Mon, May

Why LA Shouldn't Bend Over Backwards to Get Amazon to Headquarter Here


PERSPECTIVE—(Editor’s note: Amazon is looking for a second headquarters city. Los Angeles is preparing to make the case for Los Angeles. Rick Paulas thinks that may be a bad idea. Read on.) In early 2010, the city of Topeka, Kansas, was in trouble. The city's unemployment rate had risen to unprecedented levels. Some in the mayor's office thought that a lack of affordable broadband Internet access wasn't helping. Mayor Bill Bunten tried to remedy the situation by changing the city's name to Google.

The change was unofficial, and would only last a month, but the new name was designed to put the town on the search engine giant's radar. The hope was that the company would choose Topeka for its Google Fiber pilot experiment, an affordable high-speed network for "at least 50,000 and potentially up to 500,000 people." Topeka was one of 1,100 cities vying for the bid, and Bunten's gambit was an attempt to push it to the top.

It didn't work. A year later, Google announced that nearby Kansas City had won the company's services. Topeka was on a long list of also-rans.

The explanation that Google gave for selecting Kansas City was that it had met the company's goal of finding "a location where we could build efficiently, make an impact on the community and develop relationships with local government and community organizations." What that translated to was free stuff, like tax breaks, and an agreement to stay out of the company's way.

"There was a feeding frenzy, so Google was in the position to say, 'If we don't get what we want, we'll go elsewhere,'" says Tony Grubesic, a professor of policy analytics at Arizona State University who has studied Google Fiber's effects on Kansas City. "Google was in the driver's seat."

Among the concessions the city made were lowering fees for infrastructure access and streamlining the permitting process. It also meant free office space, shutting down traffic without penalty, and using taxpayer funds for development. "They had a staff specifically set aside within the government to facilitate the permits and expedite that process," Grubesic says.

A city buttering up a single corporation is, obviously, not in line with what anyone would consider free market economics. "It's stuff [Kansas City] would never let AT&T have access to," Grubesic says. The city stepped away in a way that allowed Google to essentially self-regulate. "Google hired their own consultant company to say whether or not Google was installing the stuff correctly on poles or underground," he says.

Grubesic notes that the project certainly had benefits for the city. While there was fear of technological red-lining—that is, Google only building where it was sure to get a return on investment, which tends to be affluent, suburban, predominantly white neighborhoods—the tech giant ending up hooking up a wide cross-section of people. “In the end, the landscape was not favoring any one group or socioeconomic class,” he says. “That said, even though taxpayers within the metro area subsidized it, not everybody within the metro area got access.” Grubesic compares Kanas City's courting of Google to cities offering professional sports teams heavy discounts for constructing new stadiums. “[Economists] say we all benefit because the tourism dollars and jobs, but I'm not sure [these projects] offset the costs in the long run,” he says.

But there's no way to guarantee that corporations even stick around long enough to give the city a chance. In August of 2015, Google announced that it was restructuring to become Alphabet, and one of its first moves was scaling back its Google Fiber project. It would lay off half of its staff, and end roll-outs to additional cities. What happens when the service is no longer feasible in Kansas City? We may have already had a glimpse; a report from earlier this year says that Google canceled hundreds of hook-ups:

But at some point over the past five years, it seems that Google began accepting signups and taking deposits from customers in areas that it has since decided not to build out to.

This passage highlights another problem that arises when corporations have unfettered control of a city-wide project: They aren't required to make their plans known to the public, despite the fact that the public is paying for much of the work.

It's worth asking how necessary a private project like Google Fiber really is. Rather than spending money and time wooing corporations, the city of Chattanooga, Tennessee, developed its own publicly owned gigabit fiber network to great success. (If you're wondering how much success, consider that private ISPs are now lobbying for bills that'd end municipal broadband initiatives across the country.) Google Fiber definitely made Kansas City a more connected place than before, but there's a good chance Kansas City could have done something similar on its own.

Corporations pitting cities against one another to get the best deals won't stop anytime soon. Cities … including Los Angeles …  are currently courting Amazon in hopes of becoming the site of the company's second headquarters. Tucson sent a 21-foot cactus to Amazon chief executive officer Jeff Bezos; Birmingham built huge Amazon boxes downtown; Stonecrest, Georgia, voted to give the corporation 345 acres that it's dubbed "the city of Amazon"; and New Jersey is trying to push through a $5 billion tax break.  Whichever city ends up "winning" will get jobs and a heap of publicity, and all it'll have to do in return is hand over taxpayer funds and a degree of control over its city.

"Only the bureaucrats win [in these deals]," Grubesic says. "The public should be seeing some benefit, because, in reality, they're paying for this. But it's not really a triumph of the private-public partnership, it's just a triumph of the private company."

(Rick Paulas writes for Pacific Standard  … where this perspective originated.)


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