Welfare for DaimlerChrysler

Increasingly, the citizens of Toledo, Ohio, are making connections between their daily lives and corporate welfare payouts, thanks to the recent provocations of DaimlerChrysler, which is sitting on $20 billion in cash, and its buddy Toledo Mayor, Carty Finkbeiner, who is sitting on a financially crumbling city government.

The residents are seeing the emergence of an enormous double standard where a giant, powerful corporation is given a ten year tax free holiday, is given free land, free water, and free site preparation for an expanded Jeep factory, while families, small businesses and children suffer the burdens and pay the tax freight for the bosses from Stuttgart and Detroit. What’s more, the people of Toledo are required by the one-sided November 1998 deal with the city to assume all environmental liabilities.
In return DaimlerChrysler agreed to maintain a declining number of jobs while making a whooping profit. If the company does not hold to its promise of retaining those existing 4900 jobs, the City can do nothing and take back nothing from its huge $280 million giveaway.

The automaker knows something about building cars, but it knows far more about how to construct a one-way street.

The area that DaimlerChrysler coveted did have a problem, however. People lived in a corner — about 80 houses and several small businesses. There was in the rest of the 200 plus acre tract plenty of space for the new plant and the truck staging areas. But the occupied corner nicely rounded out the geometry of the tract, and on one Chrysler map, was designated for landscaping or shrubbery.

This did not sit well with long time homeowners like Mary Ebright and the Robie family. For many years, this closely knit neighborhood never dreamed that the City could ever condemn their property and then turn around and give it to a big private business.

Well, they were mistaken. The Mayor told them that their houses and small businesses would have to go, and that they better agree on a price before condemnation proceedings commenced. Most of the homeowners agreed to modest payments and some saw their homes bulldozed after they moved out. Others held on for months and ended up getting a better price from the City. Note that Toledo taxpayers had to pay for these properties, not the bulging treasury of DaimlerChrysler.

A few months ago, I called an executive at the auto company and asked why his firm would not agree to do what every homeowner and small business (that also generate jobs) have to do in Toledo — pay property taxes for the schools, police, fire etc., and pay for their own improvements or expansions. His reply exuded the usual slogans about having to be competitive, meaning other big and powerful companies do this to their communities.

What this assertion boils down to is that a big and powerful corporation can bring a town to its knees and receive huge subsidies just by threatening to locate or move elsewhere.

Big Business freeloading is upsetting some Republicans in Congress, especially Cong. John Kasich (R-OH), chairman of the House Budget Committee, who held hearings last June critical of many forms of corporate welfare.

But it is more specifically upsetting to the members of the Toldeo-based Phoenix Earth Food Co-op. They issued a statement of what the consequences to their town will be because the Mayor decided to turn DaimlerChrysler into a tax escapee and immunize it from many other ordinary costs of doing business.

They said their public schools are running a $3 million deficit, badly need repairs and the city government gives tax holidays to “mega bucks corporations. Residents pay more taxes, corporations go free.”

The members’ statement decried the rising rates for water usage, while DaimlerChrysler gets free water. They noted that their city, even with state and federal subsidies for the deal, may not be able to meet its fiscal obligations under the arrangement with the big auto maker. As taxpayers they wondered about the cost of all environmental liabilities “now and in the future” and what incentive is that for the auto company to protect the environment?

Summing up their dismay, they declared: “Our tax dollars are used to downsize, worker-residents lose income (jobs) and the City loses even more tax revenue. Every one loses, except DaimlerChrysler.”

Indeed, the declining number of jobs is already evident at the existing Jeep plant and the number of promised retained jobs has been cut as well.

On December 8, 1999, the people fought back. Represented by local attorney, Terry Lodge and Law Professor Peter Enrich, taxpayers, residents and small businesses filed a lawsuit against DaimlerChrysler, the city of Toledo and the state of Ohio challenging the constitutionality of tax subsidies to companies that are conditioned on location of facilities in Ohio.

By conferring preferential tax treatment on in-state business, the suit maintains, Ohio law “discriminates in favor of in-state business activity and against out-of-state activity, in violation of the restrictions imposed on discriminatory state taxation by the commerce clause of Article 1, section 8 of the U.S. Constitution.”

This is a groundbreaking case based on a celebrated Harvard Law Review article (Dec. 1996) by Northeastern University law professor Peter Enrich. When politicians, laws and corporate lobbyists run roughshod over basic rights of innocent people, the last resort for justice is our Constitution.