November 13, 2018
No Same-Day Delivery: Virginia Communities Deserve Time to Consider Amazon Deal
Announcements of job projections related to economic development deals can be exciting opportunities for elected officials, but it’s critical that elected leadership, media, and the rest of us take a careful look at the realistic benefits and drawbacks of the deal, including related public subsidies and the tradeoffs that come with adding thousands – or tens of thousands – of jobs. And regular folks deserve to know what’s in the deal when their public land or public tax dollars are on offer to private corporations. The initial announcement for Virginia includes some details and a state-funded economic and fiscal assessment. Community members, press, and elected officials should be provided time to absorb these details – and receive more details if some needed information is not available – before Virginia or its localities commit public dollars to a deal.
One of the best resources for understanding economic development deals is the non-profit group Good Jobs First. Among other tools, the organization provides a beginner’s guide that includes definitions of some of the arcane language that gets thrown around so we can all be on the same page when discussing tax increment financing and key reforms to focus public subsidies on economic development projects that will actually benefit regular folks. These reforms include some measures that Virginia has already taken for state subsidies, such as clawback provisions if the promised jobs do not materialize, and it is good that the Amazon deal appears to make all direct corporate subsidies contingent on actual job creation. Other reforms, such as requiring the corporation that is seeking subsidies to sit down with the surrounding community and work out a community benefits agreement so the local neighborhood benefits from the public subsidy, would be relatively new to Virginia. Early details do not appear to show any required direct support by Amazon in the provision of affordable housing, instead relying on local governments to make some investments, although the projected additional housing units fall far short of the projected shortfall for the region.
From the perspective of the state and local governments, the more complicated the economic development deal, the harder it is to make sure the subsidies will actually result in more tax revenue over the long term–something that is not always true for megadeals. Such an analysis should include as a public cost the fact that the new development will bring new long-term costs – more need for fire protection, more children needing a high-quality education, and more need for public roads and transportation. Avoiding deals that cost more than they will raise over the long term is critically important to make sure ordinary residents aren’t paying the price for subsidies to megacorporations. The Institute on Taxation and Economic Policy has a good guide to some of the common pitfalls in economic development subsidies for states and the country as a whole.
Beyond making sure any economic development deal meets best practices for helping communities benefit, for a megadeal in an already congested area of the state with a low unemployment rate it’s worth asking whether the proposed jobs should be subsidized at all. The Washington, DC region already has a shortfall of about 45,000 homes, leading to difficulty for many families in finding decent affordable housing. That’s expected to increase to a shortage of over 100,000 homes by 2040, even without a big new megadeal.
With the megadeal promising to add thousands, and eventually tens of thousands, of high wage jobs, it is likely to further exacerbate the housing shortages in the region. Housing shortages are good for existing homeowners who want to be able to sell their house for a profit and they’re good for housing developers. And more residents and higher property values are good for local and state tax revenue assuming the public subsidy is not overly generous. Yet higher housing costs could harm lower-income renters seeking to afford decent housing and working parents trying to get to and from work. Communities may rightly demand that much of the new revenue be used to create affordable housing, reduce school crowding, and improve transportation infrastructure. Balancing these competing interests is the work of public leaders in dialogue with communities and constituents and sometimes the answer will be that the deal is worthwhile, but we shouldn’t pretend that there are no tradeoffs. (Some of the tradeoffs can be mitigated through a deal that includes investments in affordable housing and transportation improvements.)
New jobs are important for providing new opportunities to our country’s growing population, and in regions of economic struggle like certain areas of southwest and southside Virginia, economic development deals may be widely welcomed by community members for bringing much-needed jobs. Yet for regions that are already jobs-rich, the math on economic development deals should be considered alongside a serious discussion about what more economic growth will mean for existing residents of different incomes, ages, and housing statuses. Virginia residents, community organizations, and elected officials deserve time – and sufficient disclosure of the details of the deal–to take a hard look at the math and the tradeoffs. Same-day delivery is great for toilet paper, but not for public subsidies that could reshape a region’s future for better or ill.