Tuesday, August 24, 2021

Big Boxes, an Even Worse Deal than Anyone Thought

Are you old enough to remember when Walmart started to metastasize across the country, killing Main Street businesses everywhere? It seems like a long time ago. Now we have the second or third wave of similar business openings, with dollar stores eating the table scraps around the edges of the even smaller towns, which has also been going on for quite a while.

Stacey Mitchell, co-director of the Institute for Local Self-Reliance, had a Twitter thread today that told me something about the most recent outcome of that big-box trend. (Mitchell's thread has links to other stories ILSR has run on the topic over the years, so it's worth checking it for more details.)

It turns out that big-box stores are an even worse deal for cities and towns – worse than anyone, even their opponents, once thought. In the 1990s and 2000s, grassroots groups in hundreds of communities fought Walmart and other big-box stores. Some won. Most lost. They lost mainly because city officials wanted the tax revenue these stores promised to generate.

The tax bonanza was always a mirage, but you had to actually do the full math to see this. Most city officials refused — they wouldn’t look past the top-line of what the Walmart store would generate in property tax revenue.

But the bottom-line was another story. There are two big costs: Big-box stores are expensive in terms of the public services they require, mainly police and road costs. And second, big-box stores cause the value of downtown and other commercial buildings to drop. A few years after a Walmart or a Lowe’s opened, the end result for the city’s finances might be breakeven, or worse, when you accounted for these losses and costs.

Now, a decade or two later, the picture for these communities is getting even worse.

The big-box chains are systematically contesting their property valuations, slashing their payments in hundreds of communities. In Ellsworth, Maine, Walmart overcame citizen opposition in 2009 by promising over $450k in tax revenue (in today’s dollars). That’s already fallen to $350k as the cheap building has deteriorated. Now Walmart is claiming that it’s worth even less, aiming to pay just $180k.

Walmart is also appealing the valuation of seven other stores in Maine, looking to dramatically cut its tax payments. These appeals are built on something known as the “dark store” theory of value, which is as nefarious as it sounds. “Dark store” is a scheme the chains cooked up around 2014, when they started appealing tax valuations on the grounds that their stores should be valued as though they were vacant buildings and not going concerns.

A few places (smartly) escaped the big-box swindle. Vermont, for example, has a law that compels cities to do the math on new development. The result is fewer big-box stores and more small businesses than any other statute.

Today it’s pretty clear that places that said no to Walmart are better off for it.

But you still can’t get most cities to do the full math. Just look at all the Amazon warehouses going up — with the same tax breaks and empty promises.

And that's if the stores even stay open: all too often they have closed, or closed that first building and built a new one a little way down the road, requiring more infrastructure cost to the municipality and leaving behind a useless big-box building and parking lot. 

Meanwhile, the Minnesota town of Wabasso just passed a one-year commercial development moratorium to prevent a Dollar General store from opening. At least one other town in the same county used the same method recently.

As the young people say on Twitter, You love to see it.

1 comment:

Michael Leddy said...

“Or closed that first building and built a new one a little way down the road” — or several miles down the road, on the outskirts of town, leading to new sprawl, new road construction, new sewer lines, etc., etc. And the old building still sits empty.