Corporations Rake in Subsidies at Communities’ Expense — Episode 148 of Building Local Power

Date: 7 Apr 2022 | posted in: Building Local Power | 0 Facebooktwitterredditmail

On this episode of the Building Local Power Podcast, Stacy Mitchell, Co-Director of ILSR, is joined by Arlene Martínez, Deputy Executive Director and Communications Director at Good Jobs First. Good Jobs First promotes government accountability in economic development and tracks corporate subsidies. Stacy and Arlene discuss the use of nondisclosure agreements, the acceleration of mega-deals during the pandemic, and what true economic development looks like. 

Highlights include: 

  • How states have used the Care Act and American Rescue Plan funding for economic development.
  • Defining opportunity zones and exposing how the wealthy are profiting from their favorable tax treatment.
  • Revealing how one of the main consequences of subsidy giveaways is exacerbating racial disparities.
  • Why a campaign called Ban Secret Deals is trying to end the use of nondisclosure agreements.

“Amazon is eager to use its power to get what it wants.”- Arlene Martínez

“For the 4.1 billion that cities gave to Amazon over the last ten years we could have built 672 new locally-owned grocery stores in underserved communities – connected to, say, local farmers and food producers. The scale of this money is extraordinary.” – Stacy Mitchell

“The problem with the way that so much of economic development is done in this country, and the ways that these deals are structured, is that the community loses in the end, because the giveaways are so big that tax money that was given will never pay for itself.” – Arlene Martínez

Jess Del Fiacco: Hello, and welcome to Building Local Power. A podcast dedicated to thought provoking conversations about how we can challenge corporate monopolies and expand the power of people to shape their own future. I’m Jess Del Fiacco the host of Building Local Power and communications manager here at the Institute for Local Self-Reliance. For more than 45 years, ILSR has worked to build thriving, equitable communities. Where power, wealth, and accountability, remain in local hands. This week, ILSR Stacy Mitchell talks with Arlene Martínez. Arlene is the deputy executive director and communications director at Good Jobs First. Good Jobs First is an organization that promotes corporate and government accountability, and economic development. As well as smart growth for working families. Stacy and Arlene are going to discuss Amazon’s use of public subsidies to advance their growth, the company’s tax avoidance and more. Without further ado, I’m going to hand things over to Stacy to lead the interview.
Stacy Mitchell: Well, Arlene, it’s so great to have you on Building Local Power. Thanks so much for joining us today?
Arlene Martínez: Thanks for having me Stacy.
Stacy Mitchell: You all, Good Jobs First, your organization just does extraordinary work around the problem of corporate subsidies. These giveaways that happen across the country to big corporations. Tell us a little about what these corporate subsidies are all about? And maybe give a couple of recent examples of some of the kinds of bad deals that you’re tracking and why you see them as harmful?
Arlene Martínez: Yeah. Corporate subsidies are when a corporation comes to a community and wants to bring a facility, a project, and they always promise a lot of jobs. They ask for public money to help [inaudible 00:01:44] the cost of the project. They come and they say they’re going to bring a lot of capital investment. They say they’re going to bring a lot of jobs and officials get excited and start opening up their wallets. The problem with some of these deals is that, first of all, it’s done out of public view. Sometimes the community doesn’t know the company name, don’t know how much money’s being offered. That’s the case even after the deal’s closed. In some states, we never know how much money the company got. A recent deal that just happened, first when you asked that question came to mind, was [inaudible 00:02:24]. Which is a company in West Virginia, a steel manufacturer in West Virginia.
Arlene Martínez: They got a billion dollars. Over a billion dollars we think. It was a really rushed deal. There was no work requirements, which we like to see, in terms of wages. There was no location requirements or geography for workers. We think a lot of the workers will come from bordering states. They’re actually the real winners in this deal because they didn’t have to put any money up front and then they’ll get all the jobs. That was an example of a deal that we don’t like to see. There was no clawbacks, for example. If the company doesn’t deliver, taxpayers won’t get a lot of their money back. Another deal that came to mind right when you asked was a deal in Fort Wayne, Indiana. It was a deal that came under a code name, as a lot of these projects do. A majority of the city council didn’t know who the company was because of a nondisclosure agreement that the company had forced officials to sign. The council voted to give the subsidy anyway, and the company ended up being Amazon.
