Whether it is a new stadium being built with taxpayer contributions or a new casino that is looking to use public land rent-free, development projects that receive public subsidies should produce real benefits for the public.
That sounds like a pretty reasonable proposition. And yet this concept is now under attack in Michigan, where state legislators are considering a bill that bans community benefits agreements (CBAs), contracts that require businesses to meet agreed-upon community improvement goals in exchange for tax breaks or other public subsidies. These might include affordable housing, living wage jobs, local hiring or publicly accessible green space. Most important, CBAs allow taxpayers to have a say in determining what community needs should be met.
Republican legislators in Lansing first proposed the law in December. The bill passed in Michigan’s House Committee after a brief debate, but it did not come for a vote before the end of the last legislative session. However, despite opposition from small business owners’ groups such as the Michigan Black Chamber of Commerce, big business lobby groups have pledged to bring it back in the new 2015 legislative session. State Rep. Earl Poleski, who proposed last year’s bill, plans to reintroduce the measure.
Michigan is not alone. The move by state conservatives to head off CBAs is part of a wider trend. However, the Michigan law is unique in that it is the first such legislation to ban CBAs. While CBAs are a relatively new concept in urban development, over the past two decades they have become an important tool for local and regional governments to ensure that public expenditures result in real community gains. In addition to imposing regulation, these deals incentivize positive corporate behavior. In exchange for such support, companies commit to transparency and accountability. And that is something no state legislature should impede.
If approved, Michigan’s law could take us back to the days when development deals were brokered in backrooms and public money was handed out with little more than a wink and a nod. It would also set a dangerous precedent for other states.
Accountability under assault
Dubbed the Local Government Employer Mandate Prohibition Act, the bill would bar measures such as setting “minimum wage, benefit or leave requirements.” It would also outlaw any employment requirements tied to receipt of tax breaks, grants or other economic development incentives. The measure would have a drastic effect on Detroit, a city whose redevelopment program largely hinges on the disbursement of tax credits to attract businesses to the area.
In October the Detroit City Council passed an ordinance that requires future development projects in the city to include CBAs. Previously, land grants to developers did not come with provisions to ensure decent jobs or other benefits for the community. Elected officials in Detroit have often been left with little to show taxpayers. As The Detroit Free Press reported in March 2014, this was the case with a $175 million tax break given to Marathon Oil to locate a refinery expansion in the city. To win the subsidy, Marathon Oil made a nonbinding commitment to hire Detroiters. Yet the public investment yielded only 15 jobs in eight years — a paltry return on investment that would never be tolerated in the private sector.
Developers often make attractive promises when asking for public support, but they should not be given a free pass to do business on the basis of vague promises without any real commitments.
As the experience of municipalities such as Atlanta; Los Angeles; Denver; Austin, Texas; Oakland, California; and New Haven, Connecticut, demonstrate, CBAs offer a better path. For example, in June 2012, the East Bay Alliance for a Sustainable Economy in Oakland won an agreement that requires stable, high-paying employment to accompany the conversion of a defunct Army base into a shipping facility. In exchange for $242 million in subsidies, the developers and future operators of the port agreed to create 2,800 construction jobs and 2,000 permanent positions at living wages, to limit the number of part-time jobs and to establish a community oversight board. The community group also won measures that will help promote local hiring.
Holding companies that receive public support accountable is not a radical idea. “We were pursuing a very capitalistic notion,” Madeline Janis, director of the Los Angeles Alliance for a New Economy, a community group responsible for winning several CBAs, told The New York Times last year. “Public money is an investment on behalf of the community and taxpayers. We’re saying that the developers who receive the benefit of public investment should give a return on that investment to the community.”
These measures remain popular at the grass-roots level. As a result, conservatives have been unable to stop local minimum-wage laws and CBAs from passing. So they have turned to state governments to eliminate these democratic policies. Most state legislatures are stacked with representatives from districts not covered by these agreements. The bill would “[set] up the state as a dictatorship telling local units of government that they cannot do what is best for their … community,” Detroit state Rep. Rashida Tlaib said last month.
Given the gridlock in Washington, local governments have stepped in to devise innovative ways to ensure minimum wages, create affordable housing and provide development assistance for impoverished neighborhoods. Michigan’s anti-CBA bill is part of the raft of nationwide attempts in statehouses to restrain the powers of local governments. Since 2002, the pro-corporate American Legislative Exchange Council (ALEC) has peddled model legislation banning local labor laws such as the Living Wage Mandate Preemption Act and the Rent Control Preemption Act. In Wisconsin in 2011, Republican Gov. Scott Walker signed into law a ban on local governments’ guaranteeing paid sick leave. In April, Oklahoma passed a law banning a municipal minimum wage and prohibiting cities from mandating benefits such as sick days and paid leave.
While Republicans are spearheading this charge, Democrats are not afraid of limiting local democracy either. For instance, in June the Democratic-majority Rhode Island legislature passed a law preventing cities from setting their own minimum wages.
The move in Michigan to extend state-level pre-emption to include CBAs sets a bad precedent for the country. Ultimately, these agreements are about accountability. There is no reason for any developer to expect public subsidies without committing to concrete, measurable benefits for our communities. Developers often make attractive promises when asking for public support, but they should not be given a free pass to do business on the basis of vague promises, without any real commitments. And no state government should stand in the way of accountability.