Wal-Mart often arrives in a community looking for a handout. The company would prefer to talk about the small financial handouts it gives to local charities — but this is pocket change compared to the subsidy handouts Wal-Mart often asks for — and gets.
The Village of Johnsburg, Illinois this week agreed to give Wal-Mart $4 million in tax revenue that instead of helping local taxpayers — will subsidize the world’s richest retailer.
Wal-Mart could have built this project with their own money, but why bother when local towns will subsidize the effort? One year ago, on April 1, 2009, Sprawl-Busters reported that Wal-Mart was playing the community of Johnsburg off of its neighbor, McHenry, Illinois. According to the Northwest Herald, Wal-Mart applied to build a 182,000 s.f. superstore that will be only one mile away from their existing discount store in McHenry. The financial implications for McHenry could be dramatic.
Wal-Mart said last spring that it planned on building a supercenter on Route 31 and Running Brook Farm Boulevard. The proposed site is almost within sight of the existing Wal-Mart discount store in McHenry. Wal-Mart said they would shut down the McHenry store to “consolidate operations” at the new 182,000 s.f. superstore in Johnsburg, which they originally hoped would be open for business by the summer of 2010.
“This is a relocation of the store in McHenry,” a Wal-Mart spokesman told the Northwest Herald. “The associates at the [McHenry] store will work at the new store.” By Wal-Mart’s calculations, the new store will add to the 200 existing jobs in McHenry by adding 180 new jobs at the Johnsburg superstore, for a total of 380 jobs. But this does not count the loss of jobs in neighboring grocery stores, which will bring the net total of job creation to little or nothing. The existing McHenry store is 116,000 s.f., so the expansion is roughly 66,000 s.f. to add the grocery component.
“We need a larger footprint for the Wal-Mart concept store of today,” the Wal-Mart spokesman explained. Johnsburg village trustees, who are in essence stealing their neighbor’s revenues, told the newspaper that they have been in discussions with Wal-Mart regarding the move for the past year and a half. Trustee John Huemann said last spring that the retailer had submitted “preliminary plans” to the village for review. It appears officials in Johnsburg had managed to keep their year and a half romance with Wal-Mart a secret from the retailer’s host town in McHenry.
McHenry’s Mayor Susan Low must have been embarrassed to learn about the Johnsburg switch while she was shopping at the McHenry Wal-Mart. Reached by cell phone by the newspaper, she admitted, “I haven’t talked to anyone,” she said. “It’s news to me.” Johnsburg Trustees tried to put the best face on their sudden announcement to their neighbors. “We have worked in unison with the city of McHenry, and have been pretty good partners with each other,” one Johnsburg Trustee told the Herald. “The corridor is a benefit to both communities.”
But the March, 2009 announcement was the beginning of the end of the unison in McHenry County, as McHenry started to calculate the lost revenues from its stolen store. The Johnsburg/McHenry retail merry-go-round, is another classic example of what happens in the absence of regional land use planning.
On February 7, 2010, Sprawl-Busters reported that Wal-Mart still was not finished with the permitting process. The Herald reported that Wal-Mart did not expect to have the permitting process done until this summer, and construction work on the new store would not begin until the Fall of 2010. Wal-Mart also doesn’t own the land yet. The retailer’s lawyer told the newspaper, “There are permitting issues like there are with every development. They expect to start construction in 2010.” But first the company must wait for the state of Illinois Department of Transportation to widen Route 31. Many local residents would be happy if that roadwork never happens.
This week, the Northwest Herald reports that Johnsburg officials have given Wal-Mart a green light on the new store. The Village Trustees said, “Obviously we’re pleased and very excited. We’re very happy. It’s been a long planning process.” But officials in McHenry are not excited, and residents in Johnsburg may feel like they’ve been fleeced.
The Village’s $4 million giveaway to Wal-Mart was supposedly necessary to steal this store from McHenry and move it one mile. According to Johnsburg Trustees, Wal-Mart asked for the subsidy to help pay for the road and infrastructure, like a traffic light.
