It sounds like something sinister from a George Lucas movie: “The Empire Zone.” It’s a special place in the universe where large corporations go to recieve massive state tax breaks used to destroy their competitors. It’s the home of welfare for corporations, in this case nestled in the Hudson Valley of New York state, where companies like Wal-Mart and Target, with the complicity of state and local officials, hide their presence under code names like “Project Mars” (Target) or “Project Competition” (Wal-Mart) to make sure the taxpayers who are going to subsidize these monstrosities don’t learn who they are nurturing. In early August, 2002, the Times Herald newspaper reported officially what many residents of Orange county knew for months: the Target Corp (operating under the developer Eighth Street Development). had settled on a site next to the Orange County Airport on 200 acres in the town of Montgomery to build a 1.6 million square feet distribution center , which local officials — sworn to secrecy — referred to only as “Project Mars” . At the same time, a second 1.2 million square foot distribution center, code named “Project Competition,” was to be located, ironically, in the Town of Wallkill. This Wal Mart center will be the brain center that helps its supercenters stores in New York state commit “Wal-kill” on smaller grocery and discount stores. Officials in Montgomery promised the Target distribution center would mean $1.8 million in property taxes for the community, while noting that the additional car and truck traffic could be a drawback. It’s also a sweet deal for Target, because New York state taxpayers would reimburse the company for the bulk of those taxes for several years, as well as providing what the Times-Herald called “a boatload of other tax breaks and incentives.” The Target building itself would cover nearly 38 acres of earth, or the dimension of nearly 40 football fields. The building would be a beehive for 899 tractor trailers. Wal-Mart announced its distribution center around the same time. Both corporations are depending on taxpayer’s welfare in The Empire Zone to put up their stores, in essence making some of their competitors pay for property, sales and payroll tax subsidies to put them out of business. Empire Zone status means a businesses can “operate on an almost ‘tax-free’ basis for up to 10 years.” In the Zone, businesses can reap: A refundable credit against state business tax equal to a percentage of property taxes paid, based on the number of jobs created in the zone; A wage-tax credit for up to five years of $1,500 to $3,000 per year for each full-time job created; A sales tax rebate on purchases of building materials used in construction within the zone; A 10-year exemption from state sales tax on purchases of goods and services used mainly in the zone. These tax breaks can add up to tens of millions of dollars for a million-foot warehouse. according to the Times-Herald newspaper. All these tax breaks are squeezed into a 2 square mile horror (1,280 acres) known as The Empire Zone. To make these two distribution centers happen, however, state officials must first swap 100 acres in other towns away from other towns, and into the Zone, so an elaborate game of trade-offs is currently going on to define whose land is in The (Evil) Empire Zone. One town which has Zone land, and doesn’t want to give it up, is New Windsor. Officials there have asked the state to build them a public golf course, in return for Wal-Mart and Target landing their hole in one. Similarly, the town of Newburg, wants a recreation center and athletic fields in order to relinquish its Zone acreage. The newspaper reports that county officials are “racing to complete” these zone changes, and Wal-Mart is rumbling that if it doesn’t get the taxpayer’s handout as part of The (Evil) Empire Zone, it might not build. “If it were to get to that point,” a Wal-Mart spokesman said, “it’s something we’d have to consider in terms of how it would impact the project.” The swap of acres could become a political obstacle, because the deal cannot be inked unless approved by local voters in towns both receiving Zone acres, and losing them. Wal-Mart needs to pick up 35 acres in Wallkill, and Target 55 acres in Montgomery, for a total switcheroo of 90 acres. One member of the Orange County legislature, Thomas Pahucki, referred to the Empire Zone as “a corporate welfare roll that the people of New York would have to support.” One State Assemblyman from Wallkill has been involved in secret trips to land sites, including one property in which his father, a developer, is a real estate agent for the land in Montgomery coveted by Target. The Assemblyman told the newspaper he didn’t feel it was inappropriate for him to promote properties brokered by his father, noting that other public officials were present at the meeting. This Assemblyman also admitted that he “signed a confidentiality contract when I began this project,” he said. “It is supposed to be kept under wraps.”
Private wheeling and dealing. Millions of dollars in tax breaks. Millions of dollars in brokers’ fees. It all makes sense in The Empire Zone. The only people left out of the Zone are the people who will pay for it — the taxpayers of New York. Some people are questioning whether such lucrative tax give-aways are really necessary for wealthy corporations — the same companies that have weakened many existing retail districts in New York state. What is the need, for example of providing financial incentives to Wal-Mart? Wal-Mart is the largest retailer in the world, with net sales in 2002 of $217.8 billion, and net income of $6.7 billion.The idea that it could not “afford” to complete the project on its own resources is a tale from the Twilight Zone. For other scary stories about distribution centers, and the public money being thrown at private corporations, search this database by the word “distribution”, and see the recent PolicyMatters of Ohio report of $10 M in tax giveaways there.This corporate welfare is truly what is meant by the “free market”.
