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The Walmart lesson PDF Print E-mail
Written by Ozaukee Press   
Wednesday, 10 February 2016 21:03

The mega-retailer’s decision to close outlets teaches consumers   a painful lesson about what can happen if they fail to support the local businesses that enhance their communities

Walmart’s announcement last month that it will close 154 stores in the United States shocked and angered residents of communities affected by the closings.

These Walmart shoppers, many of whom  live in small, rural communities, said the company betrayed them by opening stores in their towns that lured them away from independently owned shops with product selection and discount pricing only to announce now those stores will close. In the process, long-established mom-and-pop operations unable to compete with the retail monolith went out of business, leaving soon-to-be former Walmart shoppers faced with having to drive 20, 30, even 40 miles to buy a gallon of milk or a carton of eggs.

Shocking? Hardly. Community loyalty has never been a factor in the giant corporation’s business plan, so when it became clear its smaller Express store concept was a failure and on-line retailers like Amazon were cutting into its profits, Walmart did what you’d expect by shedding underperforming stores and changing directions.

Doug McMillon, Walmart’s president and chief executive, said the decision was not easy. It probably wasn’t that difficult either. The 154 stores in the United States, plus another 115 outside the country that are slated to be closed, account for less than 1% of Walmart’s global square footage and revenue, which was $485 billion last year.

Walmart detractors, however, are on the right track when they talk about betrayal, although they have it backward. It was consumers who betrayed local merchants by choosing to spend their money at Walmart instead of at their corner grocery stores.

Along with the stories of irate Walmart shoppers who now will have to drive miles for their groceries are those of shop owners who watched in disbelief as customers loyal to them for decades gave their business instead to the mega-retailer.

Therein lies the cautionary tale to emerge from the Walmart closings. Consumers who fail to support their local businesses do so at their own risk — the risk of losing merchants who, while not always able to match the quantity-driven discounts offered by big box retailers, typically provide quality goods and services at fair prices and contribute in no small way to the quality of life of the communities they do business in.

The Walmart closings won’t affect Ozaukee County, but residents of small communities here know what it’s like to lose stores that offered necessities like groceries and were just a pleasant stroll or short drive away.

In 2007, Belgium Village Market opened in a new building that was to be the anchor of a retail and business development. A year later, it closed for lack of business.

More than six years later, the village is still without a grocery store.

In December, Village Market, Fredonia’s only grocery store, closed. Its former owner, David Roggenbuck, who sold the business months earlier because he could no longer make a go of it, told Ozaukee Press, “It is a tough business, especially when people only stop in for one or two items before heading to places like Walmart or Target for their major grocery shopping.”

Village Trustee Lisa Dohrwart described it as a “don’t know what you got ’til it’s gone” moment for Fredonia, and astutely described the trickle-down affect of business closings on a community. Aside from the economic impact, the blight of empty buildings and a dearth of local shopping options, fewer local businesses mean fewer members for organizations like the Chamber of Commerce, fewer sponsors for community functions and causes and less self-sufficiency for villages and cities that teeter on the line that separates thriving municipalities from bedroom communities.

Port Washington is an example of the former for several reasons — a healthy downtown, a strong tourism economy, residential development and yes, a grocery store. It’s unthinkable that a city of nearly 12,000 people would not have a full-service food market, yet that was the case in Port for a short period of time until Sanfilippo’s Sentry Foods opened. It remains the only grocery in the city and needs the support of local customers if it’s going to continue providing an essential service in Port.

The lesson in the Walmart closings isn’t that a global corporation with annual profits in the hundreds of billions of dollars isn’t loyal to the communities it does business in, but that consumers who don’t support local businesses risk losing stores that provide needed services and goods and make their villages and cities better places to live.

Legal tax evasion PDF Print E-mail
Written by Ozaukee Press   
Wednesday, 03 February 2016 18:29

Dodging U.S. taxes was the purpose of Johnson Controls selling itself to a company with a mailing address in Ireland

Wisconsin officials may be exchanging high-fives over a dodged bullet in the sale of Johnson Controls last week, but U.S. taxpayers have nothing to celebrate. The company’s 3,400 jobs will stay in the Milwaukee area, but $150 million per year in tax revenue needed to help fund American government services will disappear.

Avoiding payment of those taxes was the purpose of the maneuver by Johnson Controls to sell itself to a much smaller company that has a mailing address in Mahon, Cork, Ireland.

The buyer, Tyco International, will change its name to Johnson Controls. The combined company will have an office in Ireland. Though it will essentially remain a U.S. company, registered on the U.S. Stock Exchange, enjoying the protection of American laws and access to American government contracts, its tax payments will go to the government of Ireland.

This form of legal corporate tax evasion is not new, but Johnson Controls’ use of it may be the most disgusting example as a case of glaring ingratitude if not betrayal.

The company, a major supplier of automobile batteries, was one of the beneficiaries of the $80 billion American taxpayers paid to bail out the auto industry in 2008. Had General Motors and Chrysler been allowed to fail, Johnson Controls may well have gone down with them. The company’s CEO appeared before Congress to beseech lawmakers to approve the bailout.