Stacy Mitchell: Wow. You have a city council, is that common, the nondisclosure agreements? Where you’ve got a city governments’ voting to give away million, billions of dollars and has no idea who they’re giving it to?
Arlene Martínez: That was a little unusual in that a lot of the council voted on the agreement without knowing the company name. But non-disclosure agreements are really common. In fact, they’re increasingly common that we’ve been seeing. Which is a really troubling new trend that we’ve been starting to see. We actually launched, us and a lot of different organizations, across the political spectrum by the way. Left, right and libertarian. We launched a recent campaign called Ban Secret Deals. The goal is to try to get an end to the use of these nondisclosure agreements. Officials and company officials will know what they’re agreeing on. The public will sometimes not know, often not know the company name. Because of the code name that I mentioned earlier. They won’t know how much money’s on the table until it’s a day or two before the vote.
Stacy Mitchell: Wow. How common are these deals in general? How much money are cities and local governments giving away every year?
Arlene Martínez: We have seen estimates anywhere from $45 billion to $90 billion per year.
Stacy Mitchell: Year. Wow.
Arlene Martínez: Yes. It’s a lot of money that we’re talking about. That’s just our best guess. We think it’s on the higher end of that, just because we know how much money we can track coming out, and we also know how poorly disclosure is in so many states. Couple states have next to no disclosure. It’s a lot of money that we’re talking about. We really saw an acceleration during the pandemic, and in terms of what we call mega deals. Which are deals which is $50 million or higher. It used to be really unusual to see a company crossing a billion dollar threshold. This year and last we saw deal, after deal, after deal. Our researcher who runs our subsidy tracker database, which is a collection of all the subsidy deals that we can find that companies have gotten, has been really struck by this trend. By just the flood of billion dollar deals that have come in the last year or two.
Stacy Mitchell: That’s extraordinary. I mean, it’s an extraordinary amount of money for a single development project that a local or state government is handing over. More than a billion dollars. That’s just amazing. Let’s talk about one of the big subsidy getters that you’ve been tracking, which is Amazon. You all recently came out with a look back at the subsidy deals that Amazon has gotten. Walk us through what you found?
Arlene Martínez: Yeah. Amazon in around 2012 created a new office that was designed specifically to go after subsidies. Brad Stone came out with a book called Amazon Unbound. He was able to access company internal documents that showed that Amazon set a goal of getting one billion dollars a year in public subsidies. But to our knowledge it hasn’t quite hit that but it’s still quite a bit of money that Amazon has gotten over the years.
Stacy Mitchell: I think the number that you all found was that Amazon had gotten $4.1 billion since 2012. Since they opened that office of economic development?
Arlene Martínez: Yes. They’ve gotten at least closing in on $4.2 billion in the United States alone by the way. We know they’re getting subsidies all over the world. But yes, that’s what we found. Last year was especially a banner year for Amazon. It got at least $650 million if not more than that. Again, that’s just what we can track down.
Stacy Mitchell: I want to come back to that. I want to put a pin and come back to that issue of these deals really increasing during the pandemic. Because I find that surprising and I want to ask you a bit about why. But just staying with Amazon for a minute. I said their office of economic development, which of course we should put in quotes. Because that’s what they call it and that’s the line that they’re selling cities on. But in reality, this is a set of people within Amazon whose job is to go out and get free handouts from government, right. To get tax breaks and subsidies.
Stacy Mitchell: What is the dynamic, why is it that so many cities fall into doing this, especially with a company like Amazon? Many of the cases I imagine these are warehouses or possibly data centers. There are not many jobs with data centers and warehouse jobs. In terms of Amazon, wages are very poor. I mean, these are not the kinds of jobs that you would think, “Oh, we should be subsidizing.” Of course, this is a growing company that has to have warehouses everywhere. Why do cities get suckered into this at that kind of level?
