On August 19, 2001, newsflash first mentioned the “Battle of New Orleans” to stop a 200,000 s.f. Wal-Mart supercenter from locating on 17 acres in the city’s Lower Garden district. The project is now linked to a plan to develop the former St. Thomas public housing development. The Wal-Mart brings an unremarkable suburban box format plus 825 car parking lot to a most remarkable, historic urban neighborhood. On January 3rd, after 10 hours of hearings, the New Orleans City Council voted to approve two zoning petitions sought by the developer, but delayed taking up the actual ordinance changes until February. Councilman Oliver Thomas, who has received campaign contributions from the developer, told the Times Picayune that zoning votes were just a move to keep the plans on the table, but not bind the Council to a final commitment. The housing component of this project is being developed by Historic Restoration Inc., under the federal government’s HOPE VI program, with the goal of replacing the existing housing with smaller-scale, mixed-income neighborhoods. Complicating this plan is the fact that the developer is asking for corporate welfare to make the numbers work. The Council has been asked to approve a TIF (tax increment financing ) district that would divert sales-tax revenue generated by the Wal-Mart away from the city’s general fund and into a fund to pay off bonds to build nearly 60% of the housing units. Here is how residents fighting the Wal-Mast described the January 3rd vote: “In a small victory for opponents of a Wal-Mart, the City Council voted to accept the provisions of the New Orleans City Planning Commission’s approval of the Wal-Mart with a number of stipulations which Wal-Mart representatives described as ‘deal breakers.’ The City Planning Council’s provisions enforce the City’s existing, “big box” ordinances, which limit the size of parking areas, and address traffic and aesthetic concerns. This decision by the City Council, effectively negates the opinion of a hastily assembled “blue-ribbon committee” that had suggested that the City Council overrule the City Planning Commission. The Wal-Mart is not simply an issue of suburban sprawl versus preservation of historic neighborhoods. City and State officials are being asked to create a special financing district, where most of the sales tax generated by Wal-Mart would be funnelled to cover investments from the development company.” Wal-Mart would pay its state and local sales taxes — around 9% of each sale — but roughly 3.5% would be deposited into a fund to pay off the bonds. Critics note that Wal-Mart will be transferring sales from other Orleans Parish businesses, reducing sales tax revenue during the years the Wal-Mart revenue is tied up in tax increment financing, or TIF, bonds. This is the first time New Orleans has tried TIF financing using the sales tax. The developer claims that Wal-Mart will drain $25 million in sales from other local retailers, which would cost the city $875,000 a year in sales taxes. The proposed Wal-Mart is central to the financing of the developer, who has already demolished the public housing, displacing residents, and now requires funding from the sales tax diversion plan to cover a shortfall in the luxury condos that have to built on the land as part of a “mixed income community” in order to utilize the federal funds to rebuild the low income housing. The developer and Wal-Mart would also benefit from lower property taxes as part of the agreement. Wal-Mart will siphon off business from the surrounding area and actually reduce the revenue available to the city in the long run. The opponents of the Wal-Mart strongly urged the rebuilding of the public housing — but without the Wal-Mart.
The New Orleans Chamber of Commerce sold out its small business members when it came out in favor of this sweetheart deal for the developer. The Times Picayune newspaper has warned the City Council about this speculative TIF proposal, noting that “A Wal-Mart Supercenter is expected to take a substantial amount of its business away from neighboring retailers, so the city’s overall tax revenue could be reduced by the TIF. The council ought to seriously examine whether this sort of financing should be used.” The paper warned that the project should fit the community, not the reverse. “They need to remember that it’s the public’s interests they’re supposed to protect, not the developer. ” Studies elsewhere have indicated that Wal-Mart can capture 60% or more of its sales from existing merchants. A $100 million Wal-Mart sales level could mean $60 million in “stolen” sales from the city at the same time, or an offsetting loss of roughly $2.1 million annually in sales tax. New Orleans is used to fighting pirates, but even Laffite would have been humbled by the extent of revenue “captured” for existing merhcants. For more info on this Battle for New Orleans, contact Edward Melendez at (504) 949-2826.