Walmart, the world’s largest retailer, has agreed to pay the District $1.3 million after abruptly scrapping plans to open a store in one of Southeast Washington’s poorest neighborhoods.
The settlement, which the District’s attorney general announced Thursday, comes two years after Walmart backed out of plans to open two stores in underserved D.C. neighborhoods — one at the Skyland Town Center in Southeast Washington and the other at Capitol Gateway Marketplace in Northeast Washington.
Experts say the settlement sets an interesting precedent at a time when retailers continue to shutter hundreds of stores to make up for shifting customer preferences.
“This isn’t a classic clawback — it’s sort of a kissing cousin to a clawback,” said Greg LeRoy, executive director of Good Jobs First, a District-based watchdog group that tracks government subsidies for businesses. LeRoy called the settlement “unusual” but said it could put pressure on other retailers to pay local governments if they change their plans.
“This is a reminder that there are real public-sector costs associated with making it possible for companies to arrive in a city,” LeRoy said. “There is so much turmoil in retail right now — so many planned retail projects are getting canceled, or being shrunken or reshaped. City efforts to build retail are being upended.”
In Walmart’s case, both failed projects were in major developments considered crucial to the District’s efforts to bring groceries and amenities to its poorest neighborhoods. City officials say Walmart had agreed to open two stores in underserved areas as part of its deal to set up shop in the District. The retailer had worked closely with the District in planning the stores and had already signed leases. After Walmart backed out, both projects were set back more than a year, since no major retailers have signed on to replace them.
The Skyland store was expected to bring 300 jobs to Ward 7, which has some of the District’s highest unemployment rates. City officials said they had also expected about $65 million in sales and property taxes from the store.
“When Walmart terminated its lease at Skyland, an underserved part of our community was deprived of jobs and retail options it had been promised,” Attorney General Karl A. Racine said in a statement. “My office took action on this matter because District residents expect corporations and developers to honor their commitments. Moving forward, we plan to take a closer look at financial incentives made by the city and work to ensure that benefits promised to our community are actually delivered, especially where residents need them most.”
A spokesman for Walmart said the company had not received any financial incentives from the District related to the opening of any of its stores. The retailer has about 1,100 employees in its three D.C. stores and contributes about $15 million in local taxes, according to Walmart spokesman Randy Hargrove.
“We’ve been sensitive to the issues around Skyland Town Center, and we have worked with the District to resolve them,” Hargrove said. “The decision to not build and open that store was based purely on economic factors and unfavorable business conditions.”
In late 2013 the retailer, which has more than 5,000 stores nationwide, opened its first District stores, on H Street NW and another on Georgia Avenue. The company’s plans also included a 125,000-square-foot supercenter that was to anchor Skyland Town Center, at the intersection of Good Hope Road and Alabama Avenue SE.
The development has been years — and billions — in the making. The District has spent 15 years and an estimated $45 million taking land by eminent domain to make way for the project. The District also agreed to pay Safeway $3.6 million beginning in 2019 to address a covenant preventing other grocers from opening nearby.
But in early 2016, Walmart canceled its plans for the two stores and announced it would close 269 stores worldwide, including 154 in the United States. Company officials said at the time that they had new concerns about the potential profitability of those stores. It now operates three D.C. locations: near Union Station, on Georgia Avenue and at Fort Totten.
The closures also became a political lightning rod, as former mayor and current city council member Vincent C. Gray accused current Mayor Muriel E. Bowser of failing to keep the deals in place.
“We have absolutely been shafted,” Gray said at the time. “They think they can do this to us and we will roll over. I bet you Walmart doesn’t do that everywhere.”