Arlene Martínez: Yeah. I covered local government for many, many years as a journalist. I know that these elected bodies are made of community citizens who are doing public service. They really have joined, in a lot of cases, to help their community. They want to make it better, they want to bring jobs. I think they often think they’re doing a good thing by bringing Amazon in. Of course, there’s always the lure of the red ribbon cutting ceremony in front of the new facility with new jobs. That’s exciting too. But I think on a basic level, they’re excited to do something for their community and Amazon seems like such a get. I think in a lot of cases, perhaps the ripple effects that Amazon does when it comes to a community isn’t fully understood.
Arlene Martínez: Now, we know we’re in this space, we know what happens to… We know that the workers are underpaid, they’re paid poorly, they’re in unsafe working conditions, their shifts are atrocious. We know that small businesses are in impacted when Amazon comes to town. We know all these things. We know public government could be spending the money and doing economic development in a much more thoughtful, effective, meaningful way. But for the people who are serving on the city council [inaudible 00:09:49], they may not have that understanding or they just think that it’s a good project coming on. Amazon is really effective by the way at selling this story. They’re really effective of it coming in there, they hold all the cards, they can say whatever they want. A lot of times they don’t show officials their internal company documents, right. It’s not an equal playing field. Amazon’s holding all the cards and they can make a lot of fancy promises and people buy it.
Stacy Mitchell: I suppose they’re also sitting there saying, “Well, if you don’t do what we want we’re just going to go to another city.”
Arlene Martínez: That’s exactly what they say. I mean, even in this case in Fort Wayne, Indiana, that I mentioned earlier. Where a majority of the council didn’t know that they were voting on Amazon. Amazon came back for a second subsidy after the first $16 million that they got. They came back asking for another seven million dollar subsidy. But by then the public knew who it was and they weren’t happy about it. There was a lot of pressure now on the council to reject this second subsidy. The council actually did reject it and Amazon still threatened to walk. Even though construction had already started and even though they’d already gotten their $16 million up front. Amazon is I think a bully, and is very eager to use its power to get what it wants.
Stacy Mitchell: I did a bit of math, the $4.1 billion that you have documented Amazon getting over the last 10 years in the U.S. alone. We’ve been in touch with a community and neighborhood in North Tulsa, Oklahoma. Which is, in that part of the city there has not been a grocery store for a long time. We’ve been working some with a city counselor there because they’d been inundated by dollar stores, and they were trying to figure out how best to regulate and limit the dollar chains from coming in. She has also been working towards getting a full service grocery store. The community finally succeeded just recently. In the last few months Oasis Market, a locally owned grocery store, opened. It was a mix of some city financing and so on, to make the project happen.
Stacy Mitchell: But it’s a full service grocery store, obviously in a community that really needed it. The project all told, land, building, everything, cost about six or seven million dollars. For the $4.1 billion that cities gave to Amazon over the last 10 years, we could have built 672 new locally owned grocery stores in underserved communities. Connected to, say, local farmers and food producers. I mean, the scale of this money is extraordinary and the opportunity cost of what we’re not doing… In addition to empowering Amazon even further, and making a very wealthy company, and wealthy founder, Jeff Bezos, even wealthier, and more powerful. In addition to that problem, it’s the opportunity cost of what we could be spending these dollars on that’s just so extraordinary?
Arlene Martínez: Yeah. Stacy, you know that’s something that we talk about a lot, the opportunity cost. Because it’s such a poor use of money to give one of the world’s most richest, powerful companies money. When there’s a lot of better other uses for it. Good Jobs First is often labeled as anti-subsidy and we’re not. We think that public money, when it’s going to a public good that benefits a community, is a good way to spend money. But the problem with so much of the way that economic development is done in this country, and the way that these deals are structured. Is that the community loses in the end because the giveaways are so big. That tax money that was given will never pay for itself, right. A job won’t pay the amount of taxes that they’re getting in tax breaks. Yes, opportunity costs are huge when you think about what is true economic development. And that’s building great schools, great public schools, and making sure that there are safe and healthy parks, and that roads are paved. So many better ways to spend money than the way that these deals are being structured.
