Case Study of Target Stores
Although a distant second to Wal-Mart as a discount retailer, Target is nonetheless a massive operation. With $65 billion annual revenues – twice that of global giant Ikea –Target generated a net profit of $2.5 billion in 2009. It employs about 350,000 workers nationwide in its stores, distribution centers, administration and on Target.com. Unfortunately, most Target jobs are low-paid retail positions and don’t return much to the community in either buying power or income taxes.
Target has sought, and received, hundreds of millions of dollars in subsidies from states and local communities around the U.S. Many of these deals have involved the company’s distribution centers.
There are 26 Target distribution centers listed on the company’s website (with more under development). A detailed Internet search reveals that at least 17 of the centers received some form of economic development subsidy. Of the remaining nine, absence of evidence is not evidence of absence: local media don’t necessarily cover common tax breaks – especially those that may be automatic, not negotiated – and government reports may be buried beyond the reach of Google or Nexis.
Nevertheless, reports show that subsidies ranged from large to small. In 2001, for instance, Pennsylvania Gov. Schweiker agreed to provide a $5.9 million subsidy package for a Target warehouse project.
Florida Business Park, New York offered Target the entire panoply of benefits: wage tax credit, investment tax credit, employment incentive credit, zone capital credit, sales tax refund, real property tax credit, tax reduction credit, sales tax exemption. At other times, Target availed itself of benefits that clearly looked peculiar. For instance, in 2004, Target began work at a former weapons site in Rialto, California, a site that required a $3 million cleanup in order for Target to begin. But Target and the landowner balked at reimbursing the federal government for the work; Target itself offered only $330,000 in cleanup costs and asked to “be released from future liability by the federal government. In 2007, Georgia and local officials offered $3 million in grant money from the state's tobacco settlement funds and $1 million in road improvements, among other emoluments.
Few communities successfully questioned whether Target needed any subsidy in order to locate there, but several have regretted their decision to grant incentives. In 2004, DeKalb, Illinois lured a Target distribution center with a $3.8 million package. But years later, Target has failed to meet its job creation goals.
Over the past five years, the practice of subsidizing Target has continued in every region of the nation. For instance:
NEW YORK. It took decades to bring the project to completion, but now East River Plaza in East Harlem brings big box stores to Manhattan, including the borough’s first Target. Despite opposition from citizen groups, the $500 million development was offset by $80 million in tax credits and other subsidies.
MESQUITE, TEXAS. The Dallas suburb of Mesquite undertook its Project Renewal to reinvent itself as a commercial center, including improving and expanding the city's shopping malls. In summer of 2010, Mesquite completed a deal to bring one of the biggest Super Target stores in the nation to the Market East Shopping Center. Under Project Renewal, Mesquite granted Target sales tax incentives staggered over the next 20 years, and helped assemble the land for the store.
MASSACHUSETTS. A lengthy investigation by the Boston Globe revealed that over a period of 16 years, the Massachusetts Economic Development Incentive Program encouraged both the state and local governments to underwrite more than 1,300 projects – including several Target stores – with hundreds of millions in tax breaks. But the Globe questioned whether these breaks were either useful or necessary. It cited the case of the southeast Massachusetts town of Plainville, which refused to grant tax breaks to Target. Within a few years, Target opened a store there anyway.
Despite this conclusion, officials throughout the state continue to offer tax incentives. For instance in 2009, Westfield, Mass. subsidized a Target distribution center. For locating in Westfield, Target would have its property taxes more than halved for nine years, from $1.8 million down to $727,000.
CLEVELAND, OHIO. In June 2006, the Cleveland City Council approved a 30-year tax increment financing (TIF) package for a Target project. Initially Target received a $6 million economic development loan to locate at the West 177th Street site. But the TIF means that tax monies the city and Cuyahoga County would have received from Target now go instead to repaying the loan.
NEWTON, NORTH CAROLINA. This town in western North Carolina is located in a region that lost 25,000 jobs in the period after 2005. When Target placed Newton under consideration as a site for a 1.5 million-square-foot distribution center, both the state and local governments offered a package of tax breaks. In exchange for a promise of 580 jobs, the governments put forward up to $9 million in tax breaks.
KENNER, LOUISIANA. In June, 2010, the New Orleans suburb of Kenner sought to attract Target to a vacated Mervyn’s at a local mall. The city, together with the state and the Jefferson Economic Development Commission, offered tax incentives of $2.2 million, with Kenner, a city of some 70,000, bearing $1.4 million of that amount.