The Mayor of Montgomery, Alabama says that a new Wal-Mart supercenter just outside his city’s limits is getting an unfair tax break. Mayor Bobby Bright told the Montgomery Advertiser that because the 203,856 s.f. Wal-Mart is outside the city limits, it will be allowed to charge only 6.5 cents sales tax — while businesses a stone’s throw from the superstore will have to charge 8.75 cents in the city of Pike Road, and 10 cents in the city of Montgomery itself. Merchants within the city limits, less than a mile from the new Wal-Mart, say Wal-Mart is being given an unfair advantage. Mayor Bright adds that the superstore and other stores that are opening in nearby Chantilly, including Home Depot, will be able to use city water and sewer lines, without paying their fair share. The Mayor has vowed that he will never allow this situation to happen again. He said Wal-Mart now has to pay the same sewer and water fees as others in the city, but not the taxes that go to build and maintain the utility systems. “About 90 percent of the people shopping at those businesses will be from Montgomery, yet the city won’t be getting sales tax,” the Mayor said. “It’s not right. It’s not fair, and that’s why it’s important for me to let the people of the city of Montgomery know about it. The people of the city should rise up (and stop shopping there) because we don’t need a big retailer locating themselves right on the outskirts of our city limits and draining our resources — not if we are going to continue to pay our police and firemen and maintain our city services,” he said. A spokesman from Wal-Mart said that some cities have talked about annexing them into their city. “Wal-Mart is happy to operate in whatever municipality we find ourselves in,” he said. “Municipalities have contacted us, but we have not entered into any negotiations or stated a preference, and will not.” One local grocery store said it was not happy about the tax arrangement, but added, “We’ll do the best we can.” His store has a written “Wal-Mart Defense Manual” that stresses his store’s advantages: a high quality meat market, deli, bakery, and better customer service. But Mayor Bright is outspoken in his opposition to the Wal-Mart store. “We don’t need businesses ripping the city of Montgomery off, and that is exactly what they are trying to do by locating themselves right over the city limits and using our services without paying any sales taxes like other businesses here do,” the Mayor said. “They are already there using city services, and we are going to have to deal with it. But they are going to have to be paying a surcharge, or at least be paying more than the people of Montgomery are paying. These people are reaping the benefits of our services without paying for them, and all the people who go and shop there from Montgomery are supporting them in what they are doing.”
Mayor Bright knows that one option for him is to try incorporating the area where Wal-Mart is located into the city of Montgomery. The Mayor of Pike Road has also indicated interest in annexing in the Wal-Mart. But both Mayors are missing the point. If the state of Alabama lets local communities or counties to set their own sales tax, then it is to the county these Mayors must go, not to Wal-Mart. The giant retailer will take advantage of any corporate welfare the local communities give it. The Mayor can attach a surcharge onto the water and sewer bills at Wal-Mart, but shoppers will only see the sales tax on items, not the sewer fees, so they will still perceive that Wal-Mart is the cheaper place to shop. Mayor Bright should sit down with the county and work towards a regional solution that evens out the tax rate from jurisdiction to jurisdiction. Either that, or Mayor Bright is going to have to lower Montgomery’s own sales tax rate, which no doubt would have crippling effects on the city’s budget. A third option is to simply stipulate that if a business outside the city of Montgomery wants connection to city infrastructure, such as water or sewer, they have to follow city rules regarding sales taxes. This case illustrates why cities and towns should not have to rely on a sales tax for local revenue. It forces them to make bad land use decisions — what has been called “cash box zoning,” where one town tries to steal another’s malls just for the purpose of gaining sales tax revenue. In the interim, Wal-Mart is the only one laughing all the way to the bank.
