Four years ago, the developer of a proposed Wal-Mart supercenter in Florissant, Mo. (pop. 52,000) appeared before city leaders. For decades Wal-Mart had wanted to open a supercenter in my hometown and on this particular Monday evening a representative from THF Realty – Wal-Mart’s longtime developer of choice – was alternately putting on the poor mouth and subtly threatening city officials. In order to fund the development, a project developer told the city council, THF Realty would require $9 million in tax breaks.
No tax breaks, no Wal-Mart.
In brief, THF wanted a TIF – tax incremental financing, which meant the portion of the development’s property tax revenue that ordinarily would go to local schools, police, libraries and fire departments, instead would remain in the pockets of the developer.
Such threats, coming from multibillionaire developers, are commonplace. They are also effective. Though not as effective as they once were.
THF Realty (the acronym stands for To Have Fun) owns or leases more than 100 shopping centers in 22 states, many anchored by Wal-Mart stores or Sam’s Club. That’s due in part to THF’s chairman – sports and real estate tycoon Stan Kroenke – being married to Wal-Mart heiress Ann Walton. The last time Kroenke was obligated to disclose his ties with Wal-Mart – when he served on Wal-Mart’s board of directors 13 years ago – his company was renting 55 stores to the giant retailer.
Today, Kroenke — the 105th richest American — has an estimated net worth of $5.7 billion. His wife, Ann, is worth an estimated $4.8 billion. Kroenke owns the Denver Nuggets, the Colorado Avalanche, the St. Louis Rams, the Colorado Rapids and, in a sure sign that he is running out of ways to unload his billions, the English soccer club Arsenal.
Wal-Mart doesn’t always use outside developers (or inside developers like Kroenke) to build its discount stores and supercenters. “Sometimes Wal-Mart is itself the developer,” says Al Norman, an anti-sprawl consultant. When Wal-Mart purchases and develops a site it utilizes the Walmart Real Estate Business Trust, one of its many subsidiaries.
“[But] if Wal-Mart hasn’t bought the land, it’s better for them to put the burden on a developer to get all the permits, ask for the subsidies, and make any land agreement contingent on the developer having all the permits in place,” says Norman. Using outside developers, however, allows Wal-Mart to benefit from government subsidies without being the one making the pitch for the handout.
If Wal-Mart hoped to draw attention away from itself by using this tactic in Florissant it failed. For the most part the public regarded the proposed development as a Wal-Mart project and refused to distinguish between Wal-Mart and its developer. And local media played up the connection: “Florissant Council Turns Down Wal-Mart Developer,” cried one headline.
In many ways Florissant, Mo., a working class city in North St. Louis County, is no different than most American cities. When it comes to big box shopping centers its philosophy seems to be that a town can never have too many. Florissant’s sprawling main drag, Lindbergh Boulevard, is an unbroken chain of such shopping centers, with only a few acres of unadorned, treeless asphalt parking lot separating them. Each center has a large grocery store chain or a big box retailer (Target, Kmart, Michaels, Sears, Lowes, Home Depot, Office Depot) as its anchor.
Nor can it be said that Florissant residents are suffering a dearth of Wal-Marts. There’s a supercenter four-and-a-half miles away in Ferguson (you may recall that it was vandalized during the recent Ferguson riots). Another Wal-Mart waits 13 miles away in Bridgeton. Yet another sits 14 miles down the road in Granite City, Ill. And another 14 miles away in the opposite direction in St. Charles.
Fortunately for Wal-Mart and its developers, they do not have to show a need or demonstrate likely economic benefits to the community to receive subsidies and tax breaks. They need only ask and they shall receive.
Wal-Mart was no disinterested party in THF’s quest for tax breaks. A TIF could mean big savings for the retailer.
“Wal-Mart is in a position to negotiate lower lease rates when the developer is being subsidized,” says Philip Mattera, director of a watchdog group called the Corporate Research Project.
Wal-Mart was counting on that subsidy.
As a reporter I’ve covered local government since the mid-1980s. Time after time I’ve watched as Wal-Mart and its developers rode into rural and suburban cities and towns with their hands out and came away with their pockets stuffed with tax breaks and subsidies, often with little or no opposition. Back in the 1980s, the major concern of local governments, small business owners and (to a lesser extent) local residents was whether Wal-Mart would drive local mom and pop shops out of business. (The answer turned out to be an unqualified Yes.) But even then, standing in the way of “progress” and free-market competition (competition in which one side was given taxpayer-funded subsidies and everyone else was not) was considered futile, if not downright un-American. Stand in the way of progress you get runned over. Today, those concerns are moot. Wal-Mart can boast “mission accomplished.”
