In July, the Scottsdale, Arizona, City Council voted 4-3 to approve one of the largest subsidies ever given to a big box retail development. Those voting in the minority described the subsidy, which could amount to as much as $183 million over 40 years, as “obscene” and “insane.”
The 600,000-square-foot development includes a Wal-Mart, Sam’s Club, and Lowe’s Home Improvement store. The project is slated for a 42-acre site occupied by a derelict mall in south Scottsdale. Under the agreement reached with the city, the developer will receive a property tax break for a parking garage and will get to keep 49 percent of all the sales taxes generated at the shopping center for the next 40 years.
The big box stores planned for the site typically have a lifespan of about 15 years. The now defunct mall was open for 26 years.
Citizens and small business owners are fighting the subsidy on two fronts. The United Food and Commercial Workers union, which represents supermarket employees who are being undercut by Wal-Mart’s low wages, plans to file a lawsuit, arguing that the deal violates the Arizona Constitution’s ban on providing gifts to private developers.
Meanwhile, the Scottsdale Coalition is gathering petition signatures to force a referendum on the deal. The coalition formed several months ago to fight the development. It includes more than 300 business owners, residents, and unions, and has the support of the Scottsdale Area Chamber of Commerce.
The Chamber has been working on an alternative plan for revitalizing the southern part of the city. “[This] is the last large open hunk of land in the southern part of the city,” the Chamber’s vice president of public policy Rick Kidder said. “We would like to see what goes there be part of a concentrated effort to attract businesses with long-term sustainability. We do not believe this project will contribute to long-term sustainability.”
Supporters contend that, after the subsidy, the project will generate $202 million in new tax revenue for the city over the next 40 years.
But an independent study commissioned by the Arizona Leadership Institute and conducted by David Wells of Arizona State University found that development will negatively impact the city’s finances. About 40 percent of the new stores’ sales will be cannibalized from existing businesses within Scottsdale. This, combined with the subsidies, will result in an overall decline in municipal tax revenue.
The remaining 60 percent of the new stores’ revenue will be cannibalized from businesses within Phoenix, Tempe, and Mesa, costing the three communities about $1.5 million annually in lost sales tax revenue.
Local grocers, neighborhood hardware stores, and auto repair shops are among the businesses expected to lose sales and close as a result of the development.
The likely store closings do not worry City Councilor Ned O’Hearn, who said, “That’s urban dynamics. This is private enterprise. This is competition.” O’Hearn voted in favor of the subsidy.