Stacy Mitchell: I’m curious, you mentioned that Good Jobs First is not anti-subsidy. This isn’t something that I’ve really struggled with and that we’ve debated and talked about a lot at ILSR. Is, I can see there’re lots of good ways that we might spend public economic development dollars. I certainly think there’re communities that need grocery stores, for example. That’s a really good way to invest in developing those locally owned grocery stores. There are neighborhood business districts and down towns that have fallen into disrepair, and are not going to be brought back without some public investment to offset those higher costs of revitalizing those areas. Anyway, I could go on with a list of these things. In the food sector we’ve seen a real loss of the intermediating small scale processors and distributors.
Stacy Mitchell: We’ve got a whole bunch of new local farmers and food producers, and we’ve got a lot of eaters who want to eat local. But we’re missing that in between distribution. It’s often because those types of businesses require a higher level of capital investment than a lot of entrepreneurs have. Again, there’s a place where you could say, “Oh, that’s a good use of like public economic development dollars.” That’s one train of thought. But then I think, I look out at these crazy subsidy deals, this maybe $90 billion that’s spent every year. According to Good Jobs First research, almost all of that going to the biggest companies who clearly have the ability to game the system to make it work for them. I think maybe we’re better off just banning subsidy deals. But at the end of the day, if we could pass a federal law that said, “No more of this.” That would actually be better even though it would tie our hands, in terms of being able to do good things. That the scale of what corporations are able to get is… We just can’t beat that back?
Arlene Martínez: Yeah. A lot of the research that we’re seeing now is really pointing to investment in public goods. I just talked about some of them. But workers want to live… And talent that a lot of these companies seek. They want to live in good communities with good schools, with good roads, they want amenities, they want natural resources, good parks, safe neighborhoods, good housing, affordable housing. They want all these things and that’s what drives them into a community. They’re willing to pay higher taxes for that. We’ve seen that all over the country, or at least the research that we’re looking at, is showing these trends. For the governments to invest in those types of things, so then the community becomes a natural attractor for talent. Maybe that’s one way to go.
Arlene Martínez: That problem that you mentioned of so many subsidies going to large companies is a huge one. It’s just so overwhelming. How can a small business compete with a company that’s being subsidized? Right. That’s why libertarians hate them so much. Really, it’s an unfair playing field when you’ve got the government helping pick winners and losers. But I think we still see value in the right kind of subsidies and subsidies that include living wages for workers, health benefits, with sick benefits, with health insurance, those types of things. Where workers can have a say in what their workplace looks like, what their hours look like. That could all be written into these deals. I think we forget how much power local officials have to tailor these deals in ways that really protect workers and their neighborhoods. Too many of them don’t do that, again, because of the power of these big corporations. They come in with their high powered, expensive, glossy attorneys. What they’re up against is not anywhere near many city’s resources.
Stacy Mitchell: What do you think it will take to solve this? What are the key things that we should be focused on trying to do?
Arlene Martínez: Well, I think Greg LeRoy, our executive director, thinks ultimately federal action is needed. Of the type that you were just talking about, right. Saying, states cannot give these subsidies out and local communities can’t give these subsidies out. The problem is, there’s never been any real movement on that. Is that realistic or practical? It has never come close. I’ll say that. We focus a lot of our effort at the state level because what happens at… So much of this money is given out through local communities, through state enabled legislation. If the states could reign in some of what local communities are allowed to do, that could be a big help in reigning in these really terrible subsidies. But one challenge is, both parties, Democrats and Republicans, both seem to really love giving away these subsidies. It’s just a challenge getting bipartisan support to make these big changes that need to happen at the state level. But we think that’s probably the best place. That’s where we put a lot of our energy.
Stacy Mitchell: Are there states that do less of these subsidies, have good policies? I mean, there’s other states that stand out as at least more in the right direction?
Arlene Martínez: That’s a good question Stacy. I train a lot of journalists at different sessions and I get that question a lot. It’s hard to point to a state that does it really amazing. But we do appreciate some for things like transparency. Michigan, for example, has given away a lot of money. But they’re quite transparent about how much money they’re giving away and what companies are getting it. We appreciate the transparency. Illinois is another place that has very transparent about the way that they do it. Because secrecy is a big problem with a lot of these places. In terms of states that do it well, I would need to look a bit more into that.
