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When Wal-Mart proposes to build another of its giant stores, local residents often raise concerns about increased car and truck traffic, a loss of open space, higher crime rates and other negative impacts that they argue will lower the quality of life in the neighborhood and thus depress property values. The company responds to these concerns by painting a different picture, claiming that its stores provide substantial benefits to communities. Yet what Wal-Mart does not disclose in site fights--but is revealed for the first time in a new report by Good Jobs First -- is the extent to which the company later in effect concedes the point about reduced property values. Once a store has been in operation for a while, Wal-Mart frequently challenges the assessed value that local officials assign to it for tax purposes. In an effort to cut the property tax it pays to local governments--revenue that pays for public education, police and fire protection and other vital services--Wal-Mart routinely tries to belittle the value of its own facilities.
Good Jobs First discovered this behavior in a labor-intensive, nine-month investigation of Wal-Mart's property tax behavior at more than 500 stores and distribution centers around the United States. We researched local property tax records, looking at assessment appeals on both real property (buildings and land) and business personal property (fixtures and equipment), and found what appears to be a company policy of systematically challenging assessments.
While we did not explore the merits of individual appeals, the high volume of these actions suggests that Wal-Mart, rather than occasionally disagreeing with particular valuations, is engaged in a large-scale effort to roll back its assessments, lower its tax payments and thereby increase its after-tax profits. Our finding that the challenges are handled at the corporate level rather than by individual store managers reinforces this conclusion.
Our key findings:- An examination of a 10 percent random sample of Wal-Mart's 2,833 Supercenters and discount stores in operation as of the beginning of 2005 finds that at least one assessment challenge has been filed at 35 percent, or more than one-third, of the stores. Applying that rate to all Wal-Mart stores, we estimate that the company has brought challenges at more than 1,000 of its retail outlets nationwide.
- An examination of all of Wal-Mart's giant distribution centers in operation as of the same date shows that 40 percent have had an assessment challenge--this despite the fact that many of the warehouses had previously been granted property tax abatements (exempting them from property taxes in whole or in part as an economic development subsidy) when they were first built.
- At many locations, Wal-Mart has filed challenges in multiple years -- either because it was not initially successful or because it wanted an even bigger tax reduction. We estimate that the company has filed a total of more than 2,100 appeals at its stores and distribution centers nationwide.
Our findings are consistent with Wal-Mart's reputation for relentless cost-cutting; they suggest that the company treats property taxes the same way it treats suppliers and workers. But in this case, entire communities are affected. For only two things can happen when large companies like Wal-Mart reduce their property tax payments: either local public services are cut back or small businesses and homeowners are asked to pay more in taxes. Usually, it is some of both.
Our numbers probably understate the true extent of Wal-Mart's challenges to its assessments, given that they do not include all the informal initiatives taken by the company, which are often not reflected in the local government records we obtained. Our figures also exclude those appeals that were filed but later withdrawn by the company before the hearing date. Finally, our totals are limited by the fact that many local governments keep appeals records for only a limited number of years. The earliest data we were able to obtain were usually from the mid-1990s.
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Phil Mattera is the director of the Corporate Research Project of Good Jobs First.
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