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2004-07-15
Baytown, TX. Wal-Mart Gets Huge Tax Deal to Rent Distribution Center

Several weeks ago, Good Jobs First released a report on the myriad of ways that Wal-Mart has filled its beggar's cup with corporate welfare, underwritten by local and state taxpayers, to help build distribution centers. Tax breaks of every size and shape -- Wal-Mart feeds its empire from warehouses built with public money. This week, the Associated Press reports that Wal-Mart has taken advantage of something benignly called the "Permanent School Fund" to write down the cost of building a distribution center in Baytown, Texas. In this deal, the Permanent School Fund purchases the land for $80 million, and a distribution facility from the Wal-Mart Real Estate Business Trust for $2 million, and then Wal-Mart leases the facility for 30 to 40 years, and their rent payments replenish the fund. Neither the land nor building, which are owned by the Fund, can be taxed by any authority in Texas, such as city, county or school districts, because the Fund is a non-profit entity. Wal-Mart doesn't have any performance goals it has to meet for investments or creating new jobs. The retailer just gets a very desirable rent. According to the AP, the Permanent School Fund was established in 1854 with a $2 million grant from the Texas Legislature. It has grown to $18.8 billion and in recent years has contributed $700 million to $800 million a year to public education. The fund invested almost exclusively in stocks and bonds until a legislative change in 2001 allowed it to explore other ways to make money, including real estate, oil and gas. Wal-Mart will pay rent of roughly $4.8 million a year for the first five years. Every five years, the payments will increase at a fixed rate of 10.4 percent. One Republican state senator was quoted as saying, "I'm concerned about all the wheeling and dealing that's going on over here, so I do want to look at it. The obvious question is, do we want to be taking local property-tax revenue from local taxing entities so we can enhance the Permanent School Fund?" The School Land Board, which oversees the Permanent School Fund, said the state will get about $180 million in rent over the life of the lease. After that, Wal-Mart must buy back the building for what the state paid, or market value, whichever is higher. But critics wonder why Texas government is making any deal with a company that has more dead stores in Texas than in any other state in the country?

What you can do: Land Board officials claim they are at no risk with the Wal-Mart tax deal by buying the facility, and making Wal-Mart a tenant for four decades. But as some developers have learned, Wal-Mart may not be in this distribution facility for forty years, and what happens when they try to get out? More troubling, why are taxpayers giving a break for company infrastructure when other smaller firms get no such operating discounts from taxpayers? As smaller firms continue to go under, their tax payments in essence are helping Wal-Mart to put them out of business. For more background on the use of tax funds to subsidize the construction and operation of distribution centers, email info@sprawl-busters.com, or order the book "The Case Against Wal-Mart" by calling 1-877 DUNK WAL. See also goodjobsfirst.org.










 
 
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