Christmas is the season of giving, and even big corporations need “gifts” to stay in business. Home Depot is the 3rd largest retailer in the world, and the 34th. largest corporation on the planet, with revenues in 2004 of $73 billion. It is twice as big as its nearest competitor, Lowe’s. This is hardly the profile of a company that needs public welfare to survive, yet that’s exactly what officials in the city of Salem, Ohio have agreed to give them. The city has hammered together a tax increment financing (TIF) deal with Home Depot. The public subsidy for Home Depot will redirect 75% of the property tax revenue generated by improvements to the Home Depot property to infrastructure and other city projects directly benefiting the property over a 10-year period. Local school district officials were upset, because they were not involved in the negotiations with Home Depot, and the money being diverted to pay for roads, water and sewer to benefit the retailer’s project, is funding that would have gone to local schools. City officials then offered to make direct payments to the school district during the TIF period, but the school board said such payments would only draw revenues away from neighboring taxing entities, including the county’s vocational school. The schools in the South Range district will be losing money so that Home Depot can have its project. Instead of asking the wealthy corporation to pay for these infrastructure improvements, the city is redirecting the property taxes in essence back to Home Depot so that the store can have adequate roads, water and sewer. If the store had been built where there was already water and sewer and adequate roads, this subsidy would have been unnecessary, and the schools in the Salem area would have received their full share of the tax proceeds. The TIF deal makes the Home Depot project less desirable from a revenue point of view.
Ironically, when cities and towns give away these public subsidies for private retailers, they are subsidizing the large chains as they destroy smaller taxpaying businesses in the area. Small local hardware stores in the Salem, Ohio area do not get subsidies like this. The infrastructure costs in this case are only needed to serve Home Depot, and by covering these costs, it allows Home Depot to avoid paying the costs directly, and puts them in a stronger position financially to set up shop and “category kill” other businesses in town. To see other stories about public subsidies for private retailers, search Newsflash by “corporate welfare”.