Housing Complex

Walmart Says It Doesn’t Need D.C.’s Supermarket Tax Break. Does Anybody?

The areas of the district where you can get a tax break on a grocery store.

Earlier today, there was a fairly typical tiff in the Wilson Building: A councilmember wanted to make a constituent eligible for a tax abatement, and the bean counters pushed back. In this case, it was Tommy Wells who was trying to help out Safeway, which wanted its Southwest branch to be able to claim the Supermarket tax exemption, even though the Chief Financial Officer and the Deputy Mayor for Planning and Economic Development said it hadn't fallen within the geographic boundaries for the exemption since 2004.

Safeway disputes that accounting of events, and says the deputy mayor's office assured them back in 2008—as permits and financing were being secured—that the break on personal and real property taxes would kick in, no problem (if they'd claimed it originally, sales taxes on construction materials would also have been forgiven). It's a significant chunk of change, worth at least half a million dollars every year.

It's a weedsy debate, and you're not interested in the details. But the relevant point is this: Safeway is trying to go back and claim a tax exemption after a project is fully built and operating. If they really needed it to move forward, wouldn't they have taken care of it ahead of time? Sure, the area has lots of public housing, but also lots of solidly middle class people for whom Safeway is their only option; it's unlikely the chain would have picked up and left (like they abandoned their Brentwood location, which was in the tax credit area but had stopped being profitable).

The tax break for supermarkets was instituted back in 2000, when there were few fresh grocery stores in broad swaths of the city. It got tweaked a few times throughout the decade, and then overhauled last year by the FEED DC Act of 2010, which made the eligibility boundaries conform to personal income levels by census tract (play around with the incentive map here). Since the program started, supermarkets have proliferated across the District, and the may have helped companies decide to locate in underserved areas of the District.

But the parsing of motivations gets more difficult when the city also throws in other incentives, like a $900,000 grant for Yes! Organic Market on Pennsylvania Avenue SE in Ward 7, tax increment financing for Steuart's Giant-anchored development at 3rd and H Street NE, and a tax break for the NoMa Harris Teeter's parking lot. If it wasn't in the eligibility zone for one tax abatement, the District's politicians would find another.

And now, Walmart comes along and demonstrates that it doesn't need any of that. It's always been part of the retailer's strategy to ask for nothing from the city that would allow it to ask for something in return. In a seemingly thoughtless oversight, the Georgia Avenue, Skyland, and New York Avenue locations fall just outside the eligibility boundaries for the supermarket tax exemption. But at the other three, Walmart is basically entitled to a big tax break, and spokesman Steve Restivo says they have no plans to claim it.

That may be just the cost of doing business for Walmart, which is in a different public relations universe from everybody else—just like throwing around donations to favorite District causes (the Aldi that just opened on 17th Street NE, by contrast, does plan to apply for the exemption).

But it does demonstrate the market's confidence in the neighborhoods where District officials previously had to pull teeth to get someone to sell carrots. So if the exemption isn't driving location decisionmaking, and grocers are even trying to claim it for staying exactly where they are—as much as Safeway might say it couldn't have done its big renovation without the help—it's worth asking how long we should keep it around.

  • rock_n_rent

    Lydia, according to the incentives map, another recently opened grocery store that qualifies for the supermarket tax break is the new Whole Foods at Foggy Bottom (the areas around GWU and Georgetown University are eligible because, I think, the large student populations depress average incomes in those census tracts). Do you know whether Whole Foods claimed it? That is not a grocery chain you normally think of as targetng underserved populations.

  • Lydia DePillis

    Good question. I'll ask.

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  • http://urbanplacesandspaces.blogspot.com Richard Layman

    Well, Walmart has resources beyond the other groups. Plus, the presumption is that they aren't asking for money for objective business reasons when their action are really the same as Zipcar competitors outbidding them for street parking spaces--they were willing to pay more than market price to hurt a competitor. Similarly, Walmart will take the high road on incentives as a positioning ploy.

    But the general point, that DC's real estate market has probably improved enough to eliminate the supermarket incentive program, except in certain areas defined as underserved in terms of retail (mostly W7 and W8).

    Technically, if you look at the DC Code, it's not clear that the program has been renewed beyond 2010 anyway.

  • http://urbanplacesandspaces.blogspot.com Richard Layman

    Interestingly, the W4 locations illustrate the problem with the program. The GA Ave. location for WM is less than 2 miles from one Safeway and 1 mile from another Safeway, plus a Yes Market is up the street too.

    The Fort Totten location is less than .5 mile from a Giant, albeit located on the city-Maryland line, but on the Maryland side of the street.

    No food desert issues, etc.

  • Wrack

    Walmart's accountants and attorneys would scream bloody murder if the company failed to take advantage of every tax break readily available to it. Why on earth *wouldn't* they enjoy the benefit of taking the supermarket tax incentive? It's a pre-existing incentive, so it's not like they have to go and ask the Mayor or Council for some special benefit...

  • http://urbanplacesandspaces.blogspot.com Richard Layman

    Actually, Walmart's realty dept. is far more sophisticated than you make them out to be, and they perform rigorous cost-benefit calculations that figure in a wide ranging set of criteria. For most of the urban settings, they aren't likely to seek incentives in the current go around (unlike their previous iteration when they opened up stores in various places like New Orleans or Philadelphia, basically suburban format stores but in the city) for serious political reasons, focused around union and established supermarket companies, which for the most part, never rec'd incentives.

  • Hillman

    Odd how the anti-Walmart forces never mention that we already subsidize grocery stores in DC.

  • Petworthian

    Poorly targeted incentive program, should be cut altogether or completely reworked. Food deserts are a serious public problem, but this tool isn't addressing them it is just a cover for corporate welfare. Shame on Wells for shilling for big business interests.

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  • 18th St Biz

    I also watched the hearing and was appalled at Councilman Wells' gall to introduce a bill that will give Safeway on the Waterfront, a tax exemption on its, (1) Real Property, (2) Personal Property (3) Sales Taxes (2) Construction materials.

    Lyida, you forgot to mention that during the hearing representatives from 18th St and H St businesses were upset with the fact that Councilman Wells wants to give a multi-million dollar corporation millions in tax breaks, but refuses to provide any help for the businesses that are being harmed by the on-going construction in Adams Morgan.

    My advise to the business owners is, when its election time show your discontent with your voice and vote and let your customers know their councilmember is more concerned about profits for 1% than the well being of constituents.