Come for the politics, stay for the snark.

A lot of Dems talk about what the media tells them to talk about. Not helpful.

Come for the politics, stay for the snark.

The worst democrat is better than the best republican.

Putting aside our relentless self-interest because the moral imperative is crystal clear.

I was promised a recession.

They fucked up the fucking up of the fuckup!

Despite his magical powers, I don’t think Trump is thinking this through, to be honest.

This fight is for everything.

I see no possible difficulties whatsoever with this fool-proof plan.

Hot air and ill-informed banter

Today’s GOP: why go just far enough when too far is right there?

When someone says they “love freedom”, rest assured they don’t mean yours.

A last alliance of elves and men. also pet photos.

Meanwhile over at truth Social, the former president is busy confessing to crimes.

Schmidt just says fuck it, opens a tea shop.

Perhaps you mistook them for somebody who gives a damn.

Something needs to be done about our bogus SCOTUS.

Thanks to your bullshit, we are now under siege.

Reality always lies in wait for … Democrats.

Consistently wrong since 2002

I like you, you’re my kind of trouble.

If senate republicans had any shame, they’d die of it.

That’s my take and I am available for criticism at this time.

Balloon Juice has never been a refuge for the linguistically delicate.

You are here: Home / Economics / Free Markets Solve Everything / IDA Toxicity

IDA Toxicity

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I want to follow up on this post about Amazon announcing that they’re bringing jobs to New York. There were two major critiques of AOC’s victory lap:

Amazon promised 25,000 jobs, this announcement is 1,500, so this is not a win. This one is easy for anyone who knows the history of these IDA (Industrial Development Authority) deals. The job promises are over a period of time (in this case, apparently, 10 years), and the promises don’t have to be kept. Amazon apparently promised 700 jobs the first year, so 1,500 is arguably better than what the original deal would have yielded.

The most important point is that whatever Amazon promised in return for $3 billion in tax breaks, these deals don’t have any penalty for companies that don’t create the promised number of jobs, so Amazon could have promised 100K jobs, delivered a small fraction of those, and paid no New York taxes for years.

Amazon is taking office space in a complex that is the recipient of tax breaks so it’s not as big a win as it could be. This one seems to be reaching, since these IDA deals are almost ubiquitous for large projects, so it would be hard for Amazon to find space that wasn’t the beneficiary of some deal or other. And, at least an IDA didn’t shell out $3 billion more in tax breaks to get Amazon to come to town.

There’s something more important than the details of the Amazon deal itself – there’s the toxic environment surrounding these IDA tax breaks and the Hunger Games lotteries that they engender. When Amazon announced the deal, all of the well-paid development marketers for our area (the Chamber of Commerce and other booster entities), fell all over themselves to show that they were competing for Amazon’s HQ2. The local paper dutifully wrote stories taking the bait, showing how, if you look at the Amazon deal in just the right way, Rochester could qualify. When Amazon chose NYC, these stories took on a tone of self-flagellation about our inadequacy and failure.

What’s taken for granted in all of the publicity around HQ2 is that this is the way business is done. Business isn’t a large corporation choosing to site a facility somewhere that has a good pool of technical employees, good housing and good transit. Rather, its a contest to see which locales can cough up the most tax breaks and other goodies to entice the corporation to come to their town. I can’t hate the player here–Amazon just took the usual IDA game and brought it to another level. But let’s give the politicians and activists who opposed the Amazon deal in NYC their due, because it would have been pretty easy to sit on the sidelines and treat IDA-style development as just part of doing business.

By the way, I’m writing from the perspective of Rochester, which is awash in IDA deals, and there’s been a pretty significant backlash against them here. Some of that backlash is driven by examples of IDA deals that yielded almost no new jobs, or money that was supposed to go to new, risky businesses that instead go to fund expansion of existing businesses like the nicest health club in town. After those deals were exposed, some of the relatively timid local politicians here are opposing them, or at least calling for reform. That’s huge in an environment where these deals used to be announced with big fanfare for the politicians involved, after which they failed in obvilion.

In short, these deals are generally bad for taxpayers, and they don’t generate many new jobs. As voters become more educated about them, they will become politically unpopular. It’s good to see some Democrats leading on these issues, despite the flack they received.

