Bears stadium at Arlington Park? Just keep the taxpayers out of it

With the announcement that Arlington Park will be for sale, ideas are swirling about how the land could be used. I have heard a few times already the possibility of the Chicago Bears constructing a new stadium there. Here is one example:

The Loop from the North End of Soldier Field

Now it is urgently incumbent upon regional politicians and civic planners to begin a campaign to get a global-class Chicago Bears stadium built as a profitable symbol of the rebirth of the 326-acre site.

Fulfillment of such a bold and visioned plan would bring about a marriage of an NFL team and a suburb that was first discussed between “Papa Bear” George Halas and then-AP empress Marje Everett in 1968…

The question of “How?” can only be answered if there is an enormously creative and concerted joint effort put forth by such potential game changers as Bears chairman George McCaskey, Arlington Heights Mayor Tom Hayes and Gov. J.B. Pritzker…

Said Mayor Butts: “From my experience — and I’m talking about my suburb, which is 52 percent Hispanic, 47 percent Black and 1 percent ‘other’ — if you have an inspired plan, proper financing that does not put the host municipality at risk and a resolute ‘will-get-done’ attitude, toss in hard work and you can make a great thing happen.”

On one hand, this is a unique opportunity. It is rare for parcels of land this large to open up in suburbs developed decades ago. Filling a large parcel can be difficult; what can add to the existing community without threatening the current character? This particular location provides easy access to highways, easing travel for thousands of fans. The surrounding area is already used to sporting events on the sites. A suburb could become home to a major sports stadium.

On the other hand, the “creative and concerted joint effort” required to pull this off could become an albatross to taxpayers who often fund large stadiums for wealthy team owners. This is a tax break of massive proportions for a feature economists argue does not necessarily bring added economic benefits to a community. The stadium may provide status to a suburb but this does not always translate into financial gains. And Illinois has a history of this already: just see the state deal where taxes are still funding the White Sox stadium.

How to balance these competing perspectives? Many suburbs would jump at the opportunity as growth is good, having a pro sports teams is an important status symbol, and hearing the Bears are playing in Arlington Heights could be part of a branding strategy. But, I would recommend leaving the taxpayers out of this: they will likely not benefit economically from a new stadium.

Companies moving out of California – yet continuing offices and operations in California

I have read several news stories discussing the move of companies out of California. Such news feeds chatter about companies and residents leaving places because of politics, taxes, discontent, etc. But, the details in this one story suggest some companies are shifting some workers and activity while retaining operations in California.

Photo by KEHN HERMANO on Pexels.com

“Oracle is implementing a more flexible employee work location policy and has changed its corporate headquarters from Redwood City, California to Austin, Texas,” the filing said. “We believe these moves best position Oracle for growth and provide our personnel with more flexibility about where and how they work.”

The company already has a significant presence in Austin, opening a five-story, 560,000 square-feet campus overlooking Lady Bird Lake. It also has employment hubs in Redwood City, Santa Monica, Seattle, Denver, Orlando and Burlington…

Oracle follows a handful of similar moves by California companies and high-profile business leaders leaving the state. Tesla CEO Elon Musk announced he had moved to Austin last week at The Wall Street Journal’s CEO Council summit. His exodus followed months of bashing California for its handling of the pandemic. The billionaire CEO said he is maintaining company operations in California, but also has significant operations for Tesla and SpaceX in Texas…

HP Enterprise also announced its decision to relocate its headquarters from San Jose to the Houston suburb of Spring earlier this month. Palantir Technologies relocated from Palo Alto as well this year, landing in Denver. Tech giants Google and Apple have also been expanding their presence in Austin over the last several years.

Headquarters are important, particularly for cities. Attracting the headquarters of a major company is a big status symbol for any big city. See the interest in trying to attract Amazon’s second headquarters. The implication is that the new location has a favorable business climate and is on the rise (with the opposite assumed of the previous location).

But, headquarters are just part of a company. They may be the nerve center and the physical home of company executives. Yet, large companies today can have offices and plants all over the place connected to a headquarters elsewhere.

