Three possible solutions to “American cities and states spend[ing] up to $90 billion in tax breaks and cash grants” to companies

After discussing why American communities spend so much money and effort to attract companies, Derek Thompson proposes four solutions:

First, Congress could pass a national law banning this sort of corporate bribery. Mark Funkhouser, a former mayor of Kansas City, Missouri, envisions the law as the domestic version of the Foreign Corrupt Practices Act, which makes it illegal for Americans to bribe foreign officials.

It’s not entirely clear whether that would pass constitutional muster. The Supreme Court hasn’t ruled decisively on whether the Commerce Clause gives Washington the authority to ban interstate bidding wars. In the 2006 Supreme Court case DaimlerChrysler Corp. v. Cuno, Ohio taxpayers sued the state after it paid the automaker DaimlerChrysler about $280 million in tax exemptions and tax credits. The Sixth Circuit Court sided with the taxpayers, striking down Ohio’s subsidy as a violation of the Commerce Clause. But the Supreme Court avoided a final judgment on the matter by finding unanimously that the plaintiffs did not have standing to bring the suit.

Second, Congress could make corporate subsidies less valuable by threatening to tax state or local incentives as a special kind of income. “Congress should institute a federal tax of 100 percent” on corporate subsidies, Jack Markell, a former governor of Delaware, wrote in The New York Times. “This would not include investments in public infrastructure, work force development or other investments that can attract employers while also providing a significant long-term benefit to taxpayers.” Taxing subsidies would hopefully force cities to change their economic-development strategies, from importing other states’ companies to building their own—through investing in research universities, building more housing, and welcoming immigrants, since foreign-born Americans have the highest rates of entrepreneurship.

Finally, the federal government could actively discourage the culture of corporate subsidies by yelling, screaming, and penny-pinching. As Meagan Day wrote in Jacobin, “The federal government could withhold funds from governors and mayors who threaten to poach jobs from other states, or who won’t disclose their incentive packages.” Washington tends to look on quietly when cash-strapped states break the bank to welcome glitzy tech firms. But an attitude change at the top could trickle down to the local level. Donald Trump, or another president, could have made a national address after the HQ2 announcement slamming Amazon for soliciting taxpayer funds in a silent auction. He could have called a summit to encourage the nation’s mayors and governors to offer the same tax subsidy for HQ2—zero dollars and zero cents. Even a tweet could suffice: “7 BILLION FOR BEZOS?? Trillion-dollar companies in America don’t need our welfare! Bad!”

Interesting options. I have argued before that this practice leads to a race to the bottom between communities. They can even pit suburbs and cities within the same region against each other.I wonder if both businesses and communities would complain. Businesses would want to get the best deal they can. Why shouldn’t they be able to compare different offers? They may go as far as to argue that the tax breaks help them be more profitable which means they can then spread more wealth to workers and investors. Communities might prefer to keep competing because it gives them a chance to entice a business that otherwise might not move there. If tax breaks became less valuable, would certain industries and kinds of firms gather in a limited number of attractive locations? Open competitions for companies gives communities a chance to get their name out there and build a brand. Furthermore, these tax break opportunities allow local officials to show that they are making a concerted effort to bring jobs to an area.

I do not see this practice stopping soon even as we see the fallout of the Amazon race. While it may take time for the federal government to step in, communities could decide to opt out from such competitions. What would happen if in a situation like the Amazon one, the major contenders refuse to pander to the corporation?

Mapping how wealthier suburban voters helped deliver the House to Democrats

The Washington Post has a story with great maps that illustrate how suburbanites helped swing the 2018 House elections toward Democrats:

In Tuesday’s election, House districts on the outskirts of major American cities were the site of electoral shifts that propelled Democrats to power.

Wealthy and middle class voters delivered the suburban votes for enough Democratic pickups to secure a majority. In several cases, the battleground districts were wealthy and highly educated places that Hillary Clinton won in 2016, exposing the vulnerability of those Republican lawmakers.

The addition of quality mapping data in recent years to stories about election results is great. It helps highlight the clear patterns from recent elections regarding where the two parties have stronger bases, Democrats in cities and close suburbs and Republicans in rural areas and further suburbs.

