Debt issues make Chicago an outsider in bid to lure Amazon, magazine editor says
In the end, Steve Malanga thinks Chicago’s deeply mired debt crisis may be too steep for the city to dig itself out of to be seriously considered Amazon’s desired “utopia” destination.
Like virtually every other city in the country, Chicago and state leaders have let it be known that they would like the Windy City to be considered as a home for the giant online retailer’s second North American headquarters.
“Chicago is kind of an outsider because of the state’s structural problems, longtime structural problems,” Malanga, senior editor for quarterly urban affairs magazine City Journal, said during a recent appearance on the "Illinois Rising" radio program on WIND. “Everyone has jumped in, 238 metropolitan areas.”
Even with all the would-be takers, Malanga said closing the deal won’t be easy, at least partly because Amazon has set its asking price so high.
“The list Amazon put out as criteria, they’re basically looking for utopia,” he said. “They want a growing business environment, but they also want a low cost of living.”
Malanga said all the cities are competing by, among other things, offering a bevy of tax incentives aimed at offsetting costs for the company, which has vowed to house at least 50,000 “well-paid employees” at the new facility.
“In Chicago, I think the issue is you see Chicago homeowners getting hit with one property tax increase after another to pay for pension bills, can they really turn around, the city and the state, and give billions of dollars to one of the richest men in the America while everyone else is paying these big property tax increases,” Malanga said.
Clouding that issue all the more is the fact that providing streams of tax incentives to large companies rarely proves to be what they’re cut out to be, Malanga said.
“They rarely pay back the investment that they constitute,” he said. “When you go back and look at how many jobs companies create that get big tax incentives, usually the cost of each job is fantastic.”
And concerns about the city’s viability in taking on such a project don’t end there.
“I think the larger issue for a place like Chicago is rather the other things facing Chicago long term, including not just the pension debt, but Chicago does have a somewhat well- advertised crime problem, and Amazon speaks very specifically about quality of life,” Malanga said. “They are asking for things like crime rates in their analysis.”
In a recent City Journal piece, Malanga noted the New York Times’ "Upshot" recently eliminated the city in its first cut, citing its “deep fiscal instability,” including a junk bond rating and enough additional debt that other tax increases are almost inevitable.
All of it was enough to have Mayor Rahm Emanuel not long ago opining, “you won’t recruit a business, you won’t recruit a family to live here.”
In the City Journal piece, Malanga argues reforms have been slow to come by since then, and Chicago homeowners have been slapped with more than a half-billion dollars in property tax increases, much of it to pay off still rising pension debt that only continues to swell.