Outside the realm of tech companies, large infrastructure projects are mostly built by PPP model(Public private partnership). It is one of the proven models in various countries as it saves govts. from spending large money upfront and not only ensures that private corporations finish the projects but also makes them liable for quality as they are liable for future maintenance.
The Toronto smart city project by Alphabet is a modern infrastructure project and totally makes sense that they follow PPP model for payments. Why do people here think it is a bad idea? IMO, it is a win-win for both Toronto & Alphabet.
Because in the US, is is not a proven model. The vast majority of public-private partnerships really end up being "public eats the costs, but private entities win all the benefits". It's gotten to the point that the mere existence of the phrase "public-private partnership" is a red flag that something corrupt is happening. (If it was a good faith effort and all above board, then it would all be done publicly in the first place).
> it saves govts. from spending large money upfront and not only ensures that private corporations finish the projects but also makes them liable for quality as they are liable for future maintenance.
Sure, but it usually accomplishes this by transferring some amount of public assets over to the private corporation in the process, which is a net loss for everyone. It's a backhanded way of looting the public's funds under the veneer of "progress" and "cooperation".
Or for a simple analogy, public-private partnerships are usually the governmental version of a reverse mortgage.
I think you're right. PPP model works when the Government doesn't have avenues of raising funds. In less developed countries, Governments often cannot raise money by imposing taxes or issuing bonds (or they can't to the tune required to fund such things). In wealthier nations, the funding is usually not an issue, the Governments are well functioning. I agree with you that these projects must be scrutinized very closely.
The fundamental problem of any PPP is that a lot can go wrong or change in 20, 50 years. It's impossible to predict and anticipate future economic climate so both parts try to setup adversarial contracts where they are protected as much as possible.
On the other hand, a private partner can always fold, go bankrupt, etc. while the state isn't going anywhere and it's obliged by law to abide by it's commitments. So this asymmetry almost guarantees a strong survivor bias towards very bad deals for the public.
Except when everything goes exactly to plan for decades, PPPs tend to either fail or be detrimental to the public, by their innate nature. If we bring a bit of corruption into discussion in the initial tender phase, you get the full picture.
After looking at the way public infra projects like the high speed train projects in California are managed, I am not sure how one can say that public only infra projects are proven to be successful
Amazing that the 407 is used as an example. The government spent, inflation adjusted, over $100B to acquire the land and then build the highway. The cost was for the public.
Then they leased it to a private consortium for 99 years for $3B, claiming that it was a win because it "cost" $1.5B to build. That consortium has since made a windfall charging ludicrous toll fees -- the public pays again -- privatizing the profits.
PPP is overwhelmingly a sign of a bad deal. Where politicians trying to get a short term "win" end up costing ratepayers multiples.
Yes. Let corporations in to cannibalize and strip-mine the public commons (common-wealth) with perverse incentives and gamify things too important the government should be doing.
Add in another horrible example of privatization in Canada, Ontario's Hydro One power company.
With every attempt of privatization of public services, I point out that:
* Public services are sometimes just that - they won't be profitable
* Privatization not only incentivizes skimping on services and deferring infra investment to save costs, but you now have the insult of a profit margin built into prices on often vital services. The "private sector efficiency" privatizations are sold on almost never end up aligning with the public interest
* Undoing privatization almost always costs more than was made privatizing.
Some other bad example:
Chicago selling decades of parking meter collection for pennies on the dollar
German Railways going private and the continual gutting of rural services that came along with it
Enron's market manipulation of California electric grid, causing blackouts and skyrocketing prices while they profited
Just because it's not entirely clear to me, are all of your numbers inflation adjusted? Or just the cost to buy the land? Because it doesn't pass the sniff test that the government would lease the project for a century for 3% of its present value.
The government of the day wanted the political "win" of claiming a balanced budget. That it would cost the residents many, many multiples over the years wasn't considered important.
