Why One Town Said No to Corrupt Secret Subsidy Deals
Local lawmakers don't have to sit quietly and accept the status quo.
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Regular readers will know that one of the most outrageous tactics corporations use to extract subsidies from communities is nondisclosure agreements, or NDAs. Politicians and economic development bureaucrats sign binding contracts with specific corporations that prevent those politicians from divulging anything about the deal they are negotiating to the public, often including the very identity of the corporation in line to receive taxpayer funds.
These agreements are absolutely corrupt, and the public hates them, yet they persist because of the political capital and campaign donations that subsidy deals allow politicians to build and collect. Many times over the last few years, I’ve watched elected officials vote to approve corporate subsidy packages in which they either weren't allowed to divulge or literally didn’t know the recipient due to the existence of nondisclosure agreements.
But that’s not how it has to be; the secret corporate subsidy machine is not some immutable fact of economic and public life. In fact, officials in one Michigan town — a state that abounds in shady corporate subsidy dealings — recently reacted in a way that, I believe, normal voters would find much more appropriate: By excoriating the existence of these nondisclosure agreements and handing an earful to the local economic development bureaucrats who signed them.
Durand, Michigan, which is about an hour and a half northwest of Detroit and 40 minutes northeast of Lansing, is a town of about 3,500 people. It is also home to what’s known in the economic development parlance as a “mega-site”: The potential location of a large facility, usually geared toward manufacturing. Both the state economic development agency and the local one, known as the Shiawassee Economic Development Partnership, or SEDP, have been hyping the site and looking for a tenant to take it over.
And that’s where things got heated: Durand was a founding member of the SEDP. But employees of the SEDP recently signed nondisclosure agreements with a corporation, which appears to be the electric vehicle battery manufacturer Factorial Energy, in order to grease the skids for a potential deal on said mega-site. Those NDAs required the SEDP to literally boot the mayor and city council of Durand out of a meeting back in July, because those elected leaders had not signed NDAs, and thus were not allowed to hear some of the details that would be discussed, despite them being the ultimate deciders on local policy.
Durand’s leaders did not like that so very much, saying, according to a local news report, that the NDAs “diminished the trust built between the city and the SEDP over the past 21 years and made the council members question who it was the SEDP was working for.”
“It really irked me when I had to leave the meeting,” explained Durand Mayor Jeff Brands. “It doesn’t matter what kind of agreement you made with the [Michigan Economic Development Corporation]. It doesn’t mean jack. Us sitting behind this desk and those sitting behind the desk at the township make the final decision and we got kicked out of a meeting in our own building.”
Ultimately, the town council voted unanimously to remove Durand from the SEDP entirely, in favor of direct negotiations between the town, state officials, and the corporations who want to move in.
According to local reports and some local Facebook group chatter, the Durand council clearly and correctly feels NDAs are being used to hide negotiations about a potentially unpopular project in a way that could hurt them both politically and economically. Indeed, there is local opposition to Factorial Energy, which by my quick survey seems to fall along the lines of legitimate concerns about secrecy and the environmental effects of whatever plant is planned, and then some general anti-electric vehicle sentiment that is occurring in conservative circles.
The latter, I personally find unhelpful for the world, because electric vehicles are a key part of addressing our climate problems. Be that as it may, though, there are very important reasons to be wary of the deals states and cities are making with electric vehicle manufacturers and their suppliers.
As Good Jobs First recently noted in a report, loads of money is flowing into electric vehicle deals from the public: “Adding together federal, state, and local support yields subsidies ranging from $2 million to $7 million per job. And those are undercounts given that some forms of state and local support remain undisclosed and more federal money is inbound.” Those deals aren’t including particularly high standards for wages, job creation, or community benefits.
Indeed, we should all be wary of the electric vehicle race to the bottom at the state level, where the best of intentions regarding climate and energy policy is being implemented on the backs of the public in ways that aren’t fair for local communities or workers.
The switch to EVs is also one of the issues driving the recent autoworkers strikes, for the same reason: The energy transformation that needs to happen is going to occur due to workers, not in spite of them, so they should be the ones to benefit from all the money sloshing around, not the executives in the C-suite.
But I don’t want to turn this into a bad news story, though bad news abounds in this area. It was, for once, good to see local officials point out the obvious: That nondisclosure agreements in economic subsidy deals are outrageous and worth being upset about, not just a normal part of doing business.
SHAMELESS SELF-PROMOTION: Speaking of nondisclosure agreements in corporate subsidy deals, I went on the Mackinac Center’s Overton Window podcast to discuss the effort to ban them. You can give it a listen here.
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— Pat Garofalo