By Dan Powers for the Yellow Scene February 2005 issue
So Lafayette has decided to roll over for Wal-Mart - or so it would seem. In December the City Council voted unanimously to make an offer worth $2.3 million in tax rebates to help fund the construction of a Super Wal-Mart on Highway 287 north of Baseline Road to replace their aging discount store on South Boulder Road. This generous kick-back is the unfortunate best case scenario for a town whose budget is undeniably dependant on the sales tax generated by this one company. For those who share my disbelief and outrage, know this: Lafayette would be devastated by Wal-Mart's otherwise likely exit, however we all have the direct ability to deny Wal-Mart the money offered by the city.
Last spring I wrote about my personal dislike of Wal-Mart and gave a list of reasons why they do not deserve anyone's business. The situation in Lafayette has only added to my deep belief that Wal-Mart is the most influential company in America today - and not in a good way.
At first it appeared that Lafayette's City Council cowardly caved in to outrageous demands from Wal-Mart for all sorts of concessions and subsidies, knowing that the city's budget would be dealt a serious blow without the sales tax their store generates. Turns out the Council made as savvy an offer as could be devised, given the situation.
The City Council's decision was not a vote of approval on Wal-Mart's business practices; it was a vote of practical budget analysis for the city. Simply put, allowing Wal-Mart to close its current location (which the company has listed for sale for at least 5 years) would screw Lafayette and do nothing to Wal-Mart. In the reality of local politics, failing to court a new Super Wal-Mart would be incredibly irresponsible.
"The context of all this is that the city's financial situation has always been balanced on the edge," says City Councilman Kerry Bensman. "If the city chooses to do without the sales tax revenue Wal-Mart generates, the question becomes 'What do you want to give up?'"
At one point, sales at the Wal-Mart made up nearly 25% of the all the sales tax revenue Lafayette collected. That figure is down to about 14% now; in 2004 this equated to more than $1.1 million. Pluck over a million dollars from Lafayette's budget, and services people expect like landscaping, the library and the Recreation Center will certainly be affected.
There are two key issues that must be made clear: First, Wal-Mart will not be given a check by Lafayette for $2.3 million. Wal-Mart will pay all its costs up front, and only receive this money over several years from sales tax revenue above the current level of sales tax it already generates. "There is no out-of-pocket expense to the city," notes City Councilman Frank Phillips.
Second, Wal-Mart has never been considered an unwelcome corporate citizen in Lafayette; in fact the city has been urging them to stay. The store opened up 1987, and two years later, not coincidentally, citizens voted to raise the city's sales tax from 2 to 3 percent. The additional revenue this tax brought in was used to fund the construction of the city's Recreation Center. In 1997, when Wal-Mart was first rumored to be leaving, the business community rallied behind a petition and then-Mayor Carolyn McIntosh delivered 2200 signatures to Wal-Mart's headquarters in Bentonville, Arkansas asking them not to go.
What makes the City Council's decision so frustrating is that any intelligent person looking at the situation has to agree what they did is in Lafayette's best interest. How powerfully sad it is to know what's good for my town is also part of what's really bad for the whole country. Here's the short version why:
In 2004 Wal-Mart's sales were over $250 billion. That's right: Billion. It employs 1.2 million people at an average wage of $8 an hour. While earning a profit of more than $2 billion, Wal-Mart's has focused on giving consumers the lowest prices possible. Maximizing profits and reducing prices cannot be achieved without keeping wages low and limiting the expense the company pays towards health care, pensions and other employee benefits. The company has a staunch anti-union policy, a competitive advantage that helps them under-sell their competitors.
Plus, Wal-Mart is the dominant retailer of everything from lawn mowers to lip stick to CDs to dresses. Companies can reach millions of consumers if they are given space on Wal-Mart's shelves. On the other hand, companies can go out of business if Wal-Mart drops them from their supplier list. With this leverage, every year Wal-Mart insists on ever-decreasing prices from its suppliers - hence the "roll-back" smiley faces you see.
At first, this can lead to companies becoming more efficient and streamlining their processes to meet Wal-Mart's savings demands. But inevitably, the fat is all trimmed away and they start cutting into bone. To meet the lower prices Wal-Mart requires, companies reduce benefits they give to their employees, buy supplies from cheaper but inferior sources, or worst of all - they realize there's no way they can meet Wal-Mart's price mandate and still pay American wages. So they move their production jobs overseas, particularly to China.
This is how you can get $40 VCRs and $6 sweaters. People cannot be willfully ignorant to the facts that create the wonderful "bargains" you find at Wal-Mart. What seems inexpensive is actually a shift or elimination of costs that in the long run will only eliminate more American jobs and infect other industries with Wal-Mart's cutthroat tactics. Your industry, your company, your job could be next.
Like a parent dealing with issues and information above the head of their righteous, pouting teenager, the Council members have made a decision that Lafayette's anti-Wal-Marters cannot understand. Instead of yelling at the Council, here's what you can do in response to the new Super Wal-Mart: Don't shop there, and educate your friends and neighbors as to why. If they don't increase their sales tax revenue, they won't get any money back from Lafayette.
Lafayette obviously has a population of citizens who, by choice or necessity, find Wal-Mart to be the place to buy their goods. Teach those who don't know better, condemn those who do. We'll know in just a few years how principled or willfully oblivious Lafayette's citizens can be.