I should add another important point about the 407 -- the route was chosen to be a traffic release, and an industrial corridor. Because of the very high toll roads it has become essentially an "executive" highway ($41+ one way trips), and the trucks and other traffic it was supposed to offload clog up the existing highways. The public benefit has been completely destroyed because the highway has been re-purposed for private benefit.
It is a debacle from top to bottom. But for one brief moment a government could claim a balanced budget (though they were actually $10B in the red).
First time I ever saw anyone outside of politics, who was promoting such a deal, claiming PPP as beneficial. In the UK they have been financially negative from the very first back under Major. The Blair government was particularly keen on them. From wikipedia:
An in-depth study, conducted by the National Audit Office of the United Kingdom [33] concluded that the private finance initiative model had proved to be more expensive and less efficient in providing hospitals, schools and other public infrastructure than public financing.
Totally successful for private profits in general. Less so for the public, which wants a given infrastructure without having to pay out the investors (which are investing into a private venture and thus of course are entitled a higher reward than loaning to the public...).
Just look at the German "Toll Collect" system. 5 years late. 10 years later, couldn't be delivered to the public (breach of contract...), because of "patents", while the private parts still happily collected their royalities. State had to meet in arbitration (WTF, it's tax money spent/collected here). Currently owned by the public, waiting the next successful PPP.
Or look at the Genova-bridge-disaster. Basically most of the times PPP seems like the worst of both "worlds" combined, wielding an enormous shield of public bureaucracy which keeps all the private elements save from any public scrutiny reaping their maximized profits...
Or look at healthcare in the US, ...
Or ...
Or how Julius Berger built Abuja, while Lagos is suffocating.
Or ...
Just name one PPP project, which stayed in its cost envelope (isn't that the argument: public always is inefficient...) and was delivered to the public after the contract ended.
PPP are a huge scam. It’s basically a buzzword used for transferring public property into private hands. Most of the time PPP projects are ripe with corruption and end up in scandals and controversy. Typical examples are highways in Europe built with this model. Often the work is poorly done, the government spends more money than initially thought because it ends up costing 5x more usually and at the end of it all private corporation ends up extracting money from people via tolls and only doing the most minimal maintenance they can get away with.
Cannibalistic theft in a business suit. It's always sold as cheaper and then charges citizens as much as possible later because the state-subsidized monopoly is a business first, not a service.
People in Toronto don't have to look far to see PPP in action: The 407 toll highway. I take it a few times a year to bypass Toronto and just a section of it costs me over $30 per one way trip for my little sedan. It seems to be an absolutely enormous money maker with a 99 year lease.
And is it common in those projects for companies to receive a share of public taxes? Some of you might believe there isn't a big difference between a tax break to a company and a direct share of revenues and quantitatively this is true, but qualitatively it isn't. Incentives matter, and this could set a very bad precedent.
>Outside the realm of tech companies, large infrastructure projects are mostly built by PPP model.
No, they aren't. The PPP model is one of many ways of organizing infrastructure projects, and it isn't dominant even in the UK, where it has a disproportionately large penetration into the infrastructure provision market by number of projects.
If we look at infrastructure project models by dollar spend, PPP fares even worse.
This isn't to say there isn't merit to the model, but the main functional difference in the PPP model in comparison with standard procurement isn't the disjointment between the design/build and the maintain/operate steps. It's the financing - the who and the how.
What's proven about PPPs is that the government always overpays and always shoulders all of the risk anyway. So there's not even the slightest benefit to the public, it's just a way for politically-connected companies to milk the public for free money.
Because this “infrastructure” isn’t useful to anyone except people who might choose to live there. The location is virtually an island (if you consider the highway that separates it from the city to be equivalent to a river). It’s in a location nobody would go for anything other than their proposed buildings. There’s literally nothing useful there right now except parking for large events held in tents on that car park.
I recommend reading their proposal. It’s so tiny that all this noise over it is so pointless. Heated sidewalks would be nice though. Especially this week. But no, our city should not be investing in this.
