TAXES Building on the studies included in the previous category, “Public Costs,” these studies examine the different impacts of locally owned businesses and big-box retailers on public budgets. They find that large retailers systemically tilt the playing field in their favor by skirting their tax obligations, as well as that locally owned enterprises generate more tax revenue for cities, with less cost, than sprawling big-box shopping centers.

Thinking Differently About Development.” Joe Minicozzi, Government Finance Review, Aug. 2013.

While the economic development policies of many municipalities and counties favor sprawling projects, this analysis draws on data from more than 30 jurisdictions across 10 states to show that regardless of their size, municipalities receive a greater level of tax revenue from dense, walkable, mixed use urban development. Minicozzi assesses land use on a “per acre” measurement of its tax revenue generation, just as one would judge the efficiency of a car on a “per gallon” basis, and calculates that while a county earns just $7.11 in property taxes per acre on a typical big-box retail store, it earns $287.55 per acre on a mixed-use, mid-rise Main Street-style business district. “Research shows that regardless of the size of the municipality, its most potent tax-generating areas are its downtown or Main Street,” Minicozzi concludes. In another example, Minicozzi compares two prospective multi-family unit developments in Sarasota County, Fla., in 2009, and finds that, after factoring in land consumed, public facility costs, annual county tax yield, and taxes generated, the county loses $5 million on the suburban development over a 20-year period, while it profits more than $20 million off the urban development over the same period.

Skimming the Sales Tax: How Walmart and Other Big Retailers (Legally) Keep a Cut of the Taxes We Pay on Everyday Purchases” [PDF]. Philip Mattera with Leigh McIlvaine, Good Jobs First, November 2008.

This study highlights little-noticed laws in 26 states that allow retailers to keep a portion of the sales taxes they collect from shoppers. The stated purpose of these policies is to compensate retailers for the costs they incur collecting the tax. However, while half of these states cap the amount retailers can keep, the other 13 states have no cap. Because the cost of collecting sales taxes declines with volume, states without caps are providing big retailers with outsized compensation that bears little relationship to their actual costs. This practice is costing states over $1 billion a year and lining the pockets of large chains, notably Walmart. The report breaks down the losses for each state. Additionally, this study exposes how local governments subsidize the large chains by giving them sales tax rebates or funding part of their projects with sales tax increment financing. Using these two strategies, Walmart has received $130 million in sales tax diversion over the past decade.

Rolling Back Property Tax Payments: How Walmart Short-Changes Schools and other Public Services by Challenging Its Property Tax Assessments.” Philip Mattera, Karla Walter, Julie Farb Blain, and Colleen Ruddick, Good Jobs First, Oct. 2007.

This first-ever investigation of Walmart’s local property tax records finds that the retail giant systematically seeks to minimize its payment of taxes that support public schools and other vital local government services. It includes online appendices with lists of stores and distribution centers examined.

Understanding the Fiscal Impacts of Land Use in Ohio” [PDF]. Randall Gross, Development Economics, August 2004.

This report reviews and summarizes the findings of fiscal impact studies conducted in eight central Ohio communities between 1997 and 2003. In seven of the eight communities, retail development created a drain on municipal budgets (i.e., it required more in public services, such as road maintenance and police, than it generated in tax revenue). On average, retail buildings produced a net annual loss of $0.44 per square foot. “The concept that growth is always good for a community does not seem to correlate with the findings from various fiscal analyses conducted throughout central Ohio,” the report concludes. It cautions cities not to be taken in by the promise of high tax revenue from a new development without also considering the additional costs of providing services. Unlike retail, office and industrial development, as well as some types of residential, produced a net tax benefit.

Fiscal Impact Analysis of Residential and Nonresidential Land Use Prototypes.” Tischler & Associates, July 2002.

Big-box retail, shopping centers, and fast-food restaurants cost taxpayers in Barnstable, Massachusetts, more than they produce in revenue, according to this analysis. The study compares the tax revenue generated by different kinds of residential and commercial development with the actual cost of providing public services for each land use. The study found that big box retail generates a net annual deficit of $468 per 1,000 square feet. Shopping centers likewise produce an annual drain of $314 per 1,000 square feet. By far the most costly are fast-food restaurants, which have a net annual cost of $5,168 per 1,000 square feet. In contrast, the study found that specialty retail, a category that includes small-scale Main Street businesses, has a positive impact on public revenue (i.e., it generates more tax revenue than it costs to service). Specialty retail produces a net annual return of $326 per 1,000 square feet. Other commercial land uses that are revenue winners include business parks, offices, and hotels. The two main factors behind the higher costs for big box stores, shopping centers, and fast-food outlets, compared to specialty retail shops, are higher road maintenance costs (due to a much greater number of car trips per 1,000 square feet) and greater demand for public safety services.

Understanding the Tax Base Consequences of Local Economic Development Program” [PDF]. RKG Associates, 1998.

Big-box retail, shopping centers, and fast-food restaurants cost taxpayers in Barnstable, Massachusetts, more than they produce in revenue, according to this analysis. The study compares the tax revenue generated by different kinds of residential and commercial development with the actual cost of providing public services for each land use. The study found that big box retail generates a net annual deficit of $468 per 1,000 square feet. Shopping centers likewise produce an annual drain of $314 per 1,000 square feet. By far the most costly are fast-food restaurants, which have a net annual cost of $5,168 per 1,000 square feet. In contrast, the study found that specialty retail, a category that includes small-scale Main Street businesses, has a positive impact on public revenue (i.e., it generates more tax revenue than it costs to service). Specialty retail produces a net annual return of $326 per 1,000 square feet. Other commercial land uses that are revenue winners include business parks, offices, and hotels. The two main factors behind the higher costs for big box stores, shopping centers, and fast-food outlets, compared to specialty retail shops, are higher road maintenance costs (due to a much greater number of car trips per 1,000 square feet) and greater demand for public safety services.