Then as now the tax break of choice for Wal-Mart and its developers was tax increment financing. TIFs were originally established to encourage developers to invest in hopelessly blighted commercial areas. Blighted soon came to mean non-blighted. Call it subsidy creep.
Historically a few school officials and PTA moms groused when these TIFs were granted. Yet in all those countless city council meetings I attended, I never once heard a city official ask why one of the wealthiest corporations in the world couldn’t build its discount stores and parking lots without withholding tax dollars from local schools, fire departments, libraries and other public services.
The simple answer was that nobody asked them to. When it came to subsidies and tax breaks Wal-Mart’s motto seemed to be: It doesn’t hurt to ask. All they can do is say no. And then we threaten to move to the next town.
Those threats were real. If a town even considered turning down a TIF request, a neighboring jurisdiction would immediately begin courting the Waltons. The practice became so widespread the Missouri legislature was forced to pass a reform law in 2007 to address this type of “retail pilfering.” In Missouri, TIFs are now granted only on a county-wide basis.
Now, three decades later, Wal-Mart and its developers find themselves having to work harder to obtain the same subsidies and tax breaks they once received by default. Cities and towns – even municipalities like Florissant, the majority of whose residents really want a Wal-Mart Supercenter – are beginning to stand up to the retail giant and its sidekick THF Realty. Indeed, across the Midwest – Wal-Mart’s home turf – more and more cities are saying they’ve had enough of Wal-Mart’s bullying.
My town did.
When Wal-Mart developers returned to Florissant in 2010 demanding tax breaks and threatening to walk away if they were denied, city officials happily showed developers the door.
That response was almost unprecedented outside of a few quaint New England hamlets. In fact, the neighboring city of Bridgeton, had just rubber stamped THF’s request for $8 million in TIF subsidies to build a Wal-Mart supercenter, no questions asked.
In voting 9-0 to deny the subsidy request, Florissant officials pointed out that a TIF district would divert $300,000 annually in property taxes from local schools, libraries, police, and fire departments to Kroenke’s THF Realty. Florissant’s mayor told reporters that Wal-Mart and its developer were “strong enough to pay with [their] own nickel.”
Even Missouri’s right-wing think tank, The Show-Me Institute, criticized Wal-Mart and Kroenke’s browbeating tactics. “You don’t need TIFs to attract retail development. With the right project and the right location, retail development will still come,” one policy analyst said.
So what changed?
First and foremost Americans have just been through the nation’s worst economic slump since The Great Depression. While average working Americans lost their homes and livelihoods, Wal-Mart got richer. Wal-Mart was one of the few stores to thrive during the U.S. recession, noted Forbes in March 2009.
What’s more, Americans wised up. In our total information society it is hard to remain deaf to the continual buzz of stories that spotlight the incredible wealth of the retailer (Wal-Mart Inc. is now wealthier than 157 nations.) When another St. Louis County municipality (Shrewsbury) rejected Wal-Mart’s request for a TIF in 2013, an alderwoman was quoted as saying, “The six Wal-Mart heirs alone have more wealth than the bottom 40 percent of the people in the United States!” This statement was met with loud applause.
At the same time as its phenomenal growth was taking place, Wal-Mart received hundreds of millions of dollars in corporate welfare (tax breaks, grants, low-cost financing, tax abatements and free land) from state and local governments. A new report by Americans for Tax Fairness concluded that Wal-Mart receives $6.2 billion a year in taxpayer subsidies. In a 2007 report, the nonprofit Good Jobs First noted that Wal-Mart’s developer THF Realty received at least $54 million in tax breaks from local governments for Wal-Mart stores between 1994 and 2006.
While Wal-Mart benefits enormously from corporate welfare, it has become adept at dodging local, state and federal taxes. The same report by ATF noted that Wal-Mart uses tax loopholes to avoid paying $1 billion of federal taxes a year. An example of this flimflammery showed up recently in a The Wall Street Journal story which showed how Wal-Mart evades some state taxes by paying rent to itself. Yes, these tax dodges are legal, though they are only available to the world’s richest corporations who can afford to hire the world’s slickest tax attorneys.