You're stuck in an utopian delusion not dealing with reality. When you privatize government, you create perverse incentives for corporations to extort citizens by charging excessive prices and fees, provide shoddy service and tie them to other things they don't want or need.
Before it was widely brought in, in the UK, the magazine published a number of articles showing how numbers were being manipulated to make PPP seem more cost effective, years later we are stuck with the schemes.
Paying a company for 25 years and at the end of it owning a 25 year old hospital isn't great, especially when there was no reason for the govt to not own it outright the whole time.
A PPP still leaves the public with a piece of infrastructure whose profits they have not been able to realize and cannot reinvest. The "future maintenance" also tends to have a sunset period.
Neoliberal schemes like this impoverish governments over time by selling off the country's wealth one project at a time. It doesn't actually make sense, it just looks good enough in the short run for politicians.
I interned for SNC Lavalin Construction in my undergraduate, and a finance guy gave a presentation where he literally laughed out loud in this evil way about how much money SNC was going to make out of it and what a stupid deal it was for the public.
Literal quote: "They think they're getting a Cadillac, but they're getting a Toyota." Now the CEO-at-the-time has been charged with corruption and the Prime Minister is involved.
> Sidewalk Labs, which provides urban technology infrastructure, is planning a 4.9-acre smart city along Toronto’s harbor front, a project that has already faced opposition from locals over concerns of data privacy.
> [...]
> Sidewalk Labs outlined its project for a light railway transit, 2,500 homes where 40 percent would be below market price, and a tall-timber factory they project will create 4,000 jobs.
So is it a "smart city" or just a light railway, homes, and a factory? If it is the latter how does that invade privacy? If it is the former then the article is super light on details.
This article is just all over the place. Hard to form any kind of opinion on this without more facts.
I'm not sure Google knows either. "Smarty city" just smacks of vague buzzwordy-ness idealism. What is it exactly? Are you just going build some condos and stick some wifi around? How is that really different than any other modern city?
There's been a huge turnover this year, with people quitting the committee out of protest for an absolute lack of oversight into how Google will be using the "smart data" and piss-poor management by the city.
From what I can gather, some politicians want to add a "success" to their career with zero care about the long term consequences. I'd like to see every politician involved in this put their entire net worth into the project so that they have to care about the long-term success. People simply don't care about other people's money.
I'd have loved to see Kathleen Wynne go bankrupt over the hydro projects.
The impression I’ve always gotten is that it’s a combination company town (in the old, bad sense) and a testbed for massive surveillance. I think all of the rest is fluid to the point of insensibility.
"Company town" in the old, bad sense doesn't make sense. That's the sense in which the company owns all the land, the only stores are the companies, etc.
It's hard to get good numbers for a cities values, but City of Toronto property taxes are a 4.3 billion dollar line item in the budget and are probably less than 2% assessed value on average (it varies from 0.6 to 2.4 depending on building type). That's a pretty easy lower bound on the real estate in the city being worth 200 billion. Even Google can't afford that.
I’m not sure why you’re taking a discussion about a 4.9 acre “smart city” and conflating it with purchasing all of Toronto. The “company town” nature of the place doesn’t require it to be all of Toronto after all, if that’s where you live and work.
It does when the defining properties of a company town include not being able to easily go elsewhere, and it's trivial to walk/bike/drive/take public transit from the 4.9 acres currently under consideration to the rest of Toronto.
I thought the bad parts of company towns only work when the town is isolated and your paid in google points. If you can just drive 10 minutes to a non-company town store and paid in cash, where is the lock in?
The combination of your home and job, coupled with the surveillance and likely TOS aspects. It’s not a perfect analogy, but in some ways it’s even worse.
