Archive | City Paper RSS feed for this section

Box Boom: DC’s new Costco and crony corporate statism

6 Dec
Box Boom – City Paper covers the new one and only Costco allowed in DC, where WalMart is banished.

Among other aspects of the leftover attack on WalMart is that rival Costco is a major supporter of Obama and the Democratic Party. CEO James Sinegal gave $391,000 to national Democratic candidates in 2008, 2010, and 2012 alone.

CostCo has long been involved in the use of state power to increase its profits. The Institute for Justice criticized their extensive use of eminent domain to steal people’s homes to build their stores way back in 2003:

Washington, D.C. – There is a national epidemic of private entities benefiting from governments’ abuse of eminent domain-where private land is taken not for a “public use,” as required by the Constitution, but instead for private ownership and development. No corporation exemplifies this trend more than the Issaquah, Washington-based Costco. As the company’s own Senior Vice President and Chief Legal Officer stated, “There are probably dozens of . . . Costco projects where eminent domain or the threat of it has been involved in acquiring land for redevelopment.” One Costco shareholder, however, is now calling on the company to end this practice.

At Costco’s annual shareholders’ meeting on January 30, 2003, in Bellevue, Washington, Susan Watson of New York, who owns 500 shares of Costco stock, will ask the company to stop accepting land taken through eminent domain.

“Costco should take the high road in communities it serves; it should stop accepting land taken through eminent domain,” Watson said. “The company must recognize that its growth and expansion are being tainted by the abuse of eminent domain. Taking property for Costco from unwilling home and business sellers will rightfully create negative publicity. More importantly, when Costco works with local governments to take property by force for private developments, rather than negotiating as they should through the free market, they are inviting the abuse of government power and the erosion of fundamental constitutional rights.”

“As a Costco stockholder, I want to share with Costco’s management and other shareholders my dismay that the company is abusing property rights in this way,” said Watson. “But I was informed through a registered letter from Costco’s chairman, Jeff Brotman, that I would not be given that opportunity to introduce a proposal proscribing Costco’s eminent domain activity at the shareholders’ meeting. As shareholders, we need to ensure that the companies we invest in operate as good corporate citizens within the boundaries of our Constitution.”

In public statements aimed at diffusing negative publicity, Costco has defended its actions by claiming it is not responsible because cities independently condemn land-even though the company directly benefits by receiving prime real estate, often at below-market prices. Dana Berliner, senior attorney at the Institute for Justice, responds, “At least one court found that a local government had condemned private property at the explicit request of Costco. But even when the deals are not explicitly prearranged, by accepting land taken under the threat of eminent domain, Costco encourages and rewards a practice that strips citizens of their basic rights. A company with the size and clout of Costco could have a big impact on the decisions of local bureaucrats by simply saying ‘no’ the next time it is offered condemned land.”

Costco isn’t open to the public. It has 19.1 million members who spend $45 or more for the exclusive privilege to shop at the 400-plus stores located worldwide, 304 of which are located in 36 states and Puerto Rico.

Several examples illustrate Costco’s actions:

Lancaster, California A federal court found that Costco threatened the City that it would leave unless the City condemned Costco’s neighbor, 99 Cents Only. On June 25, 2001, the court held that the condemnation was not for public use and was pretextual-a prior agreement had been established by the City and Costco before the condemnation was approved-and therefore unconstitutional.

Port Chester, New York The Village condemned several small, locally owned businesses to make way for a shopping center anchored by Costco. Costco sits on land that was once a local marina and lobster shop, two small apartment buildings, and a number of other small businesses run by hardworking immigrants. The entire shopping center displaced hundreds of apartment residences, one of the largest employers in the Village, specialty retail stores, and local restaurants.

Cypress, California The City of Cypress sought to condemn the Cottonwood Christian Center for a Costco-based retail development that would generate tax revenue, unlike the tax-exempt church facility. The church had carefully assembled, from willing sellers, all the land it needed for its new center. The City and Costco wanted the benefit of that assembly, without doing any of the work. A federal judge has enjoined the condemnation.

Watson became aware of Costco’s abusive practices through the Institute for Justice, a public interest law firm that defends property rights, to which Watson contributes.

“Creating new tax revenue and more jobs cannot be a justification for the government to use its power of eminent domain for the benefit of private developers,” said Berliner. “Anyone’s home would produce more tax dollars and jobs if it was turned into a Costco. If that’s enough for condemnation, then no one’s home or business is safe. America’s Founders anticipated this argument for the expansion of government power. That is why they explicitly wrote into the Constitution that property could be taken only for a public use. A private, membership-only retail store is not exactly what Madison and Jefferson had in mind.”

“You would think that a company that recorded $38 billion in annual revenues last fiscal year could afford to purchase property through private negotiations rather than by government force,” said Berliner.

Still, Costco and other companies claim that without the use of eminent domain, they would not be able to secure the land needed for development.

“Our nation’s history disproves that suggestion,” Berliner said. “Most of the development done in our nation has been done honorably through private negotiations between the developer and the land owner; it wasn’t done by the force of eminent domain.”

“Government shouldn’t be a glorified real estate agent,” said Chip Mellor, the Institute for Justice’s president and co-founder. “The purpose of government is to protect individual rights, not to wield its power so Costco can save money on real estate transactions. Costco’s actions vividly demonstrate the unholy alliance of government colluding with big business to take property that belongs to neither of them.”

“What local governments are doing at Costco’s behest demonstrates the difference between being pro-free enterprise and pro-big business,” Mellor said. “Government power should be used to ensure a level playing field among all businesses and individuals, whether they are big and politically powerful or relatively small and without political influence. Costco is working with local governments to create sweetheart deals for itself that certainly are pro-big business, but they are directly counter to the system of free and honest enterprise our Founders created for us as an American birthright.”

Although Costco declined to raise Watson’s concerns with its investors, Watson is planning to attend the meeting and ask the question when the microphones open for general questions after the business meeting is concluded. Past Costco meetings have been available via their webcast on by going to Customer Service, Investor Relations, Financial Releases and clicking on the “Live Webcast” icon.

Watson said, “If Costco had benefited from eminent domain once, I might regard it as a lucky break. Twice would be a fortunate coincidence for the company-albeit unlikely. But the list is long, and it appears to be a strategy of Costco Wholesale Corporation to deprive others of their private property rights.”

She concluded, “You may argue that because of its size, ability to provide employment and fund higher tax payments that a Costco Warehouse is a more desirable use-that more people will benefit from the land if a Costco stands on it. But democracy does not rule private property. My favorite economist defines democracy as ‘two wolves and a sheep deciding what to have for dinner.’ When it comes to benefiting from the abuse of eminent domain, Costco looks too much like the wolf.”