It may not scare easily, but Wal-Mart appears to be getting cold feet when it comes to its plans to build two giant distribution centers in Maryland. The retailer announced last month that it was postponing the construction of a new DC in Somerset County on Maryland's Eastern Shore until 2008 or 2009, pushing back the planned construction start date from this summer. And the retailer has suddenly gone silent about previously announced plans to build a second DC in that state.
Publicly, Wal-Mart attributes the delay to a change in operations, explaining that newfound efficiencies in its state-of-theart distribution system have lessened the need for the new DC. However, some say the retailer has been scared off by Maryland's so-called "Wal-Mart Bill," a controversial health care measure that would require the retailer (and other large companies) to spend 8 percent of their payrolls in the state on health care or face a hefty tax.
Although Maryland Governor Robert L. Ehrlich Jr. vetoed the Wal-Mart bill, it's still possible that state legislators will override the veto later this year. Many Maryland politicians argue that taxpayers are indirectly subsidizing the company's health care costs through government programs and hospital fees. Maryland Senate President Thomas V. Mike Miller estimates that each job created by the DC will cost the state $2,000 a year in subsidies.
Despite Wal-Mart's public pronouncements, Aris Melissaratos, the state's economic development secretary, blamed the delay at least partly on the bill, the first of its kind in the nation. "They've said the new efficiencies would have delayed the Eastern Shore DC by about a year, but now because of the uncertainty of this bill, they've said it'll be 2007 or 2008," says Melissaratos. "We are still talking with Wal-Mart, and we are putting a lot of emphasis on our distribution and logistics capabilities here in Maryland."