Reader Interactions

53Comments

  1. 1.

    debbie

    In short, these deals are generally bad for taxpayers, and as voters become more educated about them, they will become politically unpopular.

    I was unemployed for a year and a half. This statement would have made my impoverished head explode.

  3. 3.

    Barbara

    I have no insight but I suspect Amazon knew all along where it wanted to move and undertook the beauty contest to see how much they could get from those locales.

  5. 5.

    debbie

    @Barbara:

    Exactly. Negotiations always start with asking for more than you know you will get. Everyone should just have let things take their course and skipped all the outrage.

  6. 6.

    joel hanes

    OT:

     

    Says here in the Houston Chronicle that Beto is working to flip the lower house of the Texas Legislature:
    https://www.houstonchronicle.com/news/politics/texas/article/Democrat-Beto-O-Rourke-turns-his-attention-to-14876379.php

    and here’s the site where you can donate to FLIP The Texas House
    https://flipthetxhouse.com/

     

    I need hardly point out to the esteemed jackaltariat that the Texas House is where apportionment districts are drawn, and that flipping Texas would go a long way toward ridding us of GOP misgovernance.

     

    You know what to do.

  7. 7.

    pika

    “nicest health club in town”–I knew exactly which one you meant, and I had no idea they’d gotten IDA tax breaks (I just googled).

  8. 8.

    EthylEster

    @Barbara: I have no insight but I suspect Amazon knew all along where it wanted to move and undertook the beauty contest to see how much they could get from those locales.

    Yes. But they are following a trend. And I don’t like the trend. To build a successful business you have to take risks. Not cajole folks into leveraging that risk. After all, you will not be sharing your profits with the community.

  9. 9.

    Baud

    My only issue is that there’s no evidence of a “cave.” If you think AOC was right (or wrong) to oppose the original deal, then nothing in Amazon’s announcement changed anything about that.  Maybe we’ll know more in 10 years, but speculating about alternative universes where the original Amazon deal went through is a waste of time.

  10. 10.

    WereBear

    I was part of the coalition to keep Wal-Mart out of our little town. What really turned the tide was revealing a local legislature member took money to “help” and now we have an Aldi instead.

     

    Which is standard WM procedure

  12. 12.

    Luthe

    Here in NoVa, Amazon has started trying to buy off the locals and the neighbors with donations to charities and Affordable Housing Trust Funds. Of course, the $300,000 here and the $20 million there are pocket changes compared to tax incentives they got (and the new Metro station and Virginia Tech innovation campus).

     

    Everyone here is holding their breath to see what kind of shit show this turns into.

  15. 15.

    MomSense

    Hillary actually had a smart way to deal with this. If a company accepts city, state and/or federal tax breaks to move to or stay in an American city and they decide to leave (usually when those tax breaks expire) that company has to reimburse the city, state, and feds for those tax breaks.

  16. 16.

    oldgold

    Bezos has built a better mouse trap and Americans are beating a path to Amazon’s door. Fine.

     

    But, for our federal, state and local taxing regimes to rig the system to Amazon’s advantage is not fine.

     

    Amazon, making piles of money, heavily dependent on taxpayer financed infrastructure, no viable opportunity to operate abroad and each year shuttering a huge swath of formerly tax paying entities is being excused by starving taxing authorities at the local, state and federal levels from paying their equitable share of taxes? Crazy and corrupt!

     

    That expressed, at all levels of  we need to re-think how we finance government.

  17. 17.

    Amir Khalid

    Ahem. If I may, a small correction: Per the Cambridge Dictionary, a flack is

    a person chosen by a group or organization that is in a difficult situation to speak officially for them to the public and answer questions and criticisms.

    The word you were thinking of is flak, with no C.

  18. 18.

    Juice Box

    It makes me extra happy when cities and states refuse to provide the subset of IDA-like deals that build the NFL and MLB multi-billion dollar facilities to funnel cash into their billionaire owners pockets. Jobs? A dozen Sundays per year?

  19. 19.