In 2010, the company received a $299 million federal grant for the production of hybrid batteries. It has also raked in $149 million in tax breaks from the state of Michigan.

Apologists for exploiting the business nationality loophole in the tax code say such behavior is forced on companies because of the high U.S. corporate tax rate of 35%. A case can be made that 35% is too high, but the reality is that the tax rate is subject to reduction in so many ways that no business with an accountant who can correctly add two plus two without a calculator actually pays it. Johnson Controls paid a rate of 19% in its last fiscal year, substantially less than the rate paid by most individual taxpayers.

The business tax code needs to be cleaned up. Closing loopholes such as the ploy used by Johnson Controls would justify adjusting rates to put the U.S. more in line with other industrial countries. That’s a job for Congress. Unfortunately, while there is plenty of complaining about business taxes going on there, no progress in corporate tax reform is evident.

Spokesmen for Johnson Controls describe the Ireland dodge as a responsible move by its board of directors on behalf of stockholders. Share owners will benefit from the tax savings, but that is hardly a rationale to paint the sale to Tyco as ethical business conduct. The U.S. does much to create an environment in which business can prosper, which is one reason it has the world’s largest economy. Paying taxes to support its government should be seen as a duty not to be shirked by companies that profit in that environment.

Johnson Controls and Tyco, which makes fire protection products, would seem an odd couple, but they have one thing in common—tax dodging. Tyco is an old hand at avoiding taxes, having moved from the U.S. to Bermuda, then to Switzerland, before setting up in Ireland.

As for that dodged bullet, it’s a relief that Johnson Controls is not moving its Wisconsin jobs along with its for-tax-purposes headquarters. But caution for the future is indicated: Loyalty is obviously not this company’s strong suit.

Good water, bad water PDF Print E-mail
Written by Ozaukee Press   
Wednesday, 27 January 2016 16:05

Northern Ozaukee schools’ water-filling stations highlight the importance of a pure water supply and the folly of bottled water

Readers craving news of the positive variety must have been delighted by the story and photograph on the Fredonia community news page in last week’s Ozaukee Press.

The story told of how drinking fountains in Northern Ozaukee School District schools have been modified to fill reusable water bottles. The photo showed seven grade-school students with big smiles lining up to fill blue drinking-water containers printed in gold letters with the words “Ozaukee Warriors.”

The good news starts with the fact that there was no doubt that the water going into the kids’ bottles was safe to drink. Residents of the well-managed municipalities of Ozaukee County expect that, but the Michigan water disaster playing out now is a powerful reminder that a limitless supply of properly treated potable water is perhaps the most fundamentally important service government can provide.

Residents of the city of Flint, like almost all Americans, took for granted that water from the faucets of their homes was safe to drink, but they were betrayed by the state officials who took control of the bankrupt city. In what has the markings of criminal negligence and has stirred national outrage, state managers decided to cut costs by taking water from a polluted river for the municipal water supply. They ignored anguished complaints from residents that the water was unfit for drinking or washing. In fact, the water was so corrupt that it released lead from pipes, which was ingested by residents and now threatens lifelong impairment to many of them, including hundreds of children. 

The water the Northern Ozaukee school children, and all the residents of the Village of Fredonia, drink is pumped from two wells, 360 and 457 feet deep, and is treated by the Fredonia Water Works to meet every standard set by the U.S. Safe Drinking Water Act. In a typical year, the 64 million gallons of water provided by the system is subject to more than 1,000 tests.

That careful oversight is par for all the water utilities in this area. While the Flint scandal is a failure of government—exacerbated by the shrink-government-services agenda of Michigan’s governor—the good water provided by Ozaukee cities and villages is a government success and worth every penny of the price paid for it by residents, which is essentially a tax.

More good news in Northern Ozaukee’s water story is that the reusable water bottle program is teaching an important lesson and in a tiny but symbolically significant way is fighting a threat to the environment. Single-serve bottled water is the fastest growing beverage in the U.S., with roughly 43 billion bottles being purchased every year. The plastic of discarded water bottles is clogging not just landfills, but waterways, lakes and oceans, with dreadful effects on ecosystems.

Plastic used for water bottles is said to take more than 1,000 years to biodegrade. Some varieties cannot be recycled. According to one estimate, 80% of water bottles end up as litter. If the plastic is burned, it produces toxic fumes.

The indictment of bottled water goes beyond litter: Producing those billions of bottles uses millions of barrels of oil whose consumption contributes to the greenhouse gases heating the atmosphere. Transporting the water bottles to market adds to the soaring bill for environmental damage. For good measure, making water bottles wastes water—it takes about three quarts of water to package one quart of water. Suffice it to say, there are many reasons not to drink bottled water when safe tap water is available.

But back to the good news: The water filling stations in Northern Ozaukee schools are credits to the generosity and environmental awareness of the district’s high school students and parents. They were paid for by donations from the Class of 2015 and the Parent Teacher Resource group. Now parents are buying the Ozaukee Warrior water bottles for their children at $20 each to support the filling stations.

So let’s sum up: Flint water—bad news. Bottled water—bad news. Northern Ozaukee schools water—good news.

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