Building celebrity mansions that can stave off wildfires

The Woolsey Fire in southern California has claimed the large homes of numerous celebrities:

Early Monday morning, Cyrus tweeted that her Malibu home — a $2.5 million mansion she purchased with her fiance, Liam Hemsworth, in 2016 — had been destroyed. The Woolsey Fire, which has been burning swaths of Los Angeles and Ventura counties in Southern California since Thursday, has forced evacuations and threatened thousands of homes from Thousand Oaks to Malibu…

Butler focused the camera on the charred frame of his former house, surrounded by ash and the blackened shell of a truck…

In a post on his website, Young stated that he had just lost “another” house to a California fire, referring to the Malibu home he shared with Daryl Hannah…

As The Post’s Sonia Rao reported, the historic Paramount Ranch production set in Agoura Hills burned on Friday, while wildfire threatened the nearby homes of a slew of celebrities, including Guillermo del Toro, Alyssa Milano, Lady Gaga, Will Smith, Kim Kardashian-West and Kanye West, James Woods, Orlando Bloom, Melissa Etheridge, Rainn Wilson, Cher and Pink.

Given the amount of money wealthy people put into their homes, what features could help a home avoid wildfires? A few options:

  1. An exterior sprinkler/hose system to help keep the home wet and not burst into flames.
  2. A protective shell that could arise around the exterior of the home.
  3. Construction out of certain materials that would be more fire-resistant.
  4. Building homes within communities that have permanent fire breaks around them or other devices to help slow fires before they arrive at individual homes.

None of these options would be cheap but there could be an opportunity here. And if these options could be had at a reasonable price, perhaps they could make their way to the general market.

(Side note: see an earlier related post about creating a McMansion that could withstand other natural disasters.)

Death knell for Republicans in Illinois’s 6th congressional district?

Democrat Sean Casten unseated Republican incumbent Peter Roskam in a House race in the 6th Congressional District in Illinois. Does this signal the end of Republican dominance in this suburban district? Some points to consider:

  1. This has been a Republican district since the early 1970s. Before that, the District was represented by a Democrat since the late 1920s and dominated by Republicans between the Civil War and 1911. Long-time representative Henry Hyde passing the seat to Peter Roskam may be the recent history but the district has more variation over the years.
  2. The demographics of these suburban areas has changed quite a bit. Like many American suburbs, the Chicago suburbs have become increasingly non-white and more diverse in terms of social class. The area covered by the district today is not the same white, middle-class swath that it may have once appeared to be.
  3. Redistricting and changing boundaries has happened with the 6th in the past and could happen again in the future. Read more about Illinois redistricting efforts in the 1970s and early 2000s. Some background on this particular district:

Roskam replaced conservative icon U.S. Rep. Henry Hyde in Congress, but much of his old territory in eastern DuPage County is now represented by U.S. Reps. Mike Quigley of Chicago and Raja Krishnamoorthi of Schaumburg, both Democrats.

4. The patterns of voting in the Chicago area suburbs mirror larger trends about suburban voters. The 6th district as well as several other House districts are comprised of the middle ground between Democratic voters in the big city and close suburbs and Republican voters in more rural areas and outer suburbs. These are the battleground areas and this will likely continue in future election cycles.

All this said, there are no guarantees in this district. Multiple factors could sway voters in this district in the near and far future including changes in what the national parties stand for (and what presidential candidates are leading the way), increasing diversity in the suburbs, possible redistricting, and particular concerns and issues that may resonate voters in the middle suburbs. As the suburbs continue to be important areas for both parties to try to pick up seats, expect this district to continue to be contested for at least a few elections to come.

US now has 201 communities with median home values over $1 million

Rising housing values in the United States means more communities have a median home value of over $1 million:

Meanwhile, 29 cities and towns joined those with a median home value of $1 million or more this year, bringing the total to 201. Nineteen municipalities joined the million-dollar club last year.

They include San Jose, California, whose median value rose from $930,900 to $1.09 million; Fremont, California ($966,000 to $1.13 million); Burbank, California ($845,700 to $1.01 million); Newton, Massachusetts ($977,200 to $1.07 million); and Shelter Island, N.Y. ($903,500 to $1.15 million)…

Of the roughly 15,100 larger neighborhoods around the country analyzed by Trulia, 838 have median home values of $1 million or more and about two thirds of those are in California. Nearly 30 percent of California’s neighborhoods have a median home price of at least $1 million, the most by far of any state. New York, Florida and Washington followed.