    Barbara

    @debbie: I think some localities lose sight of their own leverage — plus or minus.  There are a lot of reasons why Amazon was never going to go to Pittsburgh or Richmond, and there are  a lot of reasons why Arlington (for one) would be willing to strategically offer Amazon some amount of inducements.  For one thing, any space in Arlington that is owned by the federal government already pays no taxes.  Getting a commercial owner or tenant is a plus right there.  Which isn’t to say that AOC was not right about LIC.  I think she was rather dead on.

  20. 20.

    Amir Khalid

    I’m amazed that cities and states in America are still willing to take that sucker bet on a big corporation’s willingness to keep promises or stick around.

  21. 21.

    J R in WV

    15 Flush Mistermix:

     

    About that 10 or 15 flush slogan of Dear Flush Leader — what the hell is that demented old fart talking about? What does he imagine in his demented pea mind about flushing? Or is it a sign of his terrible eating habits and the effect on his bowel habits?

     

    @oldgold:

     

    I’m sorry to have to inform you, but Amazon is selling in other locations besides the US… I order occasionally from them when I have trouble finding something I need in the local stores I shop at.

     

    I do order e-books from them to keep my reading habit fed, I read a whole lot, especially when I’m not mobile for one reason or another. And we just don’t have room for physical books any more, the shelves, hundreds of linear feet of shelves, are full, and I am surrounded by chairs with books stacked on them, it had to stop.

     

    I just don’t know what to think about nut-job Leader any more. 15 flushes? Whut?

  24. 24.

    WereBear

    @WaterGirl: haven’t in years.

     

    Amazon I handle by trying to get it locally, first. Since the brown truck is coming here anyway, it’s a smaller footprint than driving two hours round trip. And still not finding it.

  25. 25.

    Raven Onthill

    @oldgold: “Bezos has built a better mousetrap and Americans are beating a path to Amazon’s door.”

     

    Well, hey, using sweatshop labor saves money. Without the ability to run dangerous workplaces and evade minimum wage laws would Amazon even be successful? By the way, their cut-rate high-pressure delivery service brings the danger right to your front door, too.

     

    (I found a clutch of links on the problems of their delivery service. Guess I have to do another post, to add to the one on the dangers of their warehouses. This one recounts especially outrageous abuses: https://www.buzzfeednews.com/article/carolineodonovan/amazon-next-day-delivery-deaths.)

  26. 26.

    germy

    @WereBear:

    and now we have an Aldi instead.

    We have an Aldi, but it’s about a 15-minute drive to get there.  Meanwhile, there are two (2!) “price-choppers” (now reinventing themselves as “Market 32s”) within walking distance of our house.  Everything is literally two dollars more expensive at the stores I can walk to.  I wish one of them was an Aldi.

  27. 27.

    Luthe

    @Barbara: The key there is whether the feds own the building. The biggest taxpayer in Alexandria (right next to Arlington) is the US Patent and Trademark Office building, which is owned by JBG Smith and leased to the feds. Leases are becoming the more popular model these days.

     

    As for Amazon, the “25,000 jobs” was one of the big things, though where we are going to put all those people is a big question. Housing is expensive enough as it is and even the new Metro station won’t help that much with the added traffic.

  29. 29.

    laura

    Corporate Welfare produces no social good and yet it continues.

    Socialize the costs and privatize the profits long enough so there’s no state or municipal revenues for addressing real problems makes me feel very stabby.

  31. 31.

    WereBear

    @germy: There are a few things I get at the Pricechopper in the town where I work. The last three times were awful. Only one cashier, next time cashier I chose got a problem that brought the whole system down and a manager couldn’t be found for 15 minutes, 3rd time no carts.

     

    Pathetic. Like their deli. All super-processed, somehow. This is NY! Good deli  is in the State Constitution.

  33. 33.

    germy

    @WereBear:  I find the chopper often makes “mistakes” in their favor.  Like the scanned price at checkout is usually higher than what was advertised on the shelf.  I usually don’t notice until I get home, and don’t bother doing anything about it.   Once, I went with my wife.  She saw the error and pointed it out to the cashier.  Error was fixed, but when he printed out the receipt he literally threw it in my face.  My wife had been polite through the whole thing, but I guess the cashier just felt like being an a-hole.

  34. 34.

    WereBear

    I think the answer to Amazon is making them follow laws and pay taxes like any other enterprise.

     

    Mr WereBear has a carefully crafted treatment plan with obscure supplements I can’t get locally.