Arlene Martínez: I will say there’s an interesting community in the Minneapolis area. So that they would stop this regional competition that goes on, where one county’s fighting with another county. In the Minneapolis area, a lot of counties came together many, many years ago. Now if a project comes to one, they all pay the cost of it coming. They’re all splitting the cost of subsidies, they’re all allegedly reaping in the rewards. We like to see that type of regional cooperation, we’d like to see more of it. Of course, those multi-state compacts where you agree not to poach jobs from one another, it’s also something that we really strongly support. We saw that happen in Kansas and Missouri. Although, again, during the pandemic and these deals, we saw a little of that happening anyway.
Jess Del Fiacco: I’m sorry to interrupt. Stacy and Arlene will be right back after a very short break. Thank you for listening to our show. If you’re enjoying this episode, I hope you’ll consider hitting over to ilsr.org/donate to help support our work. Your donation not only makes this show possible, but it also helps us to develop the research and resources we make available for free on our website. You can head over to ilsr.org/donate to contribute today. Any amount is sincerely appreciated. All right, now back to the show.
Stacy Mitchell: You mentioned earlier in the conversation that these deals had really gone on steroids during the pandemic. I found that surprising I guess because I would’ve thought that local governments would be so busy with the frontline needs of their communities. Also, there was a sense during the pandemic of a bit of a more fundamental reset around a lot of areas of policy. I’m surprised by that. I’m curious if you could tell us, is that a big trend and if you have any sense of why it happened?
Arlene Martínez: Yeah. You used the word surprising when you hear that. I use the word outraging. To me it is something that my head’s been spinning. I joined Good Jobs First in August 2020, so it was a few months into the pandemic. I just started seeing, a few months after I started, major deal, after major deal, after major deal. Our research analyst who tracks these closely was noticing that too. She was bringing it to attention all these major deals. Then of course we know that the cares act in ARPA, the American Rescue Plan Act. Both of those gave a lot of money states and gave states a lot of flexibility with how they could spend that money. A lot of states are using it and have used it for economic development subsidies. We’re seeing these massive packages.
Arlene Martínez: It’s hard to directly link it to this flood of money that’s coming to their states. But it happened at the same time. We know that several states got together to sue so that they could use the money for tax breaks. Then they won. It’s hard not to link it to the cares and ARPA money that came into states, to really work with. That was really money designed to help with, so that families could stay housed, they could keep food on the table, they could keep their jobs, their small businesses could stay open, all the thing. On top of that, after we saw right that the economic impact wasn’t as big as we first thought. Then there was a lot of opportunity to do new things with that money.
Arlene Martínez: We’re still hopeful that a lot of the money that hasn’t been spent will be used for things like better parks, and upgrades to schools, and increased broadband, and all these types of things. In my neighborhood we’re trying to get our school to use the money to open up the campus after hours to the public. Right now it’s closed off after school hours. There’s an open park [inaudible 00:24:30] there in my neighborhood. Some communities we’ve found are using the money for things like that. Unfortunately, some other places have used it as major giveaways to large corporations. Always large corporations.
Stacy Mitchell: Yeah. We’ve been working a lot around helping communities use it for broadband and also for nurturing their local economies, entrepreneurship development. And that sort of thing at the local level, and supporting the whole economy. As you said, there’s a really important policy distinction here between a giveaway for one company, a big tax break. Versus investing in infrastructure, schools, education, training. All the things that we know from the research are directly linked to business growth, and new jobs, and opportunities, and all of that. Trying to steer communities into making those kinds of choices, those broad based economic investments that are very different from the kinds of corporate giveaways. But it’s challenging because that requires a lot more work obviously from city governments to go that route. And to actually steward those resources as opposed to just writing a tax break for Amazon?
Arlene Martínez: Yeah. You’re absolutely right. I think one area that we think about and talk about too a lot are planning schools. The planning schools across the country, and the MBA programs across the country, and to get planning schools. Some do this but we’d like to see more of it. But where economic development isn’t about writing a check to a big company or trying to entice a big company. How do you do that? It’s more holistic than that. Like you were talking about, making a community age friendly, more ADA friendly, always education. Education we think should be a key part of economic development. But right now a lot of the way that the planning schools are, that’s not that forefront.
