Debt Traps by Necessity

San Jose     The Everett Program at the University of California at Santa Cruz specializes in technical solutions for social change organizations.  ACORN has enjoyed a partnership with the program for the last three years that has seen several students work with our hawkers union in Bengaluru the first year, another team work with the ACORN Home Savers Campaign in the USA last year, and this year work to produce PSAs to run for ACORN Honduras on television in that country.

Annually, I visit there when I’m in the California in order to meet the students face to face and move the partnership along.  This year was interesting not only as they showed me the progress on the video, but also talking to a class of Everett students about techniques to develop organizational commitment and how to develop campaigns.  I also interviewed several of our interns for Wade’s World.  The combination of these conversations may have been helpful to them, but the real eyeopener to me was the huge debt trap that seems almost inevitable for these students, even with their eyes open as well.

Having just done a campaign training in Oakland only days before on payday lending, I used that as an example in Santa Cruz as well.  The students told me that the average all-in cost for this public university was about $36,000 per year.  There is a housing shortage on campus where many of the common spaces are now bedrooms, and two-person rooms are now sleeping three.  In town, it’s no better.  Asking the class about their individual rents, the responses were as low as $750 for one young woman living with 7 or 8 others, but more commonly the rents per person ran from $1200 to $1400 per month.  The Census Bureau recently released a report indicating that the median rent is now over $1000 per month throughout the country.  A rent freeze measure on the ballot in Santa Cruz in the last election fell short along with the statewide expansion of rent control for additional cities.

Some students knew about payday lending, but that tended to be only the few who had come from lower income neighborhoods in California.  Most had bank accounts, but no one had a physical checkbook, and most claimed little experience with overdrafts since they lived out of the instantaneous information online on their balances, and banks blocked them going past the levels.  Asked how they picked their banks, one explained he was “born into it,” and others nodded in agreement.  Virtually all of them seemed to be facing the prospects of significant school debt when they would graduate.

Financial literacy is a fairly meaningless phrase when you really don’t have much money and are forced by necessity to embrace predatory products and debt prospects.  I thought about this reading about a migration of payday lending practices into lending arrangements for rent for millennials with irregular income.  An article in the Wall Street Journal described the companies entering this space:

Uplift, one of several startups offering loans to recent college graduates, professionals moving to a new city and others who want to build credit or could use assistance making rent payments. These companies, which also include Domuso and Till, are entering a market long associated with payday lenders. Compared with cash-advance loans, which come with annual interest rates as high as 700% in some states, funds from the rent-lending startups are available at much lower cost. Some are competitive with credit-card borrowing rates at less than 20%.

Reading that piece and thinking about what I was hearing from these young students, I couldn’t help thinking that I was working with minnows while the barracudas were circling.  It wouldn’t be pretty, and swimming in debt and desperation, too many of them will be easy prey through desperation rather than choice.

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Tax Subsidy Opposition and Community Benefits are Battling in California

San Francisco     The Inland Empire is largely Riverside and San Bernardino Counties in southern California east of Los Angeles.  Warehouses and distribution centers are the kings of this empire, workers and communities are too often the serfs and poor villagers.  In the last decade since the Great Recession new work in this section brought in 84,000 jobs, nearly a quarter of the region’s employment, averaging a little more than $15 per hour for a workforce population where 45% have no more than a high school education.  Amazon with a dozen warehouses in the area now is the largest Inland employer.

A community fight has now become public over a proposal to build a $200 million air cargo facility that claims it would eventually create 3800 jobs and deliver $6.5 million in revenue for a public airport on the repurposed site of a former Air Force base.  What’s the rub?  Community organizations such as Inland Congregations United for Change, part of the Faith in Action network (formerly PICO), want the guarantee of a community benefit agreement. Unions, like the Teamsters who represent many warehouse workers, want organizing neutrality to prevent wage erosion for their members.  Many elected officials want transparency on the incentive deals and negotiations for the highly secretive companies, including Amazon notorious for its additional headquarters search and its efforts to extract billions in tax breaks from New York City, and Google which has done the same for its server farms in scores of secretive deals around the country.

An article in the San Francisco Chronicle made it clear that despite all of the claims by the economic development and local officials, the community and unions are not opposing the project, but they are clear that they want real guarantees on job quality and community benefits, none of which are being assured them at this point.  State legislators have proposed bills on a variety of these matters.  One measure that has passed the state Assembly and is pending before the Senate would require any warehouse receiving more than $100,000 from local governments to at least be transparent about the number of jobs, wages, and other employment plans.  Another also moving forward would mandate public hearings annually on such incentive deals and whether or not they really deliver and, importantly, demand clawbacks if the job development and similar commitments are not fulfilled.  Similar bills were vetoed by former government Jerry Brown, but may have a better chance now in the changing environment on tax giveaways without any accountability.

Another issue, similar to the one where ACORN and our Walmart organizing project worked with the Teamsters and others in trying to win accountability in Merced, California when a huge Walmart distribution center was being built, is the environmental impact of thousands of diesel trucks coming through and polluting lower income neighborhoods, and in that case students at the new university location in Merced.  Similar concerns are being raised here about “diesel death traps,” and part of the controversy has been the quiet around the environmental impact statement done and released without any local attention in order to avoid public participation.

These fights are breaking out all over the country exploding the economic development hype about “low road” projects without community and worker benefit agreements.  Add the Inland Empire to any list of these battlegrounds, since warehouse and distribution centers are now front and center in the dispute.

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