     

    I pay for them in part by self-publishing on Amazon.

     

    I also am worn out and mindful of my own health not breaking down juggling a full time job, a small business, a sick guy, and six rescue cats.

     

    Let’s not make the perfect the enemy of the good.

  35. 35.

    snarlymon

    Has anyone done a study on the impact of “losing” one of these IDA competitions that are more often than not already decided? What about the time and money that could have been spent on other priorities instead of chasing these expensive unicorns? It seems to me this is another example of privatizing the profits and socializing the costs that big business seems to love.

  40. 40.

    MomSense

    @Baud:

     

    Change your diet to nothing but Big Macs and filet o fish sandwiches and you’ll have to flush 15 times per use, too.

  41. 41.

    Kamala.Harris.2020

    Wait, people get killed working in warehouses or driving on the street?

     

    Who knew?

     

    Bad Amazon, bad, bad Amazon.

  42. 42.

    debbie

    @MomSense: 
    Good luck collecting. As far back as in the 1990s, there were companies here who got deals, abatements, TIFs, etc. in exchange for x jobs or for x years. They never met the promise. A couple examples: Limited created 12 of the promised 120 jobs. Some company received 5 years of tax free, but relocated after 4 years. Not only has this gotten worse; it’s spread to builders of luxury condos. Not only were they given 10 years’ special status; they all just got 15-year extensions! /grumble/

  43. 43.

    debbie

    @Barbara:

    She may be right on prinicple, but I saw no evidence of her consideration of people without employment. She could have fought for further negotiation rather than just shutting it down.

  44. 44.

    Raven Onthill

    @Kamala.Harris.2020: as far as I am concerned, the number of deaths and injuries should be zero. If that means that you get your packages a day or two later, I don’t care at all.

     

    But even if not, Amazon injury rate is something like 6x other warehouses. The injuries on the road are something new; you have to go back 100 years to find anything comparable.

     

    If your business depends on suffering and death, it is an immoral business.

  45. 45.

    Barbara

    @debbie: The unemployed are obviously an important consideration but the rate of unemployment, who is unemployed and whether they are the likely beneficiaries of net employment gains, are highly relevant in the debate.  Instinct tells me that prospective Amazon employees are not currently unemployed.  Indirectly, gains in echo effect employment appear to be diffuse since, overall, the unemployment rate is relatively low in either of the places selected.  From what I read, a lot of people who opposed the deal were in fact highly informed about that kind of information, and that contributed to their opposition.

  47. 47.

    PJ

    Hudson Yards, where Amazon is now setting up shop, was one of Mayor Bloomberg’s biggest project/boondoggles. Private developers there received appx. $1B in tax subsidies, and the whole project will cost taxpayers at least $5.6B: https://gothamist.com/news/new-school-study-uncovers-another-1-billion-in-hudson-yards-subsidies

    Are these publicly supported development deals any good for communities, or just for developers?

    First off, the projected development can fail to show up, causing a revenue shortfall and forcing the local government to dip into its general fund to pay off the bonds. That’s what happened in Louisville, where a TIF to fund the University of Louisville basketball team’s KFC Yum! Center initially brought in almost no new tax revenue in its early years, forcing the city to refinance the project.

    This has already happened, to a lesser extent, at Hudson Yards: Thanks to the Great Recession, a 2013 IBO report noted, the project generated only $170 million in revenues through 2012, not enough to pay off $283 million in debt. (The city eventually refinanced the plan, but only by kicking the can down the road to rely on projected tax payments further in the future.) The good news is that the remaining development to be built at Hudson Yards is largely residential, and the housing market shows little sign of cooling off; the bad news is that New York is on the short list of cities at risk of succumbing to a real estate bubble, and the residential portion of Hudson Yards doesn’t come with the alluring tax breaks that helped jump-start the office towers.

    Secondly, a new neighborhood can develop, but only by siphoning off economic activity from other parts of your city. This is already starting to be seen in Midtown, where Hudson Yards has been successful at attracting new commercial tenants — but in many cases by luring them away from nearby Times Square.

