|Frequently Asked Questions regarding Wal-Mart's impact on the Midway Community.
Q: Will money spent at Wal-Mart stay in the community?
A: 86 cents of every dollar spent at Wal-Mart will leave Minnesota. Locally owned businesses spend more of their money with local suppliers and service providers. A recent study in Maine compared Wal-Mart to locally owned business and discovered that when local residents spend $100 at Wal-Mart "their purchase generates $14 in local spendingby the retailer. That same $100 spent at a locally owned business generates $45 in local spending, or three times as much."(1) These findings have been confirmed in studies across the country.(2)
Q: Does Wal-Mart really have the lowest prices?
A: On some items: yes; on most items: no. Wal-Mart frequently uses "loss leaders", pricing popular items at or below cost in order to attract customers. According to Kenneth E. Stone of Iowa State University, Wal-Mart "has created an illusion that the prices of each of the 75,000 products carried in a typical Wal-Mart store are the lowest. In fact, that is only true for about 1 percent of the products, but those products are the ones popular with consumers -- General Electric lightbulbs, name-brand shampoos, deodorants and cleaning products."(3) Studies in Vermont and Arkansas have confirmed these results.(4)
Q: How much does Wal-Mart give back to the community in donations and charity?
A: Less than small businesses do. According to a report from the U.S. Small Business Administration, small business give more time and money to local charities than do their large corporate competitors.(5) Their findings have been corroborated in other independent research. A study in Maine compared to Wal-Mart to eight local businesses and discovered that "the eight local businesses made $24,000 in cash donations to charities in 2002, or 0.4 percent of their total revenue. That.s more than four times as much, relative to overall sales, as Wal-Mart gave in 2002."(6)
Q: Will Wal-Mart generate tax revenue for our community?
A: Maybe. Many cities have discovered that Wal-Mart uses more taxpayer money than it generates. As BusinessWeek magazine explains, "some economists believe that Wal-Mart.s entry into a community doesn't result in any net increase in jobs and tax revenue."(7) The reasons for this unexpected result can be seen by examining the projected revenues and expenses of a Wal-Mart:
- Property Taxes: A Midway Wal-Mart will not generate new property tax revenues as Wal-Mart is leasing, not buying, the building in the Midway Marketplace. The location.s property tax will be paid by DDR Realty regardless of whether the store is full or empty. Further, the loss of property tax revenue from area small businesses that close may offset any gains that Wal-Mart creates. Economist Thomas Muller explains an Iowa study that reveals that "although the local tax base added about $2 million with each Wal-Mart, the decline in retail stores following the opening had a depressing effect of property values in downtowns and on shopping strips, probably offsetting the gains from the Wal-Mart property."(8)
- Sales Taxes: Eighty-four percent of all Wal-Mart sales come at the expense of existing retailers(9), meaning that 84% of the sales tax Wal-Mart generates will not increase area net sales tax revenue. Additionally, in the long-run, sales tax revenue may actually decline as neighboring retail stores lose business. Iowa State University Professor Kenneth Stone.s study of 34 Iowa towns revealed that the increased retail sales that Wal-Mart brought to the towns held steady for about six years, began to decline during year seven, and by year ten had dropped to below pre-Wal-Mart levels.(10)
- Payroll/Income Taxes: As Wal-Mart destroys local, higher paying jobs, payroll and income tax revenue will likely shrink. For example, a study in San Jose, CA "predicted a loss of $1.3 million because of the difference in wages between prevailing (traditional supermarkets) and non-prevailing (mega-retail discount chains) wages. The taxes created by the new super stores will be offset by the failure of pre-existing supermarkets, the loss of jobs and revenues."(11)
- Municipal Costs: Wal-Mart.s increased use of municipal services will cost us money. A study of big box retailers in 133 tax districts in DuPage County, Illinois found that "the increased cost of roads, water and sewage, security, telephone, and other services for these peripheral locations exceeded the sales and property tax revenues generated by the new stores."(12)
- Food Stamps: Workers receiving Wal-Mart.s starting wages are eligible federal food stamps. In fact, Wal-Mart issues "employee hand-outs telling workers how to use an employment verification service when applying for social services like Medicaid, food stamps and temporary assistance to needy families," the Contra Costa Times reports.(13)
- Human Services: Wal-Mart frequently passes on its healthcare costs to taxpayers. As Wal-Mart Executive Jay Allen explained, "[Wal-Mart employees] who chose not to participate in [Wal-Mart's health plan] usually get their health care benefits from...the state or federal government."(14) In the state of Washington, for example, "Wal-Mart has 341 employees enrolled in the BHP [the state-funded healthcare system], the most in the state, according to state data."(15)
Q: Will Wal-Mart be committed to Midway store for the long-term?