Another way to read the moves out of California above is to suggest that these companies are hedging their bets by being located in numerous advantageous locales. Having multiple locations can help take advantage of local tax breaks for particular purposes, build on local work forces, maintain their place in local social networks, and provide points to pivot around when conditions change. The headquarters may have moved but they may move again and the companies still see some value in keeping operations going in California (even if some of this is simply due to inertia).

This suggests a different future reality than one where cities serve as anchors for major corporations. Instead, major multinational corporations keep offices and facilities all over the place, ready to move when needed or when an opportunity arises. Austin and Houston might be attractive now, Miami or Denver in a few years (just sticking to US locations). And as cities continue to look for an edge over their competition, attracting another big company is important…even as that company is actually rooted in multiple locations.

$741 million in tax incentives for Amazon in NE Illinois – with a bigger price tag for economically challenged communities

Amazon has constructed 36 facilities in the Chicago region since 2015. And they got a lot of help from taxpayers in disadvantaged communities:

WBEZ

To help pay for its vast expansion, the company and its developers have won at least $741 million in taxpayer-funded incentives in northeast Illinois alone, according to a Better Government Association/WBEZ investigation…

Amazon collected less than $100 million in public incentives for the 15 warehouses it built in predominantly white communities but won more than $640 million in taxpayer incentives for the 21 projects built in communities with larger nonwhite populations, the examination found. Many of those communities are either mostly Black, mostly Latinx or have higher concentrations of low-income residents, and with municipal budgets already short on cash.

Records show the three largest incentive packages Amazon received — totaling $512 million — all came from predominantly Black suburbs. By contrast, the company built warehouses in at least seven mostly white communities that reported offering no public incentives at all…

While many of the communities may get more jobs, experts interviewed say the lost revenue from taxpayer incentives will strain public resources to rebuild crumbling roads from the truck traffic, mitigate pollution from the exhaust fumes and noise and to pay for other services such as police protection and fire prevention.

That big companies seek out tax breaks and local incentives is not new. Amazon played the game on a grand scale with its proposed second headquarters.

But, this illustrates one of the problems with tax breaks in general: it is a race to the bottom. Companies look for communities that will have a hard time saying no. What mayor or local official wants to turn down local jobs? Or, turn away a big company with the status like Amazon? Once they have such a company in town, communities often build on this when marketing land and facilities to other firms by saying they are home to Amazon.

Yet, the deal may not be a good one. Jobs are not the only factor that matters in a community. As the story above notes, traffic, pollution, noise, the strain on local budgets and services, and the quality of the jobs also matter. Does the addition of Amazon or another large company make the community as a whole better down the road?

The system could be improved in multiple ways. All the communities in a region could stop competing in this way; that Amazon locates within one municipality could also have spillover benefits for other communities. One community’s gain is not necessarily one community’s loss; the region operates as a whole. If revenue was shared across a region, then tax breaks in a particular community would matter less. Or, communities could just commit not to offer tax breaks at all. If companies cannot play the game, they would have to locate places for other reasons.

These possible solutions do not solve the underlying issues: jobs and capital in a metropolitan region are not evenly distributed. Patterns by race and class continue for decades as companies, residents, and other seek out particular locations and not others. That some communities have to pay more for Amazon to locate there just compounds the problem.

Welcome in Amazon, look for other businesses to follow?

Amazon will soon open a new facility in Palatine, Illinois and get a tax break to do so. That is normal. This other part caught my attention: the suburb hopes Amazon’s arrival helps spur more development.

Amazon will move into a warehouse and distribution facility under construction off Hicks Road south of Northwest Highway, and Palatine officials hope the online retail giant’s arrival sparks more development in that industrial area.

“This is a good bit of news for us, for sure,” Mayor Jim Schwantz said Monday. “It’s the right kind of use for that area. It’s a light draw on our services. It’s not going to take a ton of water. It’s not going to take police or fire calls. We know Hicks Road is built to be able to handle the additional traffic.”

