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2005-02-04
Sterling, CO. County Refuses to Give Home Depot A Sales Tax Break

The city of Sterling, Colorado and the surrounding county of Logan did not see eye-to-eye in a tax break deal for the world's richest home improvement chain store. The city of Sterling reached an agreement with Home Depot to rebate one-third of the additional "incremental" sales taxes collected after Home Depot becomes operational and starts generating sales tax returns. The agreement was signed by the Mayor on October 24, 2004. The Board of County Commissioners was not contacted in advance by either the city or Home Depot with an invitation to participate in negotiation of a joint agreement for payment of the rebate. The county board first learned of details of the city's proposal for the county to participate in funding the rebate when the city manager appeared at the board's work session on November 15, 2004. This was three weeks after the deal had already been finalized between the city and Home Depot. The county then refused to go along with the deal, writing in the Journal-Advocate newspaper that "Home Depot has never contacted the county to request assistance. To our knowledge, Home Depot isn't even aware of the city leadership's plan to have the county provide part of the rebate funding, as this plan seems to have been a closely guarded secret, at least until the county decline to participate." In fact, the city's lawyer wrote to the county, "Home Depot will not be involved nor be informed of the agreement between us... The incentive plan with Home Depot has already been executed. ... In this instance, the (city) council does not want to make Home Depot aware of any agreement between the city and the county." The county objected, and said the Home Depot deal was not an example of an economic incentive. " In this case," the county wrote, "the city proposed that the county share in a sales tax rebate, after the fact, which makes it anything but an economic incentive for Home Depot to locate here. Home Depot had already finished ground breaking and had begun construction of its store, so Home Depot was not waiting in the wings as an intended beneficiary of some agreement to be reached between the city and county, only to be nixed by the county in the end. The city negotiated its deal on its own and according to its own terms, unbeknownst to us, and then sought the county's contribution for part of the funding costs, unbeknownst to Home Depot. The county should feel isolated, not the city council." The city told the county after the fact that the deal would mean that, "If the city rebates $75,000 in sales tax to Home Depot, the county will rebate to the city $25,000 out of the sales tax collected for the county from Home Depot." The city collects the county sales tax for the county and charges a small percentage for doing so. In the end, the county nixed the sweetheart sales deal. That leaves taxpayers in Sterling footing the entire cost of the rebate.

What you can do: Home Depot has enough financial support to build stores on its own, without asking for, or receiving, taxpayer-supported subsidies, which are a form of corporate welfare. Such tax deals not only waste tax dollars, but discriminate against smaller firms that do not have have access to such subsidies, and have to compete against Home Depot without taxpayer support. The Sterling deal was ill-conceived, and the Commissioners were right to reject it. Such subsidies force taxpayers to write down Home Depot's costs for no good economic reason. For earlier stories about big box stores and taxpayer's welfare, search this database by "corporate welfare."










 
 
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