A: Wal-Mart currently has over 360 vacant stores across the U.S, many of which were built in the last 10 years.(16) In Minnesota, there are 5 empty Wal-Marts leaving us with over 430,000 sq ft of unused retail space.(17) In an industry with a penchant for changing formats, many communities around the U.S. have found themselves stuck with vacant retail space that has few alternative uses. The phenomenon was explained in the Minneapolis Star-Tribune commentary, "First there were the strip malls, which gave way to the enclosed malls. These in turn failed as developers built ever-larger regional malls. Hundreds of malls weakened and died following the arrival of the first big box stores in the 1980s. Then in the 1990s the big boxes themselves began to shed their skins, vacating existing stores only to build larger outlets across the street or across town."(18)
Q: How big of an impact will Wal-Mart have on community banks?
A: Potentially enormous. Wal-Mart wants to get into the banking business. Wal-Mart has been lobbying Congress to change banking law so they can set up what Alan Greenspan calls "a second, parallel banking system," one that would not be regulated by the Federal Reserve Bank.(19) The impact of a Wal-Mart Bank would be large for both community banks and the neighborhoods to whom they lend. As Ron Ence of the Independent Community Bankers of America explains, "Community banks look out for their local businesses and put money back into the area. If they are displaced by Wal-Mart Bank, money won't stay in the community. It will go back to headquarters in Arkansas."(20)
|(1)Stacy Mitchell, The Economic Impact of Locally Owned Businesses vs. Chains, A Case Study in Midcoast Maine, Institute for Local Self-Reliance, September 2003, pp.3.
(2)Dr. Lee A. Reynis . University of New Mexico, Bureau of Business & Economic Research, as presented at Rural Economic Development Forum, October 22, 1998; National Public Radio, Sunday Morning Edition. Quoted from Kennedy Smith of The National Mainstreet Center from a study by The National Trust for Historic Preservation. 3-26-2000; Muller, The Northern Neck, January, 1999; Harris, Kevin, American Planning Association, Economic Development Division, News and Views, October, 1996; Stone, Kenneth, Competing With the Discount Mass Merchandisers, Iowa State University, 1995; Dunham-Jones, Ellen, Asst. Prof. MIT, Sprawl: The Low-Commitment Landscape, Harvard Design Magazine, Fall 1997.
(3)The Hartford Courant, March 17, 1996, "David Vs. Wal-mart", David Owens.
(4)Elizabeth Humstone and Thomas Muller, "Impact of Wal-Mart on Northwestern Vermont," prepared for the Preservation Trust of Vermont, the Vermont Natural Resources Council, and Williston Citizens for Responsible Growth, 1995; REAP Business Update, August 2003, Vol. 12, No. 8, "Competitive Business Strategies to Survive and Thrive," Phil Menke.
(5)Patricia A. Frishkoff and Alicja M. Kostecka, "Business Contributions to Community Service," U.S. Small Business Administration, 1991.
(6)The Economic Impact of Locally Owned Businesses vs. Chains, A Case Study in Midcoast Maine, Stacy Mitchell, Institute for Local Self-Reliance, 9/2003, pp.3.
(7)BusinessWeek, October, 6, 2003, "Is Wal-Mart Too Big?" Diane Brady, Mike France, Towm Lowry, Nanette Byrnes, Susan Zegel, Michael Arndt, Robert Berner, Ann Therese Palmer. (8)Thomas Muller and Elizabeth Humstone, What Happened When Wal-Mart Came to Town? A Report on Three Iowa Communities with a Statistical Analysis of Seven Iowa Counties, For the National Trust For Historic Preservation, May, 1996, pp.46.
(10)Kenneth E. Stone, "Impact of the Wal-Mart Phenomenon of Rural Communities," Increasing Understanding of Public Problems and Policies, Farm Foundation, Oak Brook, IL, 1997.
(11)Blum, Ken. "Additional Tax Revenues in San Jose Due to the Union Wage Premium Compared to Non-Union Super Stores," Chicago: Midwest Center for Labor Research, 1996.
(12)Kai Mander & Alex Boston, "Wal-Mart: Global Retailer," in Jerry Mander & Edward Goldsmith, 1996, The Case Against the Global Economy, San Francisco, Sierra Club Books, citing a study from DuPage County Development Dept., Impacts of Development on DuPage County Property Taxes, Prepared for the County Regional Planning Commission, Illinois, October 1991.
(13)Contra Costa Times, October 19, 2003, "Wal-Mart's benefits come under fire," Janet Adamy.
(14)United Press International, December 2, 1998.
(15)The Seattle Times, February 28, 2003, "Businesses misuse state health plan, some say," Rebecca Cook.
(16)Writers On The Range/High Country News, April 17, 2001, "Littering the West with Vacant Superstores," Stacy Mitchell, Jeff Milchen.
(17)Tallied from www.wal-martrealty.com Tally, October 30, 2003, Chris Conry.
(18)Twin Cities Star Tribune, January 8, 2001, "When a Giant Retailer Moves On, It Leaves its 'Big Box' Behind," Stacy Mitchell.
(19)The Washington Post, May 27, 2003, "Retailers, brokerages want full-blown banks," Kathleen Day.
(20)Erisk News, July 23, 2003, "Supermarket Sweep", Duncan Wood.