Arlington County and the State of Virginia’s subsidy package for Amazon to locate its HQ2 facility in Arlington is another version of trickle-down economics or voodoo economics theory that giving more public funds to the rich and corporations will trickle down to lower income and middle class people. This is yet another episode in the Democratic county board’s determination to gentrify Arlington and eliminate the few remaining moderate income residents, both renters and homeowners and replace them with households earning well in excess of $150,000 a year.

The first impact on Arlington housing will be to raise rents and to raise prices of condos and houses. In Arlington a majority of resident are renters and not homeowners, and renters will clearly pay a price in the form of higher rents. The Arlington County Board has promised to spend $7 million a year to add 100 subsidized apartment to help renters, an amount so small in relation in relation to Arlington’s over 50,000 rental units as to be a joke.

The county and the State are giving Amazon roughly $1.5-2.0 billion in incentives; the chief beneficiary is the CEO and principal owner of Amazon Jeff Bezos, the wealthiest man on the Planet. So the premise is that if taxpayers in Virginia and Arlington give the richest man on Earth $2 billion, then there will be a wonderful world created that will trickle down prosperity on the rest of us.

The Arlington County Board’s mindless enthusiasm over giving Amazon as much as $400 million as incentives for 25,000 more Amazon employees to Crystal City within a decade or so must be dampened with the likelihood that higher local government expenses will absorb a high share of the expected higher tax revenues and that the cost of the subsidy itself will have to paid by current taxpayers.
The essential problem for Arlington is that we spend today about $22,000 per public student, and it is expected that these new Amazon employees will add at least 1,000 students to APS. Our schools are already overcrowded, and these new students will require the equivalent of two new elementary schools or a new middle school or a new high school. The new residents will also need our other services—recreation, libraries, social services, police and fire, sanitation, and the myriad services we Arlington residents cherish.

A George Mason University (GMU) report in November 2018 by Stephen Fuller found that a new Amazon HQ2 in Crystal City would add about 8,000 Amazon related households to Arlington, (The Economic and Fiscal Impacts of Locating Amazon HQ2 in Arlington, VA,). It also highlights that currently Arlington County spends $850 more per capita today than it gets from tax revenues so adding 8,000 new households with around 2 persons/household means that Arlington’s fiscal deficit rises by about $15 million, which is somewhat offset by $8.7 million in added tax revenue. Non-resident Amazon employees are expected to generate tax revenues that will add up to $19 million in tax revenue,

However, if one uses current school spending costs of almost $22,000 per student to obtain more accurate fiscal costs in Arlington, then the net fiscal impact of HQ2 shrinks to about $5 million a year. This is a trivial or negligible sum, compared to Arlington County’s annual fiscal revenues of about $1.3 billion in FY 2017. It also underscores how fragile are reports that there will be a large positive impact on Arlington of HQ2.

Beyond the higher school and services spending to meet the needs of these new Amazon employee residents, the county government will still have to pay off the $359 million in infrastructure bonds for Crystal City, come up with $7 million more per year for 10 years for affordable housing assistance, and then pay Amazon roughly $51 million from TOT and IFF funds over 10 to 15 years. This merely adds to net fiscal deficit that Amazon HQ2 will bring to Arlington.

This trickle down deal for Mr. Bezos the richest man in the Planet certainly provides a financial boost to Amazon, but it will cost Arlington taxpayers big time.

Bailout for Amazon and developers and tax rise for everyone else

Arlington County has now pledged upwards of $400 million for Amazon HQ2 in Arlington, but the hard part is yet to come as to how they will come up with such a sum. Likely they will have to significantly raise taxes in Arlington on current residents so that this boondoggle can be financed.

The announcement in early November 2018 that Amazon would locate 25,000 employees to the Crystal City area of Arlington (with another 25,000 in Queens New York City) brought loud acclaim from elected Arlington and Virginia officials who proudly outlined how they are going to give Amazon about $1.5 billion of taxpayer funds to one of the largest corporations in the world. The State of Virginia will provide $550 million in direct cash ($22,000 per job added), $200 million for transport; $375 million for a new VA Tech campus and expanded GMU campus, and $50 million for k-12 tech education.

Arlington will provide about $450 million dollars: $137 million for transport (combined with $220 million previously committed) in Crystal City; $20 million for direct subsidies for Amazon; and $70 million ($7 million more per year for the next ten years) for affordable housing assistance.

The politicians apparently expect that over the long run that the promised 25,000 more employees in Crystal City who earn $150,000 will provide significant more income tax and sales tax revenue, and in addition, fill empty office space in Crystal City to boost real Arlington estate tax revenue. All of these conclusions depend on a series of shaky assumptions, and, in any event, it will take years to attain, whereas the county and state will need to finance their promises immediately.