Lots of communities want Amazon to move in. They bring jobs, they fill warehouses, and they bring a big name. Just remember all the cities that put together plans to try to allure Amazon HQ#2.

But, this is another dimension of having a successful company move into your community: it could lead to further growth. Having Amazon puts you on the map. Companies could choose from dozens of warehouse or manufacturing locations in the Chicago region. But, if Amazon is already there, this may attract other firms. Success begets success, growth leads to more growth.

Another example, perhaps two decades in the making: suburbs and neighborhoods all wanted a Starbucks. Not only would this bring in sales tax revenue and more shoppers. It put a place on the map. It suggested the place was cool enough, was up and coming or had an established set of well-off residents. Starbucks could pave the way for other similar businesses that would bring in or provide for a certain crowd.

Or, think about headquarters. These facilities may not have that many employees or may just be an office building but being home to headquarters, as opposed to branches or locations, is something special. Headquarters attract headquarters. They signal something.

A typical Amazon facility is not going to be flashy. It is not going to attract many visitors or shoppers. However, it will add to a community’s tax base, provide jobs, and help the community say they are home to one of the most important companies in America. That Amazon distribution center may be the start to something greater.

The millions in tax incentives Naperville has offered to keep businesses

According to the Daily Herald, Costco has requested $5.5 million in tax rebates from Naperville in order to open a second store on the site of a former Kmart. This might fi with the incentives Naperville has offered to businesses since 2008:

Marriott

Total incentive offered: $10 million

Total incentive paid: $2,865,000 in hotel/motel tax and sales tax rebates

Expiration: When total is met or 20 years after agreement started in 2012

Hotel Arista/CityGate Centre

Total incentive offered: $7.5 million

Total incentive paid: $2,545,000 in hotel/motel tax and sales tax rebates

Expiration: When total is met or 20 years after agreement started in 2008

Hotel Indigo/Water Street District

Total incentive offered: $7.5 million

Total incentive paid: $965,000 in hotel/motel tax and sales tax rebates

Expiration: When total is met or 20 years after agreement started in 2018

Embassy Suites

Total incentive offered: $7.4 million

Total incentive paid: $1,457,000 in hotel/motel tax and sales tax rebates

Expiration: When total is met or 20 years after agreement started in 2015

Main Street Promenade

Total incentive offered: $1.4 million

Total incentive paid: $306,000 in sales tax rebates

Expiration: When total is met or 25 years after agreement started in 2013

There are a couple of ways to look at this. Perhaps this is just the cost of doing business these days. Big businesses can ask for tax breaks or incentives, plenty of places are willing to offer them, and everyone can still think that they win. For some companies and some communities, this money might just be a small drop in the budget.

On the other hand, it is striking that Naperville has to play this game. This is not a desperate suburb looking for jobs or a turnaround. This a large, wealthy suburb with a lot of accolades. And yet, to get a Costco which would provide tax monies plus fill an annoying vacancy on a stretch the city would like to improve, the city is being asked to provide millions of dollars in breaks to make it worthwhile for Costco. And if Naperville does not pony up, do they just locate in a nearby suburb?

Looking at the list of businesses for which Naperville has provided incentives, four of them involve hotels and a few involved newer developments. Competition is tight in a number of sectors, particularly among retailers and filling suburban vacancies. Again, maybe this is what it takes to keep businesses happy, jobs in town, and some tax money flowing.

Naperville will decide on this soon.

UPDATE 2/19/20: Naperville approved the deal and one leader spoke of the move as providing a catalyst to revive the Ogden Avenue corridor.

