How to Save Local Retail

Or how to start, anyway.

Nov 24

Main Street and Center Street signs — Photo credit: Alan Levine

🍁🍁 Happy Thanksgiving everyone! I am grateful this year and always for all of you who read this little project. 🍁🍁

This is Boondoggle, the newsletter about corporations ripping off our states and cities. If you’re not currently a subscriber, please click the green button below to sign up. Thanks!

With the holiday shopping season upon us, it seems like a good time to consider local retail.

Small retailers are struggling: They’ve been punished by the pandemic, of course, but the root of the problem goes back much further to the active disinterest by the powers that be in doing anything to help safeguard local retailers against the rise of big box stores such as Walmart and Target or Amazon’s takeover of online commerce (and there’s a much longer history here dating back to the 1920s, when A&P and J.C. Penney came to prominence).

In fact, local lawmakers over the last three decades often actively helped entrench dominant, national retailers against smaller, local ones through policy decisions and their use of economic development dollars. Now, those big chains are using their power to circumvent the supply chain problems that are plaguing smaller businesses, when they’re not leaving dead and dying malls everywhere as they shuffle resources across the country or online.

And that’s leaving aside that many national chains we all recognize (think Toys R Us) were being pillaged by private equity firms at the same time that they were receiving state support, so everybody lost — taxpayers, workers, consumers — except financiers looking at spreadsheets thousands of miles away.

This misguided approach occurred despite the positive benefits local retailers bring, such as keeping more money in the community, employing more people per unit of sale and paying them more, and being more civically engaged. I know, I know, people like cheap stuff, but it comes at a cost to workers, suppliers, and ultimately the local community and its ability to stay independent and keep its wealth local.

But this is not meant to be a doom and gloom piece, really! Here are a bunch of ways state and local officials can take on the power of dominant retailers and do some good for the local folks:

Stop Subsidizing Big Chains: It may seem obvious, but this is a big one. Dominant retailers suck up the lion’s share of subsidies that go to retailers. Amazon leads the pack of course (more on that later), but Sears, Bass Pro Shops, Lowe’s, CVS, Walmart, Fresh Direct, and Target have all received hundreds of millions of dollars in public funding, giving them a leg up over smaller competitors. A simple thing to do is eliminate those programs outright, or put size caps on them so the money is redirected toward local businesses.
Regulate Dollar Stores: The fastest expanding chains aren’t actually Walmart or Target, though, but dollar stores: Specifically, Dollar General and Dollar Tree (which also owns the Family Dollar chain). Dollar Tree has received $105.8 million in public subsidies, while Dollar General has received $32.5 million. These stores cause all sorts of problems: They drive out local retailers and grocers, particularly in poorer neighborhoods. Their “low” prices actually come at a high cost, as they’re only possible through the chains’ absolute negligence about the safety or health of their employees or consumers. And like good monopolists, they intend to raise prices when their takeover is complete. In addition to cutting them off from public funds, cities can use zoning regulations to stop dollar stores from concentrating in certain areas.
Stop the ‘Food Desert’ Subsidies: What a city shouldn’t do is make dollar stores eligible for subsidies meant to entice grocery stores into particular areas so long as the dollar stores throw a head of lettuce in a cooler. But that’s actually part of the much larger policy failure based on grocery store incentives. I go into it in more depth here and here, but the short version is: Tax breaks can’t fix food deserts because they try to get at the problem from the wrong side. The issue is actually corporate consolidation in the grocery sector and lack of purchasing power for certain communities, not the high cost of operating in any particular area. If you want local grocers, you need to make sure community members are able to increase their purchasing power enough to actually shop there.
Share Boondoggle
Rein in CVS: CVS is terrible. Everyone knows it. But it’s taken over the pharmacy sector (along with Walgreens) anyway because state and federal regulators have allowed it to purchase companies up and down the health care chain, which lets it preference its own stores and bury competitors, particularly the independent pharmacists that are cheaper, better for patients, and that most folks like more. Here are some things that can be done from me and my colleague Zach Freed to make pharmacies about actual patients again.
Ban “Dark Store” Theory: So-called “dark store”theory is a tactic big box stores use to lower their property tax payments by arguing that their locations should be valued not as thriving retailers but as empty husks. When that argument is successful — as it often is, though less so recently — it allows big box retailers to gain a leg up over local competitors who don’t get the same property tax favors. States and cities can straight up ban this tactic, and absolutely should.
Stop Subsidizing Amazon’s Network: Amazon is a huge impediment standing in the way of local retail, but not for the reasons you might think. It uses the distribution network for which it has received billions in public dollars as a cudgel against small businesses, forcing them to pay ever-increasing fees — which just went up again — or lose access to its mass of customers. For federal antitrust enforcers, there’s no reason Amazon’s distribution wing — known as Fulfillment by Amazon — needs to be connected to the same corporation that runs Amazon’s platform. But in the meantime, state and city officials can stop subsidizing the cost of burying their own Main Street shops and in-home businesses by cutting the subsidy spigot and redirecting the money.

