukee, Wisconsin.

A 115,000 square foot Wal-Mart was approved on a 6-2 vote by the South Milwaukee Common Council in October of 2011. The only two aldermen who voted against the project represented the district that includes the development site. The land itself was environmentally contaminated, and the corporation responsible for the pollution is linked to Buffett's Berkshire Hathaway "family" of companies.

To make this $12 million big box project work, city officials had to rezone one property from manufacturing to commercial, vacate a city street, spend $2.5 million to acquire a string of parcels -- and chip in to clean up pollution on the property. The site sits over a former wetland and a creek mere blocks from the shores of Lake Michigan. The land was contaminated with tannery toxins such as hexavalent chrome -- the carcinogen that made Erin Brockovich a household name.

It took the city 7 years to assemble 7 parcels, which it then sold to a developer for roughly 20 percent of what it cost taxpayers to buy and clean up. Part of the sale agreement required the developer to clean up the site. But city officials thought the Walton's might need some financial help to swing the deal.

The cost to handle the contamination for the western site was estimated at over $2 million. The company that polluted the site was "consolidated" through several holding companies -- into Berkshire Hathaway. Warren Buffett also happens to be a major Wal-Mart stockholder. He went on a Wal-Mart buying binge between 2009 and 2012, adding 26.7 million shares to his portfolio.

The corporations pitching this Wal-Mart had far deeper pockets than the taxpayers of South Milwaukee, a community of just over 21,000 people, with an annual budget of only $18.5 million. Warren Buffett is the third richest man in the world with a net worth of $50 billion -- enough to pay for South Milwaukee's budget for the next 2,700 years -- not counting inflation. The heirs of Sam Walton have a total net worth of $107 billion.

When corporations pollute, just try to find a board of directors willing to accept responsibility. In this case, a company called Midwest Tanning operated on the site for sixty years. It closed its doors at the South Milwaukee plant in July, 2001. Industrial trash was still piled outside the building ten years later. Midwest's operations were consolidated with a sister company, Paul Flagg Leather Company, which were both part of the Midwest Leather Group of companies owned by Wells Lamont.

Wells Lamont was purchased by the Marmon Group of Companies, and in 2008, Berkshire Hathaway purchased controlling interest in Marmon, making Wells Lamont a part of the Berkshire Hathaway companies. This sequence of entities swallowing entities, is a corporate version of the Russian nesting dolls. The original polluter is hidden by larger corporate dolls, and the city is left holding the (contaminated) bag.

Instead of asking the billionaires to clean up their act, South Milwaukee Alderman shifted part of the tab to city taxpayers. They created a TIF -- a Tax Incremental Financing District. Wisconsin has allowed TIFs since 1975. They are basically a financing mechanism that earmarks property tax payments for site improvements that inure to the benefit of the developer.

Warren Buffett did not offer to pay for the South Milwaukee contamination deposited by his consolidated company. The Walton family did not offer to scrub every ounce of pollution from their site. Instead, the city of South Milwaukee diverted $1.8 million in tax revenues to improve Wal-Mart's holdings. Such subsidies are a source of consternation to smaller businesses who get no such municipal candy. The TIF money could have gone to defray other costs in the city budget, like public safety, schools, or the library.

Dean Chapman, a South Milwaukee businessman, vigorously opposed the Wal-Mart-and-welfare deal. When he realized the Midwest Tanning connection to Berkshire Hathaway, he reached out to Warren Buffett. "I naively hoped Mr. Buffett would welcome the positive spin of paying for his division's mess," Chapman told me. "But I never got a reply. I even tried his son Peter, who I'd met when he lived in Milwaukee and shared mutual friends. Then I tried his son Howard, whose passion is responsible land use. Not one response."

"I felt like a fool when I learned Berkshire Hathaway was a major Wal-Mart stockholder," Chapman recalls. "By then, the Wal-Mart was already breaking ground. One of these billionaire's families should refund the hard-working taxpayers the $1.8 million tab we got handed."

Over the past couple of years, this project was bitterly fought by two citizens groups. Sidewalk rallies were held. Legislation and litigation was filed. The public hearings on the plan were described as "very heated" in the local media. More than 200 citizens packed the Common Council hearing room on the night the project was approved.

But one year and five months later -- another Wal-Mart store will open in South Milwaukee -- literally built on a foundation of corporate welfare. These subsidies for the rich can be a very dirty business sometimes.

Al Norman is the founder of Sprawl-Busters. He has helped communities fight big box sprawl for twenty years. His latest book is Occupy Wal-Mart.