Amazon wanted a really big tax break with HQ2

When Amazon went on a search for a second headquarters, it was motivated in part by looking for a big tax break:

When Elon Musk secured $1.3 billion from Nevada in 2014 to open a gigantic battery plant, Jeff Bezos noticed. In meetings, the Amazon.com Inc. chief expressed envy for how Musk had pitted five Western states against one another in a bidding war for thousands of manufacturing jobs; he wondered why Amazon was okay with accepting comparatively trifling incentives. It was a theme Bezos returned to often, according to four people privy to his thinking. Then in 2017, an Amazon executive sent around a congratulatory email lauding his team for landing $40 million in government incentives to build a $1.5 billion air hub near Cincinnati. The paltry sum irked Bezos, the people say, and made him even more determined to try something new.

And so, when Amazon launched a bakeoff for a second headquarters in September 2017, the company made plain that it was looking for government handouts in exchange for a pledge to invest $5 billion and hire 50,000 people. The splashy reality-television-style contest generated breathless media coverage, attracted fawning bids from 238 cities across North America and ended with Amazon deciding to split the so-called HQ2 between New York and Virginia. Then progressive politicians attacked the $3 billion in incentives offered by New York, and Bezos pulled out. Amazon was widely ridiculed for its failure to court New York politicians. To understand why that happened, Bloomberg interviewed 12 people familiar with Amazon’s effort. Their story, outlined here for the first time, depicts a team that became the victim of its own hubris. Bezos’s frustration with what he deemed meager government largess prompted executives to scrap lessons learned through the years in favor of an unapologetic appeal for tax breaks and other incentives.

This news came just as we finished introducing the concept of growth machines in my urban sociology class. In this theory, coalitions of political and business leaders drive development decisions with profits and growth in mind. In this particular case, Amazon looked to cut a deal with the city that was willing to give them the most. If Amazon chose their city, political and business leaders could claim they won because of all the new jobs plus the prestige of an Amazon headquarters while Amazon would profit from massive tax breaks. As I noted then, let the race to the bottom begin.

The biggest problem with all of this is not that there is competition between locations for headquarters and business activity. This has gone on for a long time and for a variety of organizations; read about the bids to land the United Nations headquarters. The issue is that the large tax breaks mean that some of the benefits of a business moving to a community are offset by tax breaks. And who benefits more in the end? The corporate leaders, not the community as a whole.

I can imagine a television game show format with all of this: a corporation says they want to expand and help a community or region along the way. Bidders/communities bring their pitch to the show, showcasing the best of their community (and the money). The corporation narrows it down and in the end names the one winner. Everyone else loses out (outside of making a public pitch regarding the best aspects of their community). It could be very entertaining.

Defining “blight” still matters for urban redevelopment

The term “blight” might conjure up the urban renewal of the post-World War II era where the application of the term to poorer and non-white areas could lead to redevelopment. Yet, the term is alive and well: funding for the proposed Lincoln Yards project in Chicago is tied to the concept.

But the clock also was ticking for another reason. If Emanuel and Sterling Bay had waited much longer, the development no longer would have qualified for its record-high taxpayer subsidy, a Tribune analysis has found.

To get the money, the area had to meet at least five state standards to be considered “blighted.” The city could then designate it as a tax increment financing district. At the time of the vote, the area met the bare minimum.

Less than six weeks later, new property assessments were completed. The rising values of the Lincoln Yards land meant the TIF district no longer met one of the five standards, according to the Tribune analysis of the values of hundreds of parcels…

The Tribune’s finding comes as community groups are asking a judge to reverse the City Council’s decision. They say the area is not blighted and would be redeveloped without the taxpayer assistance, given that it’s centered on the Chicago River just west of Lincoln Park.

According to an Illinois government website, “blight” is not the only word used to describe land that might be eligible for TIF districts:

Funds may be used for costs associated with the development or redevelopment of property within the TIF, allowing blighted, declining and underperforming areas to again become viable, and allowing these areas to compete with vacant land at the edge of urban areas.

Not surprisingly, this is about money: how much public money would the developers get as they went about the project? As the article notes, such use of public money is contentious. In this particular project in Chicago, the location and size of the property is particularly valuable. Does a developer need much public money when there is so much that could be made on the project? Or, thinking in terms of opportunity costs, could such public monies be used to spur development in locations that are initially less attractive to developers?