This is for sure not a comprehensive list, but reflects my own interests, experience, and expertise.

Corporate Handouts Are Leverage

States and cities can make free money less free, if they try.

Pat Garofalo

Nov 18

Welcome to Pennsylvania sign — Photo credit: formulanone

This is Boondoggle, the newsletter about corporations ripping off our states and cities. If you’re not currently a subscriber, please click the green button below to sign up. Thanks!

Last month, Pennsylvania Gov. Tom Wolf, as part of an ongoing fight he has with the Republican-controlled state legislature over the minimum wage, released an executive order requiring corporations that receive tax incentives or grants from the state to pay the same minimum wage that state contractors must pay ($13.50 an hour, increasing to $15 in 2024) and to provide their workers with paid sick leave.

“With Pennsylvanians renowned for our work ethic, this is an opportunity to improve jobs in the state, which will attract and retain hardworking people to live here and bring new industries to the commonwealth that want a talented, skilled and dedicated workforce," Wolf said.

My reading is not that Wolf cares all that much about corporate incentives such as they are, but saw them as leverage to get what he really wants: More workers receiving a higher minimum wage in a state that still sticks by the federal minimum of $7.25 an hour.

And that’s fine! In fact, more locales should be attaching far more strings to their corporate handouts programs that would benefit workers, even if their chief concern is not incentive reform for the sake of incentive reform.

Now, to be clear, my first preference is for eliminating corporate incentive programs altogether, because they achieve none of their stated aims and are bad for democracy. My second preference, if repeal isn’t on the table, is to redirect all the funding to small businesses, giving local firms and entrepreneurs help competing against entrenched incumbents, rather than the typical practice of subsidizing already dominant corporations in order to help them build monopolies.

But barring those, sticking loads of conditions onto these deals is a good backup option.

These conditions can come about in a couple of ways: One is that the public body overseeing the programs implements them, as is the case in Pennsylvania now, or when the various levels of economic development agencies and boards in certain states require certain things from corporations (though they often go to great lengths not to enforce those agreements).

A second avenue is to require what are known as community benefits agreements between the corporation and the municipality or local groups (such as labor unions or non-profit organizations) within the area where the corporation will be located. For instance, New Jersey’s big incentive reauthorization this year, while awful in many ways, does require any project where the total cost will be more than $10 million to include a community benefits agreement with the local municipality.

Share Boondoggle

The process allows residents and officials to demand various things, such as wage levels, residency requirements for employees, investments in transit or housing, or whatever else, in return for public money. No agreement by the corporation, no funds.

The community benefits agreement approach was pioneered in Los Angeles in 2001, around what to do regarding development near the Staples Center, errr, Crypto.com Arena. It was also used to good effect more recently by activists in Nashville who secured an agreement in an incentive deal for a publicly-funded professional soccer stadium.

