When public money is flung at private companies without public input, guess who loses?
When Amazon announced a competition late last year to find a host city for its shiny new headquarters, the response was swift. Officials in more than 230 cities stumbled over themselves to cobble together flashy PR campaigns for the inevitable social-media blitz. Here in Las Vegas, they fired off tweets, lit up buildings in Amazon orange, and coughed up a schmaltzy promotional video advertising Las Vegas.
“A mecca for youthful, fresh energy,” a voiceover says, without a hint of irony, as the video cuts to a shot of the monorail.
The one thing they didn’t do, however, was tell anyone what they were actually offering the company in exchange for the new facility. The proposal sent to Amazon was concocted by public officials entirely in secret, and forwarded without so much as a public hearing. A public-records request for the state’s offer by a Review-Journal reporter was flatly denied, though the point ended up being moot: The company revealed its shortlist of cities in January, and Las Vegas failed to make the cut. Some information about the state’s proposal has trickled out since then, including the news that city officials had offered to give the company 84 acres of public land Downtown — including Cashman Field and the Las Vegas Natural History Museum — entirely for free if Amazon met certain unspecified conditions.
This isn’t new. In recent years, Nevada lawmakers have put billions of taxpayer dollars on the line to court large corporations. The one constant, aside from the extraordinary sums involved, is a curious cold-shouldering of the public. But why?
You can follow the crumbs all the way back to the recession of the early ’80s. Having convinced officials in South Dakota to scrap laws against predatory interest rates in exchange for building a credit-card processing facility there, Citicorp, now Citigroup, tried the same with Nevada. According to a 2015 retrospective in Vegas Inc., then-Gov. Richard Bryan returned from a meeting at the company headquarters in New York with whispers of a similar grand deal. At the urging of executives and pro-business groups, a special legislative session was called that spring. It took only a day to bulldoze the banking regulations keeping Citicorp out of the state, during which lawmakers were inundated with credit card offers addressed from the company’s newly minted South Dakota offices.
In return, Citicorp built a processing center on West Sahara Avenue, and Bryan promised the company would become “an active participant in community affairs.” The company was so grateful that it quickly removed all traces of Las Vegas from its paperwork, preferring the more wholesome, corporate-friendly “The Lakes, NV.” The company stayed until 2014, when it laid nearly everyone off and skipped town, but suffice to say Las Vegas never became the burgeoning finance hub many claimed it would.
That was a long time ago, but what ultimately survived was the blitzkrieg political strategy that made it possible, of stuffing the public full of curated optimism and buzzwords like “jobs” and “diversification,” all while the real business is hashed out in closed-door boardrooms.
The boring name for this is economic development, but before your eyes glaze over, consider that economic development is tax policy. It’s more than government bean-counters deciding where to stick a traffic light or elementary school. It’s largely unelected business boosters — Steve Hill, outgoing chairman of Nevada’s economic development office, ran a gravel company — diverting public money that would otherwise go to creating public goods, to play a risky game of commercial chicken with other states. What’s worse, there’s no real evidence that it benefits anyone other than the recipient.
“There is a role for competition among states when it takes the form of a general tax-and-spend policy,” economists for the Federal Reserve Bank of Minneapolis concluded in 1995. “But when that competition takes the form of preferential treatment for specific businesses, not only is it not ‘admirable,’ it interferes with interstate commerce and undermines the national economic union by misallocating resources and causing states to provide too few public goods.”
As is often the case in government, when high-stakes wheeling and dealing rubs up against the public’s inherent distrust, the result is simply to keep affairs hidden.
In 2012, when Apple sought tax abatements for a new data center in Sparks, executives met with public officials in secret and actively kept the company’s name off agendas and public documents until just three hours before the Washoe County Commission met to consider the issue. According to reporters, the discussion lasted 20 minutes before commissioners unanimously approved $89 million in abatements and then posed for photos with executives.
The deal-making behind 2014’s $1.3 billion Tesla Gigafactory deal followed in similar style. According to journalist Jon Ralston’s detailed account, the initial idea was concocted behind the scenes by then-Senate Majority Leader Harry Reid, Gov. Brian Sandoval, and Tesla owner Elon Musk, and hashed out in negotiations with unelected state economic development officers. All this before anyone in the public even knew enough to be in favor or opposed.
“I feel so cheap and used,” a political insider told Ralston following the Tesla vote. “While I truly appreciate the benefits of this deal for Northern Nevada jobs and revenue, it’s quite a hefty price. Does this set precedent?”
The list goes on, from Hyperloop 1, which received $9 million in tax breaks, to automotive startup Faraday Future, which received $335 million from the state without having to prove it had so much as a working prototype of a car. The company ended up giving the money back and leaving, but, as Patrick George of the website Jalopnik wrote, “(O)ne has to wonder how much taxpayer money was spent overall in this debacle that went nowhere and brought no new jobs to a region that badly needs them.”
By the time the Oakland Raiders rolled around, the “precedent” that so worried some in government had all but become standard practice. The plan for a $2 billion stadium near the Strip was sloppily workshopped into existence by a board of mostly unelected gaming executives, working off imaginary economic projections that one economist called “a catenation of optimistic assumptions,” as well as “the worst deal for a city I have ever seen.” After a rushed initial process that offered few opportunities for widespread public input, the deal was then passed during the literal dead of night in a show of brute-force lobbying so depressing that sitting legislators openly commiserated, and despite polls that showed most people opposed the deal.
None of that seemed to bother Sandoval, who declared it a win for Las Vegas’ “brand.” After all, it was Sandoval himself who outlined the approach at a 2012 meeting of the business group Keystone Corporation. Speaking to an audience gathered at the Silverton, he described economic development as a “contact sport,” arguing that Nevada needed to compete if it wanted to “be in the game.”
Which is exactly how it has unfolded. Politicians and titans of industry duke it out for high stakes, while the public looks on from the bleachers. It all makes for a good metaphor, but hardly good democracy. As professors Alan Peters and Peter Fisher from the University of Iowa wrote in the Journal of the American Planning Association in 2004, “Continuing on the path of traditional incentive-based economic development policy will simply produce an unending merry-go-round of tax cuts and subsidies whose net effect is to starve government of the resources it needs.”
And the problem might not be solely fiscal.
Mounting evidence suggests that Americans are more disconnected than ever from the political process. According to the Pew Research Center, months after Richard Nixon resigned the presidency for his involvement in the Watergate scandal, the share of Americans who held trust in government hovered around 36 percent — more than 10 points higher than it was during the whole of Barack Obama’s presidency.
A CBS poll in 2011 found that voters believed they themselves wielded the smallest influence on politics. The report concluded, “eight in 10 believe most members of Congress are primarily interested in serving special interests, not the people they ostensibly represent.” Frustrated, people stop caring, disengage, and merely watch politics play out as spectators. Obviously there’s more to this phenomenon than secretive public-money giveaways, but they certainly feed into it.
In a state that consistently ranks among the lowest in the country for political participation, perhaps it’s time to rethink our approach.
Companies like Amazon may have a long list of demands — the company used the word “incentives” 21 times in the proposal it sent to states — but so do citizens. In Nevada, for starters: better education and better healthcare. Instead of giving away the farm, why not make it a real negotiation and demand something in return? It can’t hurt; after all, most media outlets eliminated Las Vegas from the Amazon race early on.
We might not have landed the deal, but we just might have come away with something arguably as valuable: our dignity and sense of community. And it might have set an example for citizens in other states locked perpetually in the same self-defeating cycle to start making demands of their own.