As city and state officials head into the next phase of their courtship of Amazon and its second headquarters, Mayor Rahm and Governor Rauner are starting to resemble the pitchmen from those Celozzi-Ettleson Chevrolet commercials that appeared on late-night TV back in the 1980s.
I half expect R and R to show up in an ad wearing outdated sport coats, waving wads of bills, and asking Amazon CEO Jeff Bezos to come on down to Chicago, “where you always save more money.”
I joke, but the first-round offer submitted on October 16 doesn’t give Chicagoans much to laugh about—unless you’re tickled by your elected representatives handing over your tax dollars to one of the wealthiest men in the world.
The letter sent to Amazon was signed by Emanuel, Rauner, Cook County Board president Toni Preckwinkle, and the four Republican and Democratic leaders of the statehouse, among them house speaker Michael Madigan and senate president John Cullerton. Apparently, the only thing this bunch agrees on is that it’s a good idea to give away prime real estate and at least a couple of billion dollars in tax breaks, grants, and other incentives to one of the world’s richest corporations.
Bezos got things going in early September, when he announced he’d build a second headquarters, dubbed HQ2, for the Seattle-based behemoth online retailer in the North American location that offered him the best deal. Since then, more than 200 cities or states have responded, lured in part by the promise of some 50,000 relatively high-paying jobs.
There are two things to remember from similar boondoggles, such as our bid for the 2016 Olympics:
1.) Elected officials tend to overstate the public benefit of such deals. In this case, Chicago hasn’t commissioned an independent analysis to see if it’s worth spending so much money to bring Amazon to town.
2.) The eventual price tag is almost always higher than the original bid. That’s for sure.
This sucker is a bidding war largely controlled by Bezos, who’s already said there could be two or three rounds before Amazon makes its decision next year. Expect that initial sum of $2.25 billion to go way up.
As it is, Rahm and Rauner have already offered Bezos about $1.32 billion in Economic Development for a Growing Economy (EDGE) tax credits. This is the program in which the state essentially lets a corporation keep the income tax dollars that its employees would normally pay to the state.
For example, say Amazon hires someone at $100,000 to program computers at HQ2. Normally that employee would pay $4,950 to the state for things like road repaving, policing, education, and so forth. With the current tax rate of 4.95 percent, the hipster essentially pays up to $4,950 to his boss at Amazon.
I think there should be a legislative hearing to examine why this isn’t a form of wage theft in which the state forces an employee to kick back a portion of his salary as a condition of his job.
As with the private school tax credits Rauner forced the Democrats to swallow this summer, EDGE tax credits are a great way to cripple government by taking money from programs intended for the common good and turning it over for private consumption.
In addition, Rahm and Rauner have offered Amazon a property tax break of at least $60 million. Bezos hasn’t even selected a site and he’s already getting a break in Amazon’s taxes. (Usually he’d have to hire Madigan’s or Cullerton’s law firm before he was able to cut such a deal.) And we’re not talking about bargain-basement land next to a toxic waste dump. In the city and state’s bid, Rahm and Rauner have given Bezos his choice of ten sites: eight high-priced properties in and around the Loop and two in the suburbs.
Of course, a property tax break for Bezos means a property tax hike for the rest of us schmoes as the government tries to compensate for money it’s not getting from some of its most valuable properties downtown. This is regressive taxation as the tax burden shifts from the wealthy to everyone else. Ordinary citizens will pay more so Bezos pays less.
What a cop-out by my fellow Democrats. All year long they’ve been telling us we need more progressivity to wipe out the inequities in education between the Chicagos and Winnetkas of the world. Then in one fell swoop they caved on their principles—just as they caved on the school distribution bill. They say one thing and, under pressure, do something else. And you wonder why working-class voters in swing states like Wisconsin and Michigan fell for Donald Trump’s bullshit? It can be hard to trust anything a mainstream Democrat says.
By the way, Rahm and Rauner still haven’t told us who’ll pay to buy this land on which Amazon will settle. I’m pretty sure Bezos will demand that he not pay for it, and I don’t think the current owners will give it away. Unless, of course, Amazon decides to settle on the old Michael Reese Hospital site, which is owned by the city. In which case, Rahm would be like, “Take our land, please!”
My guess is the acquisition costs will come out of TIF funds, as they generally do in such deals.
Amazon required that applicants “provide a timetable for incentive approvals at the state/province and local levels, including any legislative approvals that may be required.” And so, to soothe the company’s worries that our City Council or state legislature might summon up the gumption to torpedo the deal, Rahm, Rauner, Madigan, et al added this assurance in their letter: “Please know that we are prepared to undertake legislative action as a condition to your selection and look forward to better understanding your timing needs in that regard.”
Translation: We’ll twist their arms into submission!
Once again, our leaders seemed determined to take the city’s wealth and throw it away. Mayor Richard M. Daley tried the same thing with his pitch for the 2016 Summer Olympics. I can only hope that, as with the Olympics bid, Chicago gets bounced in the first round. v