According to Fortune Maagazine’s “Global 500″ list, Wal-Mart, Inc. is the second largest global corporation in the world, with total revenues in 1999 of $167 billion, or just about $10 billion shy of #1 General Motors. One would think with that kind of a bankroll, that Wal-Mart wouldn’t need to approach local cities and towns for a handout. But that’s just what’s happening in Galena, Illinois. Wal-Mart has made known its interest in a piece of property on the west side of Galena, but has asked city officials to rebate as much as half of their sales taxes.”Wal-Mart requests the city’s assistance with this project in the form of sales tax rebates,” the company’s lawyer wrote to the city. “Wal-Mart proposes a total rebate of $2 million payable as follows: one half of the sales tax received by the city would be rebated to Wal-Mart, together with interest on the balance from time to time outstanding at the rate of 8% until the $2 million figure is reached.” This tax kick back scheme has outraged some members of the public, but there are also Aldermen who believe a Wal-Mart supercenter with half a sales tax payment is better than none at all. They argue that having their very own Wal-Mart will end sales leakage to nearby Dubuque, IA, location of the nearest Wal-Mart. Others in the city realize that if Wal-Mart succeeds in eliminating the city’s other grocery, Dick’s Supermarket, the Arkansas giant will have a virtual monopoly in town. The city has apparently not learned its own history. When Dick’s moved in, with a low interest loan from the city, two downtown grocery stores eventually shut down. Now the big fish wants to swallow the medium fish. Many economic impact studies show that most Wal-Mart sales are simply transferred from other cash registers in town. Alderman Dan O’Keefe supports competition, but told the Telegraph Herald: “its a question of just how much the city is willing to subsidize that competition.” Another Alderman, Eldon Glick, was more direct: “If they want to come, let them come on their own. They’re not getting a penny from me.” Mayor Dick Auman also told the Telegraph that he was curious as to why Wal-Mart needed tax write downs. It turns out the taxpayers have already subsidized the developer to the tune of nearly $500,000 for infrastructure at the site. The Mayor has called for an independent economic impact statement on how much the project will drain from existing merchants. Roy Clingman, whose downtown pharmacy never asked for a tax rebate, said “Wal-Mart is one of the biggest retailers in the world, and I don’t know if they should get concessions either.” Complicating the kick back scheme is the public charge that elected officials had been secretly meeting with Wal-Mart representatives since last winter (see similar story from Des Plaines below). The Galena Gazette aired that charge in a recent story, provoking at least one Council member to say nothing wrong had occurred, because only two members of the Council were ever present at the same time at such meetings. “I hope Wal-Mart will come and bring their own newspaper,” said Councilor Terry Murphy. (Since Wal-Mart rarely advertises in newspapers, the business is not likely to top their list.) The Mayor made a distinction that might have been lost on the average voter: “The meetings with Wal-Mart were private,” he told the Gazette, “not secret. Private meetings between elected officials and citizens take place all the time.” According to the Gazette story, it was Wal-Mart who “demanded” total confidentiality concerning the meeting.” The bottom line is the discussions with Wal-Mart were held behind closed doors, with the public unable to participate, or learn from, the encounters.
What a mockery these kick back deals make of the concept of the “free market”. Wal-Mart’s request for $2 million is neither free to the taxpayers, nor fair to existing merchants who never got a handout. By locating on the edge of town or along highways, big box retailers take advantage of a number of unfair forms of public welfare: 1) water and sewer lines extended to their site, at taxpayer expense. 2) cheaper land on the margin of town 3) abundant parking not available often in downtown markets 4) incremental tax financing or outright sales revenue givebacks 5) often extensive off-site road construction and maintenance, signalization, addition of turning lanes, etc. In most cases, wealthy corporations gain an even greater advantage over their smaller competitors by cashing in on these forms of corporate welfare, giving new meaning to the words “free” enterprise.For further background on the Galena Wal-Mart controversy, go to www.delphi.com/galenanews. Direct your comments to Harold Rubin, and post a contact name, email and phone number.
