Study: Wal-Mart Systematically Challenges Property Tax Assessments

For Immediate Release
Wednesday, October 10, 2007

Contact: Phil Mattera (Good Jobs First) at 202-232-1616 x212, pmattera@goodjobsfirst.org

Washington, D.C. - The first-ever investigation of Wal-Mart’s local property tax records finds that the retail giant systematically seeks to minimize its payment of taxes that support public schools and other vital government services. That is the key finding of “Rolling Back Property Tax Payments,” a report released today by Good Jobs First, a non-profit, non-partisan research center in Washington, DC. The full text is at www.goodjobsfirst.org.

“Wal-Mart, a company with $350 billion in annual revenues and $11 billion in profits, drains vitally needed funds from communities by regularly challenging the valuation put on its properties by public officials,” said Philip Mattera, research director of Good Jobs First and principal author of the report. “When the company succeeds in one of these challenges, it diminishes the funds available to pay for education, police and fire protection, and other essential services provided by local governments.”

Based on a large national sample of Wal-Mart stores and a review of all of its distribution centers open as of the beginning of 2005, Good Jobs First concludes that Wal-Mart has filed assessment challenges at more than one-third of its facilities around the country. At many facilities there have been appeals in multiple years. Overall, Good Jobs First estimates that the company has filed more than 2,100 property tax challenges nationwide.

“Wal-Mart’s frequent poor-mouthing of its properties makes the company appear hypocritical,” noted Good Jobs First executive director Greg LeRoy. “When it meets opposition to a new store, the company claims it will bring economic benefits to the community, which would normally be reflected in higher property values,” LeRoy said. “Yet, in these assessment appeals the company routinely argues that the value of its properties has declined. Unwittingly, Wal-Mart appears to be confirming the argument often raised by neighborhood groups that the presence of one of its giant stores will reduce property values.”

“These systematic property tax challenges are part of a larger pattern of state and local tax avoidance by Wal-Mart,” Mattera stated. “They are consistent with the company’s reported use of a real estate investment trust gimmick to dodge income taxes in many states. And they are consistent with the widespread property tax abatements, income tax credits and sales tax diversions that make up a large part of the more than $1.2 billion in economic development subsidies that Good Jobs First has documented in previous research on Wal-Mart,” Mattera added. Good Jobs First’s findings on development subsidies can be found at www.walmartsubsidywatch.org.

Unlike subsidies, which Wal-Mart enjoys with at least the nominal consent of public officials, property tax assessment protests are pursued in direct opposition to the wishes of local governments. Assessors who set the valuations typically oppose Wal-Mart—sometimes at great expense—when the appeals are heard by review boards and in court.

“We were surprised to find that Wal-Mart, despite its enormous resources, loses more assessment challenges than it wins,” LeRoy said. “Even when it wins a reduction, it often fails to get as much as it wanted, meaning that the overall dollar amount of Wal-Mart’s tax reductions is far below what the company sought.” The Good Jobs First report found that the company’s win rate in assessment challenges is just under 50 percent and that it has won a total of about $30 million from those appeals over the past decade. See the box below for more details. Comparable statistics on other companies are not available.

“We were amazed at how outspoken some local assessors were when we phoned them for information about Wal-Mart,” Mattera said. A county official in Arkansas, the company’s home state, said in reference to a court decision that rejected the company’s attempt to reduce the value of a distribution center by more than 30 percent: “We just kicked their butt.”

Good Jobs First found significant variation in the frequency of assessment challenges from state to state. The largest numbers, both in percentage and absolute terms, were found in Texas. More than 80 percent of the Texas stores in our random sample of Wal-Mart stores had at least one challenge. Other states found to have high appeal rates are Colorado, Kansas, California, New Hampshire and Georgia.

The states with the most frequent appeals are not always those in which Wal-Mart has the most success. While Texas has the most appeals, the company’s success rate in the state has been only 43%, far below the 82% success rate in Florida, for example. In California, the state where we found the second largest number of appeals, its success rate has been even lower: 25%.

There is no evident relationship between the frequency of Wal-Mart’s challenges and the property tax rates in different states. Those with the highest frequencies include Texas, which is considered to have high property taxes (it has no state income tax), and California, which because of Proposition 13 has low property taxes—as well as states not necessarily high or low.

Although Wal-Mart’s overall campaign to downsize its property tax payments has been blunted in some states, the company has won big tax cuts in certain individual communities. In numerous locations, Wal-Mart has won total tax savings of more than $100,000. For example:

• In 2004 Wal-Mart proposed that the assessment of its distribution center in Tomah, Wisconsin be lowered from $43.6 million to $23 million. The city resisted, but Wal-Mart persisted.  This year the matter was finally settled, with the city agreeing to drop the assessment to $31.4 million and refund the company more than $300,000 for each of three years—a total of $949,000.

• Wal-Mart has filed 11 separate challenges at its distribution center in the northern California city of Red Bluff. The company first appealed for the years 1994-1996 but got no change. It then appealed for the years 1997-2002 and reached agreement on changes for each year, achieving total savings of $644,000—a substantial amount but much less than what Wal-Mart was seeking. The company returned with appeals for 2005 and 2006 and recouped another $150,000.

• In 2003 Wal-Mart succeeded in getting the real property assessment of its Supercenter on East Hampden Avenue in the Denver suburb of Aurora reduced from about $22 million to $9.6 million. This brought the company tax savings of $456,000.

Even when local governments defeat a Wal-Mart appeal entirely, there still may be substantial costs for the community. Assessors told us of major cases in which they had to spend tens of thousands of dollars on outside lawyers, appraisers and other consultants to prepare their defense. 

“While we may suspect that many of Wal-Mart’s assessment challenges are motivated by obsessive cost-cutting rather than a belief that a facility is being taxed unfairly,” Mattera said, “this study does not analyze the merits of the company’s claims.”

The Good Jobs First report concludes with the following statement:

To Wal-Mart, we say: cease your assault on property taxes. If you are serious about being a responsible corporate “citizen” and you really care about the communities in which you operate, you should forget about assessment challenges and pay your tax bills in full without complaint. You can easily afford to do so, and the amounts involved mean a lot more to those communities than to your enormous bottom line.