More broadly, this gets at foundational questions about development in general. Who ultimately benefits from development: local residents, the city/municipality, and/or the developer? The growth machines model suggests development benefits local business leaders working with officials and other leaders who benefit from growth (and the status and revenues that come with that). Local residents could see some improvements through new development but the developers and business leaders are the ones who truly profit financially.

(See an earlier post regarding the term blight and its application to Foxconn’s development in Wisconsin.)

Henderson, NV: do not go all in with public money for a baseball stadium

The large Las Vegas suburb of Henderson is interested in acquiring a major league baseball team and willing to use a lot of taxpayer dollars to do it:

Renderings show a retractable-roof baseball stadium near St. Rose Parkway and Bermuda Road in rapidly growing west Henderson, which city officials envision as a hub for sports and entertainment. The proposed site, one of four floated by the city, sits behind the future headquarters and practice facility of the NFL’s Raiders.

According to the presentation, Henderson hired a consultant to conduct a financial analysis, assuming the ballpark would have 32,000 seats and space for 4,000 standing-room-only ticket holders. The Diamondbacks would serve as the primary tenant for a 30-year term and the stadium would be publicly owned and exempt from property tax.

The consultant estimated the ballpark would cost about $1 billion to construct…

The Diamondbacks expressed interest in creating a development at a potential new home, pointing to the entertainment district near the Atlanta Braves’ SunTrust Park as inspiration, according to documents that detailed the team’s wish list for prospective suitors.

The city said it ultimately views itself as capable of drawing major sports franchises because of a business-friendly approach, attractive demographics, socioeconomic characteristics and available land.

It sounds like the suburb of over 300,000 residents sees at least three benefits of such a move:

1. It would boost the status of the suburb. Few suburbs could boast of a collection like this with an MLB team, an NFL practice facility, and an ice rink connected to an NHL team. This could then help attract businesses and residents.

2. The potential for development around a major league stadium. Imagine restaurants, retailers, and residences near the stadium.

3. Becoming a unique location with a growing metropolitan region. As suburbs compete for corporate headquarters, residents, retailers, and entertainment centers, a stadium would stand out. It is easy for critics to stereotypes as collections of subdivisions and strip malls but Henderson would have a different collection of sites.

Yet, the research is clear: sports stadiums enrich sports teams, not communities. Suburbs that have tried this tend to run into problems (see recent examples of Glendale, Arizona and Bridgeview, Illinois). Teams will use cities and suburbs against each other to get better deals – just as big companies like Amazon do – and also leave those places behind if they can get better deals.

So before Henderson throws up to a billion dollars at a major league team, they should think twice. Can the suburb handle that amount of debt if it does not work out? Could that money be spent elsewhere on development and/or amenities that would benefit a broader swath of their residents? Is being a high-status suburb more important than being a quality place to live?

With opposition to Google’s Toronto smart neighborhood, larger questions about powerful corporations, tax breaks, and public-private partnerships

Plans in Toronto for Google’s major development have hit multiple stumbling blocks:

As in New York, where fierce opposition to Amazon led the online retail giant to cancel plans to build a second headquarters in Long Island City, a local movement here is growing to send Sidewalk Labs packing. Their concerns: money, privacy, and whether Toronto is handing too much power over civic life to a for-profit American tech giant.

The #BlockSidewalk campaign formed in February after the Toronto Star reported on leaked documents indicating that Sidewalk Labs was considering paying for transit and infrastructure on a larger portion of the waterfront. In return, it would seek a cut of the property taxes, development fees and the increased value of the land resulting from the development — an estimated $6 billion over 30 years…

Separately, the Canadian Civil Liberties Association is suing the city, provincial and federal governments to shut down the project over privacy concerns. Michael Bryant, the head of the group, said Trudeau had been “seduced by the honey pot of Google’s sparkling brand and promises of political and economic glory.”…

Micah Lasher, the head of policy and communications for Sidewalk Labs, said providing more details about the business model for Quayside and plans for data governance earlier would have helped allay many concerns. But he also said the business model remains uncertain.

