Shopping mall owner and operator General Growth Properties has drained local governments and schools of hundreds of millions of dollars in revenue through subsidies and tax assessment appeals, the author of a union-funded study said Wednesday.
The Chicago-based company has taken at least $200 million from government coffers by pursuing what appears to be a “systematic business strategy,” said Philip Mattera, research director for Good Jobs First, a nonprofit economic research center in Washington, D.C.
The study, commissioned by the Service Employees International Union, shows how General Growth lobbies aggressively to secure taxpayer subsidies for its development and then systematically appeals to reduce its property tax assessment and pay less taxes.
“What’s going on is not a minor disagreement between General Growth Properties and the assessor and what the assessment should be,” Mattera said. “They’ve got a couple dozen appeals at any given time. The company views the appeals as a profit center.”
General Growth simply files an administrative appeal to tax assessments and, in some markets, will take it to court, costing local governments legal fees whether they win or lose the case, he said.
Everything General Growth did was legal; there was nothing illegal or secret about it, Mattera said.
“We got all this from public record. We’re not digging up dirt from a Deep Throat source. Some tax appeals received attention in the local media, but many didn’t,” he said.
Mattera, though, questioned whether a company with $12 billion in assets should be the cause for revenue drains in the cities in which it operates.
“Do they really need to be systematically appealing their tax? The fact is it occurs so repeatedly. They would repeatedly and regularly appeal these assessments to keep down their tax bill,” he said.
General Growth public affairs director Jim Graham rebutted the study’s findings. Rather than being a drain on tax revenue, he said, his company is just the opposite.
General Growth paid $350 million in real estate taxes last year, an average of $1.8 million a mall, he said.
Even more important is the sales tax revenue that General Growth mall retailers generate for a community, he said, more than $1 billion nationwide in 2006.
“It’s ironic because they talk about us taking TIF (tax increment financing) funds from schools when it’s the cities taking TIFs to encourage development and start projects that create jobs across the country,” Graham said.
“Any homeowner who ever appealed their tax assessment understands the process and the fair way to determine taxable value,” he said.
Cities whose taxes, schools and vital government services have been particularly affected by General Growth’s business practices include Cincinnati; Houston; Baltimore; and Portland, Ore., the study said.
The report revealed no subsidies or appeals for the Fashion Show mall and Grand Canal Shoppes at The Venetian, General Growth’s properties in Las Vegas. The company also owns the Meadows and Boulevard malls.
Mattera said he tried to choose a group of properties for the study that represents geographic diversity, focusing on malls in which General Growth had a majority or 100 percent ownership.
SEIU spokesman Kevin O’Donnell said the union hopes to shed light on business practices that are often outside the public view and to hold General Growth accountable to the communities where it operates.
General Growth has ambitious plans for inner cities, where many SEIU members live, he said. The union represents about 16,000 health care and public service employees in Southern Nevada.
“Janitors at (General Growth) malls around the country are trying to form a union with us and we’ve heard about their poverty wages and lack of health care,” he said. “Our mission is to fight for working families and we work with community groups who share the same mission.”
Graham said General Growth has increased wages and health benefits for all of its mall janitors.
Greg LeRoy of Good Jobs First said his organization has been on record for years questioning business practices of retailers such as Wal-Mart and Nordstrom. All research was done independently of the Service Employees International Union.
General Growth Properties owns more than 200 regional shopping malls in 44 states. In 2004, the company acquired Rouse Co., adding the master-planned Summerlin community to its portfolio.