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Will Amazon Be Good For Arlington?

A lot of folks are asking whether the Amazon deal will be good for Arlington? Given the county’s propensity for hype and consistent lack of candor, it’s hard to know for sure. Here’s what we do know: Crystal City has been a virtual ghost town for far too long. We need a catalyst to rejuvenate this important business corridor.

Many argue that Amazon abuses its workforce, undercuts community-serving brick-and-mortar retail with predatory pricing, shifts its tax burden onto other taxpayers, makes tons of money and doesn’t need another taxpayer-funded handout. All true. But Nestlé is hardly a shining example of corporate social responsibility, and yet we gave it a relocation incentive package valued at over $16 million. Precious few Arlingtonians complained about that deal (full disclosure: I objected).

Here’s another question frequently posed by Amazon critics: Instead of attracting new businesses, why couldn’t we simply convert our empty commercial office buildings into residential ones? Short answer: Arlington has significant deficit spending on the residential side.

Table 6 in GMU’s fiscal and economic impact analysis of the Amazon deal uses revenue and expenditure figures from Arlington’s FY2017 CAFR to document that we are spending at least $850 more per resident than we are receiving in tax revenue from residential sources. [Note: In this analysis, apartment buildings were counted as “residential” in the revenue and expenditure calculations. Normally, apartment buildings are categorized as “commercial” revenue sources.]

GMU’s analysis understates Arlington’s actual spending on education (a “residential” expenditure) by about $400 per resident. [Audited numbers in the CAFR show that Arlington spent closer to $22K per student rather than the $18K+ per-student figure GMU quoted in its analysis.] Thus, the $850-per-resident deficit spending figure is a conservative estimate. One way to offset residential deficit spending is with revenue surpluses that are typically generated by commercial properties (office space, retail, etc.) and businesses operating in Arlington.

GMU’s analysis emphasizes the imperative of balancing residential growth with commercial growth (p. 11):

These differences in the percentage shares for revenues and expenditures between residents and non-residential functions explain why it is fiscally important for the County to balance residential and non-residential growth.

When Arlington fails to collect sufficient commercial revenue to offset its residential spending deficit, then it must cut spending, raise the tax rate (and/or assessments) or use a combination of the two to balance its budget. The County Manager’s proposed FY2020 budget combines some spending cuts with a 1.5-cent real estate tax-rate increase (on top of assessment increases). The County Board subsequently bumped up the advertised tax-rate increase to 2.75 cents per $100 of assessed value.

Given that Arlington’s 4th quarter development report lists over 11,000 new multifamily housing units under construction, recently completed or approved and on the drawing board, we can expect millions more in residential deficit spending in the coming years. Using APS’s surprisingly low student generation factor for market-rate elevator apartments (0.08 students per unit), just these units alone will add roughly 880 new students to our already overcrowded school system over the next few years.

In this short blog post, I’ve demonstrated the fiscal necessity for ongoing commercial growth. Whether Arlington can truly afford a $23 million “incentive” cash giveaway to Amazon is another question, one that I hope to address in my next blog post. Stay tuned. —The Reality Chick

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