Equally damaging are the frequent stories that show Wal-Mart stiffing American taxpayers and its non-union employees. Low wages at a typical Wal-Mart Store cost taxpayers about $1 million in government assistance annually, according to a study by Democrats in the U.S. Committee on Education and the Workforce. Meanwhile the media is rife with stories of Wal-Mart employees who can’t afford to shop at Wal-Mart, who are forced to rely on food stamps, and who cannot afford to buy even the crappiest of cars to get to work. In October, Wal-Mart announced it would end health care benefits to a portion of its part-time employees.
And who can forget the story about Wal-Mart employees holding Thanksgiving food drives for their co-workers?
After receiving an unexpected setback in Florissant, THF Realty redoubled its efforts in the fall of 2012. Plan B was to seek designation as a community improvement district. Missouri’s CID law, passed by the state legislature in 1998, was created to combat “community disinvestment and neighborhood decline” in inner-ring suburbs. (Florissant is an outer-ring suburb, but no matter.) In effect, community improvement districts bring improvements to small pockets of retail, while the rest of the town crumbles. And it is more likely to crumble since residents who are already paying higher sales taxes in these retail pockets will have less taste for a city-wide sales tax which would raise the standard of living for all residents.
The special taxing district would have permitted Wal-Mart to assess a one percent sales tax on store transactions. Just another way for Wal-Mart and THF to pass along the costs of construction to the middle and low-income folks who shop at their stores. Needless to say that revenue would not go to increase the wages of Wal-Mart workers.
Again, Florissant city leaders stuck to their guns, unanimously voting down the proposed CID.
Kroenke, however, still had his ace in the hole. He turned to the courts; not to sue the city of Florissant, but to file a petition in circuit court for the formation of a transportation development district.
The Missouri Transportation Development Act was passed by the Missouri Legislature in 1990 to address genuine transportation needs. Say, your town has grown by leaps and bounds and you desperately need a new overpass over the Interstate highway so emergency vehicles can get to the other side of town more quickly and thus save lives.
More often, however, a TDD is just another needless handout to billionaire developers.
With one rather remarkable difference. Unlike a TIF or CID, the public (or its elected representatives) have no say in the matter. Since St. Louis judges are appointed, the project is approved (TDDs are always approved) by an unelected judge. Taxpayers have no say whether sales taxes are imposed or what happens to their tax dollars or even whether the transportation projects are needed.
If approved, the THF’s transportation development district would have allowed a board handpicked by Kroenke to impose a sales tax on shoppers to help pay for roadwork that benefits his private property. What’s more, any money that Kroenke “loaned” to the project would be repaid with interest. If this TDD turned out like Kroenke’s other ventures, it would be overseen by a board made up of his rubber-stamping cronies. A board that meets and operates without any real oversight. “Read state auditors’ reports on special taxing districts, and you’ll see all kinds of reports of shoddy recordkeeping, self-dealing and much transparency in name only,” reports the Kansas City Business Journal.
Once again, working families would pay for Wal-Mart and the billionaire Kroenke’s street improvements through higher sales taxes.
At the hearing for what was now called the Shoppes at Cross Keyes Transportation Development District, Florissant’s city attorney informed the judge of Florissant officials’ unanimous objection to the transportation district. Nevertheless Circuit Judge Brenda Stith Loftin could find no legal reason not to approve the TDD. Moral reasons, yes. But legal, no.
The TDD was approved.
Beaten, the Florissant City Council approved zoning for the Wal-Mart. As one disgruntled city councilman told a St. Louis newspaper, “We sort of feel like they pulled an end-around.”
To many observers, Wal-Mart and their developer looked pathetic in their desperate craving for a corporate welfare fix. Wal-Mart and Kroenke didn’t seem to care what kind of Three-Letter Subsidy they wrangled (TIF, CID, TDD) as long as they got something from the taxpayers. Anything. Free landscaping. Free signage. Whatever.
Still it’s hard to blame Wal-Mart too much. Writing in Forbes, David Brunori notes that it’s wrong to fault corporations for behaving like giant, amoral machines acting in their own self-interest. “They act rationally,” he writes. “If someone gives you $1 billion, you take it. The blame lies with us.” In the end it is the fault of all of us for giving Wal-Mart’s lawyers the tools with which to defeat us.
There’s an old saying: You can’t beat City Hall. This is still true for 99 percent of Americans.
Just not for the One Percent.
Christopher Orlet is a journalist living in Florissant, Missouri.