Virginia’s income tax rate is about 5 percent, and, assuming that 25,000 employees earning $150,000 were to live in Virginia, this generates $200 million more annually in Virginia income tax revenue. However, many of these employees will not live actually in Virginia or already live here, and many will likely live in Maryland and the District of Columbia (2 Metro stops away). Even if half of the new employees live in Virginia, the annual increase in income tax revenue shrinks to be less than $100 million. Arlington can expect to receive maybe one fourth of the state income tax or $25 million a year.

County board members have long deplored the high rate of commercial office vacancy in Crystal City and other parts of Arlington (the rate is 18 percent) is higher than it was 10 years ago. However, the national office vacancy rate is nearly this same average level as Arlington—about 16.5 percent according to Reuters, so Arlington is not that unusual compared to other U.S. metro areas. The county board wants to fill up offices in Crystal City, but Amazon will not fill up the vast empty buildings in Ballston or Rosslyn or the dozens of new buildings under construction today.

Filling more office space in Crystal City will not fill empty space in Ballston or Rosslyn each of which have a 24-percent vacancy rate. Filling empty office space in Crystal City with Amazon will eventually raise commercial rents there, and then drive out current businesses that then locate to much cheaper Reston or Tysons Corner. The county board is not responsible for irrational realty companies with trillions of dollars to spend nor can we ignore the maniac building boom in Tysons and Reston since the Silver Line opened.

How will Arlington finance its subsidies to Amazon? Arlington County has issued or authorized to issue about $1.4 billion in long term bonds for its schools, Metro, community and recreation needs, and cannot exceed that amount or its credit rating (now AAA) will drop raising financial costs for taxpayers. So it cannot issue another $300 million in general bonds unless it wants to impair its credit rating.

Arlington county operating budget has been very tight recently as rising school and Metro-rail costs have absorbed nearly all the increase in tax revenue, and cuts were made to other programs. In 2018, the county board cut spending for affordable housing assistance (housing grants), environmental programs, and adult education. There is no significant cash or rainy day fund to use, and 2019 will be another year when another $10 million will be needed for the public schools and the troubled Metrorail will need another infusion of capital.

Where then will the county get the short term funds to finance Amazon? It will have to raise the tax rate for the 230,000 current Arlington residents–higher property taxes for homeowners, renters, and l commercial businesses. In essence, the county board will force we the resident and voters in the county who will reap NO significant benefit from Amazon moving to Crystal to pay higher taxes to finance this corporate piggy deal.

The county board and the State of Virginia are playing a dangerous game of picking winners and losers in a capitalist world using tax payers’ funds that are urgently needed for other things, like schools, Metrorail, affordable housing assistance, recreation and parks, public safety, and community infrastructure like storm sewers and sanitation.
It would be far better for the county government to simply welcome Amazon and refuse to give them one cent of public dollars.

Arlington Greens will meet on Wednesday, Dec. 5 at 7:30 PM at the Ballston Fire House located at N. George Mason Drive and Wilson Boulevard, Arlington, VA  22203.   The public is welcome to attend, but only members can vote.  Membership is open to any Arlington resident for $5 annual dues.

Agenda items

Outcome of local election and implications

Historic preservation of Westover Apartments

Amazon Headquarters in Arlington

Arlington Energy Plan and environmental advocacy in 2019 with the Virginia General Assembly

Plan to attend.

For more information, email John Reeder  info@greensofarlington.org

Arlington Greens Oppose as Wasteful the Three County and School Bonds on the Arlington County, Virginia November Ballot, but Support the Metro Bond

Arlington Greens voted at their October meeting to oppose three of the four bonds on the November ballot, but to support the $75 million bond for Metro and transportation.  Greens felt that the need for more spending on Metrorail is imperative given safety, and improving bus and rail reliability, and urged Arlington voters to vote “Yes” for the Metro bond on the ballot referendum.

Greens however oppose the $29 million parks and recreation bond, the $37 million community infrastructure, and the $103 million public schools bond.  None of these three bonds are based on well thought out projects that have already been carefully designed, bid for construction costs, and scrutinized for waste.  The parks and recreation bonds will actually destroy or impair parkland since it will be used to build and pave over existing green space, demolish trees, and build extravagant energy-wasteful buildings.

The county government is issuing $80 million in bonds this year, and moreover has another $108 million in unused authority to issue more bonds, with more than sufficient funds for its needs. The county government and the school board both need to go back to the planning boards, and come back with precise and accurate information on projects for Arlington voters to consider.

About $44 million of the proposed $103 million school bond is to be used to build an entirely new Reed Elementary School in Westover.  The latest estimated cost of Reed is already far more at least $55 million, with possibly tens of millions of dollars in costs for a parking garage.  The school board has no idea what Reed School will cost.  In 2009, the school board spent about $20 million to fully renovate and expand Reed School which now will be demolished. Why?

