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2002-02-18
Lewiston, ME. A "Texbook Case" of Welfare for Wal-Mart

If you ever wonder how companies like Wal-Mart gain a "competitive" advantage in the retail world, you have to look beyond their "everyday low prices" on store shelves. Look to places like Lewiston, Maine, which just gave the world's largest corporation a sweet advantage over its rivals -- and negotiated in secret for more than six months to do it. Just before Christmas, 2001, stories began appearing in the Sun Journal newspaper alleging that the city and state were about to ink a deal for a Wal-Mart distribution center, rumored to be as large as 900,000 s.f.and employing 600 people. That turned out to be an exaggeration, but a secret deal was in the offing. Throughout the fall, Wal-Mart officials wouldn't confirm they were seeking a financial deal in Lewiston, and city officials went along with this silence of the lambs. Just before Xmas, Lewiston Mayor Kaileigh Tara told the newspaper: "About one month or so ago, I had to sign my life away to protect the confidentiality of the company." In so doing, city officials also signed away millions of dollars in public tax revenues for a company that had gross sales of $219 billion last year, surpassing Exxon Mobil to sit on top of the corporate world. But Mayor Tara signed her life away to give Wal-Mart a very expensive and unfair incentive over its competitors. She was not alone. Complicit in the deal -- for which the pubilc had only two days advance notice -- was Maine Governor Angus King, who ironically said the financial breaks given to Wal-Mart "levels the playing field". The Governor said dispensing such corporate welfare in the form of tax rebates, free land and road improvements, were necessary to give Maine, a "high tax state", a shot at projects like a Wal-Mart food distribution center. It turns out that Wal-Mart has built much of its distribution network on "incentives" that have cost local and state taxpayers millions of dollars in lost revenues. The Sun Journal researched 6 other Wal-Mart distribution centers, and found that Wal-Mart received nearly $75 million in incentives over the life of agreements with communities. In Johnstown, New York (see 9/3/98 newsflash), state and local taxpayers tossed in nearly $25 million to make a deal for a Wal-Mart distribution center. Taxpayers gave the company nearly $9 million in Bradford, Pennsylvania, $6 million in Bedford, Pennsylvania, $10.4 million in Grove City, Ohio, nearly $11 million in Isle Creek, Ohio, and $13.7 million in Washington Courthouse, Ohio. According to the newspaper, the $16.7 million incentive package in Lewiston was one of the largest giveaway yet -- totalling $47,852 in incentives per job. These incentives include sewer improvements, training grants, tax credits, and highway funds. When the agreement was finally announced in Lewiston, Wal-Mart's real estate agent described the clandestine negotiating as "a wonderul process, a textbook example of the process" for locating a Wal-Mart facility. Only no one in the public got to read the book until it was published. Here's what it cost the city to level the playing field: 61 acres of land -- assessed at $300,600 -- for free; relocation and expansion of sewer lines, $1 million; a new sand a gravel pit for $940,000; a new shed for sand and gravel, $800,000; a commercial subdivision plan, $45,000; water and sewer fee reimbursements, $18,300; property tax reimbursements, $5.8 million. The total comes to nearly $9 million from the city. The tax incremental financing deal came to 25 pages, plus a 65 page memo of agreement. Add to that another $8.4 million in state candy: a "Business Equipment Tax Reimbursement" program that will reimburse Wal-Mart over 12 years as much as $7.8 million on all personal property taxes; $1.5 million for road relocations; $180,000 in training money, and as much as $348,750 in rebated state income tax that comes from its workers' payroll witholdings. In return for all this, Wal-Mart had to promise to employ 350 people, employ them for 30 hours per week, and pay them $12 an hour. A Wal-Mart employee on such a shift would make less than $19,000 a year. In doing its Wal-Math calculations, no one in Lewiston counted the number of jobs that would be lost in the distribution and retailing network of other grocery stores in the area which will lose business or close as the Wal-Mart network strengthens. By giving Wal-Mart free land and a sweet tax deal, its competitors pay the price in lost jobs and lost tax revenues. It's a texbook case in welfare for the rich. This special deal will actually hurt competition in the state, and narrow consumer choice as other markets fail. Meanwhile, in Raymond, New Hampshire, residents got a Wal-Mart distribution center in 1996 more than twice the size of Lewiston's -- and they didn't have to shell out sweets to get it. "We didn't offer them anything," asmitted Raymond's town manager. "They offered us incentives. They bought the town a ladder truck for the fire department." By comparison, Lewiston has "signed its life away" for Wal-Mart. One of Wal-Mart's real estate Vice Presidents told local officials: "You will never have to duck around the corner" to avoid critics of this deal.

What you can do: The only vocal critic of the plan was Rex Rhoades, Executive Editor of the Sun Journal. "It strikes me as grossly unfair that one of the poorest states in the union with the highest citizen tax burden must pay top dollar to attract low to middle income retail industry jobs...And it's not as if this is an export industry or these are research and development jobs. When Wal-Mart sells groceries, somebody else doesn't. We only eat so much, making it a finite market. Competition is good, but it simply means that a grocery store job at Wal-Mart is subtracted from a grocery store job elsewhere." One city councilor who eventually voted for the plan, nevertheless expressed his distaste for how Wal-Mart kept the "wonderful process" a wonderful secret."I think it's despicable that this company chose to avoid public disclosure. People can say that's not the way it works. Well, not in my world." It turns out the "free market" came at a dear price to the residents of Lewiston.










 
 
"Norman has become the guru of the anti-Wal-Mart movement" ~ 60 Minutes

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