The way this subsidy works, the Village will collect a base sales tax level every year, but any money above the base sales tax, two-thirds will be given back to Wal-Mart to pay for the road widening and other site work until the kickback totals $4 million or 14 years pass — whichever comes first. In other words, it’s a project kickback to Wal-Mart.
Village officials should have realized that in 14 years, Wal-Mart will have little or no interest in this store — just as it abandoned its McHenry store. For this tiny Village, Wal-Mart sales tax payments will equal the total amount of tax revenue generated by all other businesses in the Village. Officials have not bothered to subtract the sales taxes that will be lost at other retailers in McHenry and Johnsburg.
School officials in Johnsburg are also excited, because the farmland that Wal-Mart will take is now produced very little revenue. But when the farmland is destroyed, and a big box built, the school will benefit from the increase in assessed value from the project. “It’s going to bring in property taxes, but it doesn’t bring in kids,” one school board member told the Herald. “That’s a bonus for us, a great thing for us.” Farmland apparently holds little interest for the Village of Johnsburg — they’d rather import their food products from China.
Wal-Mart continues to claim that this new superstore one mile from its ‘old’ discount store will create 180 new jobs. This is a gross figure — and does not count the grocery jobs that will be lost at other retailers. The voodoo economics of this project don’t’ seem to bother Johnsburg Trustee Bruce Bennett. “I’ve even had neighbors bugging me about it,” Bennett told The Herald. “‘Hey, when is that getting started?'”
Not only is there no need for another superstore in the area, but Wal-Mart could reconfigure its existing 116,000 s.f. store in McHenry to be a superstore. Wal-Mart has built supserstores as small as 99,000 s.f., so the move to Johnsburg is one of convenience for the company, but very disrupting to McHenry, and totally wasteful of land.
Wal-Mart operates five stores in McHenry County, along with one Sam’s Club outlet, and a sixth location has opened in Huntley, Illinois. On the village’s website, Johnsburg announced that the “permitting process was well under way.” “We are thrilled that this very complicated and involved process continues to move forward,” said then Village President David Dominguez. “The end result will be a wonderful new Wal-Mart that will not only enhance our community, but provide approximately 180 new jobs and expand our non-residential tax base.” “Our Wal-Mart team of real estate brokers, engineers, lawyers, environmental consultants and architects have been diligently working to make the opening a Johnsburg Supercenter a reality in 2010,” said Wal-Mart’s spokesman. Wal-Mart said their new store “will reflect the appealing new Wal-Mart construction prototype.”
Readers are urged to email Village Trustee John Huemann at http://www.johnsburg.org/?q=contact_the_village with the following message: “Dear Trustee Huemann, You surely realize that the Johnsburg Wal-Mart project you just approved is simply stealing sales from the McHenry store # 1377, which will shut down. That’s all this project amounts to: retail musical chairs. The proposed superstore is a totally unnecessary waste of land, since Wal-Mart’s store in McHenry is large enough to reformat into a superstore, without building a new one. McHenry will struggle to fill the old store, and it could sit on the market for years, especially in this environment. But on top of this waste of land and resources, the Village paid Wal-Mart to improve the infrastructure, as if Wal-Mart could not pay for its own work and had to have a $4 million handout. Your village only has around 6,647 people (2007 census), and you don’t need a 182,000 s.f. store. But you put Wal-Mart’s needs before those of your residents, and you denied taxpayers $4 million that is rightfully theirs. This project brings no added value to the local trade area, since most of its sales will come from the existing store in McHenry, and most new grocery sales will come from existing grocers in the immediate area — one or two of which can be expected to close. Regional land use planning is a great thing: Johnsburg might want to try it sometime. For now, you will have to find a way to rationalize the stealing of revenue from McHenry, until the day McHenry finds another anchor store to try to steal the sales taxes back. Many of your residents are just hoping that IDOT will take their time in getting around to widening Route 31. Not only have you approved a store that was not needed in the first place, but you have given public welfare to the richest retailer in the world. Your Village has lost control of its future and its land, and until you sit down with McHenry and work as a team, you will continue to waste land and resources to mindless sprawl.”