Here’s a state level bill authorizing community benefits agreements in corporate incentive deals. To make it a requirement, all an enterprising state lawmaker would need to do is replace “may” in the first subsection with “must.”

What local folks should most definitely not do is follow the example set this week by Knoxville, Tennessee. The city council there voted to gift Randy Boyd — a local rich dude who owns the Tennessee Smokies minor league baseball team and is the president of the University of Tennessee System — $65 million in public funds for a new stadium.

Local labor leaders and some members of the council wanted Boyd to sign an agreement about worker pay and other matters. Boyd said no, with the following justification:

Another reason he declined to sign an agreement, Boyd has said, is that unlike out-of-town investors who may not have the interest of the community in mind, he and his family have a philanthropic history that proves his dedication is sound.

A CEO (Allegedly) Admitted to the Scam

PLUS: A new coalition is set to take on corporate power in New York

Pat Garofalo

Nov 11

This is Boondoggle, the newsletter about corporations ripping off our states and cities. If you’re not currently a subscriber, please click the green button below to sign up. Thanks!

As readers here well know, a key fact about corporate tax subsidies is that they don’t actually influence corporate behavior: Research shows that nearly all of them simply pay corporate leaders to do what they would have done anyway for other reasons.

The trouble is that CEOs and executives like the make it seem like subsidies are the key factor in their decisionmaking, in order to gin up bidding wars and receive more public cash. But every now and then, they slip up.

That’s apparently what happened in Utah recently. The CEO of Domo, a tech firm, was at a confab with state legislators and allegedly admitted that he received pre-approval for $23,314,700 in subsidies meant for corporations that are threatening to move to or expand in another state, but that he never actually planned to leave.

There’s no reporting on his exact remarks, merely the fact that whatever he said was enough to get the state Office of Economic Opportunity to launch an investigation. That office runs Utah’s incentive programs and gave Domo access to funds back in January.

Here’s what a Domo spokesperson said at the time of that approval: “We really love Utah and we want to continue our growth here and contribute, and so the incentive to do that commits us to growing our jobs in Utah versus growing in other states or moving our business to other states.” That certainly sounds like a threat to leave! If the CEO admitted that it was a sham, though, the funds could be forfeit.

That it’s the economic development office itself running the investigation cuts two ways, I think: On the one hand, those offices are usually in the business of cutting as many deals as possible in order to make themselves look good and useful, so they may not want to hammer Domo too hard.

On the other, there’s actually a concerted push in Utah right now to rethink corporate incentives altogether, so the economic development folks might want to make an example of Domo in order to prove that they’re not irresponsibly throwing public money around or being incompetent, in order to save their jobs.

That a corporation lying to get incentives could lead to consequences at all, though, is too rare. In my book, I detailed how Toyota received $40 million in public funds in 2014 to consolidate several offices into one in the Dallas area, and Toyota executives then later admitted that the public funding had nothing to do with their decision, since coming to the Lone Star State made sense for several other reasons.

What happened next? Literally nothing! Toyota kept the money.

Share Boondoggle

More recently, New Jersey’s big corporate subsidy investigation — the one that began with a bang and ended with a big whimper — resulted in some corporations being referred to the state regulators or law enforcement for allegedly lying on their incentive applications. And just today, New York State Sen. James Skoufis called for a criminal investigation into Medline, a corporation he alleges lied about being ready to move to another state in an attempt to access tax incentives

But those are exceptions, not the rule.

Some of the reticence to enforce those requirements has to do with bureaucratic disinterest or incompetence, sure, but it is also, for a corporation that isn’t completely mailing it in, not that hard to gin up a fake threat to leave that looks real enough. Too many locales are willing to be the stalking horse that enable public dollar extraction elsewhere.

Designing a real test that can determine which corporations would move elsewhere “but for” a particular subsidy, as the term of art goes, and which are gaming the system is really hard. As Good Jobs First, put it, a “but for” requirement is “a frequently-abused rule that is almost impossible to verify and has more to do with covering politicians' backsides than preventing needless giveaways.”