The City of Alexandria just opened a new elementary school that cost around $22 million and was completed in about one year.   The City bought an commercial office building and re-modeled it into a 500-student school that opened in one year.   Fairfax County Public Schools did this several years ago to build an elementary school at 7-Corners within one year.   Why does Arlington have to build the most expensive schools in the U.S. and then tear them down ten years later?

If the county goes ahead and issues another $243 million of bonds on the ballot in November, it will likely endanger the county’s triple-A bond rating for municipal bonds since this will pass the 10 percent limit on bond service used by leading municipal bond rating companies.

The county already has issued $1.1 billion in bonds, and adding $243 million as well as the $188 million in already authorized bond will raise the debt service to over 10 percent of the county’s general revenue.

Arlington Greens will hold their next meeting on Wednesday, September 5, at 7:30 PM at the Ballston Firehouse Community Room, located at George Mason Drive and Wilson Blvd, Arlington, VA.

Major topics

Amazon HQ2 in Arlington, next steps for our opposition

Westover Apartments historic preservation–setting up a legal fund

environment–saving more trees in Arlington

opposing approval of Kavanaugh for U.S. supreme court

All are invited, but only paid members may vote.  Membership is $5 per year and limited to Arlington residents.

The Arlington County Board refused to modify real estate tax relief in order to target its benefits mostly to lower income seniors at its July 14 meeting. The board continues to reward many homeowners who are rich in wealth and higher income than the vast majority of lower income renters in Arlington. The board loosened restrictions on eligible homeowners costing another $154,000 in lost annual taxes; in April the board cut funding for rental housing grants by $400,000. So the rich get richer and the poor get less.

Arlington Greens had urged the board to limit real estate tax relief for homeowners to tax deferral which would increase county tax revenues by about $3 million annually that could then fund assistance for more needy Arlington residents with other forms of housing assistance, particularly rental grants. Greens urged the board to equalize maximum income levels for both renters and owners to a maximum 80% area median income. Arlington renters who are seniors getting a housing rental voucher have maximum income of 40% AMI, and most actually earn far less than this.

But the county board did the expected, and continues to give out over $4 million a year to homeowners many of whom live in a half million residence and have additional financial assets over $300,000.
This property tax relief program is highly inequitable, and treats Arlington property owners with higher incomes and much higher wealth better than Arlington residents who are renters.

With tax deferral, there would be about $3 million in additional tax revenue that could then be used to expand rental housing grants for elderly, disabled and families by the same amount. The housing rental grants program serves the elderly, disabled and families with a child all of whom earn well under 40 percent area median income (AMI), and who have personal assets under $35,000. The average senior getting a housing grant earns $14,000 a year. In April 2018, the county board cut housing grants by $0.4 million.

The real estate tax relief program in FY 2018 spent $4.4 million for tax exemption or tax deferral of property taxes to benefit 932 households (each receiving an average $4,700 benefit) of seniors and disabled persons who can earn up to $100,000 a year (130 percent AMI for a single person), and can have personal assets up to $540,000, in addition to their residence, potentially well over a million dollars in wealth. About $3 million of the program cost occurs owing to tax exemption.

With tax deferral, property owners would pay no real estate tax until the property is sold; there is no financial burden on them as our rising property values insure that even these deferred taxes will be paid without a net cost to these property owners in the future. In general, our real estate tax is about 1 percent of the value of the property, and property values have been rising at 2-3 percent or more annually. It is a significant form of housing assistance to be able to avoid paying taxes for years, and to repay them without interest years later from the proceeds of a capital gain.

The Affordable Housing Master Plan (AHMP) goal is to help an additional 630 more households with housing assistance annually over the next 25 years. The county has never met this goal in any year, and it appears that the goal is mostly just words on a piece of paper without the funds to make it reality.

Housing rental grants are the county’s single most effective housing assistance program. A HUD study found that housing grants in the United States were 72 percent less expensive than building new subsidized apartments—so called committed affordable units or “CAFs.”

The county should give more housing (rental) grants to seniors, disabled and parents with children, and other adults by lowering the current minimum age for seniors from age 65 to 50, and eliminating the other purely arbitrary restrictions that block tens of thousands of Arlington renters from applying for rental grants.

Arlington Greens will meet at Booeymongers Restaurant (1020 N. Glebe Road in Ballston) on Wednesday, Aug. 1, at 7:30 PM. The public is cordially invited to attend, but only dues paid Green members may vote. Dues are $5 per year; you can join at the meeting.

Major topics:
Amazon HQ2 in Arlington–results of townhall and next steps to stop county funding for Amazon in Arlington

Status of local elections races–county board, school board

Westover Apartments preservation

Rental (housing) grants and reforming local real estate property tax relief

Environmental issues–energy plan, banning plastic bags and saving older trees

Other topics

Please note our new meeting location at Booeymongers Restaurant http://www.booeymonger.com/locations

You can order food and drink or just attend our meeting without ordering anything