Arlene Martínez: The same with a lot of the MBA programs too that are structured to, how do you make the most money? Profit, profit, profit. Rather than, what makes a corporate citizen? What’s the role of a company in making the world a more just and equitable place. As corny as that sounds, business schools have a great opportunity there to nurture those kind of leaders. I think too many programs are missing that and the same with the planning schools. It’s a lot harder to do that, the type of thoughtful investment that you’re talking about. Yes. But it can be done as I know you agree.
Stacy Mitchell: I think you’re right about this, thinking about the next generation of people who are coming into these fields. As being a really important way to think about how we shift directions. So much of it too seems like is almost ideological you could say. In the sense that, for the last 40 years or so in the frameworks that we’ve been living in. We think about spending money on schools or community infrastructure, around say pedestrians. Making communities walkable, which is really good for small business development. We think of those kinds of public expenditures as expenditures.
Stacy Mitchell: Whereas, we think about, when we give away money to a big corporation that somehow it’s an investment or something. We categorize it mentally, it seems like as a society it’s something else. Like, “Oh, this is an investment that’s going to pay off in jobs.” But we don’t think about that in terms of those public goods. I’m hopeful that maybe we’re at a moment where that’s shifting. It seems like there’s at least some signs that we’re waking up to how wrong that way of looking at things is?
Arlene Martínez: Language is so important. I think the pro subsidy, the pro large corporation movement has been so effective in calling their types of projects investments. As you just mentioned, instead of… And categorizing other things as giveaways, or to let people not sit on their couch, or whatever the case may be. Yeah, I think reframing this whole story and challenging that narrative that somehow they’re creating jobs. Which, if they are creating jobs, they’re poor paying and they’re so heavily subsidized that they don’t contribute to the tax base.
Stacy Mitchell: I want to ask you in particular about a certain kind of, I guess, subsidy deal. I don’t totally understand it myself. But there are these things called opportunity zones. This was a law that was, I guess, passed several years ago. Where communities, I guess, could create these zones. The idea, as I understood it, was we’re going to create special tax incentives in areas that are really struggling. Yet when I read about a lot of what’s actually happening in opportunity zones, I’m seeing luxury condo development. I mean, what is going on and why are there no parameters apparently around what places can do with these zones?
Arlene Martínez: Opportunity zones are part of the 2017 tax cuts and jobs act, right, the Trump tax cuts. They were inserted in there pretty quickly, very quickly. David Wessle who was a reporter at the Wall Street Journal wrote a book about opportunity zones and it was a really fascinating. Look at how Netflix founder, he’s the one got opportunity zones eventually passed as legislation. Because he was trying to avoid paying capital gains on some of his tech gains, right, for him and his friends. They put a few hundred dollars in and now they were billionaires. I’m exaggerating, but you know. They were looking for a place to not have to pay those capital gain. I think the Netflix founder, Sean Parker, really had a… It started from a good place. At least this is what David Wessle told me, we talked about it. Where he really thought they could put their money into communities that were struggling and they would really help them thrive.
Arlene Martínez: The problem is, of course, how the bill was eventually passed. Which was, as it went through all the stages, any type of safeguards were stripped out. In the end, you got the same amount of money, whether you invested in a really downtrodden community or a gentrifying more affluent community. Which is where we’ve seen most of the investment. There was no necessity to engage community groups or grassroots groups. They didn’t have to do any type of engagement. There was no worker protections, there was no affordable housing requirements. You saw things like a storage facility with one job, literally one job because it’s automated. That was an acceptable opportunity zones project.
Arlene Martínez: There was a project in Portland, Oregon, where it was constructed and they already had their major tenant which was a gas company. By changing the deed of occupancy ownership, they were able to qualify suddenly now for the opportunity zones, really at the last minute. That was because of the way the legislation was written, where it was so poorly written. The only project that really makes sense under opera opportunity zones, as they’re currently written, are these more mid to high projects. I think one developer said, “It doesn’t make a bad project good but it makes a good project great.” They’re a real problem and they won’t solve any things that they were trying to solve. Because they can, because that’s just not how they’re structured.
