Meet A Corrupt Company Town

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During the 2020 election, Disney bought itself the Anaheim City Council, ousting a group of reformers who wanted to cut off the flow of favors running from city hall to Disneyland and its surrounding attractions. At the time, I called Anaheim “a modern company town,” one where big business doesn’t literally own everything, but figuratively owns the mechanisms for decisionmaking and bends policy to its own ends.

But I didn’t know how close to the mark I actually was. Disney and the Anaheim Angels, the Major League Baseball franchise that Disney once owned, are currently at the center of a corruption scandal in Anaheim that has already resulted in the resignation of the city’s mayor.

According to documents from an FBI investigation, there is a “cabal” of elected officials and business leaders in the city, including a Disney representative, “who allegedly meet privately to influence public policy decisions.” In the investigative documents, Disney is identified as “Company A,” shaping fiscal, labor, and tax policy in the city.

One of the chief concerns about the stuff I cover here in this newsletter is that it results in an economy that works for no one but the biggest corporations. But those same policy choices, as Anaheim reveals, result in a democracy that only works for the biggest corporations, as well. Anaheim is a vital warning to anyone concerned about good governance and fair economics: Get your politicians out of the big subsidy business and away from too-cozy relationships with massive corporations.

To catch you up, now former Mayor Harry Sidhu resigned due to an investigation into an allegation that he helped craft a sweetheart deal for Angels owner Arte Moreno, selling him the land the Angels’ stadium currently sits on at a very steep discount, in return for a $1 million campaign contribution.

Disney, meanwhile, spent big in city elections in 2018 and 2020, dumping loads of money into city council races in order to oust antagonistic councilors, thus protecting its access to local subsidies and enabling it to beat back an effort to levy an additional pandemic-related fee on park visitors. The most dismaying stat from the 2020 election is that Disney alone spent six times as much on flyers and phone banking for one of its favored candidates as the incumbent council member spent on her entire campaign.

That spending bought Disney and other corporations “cabal” access, which it turned into episodes like this:

In March of 2021, an Anaheim City Council member read from a script at a council meeting in favor of issuing more than $200 million in municipal bond debt to help make up for pandemic-related revenue shortfalls.

The script, according to the FBI affidavit, was written by an unnamed political consultant who did work for Disney, with input from Ms. Nocella. Later, the consultant asked the city council member’s office to edit the script so that it wouldn’t mention a Disney-owned parking facility, according to the affidavit.

A similar situation exists in Florida, where Disney uses political donations and a web of trade associations and front groups to wield its influence on everything from labor rules to land use to preemption of local ordinances that would harm its bottom line.

The clear nexus here is between public subsidies, private campaign donations, and other policy favors, a connection which academic research has found is very real and problematic. One study last year found that more corporate subsidy spending in a state results in higher campaign contributions for incumbent politicians. Specifically, when a state starts dishing out “large” subsidies — defined as a big jump from the historical baseline — then:

Annual campaign contributions increase by approximately 38.4% (or $738,100) in the average state from construction and labor unions, 20.5% (or $158,600) from lobbyists and lawyers who represent large firms in the political process, and 106.8% (or $122,000) from large business advocacy and trade organizations.

Another study found that if a corporation makes state-level campaign contributions, it “is nearly four times more likely to receive an [incentive] award, and the award is 63 percent larger.” And finally, a 2016 study found “that a greater number of lobbyists and campaign contributions from businesses leads to more subsidy spending, all else equal.”

These numbers should all make intuitive sense: Corporation-specific incentives, by necessity, require a too-cozy relationship between elected officials and corporate leaders, so when the subsidies flow, so too do the re-election efforts.

But that coziness also leads to overt corruption, which is plain to see in Anaheim, the Buffalo Billion fiasco, or an Iowa film tax credit corruption scandal that wound up with the program’s head convicted of felony misconduct.

This isn’t just anecdotal. I have numbers here, too. According to a study by the Kansas City Federal Reserve, places with more “troubled political cultures” spend more money on corporate subsidies. Specifically:

Cities and counties in states with troubled political cultures demonstrate the greatest willingness to offer business development incentives, the evidence indicating that increasing the rate at which government officials are convicted of federal corruption crimes by 1 per 100,000 residents over a 13 year period is associated with a 2.9 percent greater chance that a community will offer business incentives.

So according to the history and the academic research, Anaheim’s situation is exactly what we should expect when cities spend so much on massive subsidies and other favors for big corporations: Those corporations then become the de facto government, shaping decisions out of the public eye, and walking off with public resources.

As the dollar amounts of these deals climbs and the use of restrictive contracts in them grows across the country, I’d expect to see more Anaheims come out of the woodwork.

But there are things to do, rather than wallow in the doom of it all. Help elect better people. Use open records and open meetings laws to your advantage. Push for better rules at all levels of government, and diversified economies that support small businesses, thus spreading out the power that any one business or industry can exert on lawmakers.

Communities can take on the Amazons and Disneys of the world and win. We all just need to share the resources and tactics that make those wins possible.

This post initially appeared in a slightly different form on the author’s Substack, Boondoggle, on June 2, 2022.

Pat Garofalo is the author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, the Boondoggle newsletter, and the director of state and local policy at the American Economic Liberties Project.