February 6, 2019
Virginia is roiling over a photo posted in a 1984 yearbook allegedly depicting Gov. Ralph Northam in blackface. No matter that the news was surfaced by opposition research or that the current sitting U.S. President was himself sued as a young man by the U.S. Department of Justice for discriminating against Blacks. State and national Democratic leaders have fallen all over themselves demanding Northam’s resignation.
A Bribe Is a Bribe
I too question Governor Northam’s leadership, but not because of his youthful indiscretions. I’m concerned about the deal he negotiated with Amazon to site one of its new headquarters in Crystal City. Specifically I don’t like the extortionate $550-$750 million “incentive payment” Amazon extracted from the state to move here.
Stephen Moret, president and CEO of the Virginia Economic Development Partnership, defended the deal, arguing that it was a fraction of what other states offered to get HQ2. Yet a bribe is a bribe regardless of the amount.
Notwithstanding questions about the propriety of the Amazon deal, bills authorizing the payoff recently sailed through the General Assembly. If Gov. Northam exercised poor judgment in negotiating it, the legislature exercised even worse judgment in approving it.
Economic Benefit of HQ2 Exaggerated
There are also questions about the actual economic benefit of HQ2 to Arlington County. Stephen Fuller of George Mason University originally estimated an annual economic net benefit to the County, i.e. revenue less expenditures, of $52 million. He halved that number after Amazon split its jobs “award” between Crystal City and New York City.
Examination of the data used to estimate per capita costs and per job benefits in Table 6 of the Fuller report indicate that the impact of the move on education costs was underestimated by $87 million or $390 per capita by using data from an unaudited table (p. 132) in the 2017 Consolidated Annual Financial Report (CAFR) rather than the audited table (p. 48 ).
Using corrected education costs and the multipliers below on the data in Table 6, the annual net benefit of Amazon HQ2 comes to $17 million–$9 million less than Fuller’s current estimate and $15 million less than the County’s current estimate.
While this net benefit may justify the move, it does not justify the state’s subsidy for the move. Also given the inflationary impact of HQ2 on housing prices, the County’s $23 million subsidy to Amazon is misdirected. The subsidy should go to those displaced by higher rents not to a corporate behemoth capitalized at $800 billion.
$1,240 ($850+$390) per capita residential cost
$1,095 per hire commercial benefit
3,750 (15% of 25,000) HQ2 hires moving to Arlington
8,250 (2.2 * 3,750) HQ2 family members moving to Arlington
$562,773,691 (correct) v. $475,698,480 (incorrect) 2017 education expenditure
222,800 2017 Arlington population