Stacy Mitchell: Right. You make these choices at the policy level and you get the outcomes that you set up. Is there any effort in Congress or anywhere else to put some guardrails and try to fix that program?
Arlene Martinez: There is. One thing that David Wessle did throughout the book was say, “Don’t blame the player, blame the game.” But I wrote a review of the book and I said, “I will blame the players because they… It was a group of people who consciously made this decision as it goes along.” Didn’t come out of thin air. This was purposely meant to be a program that you didn’t have to report. By the way, there’s no reporting requirements. Everything could be done secretly and you could focus on luxury housing. Yes, I’ve been cheered to see actually a couple different efforts trying to reform. Trying to get things like storage facilities banned, trying to get certain types to projects like college housing for example, which tends to be pretty lucrative. Because there’s always college students, they can pay more rent often.
Arlene Martínez: Trying to get some of those projects out. Trying to reduce the number of zones just so the hardest hit ones qualify. All those efforts have been talked about and introduced. We know of other legislation that’s at least being discussed. People have reached out to us to look it over and see what might be missing and propose legislation. We’re hopeful for that. I mean, obviously we think it shouldn’t exist, that would be best case. Would just be to get rid of it. Second best case would be for it to end when it’s supposed to end. While it’s in existence, tighten it quite a bit and require reporting about what projects it’s being used for. Which is not currently available. Right now there are also efforts to extend it. Ohio, for example, just doubled the amount of tax breaks that was allowed. It’s a temporary doubling. But it took what opportunity zones allowed and doubled it for the next couple of years. Obviously, there was some sweet heart deal, I think anyway that was meant to ultimately benefit. But that passed too in the last few months.
Stacy Mitchell: One of the consequences of these big subsidy giveaways is that they exacerbate racial disparities. That they benefit some groups and undermine other communities. Can you talk about what your research has found and what you’re seeing out there?
Arlene Martínez: Yeah. One of the big problems with subsidies is who gets them. We’ve talked a lot about the fact that a lot of large corporations get them. Well, large corporations are typically often majority white men who are running these companies. You have a real disparity, just fundamentally, in who’s getting these subsidies. Our research has also shown, particularly when we look at money that schools lose through these property tax breaks and other tax abatements. In some states we’ve found that communities with higher black and Latino populations lose more money to these tax breaks.
Arlene Martínez: In fact the Kansas City Public Schools superintendent, for example, called the way that the city does economic development subsidies, systemic racism. Because his schools, which were primarily black and Latino, were being drained of revenue that they really needed. While the white suburban districts were losing very little. Again, going back to the way that these programs are structured, so there’s a real racial and ethnic disparity that happens. Both who gets them and who pays.
Stacy Mitchell: I mean, just so many ways in which these deals just drive inequality. Yeah, that’s really extraordinary to think about black and brown communities actually shouldering the cost of these deals. In addition to not benefiting from how the deals are structured in the first place. But also ultimately having to pay more for them?
Arlene Martínez: When you think about student and the way that schools are financed, it’s often through property taxes. When property taxes are drained they’re losing that money. Even when states make some communities whole, states sometimes will return the money that was taken out through subsidies. It still isn’t enough funding often to make up for what they lose. Communities with poor population have higher needs and should be funded at a higher level anyway. They lose in a couple different ways, many different ways.
Stacy Mitchell: I want to close out by asking a little about, Good Jobs First has some great tools on your website that individuals and community groups can use to understand what’s going on with subsidies in their area. I was wondering if you could talk a bit about those? If you have any suggestions for how somebody who’s hearing this and wants to become an advocate for reforming these kinds of giveaways, what they can be doing in their own community?
Arlene Martínez: We have a great resource on our website. It’s really just a beginner’s guide to economic development subsidies. It breaks down all the terms of what subsidy is, how all the different types of subsidies that are offered, because it’s often a collection. A lot of times a project will layer various subsidies upon one another. There’s a lot of different ways that a company can get money from a community. We walk you through some of the different ways that companies can do that. How to look for a deal, because sometimes, again, these project code names make it difficult to find out whether it is a project getting subsidies. We walk you through that. We also have a lot of resources for how to submit public records requests and how to… Even down to what kind of language to use when you’re requesting these documents.