It is not surprising that California leads the way given the housing issues in the state (recent example of lawsuits for housing in suburbs).

If I had to guess about the rest of the communities, they are (1) clustered around coastal cities in the West and Northeast (with exceptions being small, extremely high-end suburbs in the Midwest and South) and (2) most of the communities are suburbs. The first guess has to do with limited land, demand, and certain policies. I base the second conjecture on the facts that suburbs prize single-family homes, exclusion, and local control.

Amazon HQ#2 may be headed to a wealthy suburb

Crystal City, Virginia may be the new home of Amazon’s second headquarters site. Here are a few features of the suburban neighborhood located in Arlington:

With the Ronald Regan Washington National Airport two miles to the east, the heart of Washington D.C. five miles to the north, and a few stops on Washington’s Metro linking all three, Crystal City is in the right geographic spot for the Seattle-based company…

Today, the neighborhood, although a part of Arlington, has its own distinct downtown area. The walkable Crystal Drive is dotted with businesses, restaurants and public art, while public/private partnerships are bringing investment in parks and open space

Home prices in Crystal City might be more affordable than they are in Seattle, but that’s not saying much. The median home value in the 22202 area, a zip code Crystal City shares with neighboring Pentagon City, Aurora Highlands and Arlington Ridge, is $625,800, according to Zillow — nearly three times the U.S. median.

Might the lack of single-family homes also be attractive to Amazon?

Crystal City is dominated by one apartment building after another, most of which don’t have ground floor retail or restaurants that would create a sense of community or neighborhood vibrancy. Walk a few blocks away from the shopping mall during any evening of the week and it’s a quiet, almost desolate place. This lack of a community might have been the final piece that Amazon was looking for since it means they can come to town without much opposition.

A few quick thoughts:

  1. On one hand, it is interesting for Amazon to choose a suburban location. A sizable headquarters would be a boon for numerous communities, particularly cities that need a shot in the arm. On the other hand, this is an urban suburban location. The location is technically outside Washington D.C. yet it is a community of high-rises with little distance with the central city in the region.
  2. A location in this region contributes to the rising status of the Washington D.C. region. While other cities and regions may still be larger, this region with its collection of government, military, and business opportunities just keeps growing.
  3. It would be interesting to see how much Amazon would want to contribute to a thriving streetscape in the community. Based on several articles, it sounds like there is limited activity in this community after business hours. Does Amazon want to contribute money to trying to develop a vibrant urban neighborhood (even if it is located in a suburb)?

Suing for more suburban housing

A California law makes it possible to sue communities regarding housing:

Pro-housing activist Sonja Trauss, a pioneer in the YIMBY movement, was reading about a controversial 315-unit affordable apartment project in Lafayette in 2015 when she learned about a 1982 state law she’d never heard of before: the Housing Accountability Act.

The law said municipalities must approve a housing development as long as it is consistent with local zoning rules and general plan objectives, would not create a public health hazard or take water from neighboring farms, and would meet state environmental standards…

The California Renters Legal Advocacy Fund, or CaRLA — a group Trauss and her YIMBY allies formed in 2015 — is waging the sue-the-suburbs campaign. CaRLA has used the Housing Accountability Act to sue on behalf of developers in Sausalito, Berkeley, San Mateo, Sonoma, Dublin and Lafayette…

While the lawsuits will eventually result in some increase in the Bay Area’s housing stock — none of the projects in question have opened yet — the bigger impact so far has been to make municipal officials aware that violations of the Housing Accountability Act could result in expensive litigation.

How long until California changes the law to give communities more say over these matters? Not surprisingly, the end of the article mentions a counter group that a co-founder says is “not NIMBYs or anti-housing; for us the issue goes back to democracy and local control.” Suburbanites do like their local control.

This certainly would not be the first time the courts have been used to allow new housing construction in wealthier suburbs. It may be the only way to force compliance from suburbs that would rather not have cheaper housing and different kinds of residents. Unfortunately, it can be a very slow process within specific cases and overall progress is limited. Perhaps the threat of lawsuits and several successful cases in the past could force suburbs to move more quickly but I would guess some would still aim to drag out the process as much as possible.

Final thought: it would be interesting to track what happens to these developments allowed by the courts over time. Do communities eventually accept the housing units and residents? Would a positive response to a new development than encourage the community to pursue other similar developments? Or, does a court victory lead to hardened resistance?