Whirlpool Corp—A Michigan Job Creation “Success Story”: Dodging Taxes & Profiting from Poverty

by Chris Savage

I have been following and writing about Public Act 4, the Emergency Manager law, since it was passed in March of 2011. The first impacts of the changes made by this law hit in Benton Harbor, Michigan. A tiny town on the shores of Lake Michigan, it has only 10,000 residents according to the 2010 census with over half of the people living below the poverty line.

Yet in the middle of this desperate town sits the world headquarters of Whirlpool Corporation. Even through the recent recession, the company consistently posted profits north of $200 million per quarter. Though they once employed a significant number of Benton Harborites, this is no longer true — manufacturing there ended in early 2011. The headquarters, however, is growing and construction is in progress.

How is it that a successful company like Whirlpool remains in a place like Benton Harbor, with all of its poverty and despair? The answer is that it has been and continues to be highly profitable for the company to do so. Though the company employs few locals, Whirlpool has much to gain from exploiting the poverty of Benton Harbor as the gentrification of the city rushes forward.

Jonathan Mahler of the New York Times Magazine recently wrote a comprehensive piece about the plight of Benton Harbor. I gave his piece a good review, and was able to guest-post a piece on the Times Magazine’s The 6th Floor Blog, where I talked more broadly about the impact of P.A. 4 on Benton Harbor and our state. Mahler concludes that although Whirlpool isn’t necessarily the “good guy,” it would like everyone to believe it is; the company may, in fact, be the only answer for Benton Harbor.

In an essay for In These Times, Roger Bybee takes strong exception to this conclusion:

Despite Mahler’s moving and insightful description of a de-industrialized city being re-shaped by those who destroyed the economic base, with the victims being deprived of any voice, he fails to point out several fundamental features:

• Those harmed most by past corporate decisions are treated as disposable people standing in the way of corporate-defined reconstruction.
• Democracy and public participation are early victims to this process.
• With corporate elites having shrunken government’s public-interest role in planning and economic development, major “job-creation projects” must be shaped around generating profit with the needs of the majority a negligible concern.

But despite all the rhetoric about corporations rushing to the rescue of troubled cities–whether New Orleans, Benton Harbor, or Racine—massive public subsidies to CEOs advocating “free enterprise” are an essential element.

It’s a formula for private benefit with public funding, for a distorted form of “development” devoid of democracy or public benefit.

Bybee’s piece is compelling and suggests a closer look at the role that Whirlpool has played (and is playing) is warranted.

Whirlpool’s exploitation of the situation in Benton Harbor likely goes back more than a decade, but we can start with the turn of the millenium. A former official with the Southwest Michigan (SWM) Airport board recently told me that Whirlpool benefited significantly from a connection with U.S. Congressman Fred Upton:

I am a former elected and appointed official from Stevensville who was on the SWM airport board. While I appreciate that you expanded the facts for Rachel Maddow’s show, there is much more. During the time I was serving, I had a considerable number of flights in and out of that airport. It is not well known that Northwest airlines received a ticket subsidy for every seat in and out of the airport. That lasted for two years, which is just the time the airport serviced the public commercially. It was required to service commercially in order to receive federal funding for the airport’s runway extensions and electronic navigation aid updates. Of course, this coincided with Whirlpool’s purchase of a new jet which required a longer runway and new navigation electronics. The person who supported the bill to subsidize the tickets? Fred Upton.

You mention the upgrade of local property values, and do not mention the Upton’s property in close proximity (2 blocks).

While nothing is illegal about these things, I just felt that the focus has been on benefiting Whirlpool and Whirlpool’s heirs, and not the general population. I [have connections] with the Uptons in northern Virginia, so this is not a personal attack, just an observation. For so long in Congress, I am really surprised at the fiscal conservatism applied to the constituents and not the person or the corporate beneficiary.

[A2P Notes: According to campaign finance information, Whirlpool’s PAC has donated $84,170 to Upton’s campaigns, putting Whirlpool’s PAC at number four on the list of the Congressman’s top donors, behind AT&T ($99,600) and the Ford Motor Company ($86,900).]

Indeed, in addition to the ticket subsidies, the SWM Airport received an earmark for fiscal year 2011 as part of a nearly $1 billion allocation in discretionary grants, which coincides with the expansion of the runway.

Whirlpool is also an integral part of a development group in Benton Harbor known as the Cornerstone Alliance. In fact, many would argue that Cornerstone Alliance is Whirlpool. Non-profit, investigative reporting site TruthOut.org reported in May 2011: “To keep a clean public image, Whirlpool funds and largely controls a nonprofit in Benton Harbor called the Cornerstone Alliance, which has a revolving door with Whirlpool and the Whirlpool Foundation for its staff members and employees. Cornerstone has long served the interests of Whirlpool in Benton Harbor, creating a façade through which the company can pass off its actions as being in the interests of ‘the community.'”

Cornerstone Alliance has been aggressively developing whatever property it can procure in Benton Harbor. The company is the developer of the Harbor Shores luxury golf community that has received a great deal of attention, in part because developers convinced city officials to lease part of Jean Klock Park to them.

Jean Klock Park was deeded to the city in perpetuity but with the help of a city attorney who later went to work for Cornerstone, they secured a decades-long lease for three holes of their Jack Nicklaus Signature golf course. In the process, acres of shoreline dunes were deforested for a golf course where the annual fee exceeds the average annual income of Benton Harbor residents. An interactive panoramic of the area affected can be seen HERE. Before and after pictures can be seen HERE (courtesy of Protect Jean Klock Park.)

In exchange for this precious piece of public land (which is the primary reason Harbor Shores can be called “Shores”) the city exchanged land later found to be highly contaminated with industrial waste:

To compensate for the project’s reduction of public parkland, developers have promised to create a new bike path and trail system on a string of parcels along the Paw Paw River and around Benton Harbor. A good bargain if you can get it.