Arlene Martínez: We also have corporate research guides, so that you can look at company. When you’re exploring whether a company coming to town, if you can find out who that company is, and you can do some research into the company’s track record. One argument is, should a company that has stolen wages from workers, harm the environment, or otherwise committed theft, or fraud against the government. Should they be getting a subsidy? Well, you could make the case. No. And you can use our resources to search the company to see what kind of track records they have.
Arlene Martínez: We also have model legislation too. Everything from nondisclosure agreements, what something [inaudible 00:38:28] that could look like. Also, we have what’s called a unified budget, so that give governments ideas for how to better report their subsidies if they’re so inclined. But a lot of resources in there for communities. We also work closely with community groups too, so engaged in certain fights. We’re always happy to reach out if a community is looking at something or wants us to look at an agreement. But those beginners guides and research guides are just full of valuable information. I read it from top to bottom and I’d already been here a year and a half, but I learned a ton.
Stacy Mitchell: That’s great. Yeah, those are all really… Your resources are great. I always find it fascinating to be able to go look up subsidies by location, by company, and really just have all of the data. At least the data that’s public. As you know, in some cases we don’t know the total value of these deals. I feel like small businesses are really a constituency that maybe can become increasingly activated around this issue. We just did a survey of over 900 independent businesses nationally. One of the questions we ask them is, which of these policies actions would be most effective in improving the survival and success of independent businesses? The number one vote getter was ending subsidies and tax breaks for big businesses. Because it creates a huge un-level playing field. I’m hoping that argument, in addition to the ways in which workers and communities lose around these deals, might help us get some more traction with local governments?
Arlene Martínez: We would love to see more activation among the small business community. I know there’s a lot of effort there, I know your organization has been doing quite a bit in that area. Because I do think that that’s a really important group to mobilize and work against these small businesses who are so hurt by a company like Amazon and others coming in, in getting a ton of money. Now they have to compete with a company that can offer subsidized shipping, right. Amazon doesn’t… Their Prime doesn’t pay for their shipping costs, is one example. Yes, I think the small business community is one that would be such a valuable voice in this fight and stand to gain so much. I think one point that Greg LeRoy, our executive director, always makes is looking at small business stats and how they’ve gone down, and how alarming that is. Because small businesses have really been the backbone of this country. Any healthy country has a lot of small businesses. That’s alarming. It’d be great to see more small business movement around this and pushing, lighting against it.
Stacy Mitchell: Thank you so much Arlene. It’s been wonderful to talk with you today. I really appreciate you taking the time to be on our podcast.
Arlene Martínez: Well, thanks for having me Stacy, keep up your good work.
Jess Del Fiacco: Thank you for tuning into this episode, the Building Local Power podcast, from the Institute for Local Self-Reliance. You can find links to everything discussed today by going to ilsr.org and clicking on the show page for this episode. That’s I-L-S-R.org. While you’re there, you can sign up for one of our many newsletters and connect with us on social media. We hope you’ll also take the opportunity to help us out with the gift that helps produce this very podcast and supports the research and resources we make available for free on our website. Finally, we ask that you let us know how we’re doing with a rating or review on Apple Podcasts, or wherever you find your podcasts. This show is produced by me, Jess Del Fiacco and edited by Drew Birschbach. For the Institute for Local Self-Reliance, I’m Jess Del Fiacco and I hope you’ll join again in two weeks for the next episode of Building Local Power.

 

 

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Audio Credit: Funk Interlude by Dysfunction_AL Ft: Fourstones – Scomber (Bonus Track). Copyright 2016 Licensed under a Creative Commons Attribution Noncommercial (3.0) license.

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Luke Gannon

Luke recently received a BA in journalism, creative writing, and ethnography from Hampshire College. She wrote, designed, and edited a magazine titled The Politics of Land in Teton Valley, ID that analyzed the environmental, economic, and social patterns of the region amidst Covid-19.