Proximity, convenience, habit and time generally incentivizes people to behave in certain ways. I have a supermarket that I go to only because it's 50m away from where I live. Its selection is marginally worse and if there were a better one right next to it, I'd go to that instead, but there isn't. The next one is just enough distance/time away from my regular route to work that I don't feel it's worth the effort unless there's something really specific that I need. This is the kind of calculus that everybody uses to decide where to buy groceries. In a Google "town" with conveniently placed Google markets with a sufficient selection to cover most or all demographics and even a marginally higher cost would manage to capture the vast majority of residents.
That isn't the economic trap of living in a company town, that is like living in the more expensive area of town. So the company town effect doesn't happen. They can only raise their prices too much before the cost of goods outweighs the cost of inconvenience.
I really doubt that any sort of real 'company town' effect will happen.
Thank you. The piece clarifies things, the financing mechanism is very common in the states (TIF), but the payee is always a public entity that may or may not (almost always it is) paying off bonds held by private parties.
Is it possible that this financing proposal is just Alphabet's attempt to offer an alternative to local governments that would be reluctant to commit to directly fund these high-cost developments? Google is pretty evil, but this project has been moving very slowly and has been relatively responsive to public concerns. They're not trying to pull a fast one on the city like Amazon and NYC.
As a resident of the neighborhood under discussion, I would love to see it developed. I'd rather not offer Alphabet this incremental tax revenue, but I'd accept it: that would be a tiny fraction of the value the project would create for the city, and potentially for the world if some of the experiments are successful and spread.
I'm confused about why tax revenue needs to be forked over to Google at all.
Google is a developer like any other here. They should be able to make enough money from the project on its own. If they can't, then don't move forward with the project.
To be fair it sounds like this proposal includes building public transit infrastructure for the city, which is something you would usually expect to be paid for.
Why we wouldn't just pay them a dollar amount and be done with it though...
Percentage, similar to giving stock, makes Google invested into making it as good as possible, because the more successful it is the more money they make.
If the flat amount is roughly equal to the tax revenue from a successful development, why is it suddenly "evil"? It also spreads the payment over a longer period of time, making it easier to finance.
If it fails, Google gets less money, so they will try their best to make it work.
You're putting words in my mouth, I never said anything approaching that.
It's somewhat problematic because it obscures the amount we are agreeing to pay, and it lets politicians play accounting games to make themselves look better. That's not to say it's "evil".
Not necessarily. I'm sure they have target numbers in mind in terms of how much returns this construction will bring. So instead of paying in a single sum, they simply adjust the percentage to add up to the same amount, assuming the place is as successful as they had hoped.
If it ends being more successful, it's a win-win situation because Google makes more, and so does the city. If Google fails, then they also get paid less for it, and it's less of a loss for the city.
Lastly, paying over 30 years seems far easier to handle than a single sum too. In almost every way this seems like a better choice.
And we trust Google's target numbers to decide how much Google should get paid?
Any reliable baseline numbers here are basically impossible, because
- The land is massively underutilized right now consider it's location, with or without Google's help it is going to become more utilized and property values are going to go up.
- The government is pouring billions of dollars into this area, which is going to have returns with or without Google's help.
> it's a win-win situation
Paying someone more money is not a win-win. Developing the land is, but the negotiation over how much you get paid is approximately zero sum.
> And we trust Google's target numbers to decide how much Google should get paid?
I was talking about the city's targets.
> The government is pouring billions of dollars into this area
Right, and Google is proposing to instead of taking billions as a flat sum, taking it over 30 years instead, because they believe in the success of the project.
> which is going to have returns with or without Google's help.
They clearly want Google's help, as this project is already 1-2 years in the working, and has already gotten approval from all 3 levels of government. If they didn't want Google, they could've very easily refused the offer. No one is forcing anything on anyone.
> Paying someone more money is not a win-win.
Who said more money? Why do you instantly assume the worst? Take any amount of money you were going to pay them for their work. Take any target you had for how successful the project was going to be, and calculate the percentage distributed over 30 years. No one is talking about paying them more than they are owed.