So good on Utah for investigating, but it’s still operating within the confines of a system that is never going to work for taxpayers.

SHAMELESS SELF-PROMOTION: If you missed our American Economic Liberties Project event this week on building local power to confront corporate dominance, don’t worry! You can watch the whole thing here.

I think it’s really worth it: New York State Senator Michael Gianaris explained his proposed antitrust reforms (more on that below), Washington, D.C. Attorney General Karl Racine broke down his major lawsuit against Amazon, and I hosted a great panel with Illinois State Sen. Robert Peters, Florida State Rep. Anna Eskamani, and Align Executive Director Maritza Silva-Farrell that touched on corporate secrecy, subsidies, and how communities organize to push back. Again, watch it here.

I also released a toolkit for state lawmakers who want to rein in Big Tech’s economic power. It includes policy ideas, model legislation, and how to respond to critiques from those invested in the status quo. NBC covered its release here. You can read the whole toolkit here, and please send it to your state legislators if you can. Every bit helps.

ONE MORE THING: On Wednesday, New Yorkers for a Fair Economy, a coalition pushing to pass a bill called the 21st Century Antitrust Act through the New York legislature, formally went public in front of New York City’s first Amazon bookstore. Its members include Align, New York Communities for Change, the Institute for Local Self-Reliance, the Strategic Organizing Committee, the Teamsters, and the Retail, Wholesale and Department Store Union, as well as my shop.

The 21st Century Antitrust Act, as I wrote about a bit last session when the bill got through the State Senate before stalling in the Assembly, would update New York’s antitrust law so that it actually functions as antitrust law is supposed to: To protect workers and local businesses from the predations and abusive tactics of dominant corporations. I wrote an explainer about the bill that you can read here.

I’m sure I’ll say more on this in the future when the New York legislature comes back into session, but if any folks want to know how they can help with this, let me know. Below are some photos from our launch.

American Economic Liberties Project @econliberties

NOW: we're rallying outside an @amazon bookstore w/ workers, small businesses, and community members to launch New Yorkers for a Fair Economy. It's time to keep abusive corporations accountable in our communities. We are demanding for a #FairEconomyNow!

Sen. Mike Gianaris @SenGianaris

Reigning in corporate monopoly power cannot wait. We’re calling for a #FairEconomyNow to protect workers, small businesses, and our communities from corporate dominance. My bill, the 21st Century Antitrust Act will do just that for New York

Emily Gallagher @EmilyAssembly

We ended the first Gilded Age by passing federal antitrust law, empowering the government to break up monopolies. It’s time for us to build on the lessons of our past and pass landmark legislation that would let our state do the same thing.

American Economic Liberties Project @econliberties

Economic Liberties' very own @Pat_Garofalo up next! "I talk to people every day, coast to coast, who are looking for ways to support small businesses, to support workers. This bill will do that."

If you don’t subscribe already and you’d like to sign up, just click below.

Finally, if you’d like to pick up a copy of my book, The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, go here.

Thanks again!

— Pat Garofalo

Water Is Life, and Also a Trade Secret

Google won't tell you how much water it uses and an Oregon city has its back.

Pat Garofalo

Nov 3

Water droplets — Photo credit: Tim Geers

This is Boondoggle, the newsletter about corporations ripping off our states and cities. If you’re not currently a subscriber, please click the green button below to sign up. Thanks!

Google may have been cowed into turning down subsidies for new office buildings in a few major cities, but that doesn’t mean it isn’t up to its usual shenanigans outside of those metro areas. Out in Oregon, in fact, Google is embroiled in a controversy in which it’s gotten a town to argue that Google’s water usage should be considered a trade secret, not public information.

Due to the state’s significant use of data center subsidies, most major tech corporations have a presence in Oregon. Google recently received subsidies for two new data centers in The Dalles, a city of about 13,000 people some 80 miles outside of Portland, where it already has a massive operation. (Google acquired the land for the new centers back in 2016, begging the question of why they need to be subsidized at all since Google clearly intends to build them no mater what, but we’ll leave that aside for now.)