    Cross acknowledges that Hudson Yards office tenants will likely relocate from elsewhere in Manhattan — Coach, the anchor tenant of the first-completed building at 10 Hudson Yards, actually moved from a since-demolished building in Hudson Yards itself — but notes that “it’s a complex dance,” as ultimately this could open up older office buildings to get retrofitted as needed housing.

    LeRoy remains skeptical, noting that at best this would be an exceedingly inefficient way to create affordable housing. “Even intellectually honest backers of those programs will admit to you that they don’t necessarily create net new economic activity — they simply move it around,” he says. “They make it more attractive to do it in one place rather than the other, but they don’t create the market for the activity.”

    Finally, the projected development can show up, but only because it was likely to get built regardless — thus wasting public subsidies on a project that could have been achieved at no cost to taxpayers. Perhaps the most infamous example of this is Chicago, where Mayor Richard M. Daley expanded TIFs at such a precipitous rate that eventually more than 40% of city property taxes were being diverted to the districts. One survey of recent literature found that between 75% and 98% of projects that got development incentives would have happened even without the public cash, which is a hell of a lot.

    All of these pitfalls, ultimately, come down to but-for: Is your city putting money into a project that will churn out jobs and tax revenues that otherwise wouldn’t exist? Or is it throwing money at something that developers would want to do regardless, but are happy enough to take a few billion in cash for to boost their profits?

    LeRoy calls but-for “a political deflector shield,” providing cover for elected officials who might otherwise come under fire for handing over tax money to wealthy real estate barons.

    “What happens is, taxpayers get upset at politicians for granting an overly generous TIF package,” he says. “The politicians say, ‘But the developers signed the but-for clause, that this wouldn’t have happened but for the TIFs.’ And because nobody ever gets to see inside the developers’ books, we just have to take their word for it. It passes the buck to somebody who doesn’t have to say.”

    https://gothamist.com/news/hudson-yards-has-45-billion-in-taxpayer-money-will-we-ever-see-it-again(This article was written before the taxpayer cost was revised upward to $5.4B).

     

    I don’t have access to the WSJ so I can’t read this article, but I find it hilarious that Hudson Yards is being called “Little Dubai”:https://www.wsj.com/articles/hudson-yards-little-dubai-or-down-to-earth-neighborhood-11572357600?shareToken=stb3511b4dce16447a805f0f5ac09bc652&mod=e2twny&fbclid=IwAR0hDU5iLM_KZVOoNdOiMjRTGoIRxnjZuZKtyEp2gvt2BHPC0FNmh0_AqMw

  50. 50.

    Ruckus

    @WereBear:

    I use the same scheme. Shop local as much as possible and only after not finding or being able to purchase at a reasonable price do I go online. And even then I try to avoid Amazon. I avoid wallyworld 1000% of the time. The CEO of my last job had been an investment guy and his client was one of the owners. The stories I heard, along with observation told me that they are ruthless and useless. They moved into a town that we held a yearly large event at. Did their usual opening low price BS till all the locally owned small stores closed and then raised the price of everything. That’s the wealthy, shoving their marketing on everyone. They are evil. I like that many areas fight their moving in till they move on

     

    Also wanted to mention that a lot of stores with online sites sell goods for store pickup, but much cheaper than in store pricing. Sometimes as much as 100% difference and often 40-50% in price. So I’ve brought from the store, through the website and just gone and picked up from the physical store.

  51. 51.

    Barbara

    @debbie:  If the intetests of the unemployed were paramount in these deals then the terms would be tied much more directly to net job growth.  They aren’t.

  52. 52.

    Barbara

    @Ruckus: Waiting for someone to show up and accuse you of spouting condescending BS, which is what happened to me when I made similar points.

  53. 53.

    AnonPhenom

    Jeff just lost a considerable chunk of his bank account in a messy divorce. To console himself he’s purchased a mansion on Madison Park valued at 80+ million in the heart of Manhattan. It is here where planet Earth’s newest most eligible batchelor will wine and dine all the models he’ll be dating when he’s not working.
    Right, working. He can arrange to do that anywhere, cause he’s the boss.
    NYC nightlife?
    Yeah, no. You gotta be here for that.

    Amazon was always gonna have a big presence in NYC.
    (in the past 12 months Amazon & Amazon Web Services have listed more jobs on Monster.com for NYC than Google &Twitter combined)

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