At any point in time, Wal-Mart Realty has between 300 and 350 ‘dark stores’ on its hands that Wal-Mart has abandoned. This has been the case since the late 1990s, when Wal-Mart began systematically shutting down discount stores that could not be expanded into supercenters. Since then, hundreds of discount stores — about a third of them over 100,000 s.f. — have been prematurely emptied to make way for larger stores across the street, or just down the road. Wal-Mart likes to boast that its real estate team is aggressively marketing its dead stores, but some communities have learned the hard way that public money ends up being involved to prevent blight when Wal-Mart abandons a store. Today, in Carson City, Nevada, the city’s board of supervisors gave initial approval to using $2 million in taxpayer’s money to support a private owner who bought an “old” 120,000 s.f. Wal-Mart building. The new owner has not found tenants to fill the store, but told city officials that the Burlington Coat Factory is interested in using just over half of the space — 70,000 s.f. The $2 million in public funds would be used to offset the costs of improving the building. The owner, Robert Rothe, apparently has no problem with taxpayers subsidizing this private deal. After all, that’s what the ‘free’ market is all about. All Rothe has to date is a letter of intent from the retailer to rent part of the space. The letter of intent is an agreement to begin contract or lease negotiations, but the deal is far from final. “The owner is going to require some help from us in order to secure the lease,” said Carson City Economic Developer Joe McCarthy. “He must begin to refurbish the interior and exterior of the building in a couple of weeks to have it ready by March, when Burlington Coat Factory is going to open.” Taxpayers will subsidize the heating, air conditioning and ventilation system. “You have to be able to entice nice retailers to town,” McCarthy told the Nevada Appeal newspaper. “Without this incentive, they’d go to other areas.” City officials say the funds to bail out the new Wal-Mart building owner would come from money set aside for economic development. The Carson City Wal-Mart moved out of its building five years ago. It was purchased one year after it came on the market, for use as a casino. But that gamble never cashed out, and the site was sold to another buyer, who then sold it to Rothe. During all these transactions, the building sat empty for five years, except for a few short-term tenants. This wasteful use of land and buildings was just so Wal-Mart could make more money in a bigger store.
The city justifies its welfare payment to the landlord by saying the Coat Factory will add $15 million in taxable sales to the city’s annual total. They say the new store will generate more customer foot traffic, improve conditions for surrounding retailers, and possibly lure more businesses to the area. The promise of higher revenues will create “a significant return on that investment,” said City Manager Linda Ritter. “It’s a business opportunity we can afford to take advantage of,” she told The Appeal. “That’s why the city is investing in it – in order to stimulate more activity throughout that district, add to our sales tax revenues and provide residents with more retail choices.” As a result of Wal-Mart’s departure, Carson City ended up with a building generating no sales tax for five years. The city may not have cared, because they already have two Wal-Mart superstores, one on Market Street, and one on South Highway 395. How much the new owner paid for the old store was not made public, but one has to wonder how the owner got himself into a situation where he had to turn to the public for a $2 million subsidy, and what would happen if the tax money was denied? These developers, who complain during the permitting process that government should just get out of the way of the free market, are the same developers who hold their hand out for public welfare once the deal is approved. This reuse of a Wal-Mart building should stand on its own, without a tax subsidy. If Carson City had required Wal-Mart to post a “store continuity” bond, the retailer might have been asked to set aside money to pay for reuse of their building if they abandoned the site in less than 15 years, for example. In the end, the city let Wal-Mart relocate its store, and leave the old building behind for taxpayers to support. This is the real story of Wal-Mart’s “dark stores,” and one in which Wal-Mart gets off cheap, while the working people of Carson City pay millions to fill up the old building. To see other stories on this topic, search Newsflash by “dark stores.”