On Monday, Nov. 8, The Dalles’ city council will be voting on a plan for Google’s water usage at the new facilities. Neither the city council nor Google will divulge publicly how much water Google will use under this new plan, because the city councilors are bound by a non-disclosure agreement. They’ll only confirm that the city’s current capacity can’t handle it, so Google is paying for some sort of upgrade.

In fact, the city is suing a local news organization in state court on Google’s behalf in order to keep Google’s water use secret, after a district attorney ruled two weeks ago that Google’s water use should be subject to public records law. The city’s suit argues that Google’s water should be exempt from public disclosure because it is a trade secret; even if The Dalles loses, the suit will push disclosure past when the city council vote occurs, so will achieve its purpose all the same.

Now, what we know generally is that data centers use massive amounts of water, in order to prevent them from overheating. Google alone is responsible for billions of gallons of water usage across the U.S. each year — 2.3 billion gallons, to be specific, and that’s only what’s been disclosed, which most of Google’s water usage isn’t, since it fights every kind of transparency measure.

The concern voiced by critics in The Dalles is that Google will be taking some unknown amount of water in an area that is experiencing a pretty severe drought. And that’s not uncommon: As one study found, “one-fifth of data center servers direct water footprint comes from moderately to highly water stressed watersheds, while nearly half of servers are fully or partially powered by power plants located within water stressed regions.” Farmers in the area seem particularly aggrieved about not being able to find out what sort of water usage Google is planning. (Facebook is involved in a similar dispute in Mesa, Arizona.)

A logical question to ask at this point is, of course: How is the amount of water a data center uses a trade secret? I’m honestly not sure why anyone takes the claim seriously; it’s just an amount, not an explanation for how the mechanisms inside the data center work. Especially since water is a public resource, it seems a significant abuse of public records law to claim trade secret exemptions here. Other Oregon cities, for the record, have no problem disclosing how much water various corporations use, including how much Apple uses for its data centers.

As the district attorney wrote earlier in rejecting Google’s trade secret claim, “The document simply states the amount of water used by Google in The Dalles. … Nothing about water use gives away the design or actual use of the water, just the amount. Without something more, the City fails to meet its burden to uphold its claim of exemption.”

Share Boondoggle

My guess as to why Google makes this claim is it uses and wastes massive amounts of water, and also receives discounts on that water from local municipalities, which may then resort to rate hikes on other users to balance their books. A similar dynamic exists around data center energy usage, as I wrote about here, which is significant since nearly 2 percent of the electricity used in the U.S. powers data centers.

So Google demands secrecy as a condition of its investment and pliant politicians and utility officials go along with it in the name of job creation (even though data centers don’t actually create many jobs at all). In this case, that means a cynical lawsuit to push disclosure past when having the numbers out in public could affect the political debate.

Like with tax subsidies though, water and other utilities are public goods controlled by public bodies, so the public deserves to know how much is being used by corporate entities, how much they’re paying for it, and whether those deals warrant the re-election or removal of the officials who negotiated them.

I guess it boils down to my headline: Water is life, not a trade secret, and communities get to know who’s tapping into their resources.

FUN EVENT!: My colleagues and I at the American Economic Liberties Project are hosting a really great virtual event next week. “Building Local Power to Confront Corporate Dominance: Lessons from State and City Leaders” will feature keynote remarks from New York State Senator Michael Gianaris and Washington, D.C. Attorney General Karl Racine, as well as a panel that I’ll moderate with Illinois State Sen. Robert Peters, Florida State Rep. Anna Eskamani, and Maritza Silva-Farrell, the Executive Director of ALIGN in New York.

The event is on Tuesday, Nov. 9 at 11 a.m. RSVP here and stream it on YouTube here.

ELECTION NIGHT: Voters across the country rejected new public funding for sports stadium during yesterday’s elections, including Albuquerque voters defeating a planned $50 million minor league soccer stadium by a 2-1 margin. Excellent work voters!

