In its lawsuit, Ypsilanti Township argued that, by accepting the tax abatements, General Motors had entered into a contract with the government. Shelton noted in his opinion that while about 30 states do treat tax abatement agreements as contracts, he was forced to reject the town's argument under Michigan state law, which, he wrote, "unwisely did not intend to create contractual rights for the state or its subdivisions." The judge, however, held that GM is bound to remain in Ypsilanti by promissory estoppel, a legal doctrine that says if favors are granted as a result of a promise made, then the promise must be fulfilled. "My conscience will not allow this injustice to happen," Shelton said in issuing his ruling.
General Motors immediately appealed Shelton's decision, and it is likely that the ruling will be overturned. But the case, and the judge's opinion, are significant in pointing to the economic stranglehold large corporations have over U.S. communities.
"There would be a gross inequity and patent unfairness if General Motors, having lulled the people of Ypsilanti into giving up millions of tax dollars which they so desperately need to educate their children and provide basic governmental services, is allowed to simply decide that it will desert 4,500 workers and their families because it thinks it can make the same cars a little cheaper somewhere else," Shelton wrote.
GM's behavior in Ypsilanti has been particularly appalling. In December 1992, the company announced it would close down either the Michigan facility or a plant in Arlington, Texas, pitting the two communities against one another in a bid to save their respective plants. Arlington workers agreed to accept special shift arrangements, allowing GM to operate the facility 24-hours-a-day.
"General Motors is not closing this plant because there is no demand for the cars," Shelton wrote. "It simply has chosen to transfer the one shift of production of those cars to add a new third shift at another plant." Arlington, along with the county and Texas state governments, also gave GM about $30 million worth of tax abatements and other incentives.
Ypsilanti and Arlington are symbolic of the vast numbers of U.S. communities which feel forced to sacrifice social services and their children's education to corporate blackmailers. Corporations now routinely demand tax abatements before committing to opening new facilities, and frequently threaten to close existing ones unless they receive tax breaks. The threat of job loss, of relocation to lower-wage communities or countries (particularly Mexico in light of the upcoming North American Free Trade Agreement) pressures workers to make wage and benefit concessions, and communities to mortgage their futures.
The Ypsilanti case should be the harbinger of new assertiveness by U.S. workers and their families, and a new refusal to let corporate moguls roll over their towns. Immediately following the Shelton ruling, Boston Mayor Raymond Flynn asked the Massachusetts attorney general to investigate bringing a similar action against Digital Equipment Corporation which is planning on closing a Boston plant and laying off 190 workers. With nothing left to lose, communities may finally begin to demand some security in exchange for years of accommodating corporations.
The Ypsilanti experience demonstrates the futility of the tax abatement strategy - there is always another city or town willing to offer even greater concessions than the last. And, in any case, most corporate decisions about plant location are based on internal business concerns of far greater magnitude than the amount of state or local taxes avoided.
Government officials and community activists should develop new strategies to prevent corporations from playing communities against each other and to change the societal understanding of what companies owe to the communities in which they reside. They should look to Shelton's opinion and its sense of moral outrage as the basis for developing more equitable relationships with large corporations which all too often consume and then abandon communities.