Wal-Mart Developer’s Tactics Questioned in New Orleans

Date: 1 May 2002 | posted in: Retail | 0 Facebooktwitterredditmail

Rumors of a citizens lawsuit are beginning to circulate in New Orleans less than a month after the city council approved a 200,000 square foot suburban-style Wal-Mart supercenter. The 17-acre development will be situated along Tchoupitoulas Street in the Lower Garden District, a historic neighborhood wedged between a bend in the Mississippi River and downtown.

The development has been the subject of heated debate in the city for nearly a year. Small businesses, preservation groups, and many residents fought hard to stop it. Hundreds turned up at every major hearing on the project. Letters poured into the newspaper. “No Sprawl-Mart” and “Is the worst of the suburbs the best we can hope for?” signs hung on many front gates.

This month it was revealed that many of the “concerned citizens” in favor of Wal-Mart were in fact paid by the developer, Historic Restoration Inc. (HRI). One of the most out-spoken supporters of the project, Marie Galatas, received $35,000 in consulting fees from HRI. A well-known, long-time community activist, Galatas called those with any reservations about the development “devout racists.” Felton White, another long-term neighborhood resident and vocal supporter of Wal-Mart, received $60,000, ostensibly to oversee some hiring for the project.

HRI also tossed lucrative contracts to firms owned by friends and financial supporters of the mayor, such as a $350,000 consulting contract given to Major Services. HRI’s permanent payroll includes former Mayor Sidney Barthelemy. Additional endorsement came from former Governor Buddy Roemer, whose firm is working with HRI to develop a nearby retirement community.

HRI also covered the $15,000 in expenses incurred by a “blue-ribbon committee” of distinguished citizens appointed by the mayor to reach an objective recommendation on the controversial project. The committee felt that it was not their place to question the “most successful retailer in America,” in the words of committee member John Koerner, and endorsed the project.

In the end, the city council not only voted unanimously in favor of Wal-Mart, but also dropped some 30 conditions recommended by the planning commission. These included a reduction in the number of parking spaces, extra trees, bus shelters, and relatively modest design changes.

Wal-Mart insisted that there was no way it could build a store to these specs. But just weeks after the New Orleans vote, Wal-Mart unveiled, with much fanfare, plans to build a two-story outlet fronting the street with underground parking in downtown Dallas.

The New Orleans site had been a federal low-income housing project, which was torn down by HUD as part of its HOPE VI program to redevelop failed housing projects into livable neighborhoods.

Unfortunately, no rebuilding plan existed at the time the housing was demolished. City officials and former residents have grown increasingly desperate for construction to begin. HRI leveraged the housing component to push through Wal-Mart by insisting that the housing could not be financed without a major big box development.

An independent audit compared the St. Thomas redevelopment with other HOPE VI projects and found that HRI’s total development cost is $199,864 per unit of housing—$56,314 higher than the national average and $103,040 higher than in Dallas/Fort Worth. Moreover, the development fees are approximately twice the average of similar projects.

None of this stopped the city from using tax increment financing (TIF) to subsidize the development by diverting the sales tax generated by the Wal-Mart to fund the developer’s costs. This, combined with the impact Wal-Mart will have on existing businesses, will reduce the city’s general fund by several million dollars a year. Everyone agrees that a minimum of 20 percent of Wal-Mart’s anticipated $85 million in annual sales will be diverted from nearby businesses—mostly locally owned stores along Magazine Street that have longed served community needs.

“It’s no wonder so many New Orleanians feel like they’ve been played—by the retailer, the developer and their own elected leaders,” declared the Times-Picayune.