Any major development or redevelopment project in a major city can run into issues. But, there seem to be at least three larger concerns at play here:

  1. Google and the role of tech companies. The public may be more suspicious of these corporations today compared to ten years ago when all the technology seemed rather magical. Issues of privacy and power matter more today.
  2. Tax breaks may not be the answer they once were in cities and metropolitan areas in order to attract corporations and developers. Residents and local leaders may ask why Google, a very wealthy corporation, needs any tax breaks. And, if the tax breaks are not provided, will Google take its smart city development elsewhere?
  3. This might signal larger issues with public-private partnerships. For at least a ten years or so now, these have been hailed as a way to move forward in many cities: both the local government and the developers chip in to get things done with benefits to both sides. But, do such deals turn over too much control or too many of the benefits to the private side rather than spreading the benefits to the residents and the community?

It will be interesting to see how local political and business leaders handle this: can they afford to let the project die or go elsewhere?

Perhaps the long-term answer for companies like Google is to follow the lead of Disney and Celebration, Florida and create whole communities rather than entering in messy situations in already-existing communities.

Small Illinois town becomes intermodal facility and warehouse central; long-term benefits are not good

Elwood, Illinois is home to facilities of a number of important American companies but the small community experiences few benefits:

It’s hard to find anyone who will admit to it now, but when the CenterPoint Intermodal freight terminal opened in 2002, people in Elwood, Illinois, were excited. The plan was simple: shipping containers, arriving by train from the country’s major ports, were offloaded onto trucks at the facility, then driven to warehouses scattered about the area, where they were emptied, their contents stored. From there, those products—merchandise for Wal-Mart, Target, and Home Depot—were loaded into semis, and trucked to stores all over the country. Goods in, goods out. The arrangement was supposed to produce a windfall for Elwood and its 2,200 residents, giving them access to the highly lucrative logistics and warehousing industry. “People thought it was the greatest thing,” said Delilah Legrett, an Elwood native…

But this corporate valhalla turned out to be hell for the community, which suffered a concentrated dose of the indignities and disappointments of late capitalism in the 21st century. Instead of abundant full-time work, a regime of partial, precarious employment set in. Temp agencies flourished, but no restaurants, hotels, or grocery stores ever came, save for the recent addition of a dollar store. Tens of thousands of semis rumbled through Will County every day, wreaking havoc on the infrastructure. And as the town of Elwood scrambled to pave its potholes, its inability to collect taxes from the facilities plunged it into more than $30 million in debt…

According to the Will County Center for Economic Development, at least 25,000 tractor trailers a day come through the Intermodals. That amounts to three million containers annually, carrying $65 billion worth of goods. A staggering $623 billion worth of freight traversed Will County infrastructure in 2015 alone, roughly equivalent to 3.5 percent of the U.S.’s total GDP…

But when it comes to the long-term prospects for the region, optimism is scarce. Paul Buss’s son, who works as a building inspector in Joliet, told his dad there’s concern “these companies are gonna come in, they’re gonna build these buildings, and they’re gonna use them for however long they can get a tax break on them, and then they’ll move someplace else.” The threat of empty warehouses looms large.

The freight industry, composed of both railroads and trucks, has to be placed somewhere. The southern edge of the Chicago region is a logical place with close connections to major highways, cross-country railroad lines, airports, and both the Great Lakes and the Mississippi River as well as proximity to the third largest metropolitan area in the United States. And there are likely benefits to these companies and industries to have a concentration of facilities rather than scattering them across multiple communities and regions.

But, the article suggests we should not view the communities where these facilities are placed just as collateral damage. There are real consequences to the trucks and trains that ship all the goods we need on a daily basis. People’s lives are affected. Could the facilities should be placed outside of towns and away from residences as possible?

Perhaps the true test of all of this is whether the next town that is chosen or selects itself as the possible next facility center turns down the opportunity or they dive headlong into the same issues.