ONE MORE THING: Speaking of Rep. Eskamani, she once again introduced a series of bills to bring transparency and accountability to Florida’s wretched hive of corporate tax villiany. One would enter Florida into the interstate compact to eliminate corporate tax giveaways, and another would abolish an absurd tax break program that is supposed to benefit struggling urban neighborhoods, but really just benefits Universal Studios.

The final bill would repeal the Florida law that allows local officials to sign non-disclosure agreements and other confidentiality measures when negotiating economic subsidy deals. Great stuff all around!

Rep. Anna V. Eskamani 🔨 @AnnaForFlorida

Ending corporate giveaways one bill at a time!! 🙅🏽

Pat_Garofalo @Pat_Garofalo

Again, @AnnaForFlorida is trying to get Florida to take the obvious step of eliminating a corporate subsidy program that is supposed to help struggling communities but really just benefits Universal Studios. https://t.co/iO7Ylo2ePJ

If you don’t subscribe already and you’d like to sign up, just click below.

Finally, if you’d like to pick up a copy of my book, The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, go here.

Thanks again!

— Pat Garofalo

Five Years of Silence

How states and corporations use public records exemptions to cover up deal details.

Pat Garofalo

Oct 28

This is Boondoggle, the newsletter about corporations ripping off our states and cities. If you’re not currently a subscriber, please click the green button below to sign up. Thanks!

The Tennessee legislature last week approved a massive new deal for a Ford electric vehicle and battery plant at a site about 50 miles east of Memphis. The legislation creates a “megasite” authority that will dole out $884 million in state funds: $500 million in corporate handouts to Ford and another $334 million in infrastructure and education spending. It’s the largest corporate subsidy deal in Tennessee history.

But the exorbitant cost isn’t the only issue. The legislation creates a public board to oversee the development of Ford’s project, and its powers include using eminent domain to seize land (in an unfortunate parallel to the failed Foxconn deal in Wisconsin, where eminent domain was used to acquire land that Foxconn subsequently didn’t use).

And the board is given wide latitude to keep documents and information pertaining to the deal out of the public eye, thanks to a huge exemption from state open records law. I’ve copied the relevant part of the legislation below.

There are two important parts of this statue worth noticing. The first is that nothing the board, Ford, or any other corporation involved in the project do is deemed a public record until the corporations agree to it, so the public will have little opportunity to weigh in as negotiations happen, putting them at an immediate disadvantage regarding anything that is eventually disclosed. This is the same tactic Amazon used to keep many of the HQ2 bids it solicited from being publicly disclosed, even to this day.

But it gets worse. The CEO of Tennessee’s new megasite entity can deem just about anything the board does secret for five years, putting it out of the reach of the state’s residents entirely. As Deborah Fisher, the executive director of the Tennessee Coalition for Open Government, put it, “That’s a whole lot of time to hide stuff you don’t want the public to know about.”

Share Boondoggle

Though nearly every state has some sort of public records law, with most dating back to the 1960s or 1970s, many of them carve out wide exemptions for economic development deals. Even if those exemptions aren't explicitly in the law, economic development officials and agencies tend to use whatever latitude they can find in vague language or loopholes to keep economic development information under wraps. As Megan Rhyme, executive director of the Virginia Coalition for Open Government, told me, “Whatever is allowed to be withheld before or after [ a corporate subsidy deal] is routinely interpreted as broadly as possible.”

The stated theory for the creation of these exemptions is that subjecting deals to public records requests and ultimately disclosures will put the state at a competitive disadvantage when competing for corporate investment. In reality, the effect is exactly the opposite: Blind auctions drive up the prices states pay for corporate subsidies, because more information being out in the open means less opportunity for corporations to play states and cities off against each other.

That’s one of the reasons the interstate compact against corporate tax giveaways includes transparency measures that would apply across states. States and municipalities sharing information in real-time would make things better for taxpayers, not worse.