But these properties contain unsafe levels of industrial waste, according to documents recently released by the state in response to Freedom of Information Act (FOIA) requests by project opponents. Critics of the Harbor Shores project say that details of the contamination raise new questions about the propriety of the deal — the land was represented by developers as of equal value to the lakefront park, they say, and creating a construction zone on contaminated land could spread pollution and endanger wetlands.

An April 2, 2007, letter from a hydrologist with the company Earth Tech — stamped “received” by the Department of Environmental Quality on April 5 — states that pollution on the parcels exceeds levels considered safe by the state. The pollutants identified include lead and arsenic, volatile organic compounds and polynuclear aromatic hydrocarbons.

In other words, Whirlpool’s development arm exchanged contaminated land for pristine duneland on the shore of Lake Michigan.

Whirlpool-backed Cornerstone was also able to procure brownfield redevelopment grants from the State of Michigan to redevelop other contaminated areas, shifting the cost of the clean-up to Michigan taxpayers.

Whirlpool-backed Cornerstone is involved in many other development projects in the city, as well. They have benefited tremendously from the fact that Benton Harbor was a Renaissance Zone. This makes development activities virtually tax-free. However, the developments being pursued do not benefit the poor people of Benton Harbor, they benefit the wealthy developers hoping to make a killing from the Harbor Shores development and the boon they count on it creating. Cornerstone’s “non-profit” status is crucial to this.

The siphoning of public monies through the Cornerstone Alliance continues today. In November of 2011, they received stimulus funds to build 17 homes in a downtown area of Benton Harbor—a development they are calling “Harbor Town.” Unlike the luxury vacation homes being built in Harbor Shores, these more modest homes, less than two dozen of them, will be worth in the area of $125,000 — still far too pricey, however, for most of Benton Harbor’s residents.

Taxes, by the way, are something that Whirlpool doesn’t have to contend with much. Through countless efforts to keep them in Michigan, the company has received a multitude of tax breaks. They received a huge tax break under the Granholm administration when they agreed to build a new headquarters. The city itself has given them significant tax breaks. In fact, Whirlpool not only hasn’t paid a dime in taxes in over three years: In May 2011 Think Progress reported that Whirlpool is one of the country’s many corporate tax dodgers paying no federal taxes for the previous three years, and in 2010 receiving a $64 million dollar tax refund.

Even now, with Benton Harbor under the control of an Emergency Manager, Whirlpool and Cornerstone continue to harvest development funds from the destitution of the city. City Commissioner Marcus Muhammad and others are questioning how such a profitable “non-profit” can be using HUD funds for their own benefit while just blocks away are neighborhoods full of poor families, abandoned homes and desolation. From a November Herald-Palladium article (no longer online but excerpted HERE):

The Benton Harbor City Commission wants an investigation into agreements over city property between Cornerstone Alliance and Emergency Manager Joseph Harris.

The commission unanimously passed two resolutions Monday night – one that asked for an investigation of Cornerstone Alliance by the U.S. Attorney General, Michigan Attorney General and the FBI, and a second that asked for an investigation by the Michigan Attorney General, the U.S. Attorney General and the IRS into the city’s water rates. […]

Harris has said the city’s water rates will increase by 50 percent, and could increase by up to 100 percent.

The commissioners questioned the legality of raising rates by that much.

[Commissioner Marcus] Muhammad read from a list of 87 Cornerstone Alliance-owned properties that he said the organization is not paying taxes on. About 70 of the properties are in Benton Harbor, while the remaining on the list are in Benton Township and St. Joseph. […]

Muhammad said Cornerstone Alliance has gotten millions of dollars in developer fees for its role in the Neighborhood Stabilization Program 2 while paying $1 for property.

“What kind of corruption and organized crime is that?” Muhammad asked.

Whirlpool/Cornerstone clearly would like to reshape Benton Harbor in the image of its sister city across the river, St. Joseph. The contrast between the cities is stark, with Benton Harbor’s population 89+ percent African American and poor and St. Joseph’s population 88+ percent white and wealthy. Cornerstone had the audacity to make a game out of getting community members to highlight the worst places in Benton Harbor. In the May issue of their newsletter Cornerstone Chamber Insider (pdf) they introduced a project called “75 Viewpoints.”

Click for larger image

The Good, Bad, & Ugly . . .
If you have a camera, an opinion, and a little free time, you can play a critical role as a catalyst for change right here in Michigan’s Great Southwest. Cornerstone Alliance has launched “75 Viewpoints,” a dynamic project designed to point up the good, bad and ugly of our area as we work to maximize the first impressions of golf fans from around the world who will be visiting the 2012 Senior PGA Championship presented by KitchenAid at the Golf Club at Harbor Shores. Volunteers are being asked to take 10 to 25 photos of things in the area that drive you crazy and need to be fixed…and another 10 to 25 photos of things around town that they love and would like to see more of. It’s actually a project that your entire family can take part in. So, what are the amenities that we love, and the eyesores that need to be remedied or eliminated? If you would like to be one of the 75 people offering their viewpoints, please fill out the form that accompanied this newsletter, or contact Jamie at 269-757-0207.

Whether or not Jonathan Mahler is right about Whirlpool being the salvation of Benton Harbor remains to be seen. What is clear is that, if they are, it will be because they have very deliberately used the city’s desperate situation, in part caused by Whirlpool’s outsourcing of manufacturing jobs to other countries, to direct taxpayer monies into their own bank accounts. If Whirlpool saves Benton Harbor, it will likely because they were able to steal Benton Harbor from the largely black, poor residents who live there—a scam underwritten, in part, by taxpayers.

Maybe they’ll rename the town Upton Harbor.