Ok, the next part addressed why it's not really possible for those to be accurate either.
Also see the whole 407 thing discussed elsewhere in the thread. Trusting the cities numbers to be accurate/not just a version of Google's numbers is foolish.
The fact that you have to trust someones numbers at all is sufficient proof of my original statement, that this obscures the actual cost of the project.
> and has already gotten approval from all 3 levels of government.
That's a gross exaggeration. All the levels of government are talking to them, but as discussed in the article they are hardly on board.
> not really possible for those to be accurate either
Sure, but you can make a good estimate, and if it ends up being more, then everyone wins. Google makes more, but so does the city and all businesses involved. And let's not ignore the other side of the coin, where if they do poorly, they will make less money.
> as discussed in the article they are hardly on board.
That's about this specific proposal, I was talking about the project as a whole, which was announced October 2017.
Google can afford to write off a huge amount of money, and there’s no way in hell the amount on the table even approaches that. As for evil, look at their business model and extrapolate. If they want to take a risk with an insane project they’re unsuited for, let them shoulder the risks or rethink the feasibility of the project. The state owes them nothing, especially given how Google dodges their taxes.
They are a developer, but they are proposing a model where they sacrifice up front returns and absorb more of the downstream risk.
I'm not sure why this is a bad thing, unless the share of revenue they are suggesting is out of line with the the effective subsidy level and absorbed risk.
Frankly I'd prefer if zillionaire companies were laughed out of the room when asking for concessions. Build in Regina if you don't like the way Toronto currently works, they'll be happy to have you and the lower property costs will more than make up for the taxes.
They're not asking for concessions. They're asking to be paid for the project they're building.
Whether the project is worth what they're asking is a separate question. This is about a private company fronting the cost of infrastructure development and being paid back with revenues over time. That doesn't feel shady.
I would point out the Google Fiber rollout in Louisville as a better example of what they want to do: Create an experimental infrastructure for their own benefit, that may or may not provide long term value to residents.
Google ripped up the roads in Louisville to install fiber with an experimental methodology, and then abandoned it after it became clear the experiment failed. Rather than fix it, they're just going to leave. Louisville spent a ton of money fighting to bring Google in, gave them tons of allowances to do things nobody else would've been allowed to do, and got left holding the bag.
Since Google's fiber install was bad, Louisville can't even use the network after they leave. It's just trash.
Especially given the Louisville example, Toronto residents should fight like heck to not end up paying for Google's experiments.
Which is exactly why being paid in tax revenue over time is a much better solution, because if they fail and leave, they won't make money. If you pay them in a flat cost, then they are not as invested at seeing it succeed long term.
The mistake you are making is believing Google should be paid at all for their own project they initiated for their own benefit. This is something Google wants to do, not something Toronto wanted or needed. If Google wants to use cities as guinea pigs, the cities should not be paying the price at all. Arguably, Google should be paying Toronto for the opportunity.
New York decided it didn't really need to pay for Amazon to come there. Wisconsin learned how well paying Foxconn to set up a factory there worked out. Governments need to stop selling out their citizens to big tech companies, and start using tax dollars to benefit their constituents. Companies with tens or hundreds of billions of dollars in reserve cash do not need handouts.
You are conflating completely unrelated events. Amazon getting $3B tax cuts to build their own office there is in noway comparable to Google building homes, transportation and factories for a city.
It's not Google's "job" to build your house, and you calling it "their own project" doesn't mean they should do it for free. If you don't want their help, go ahead and say no, but to expect this to be done for free is ridiculous and naive, and also in no way comparable to the Amazon situation.
You are mistaken for what google wanted to do. They are not "building houses" or "transportation" or "factories"
Google wanted to harvest data from citizens of Toronto so that they can understand what people do in a city.
It's a part of their data collection goal, and so they asked Toronto "what would it take for you to let us do this" and Toronto said "we need xyz, transport, etc" and then Google came back with the proposal, with the caveat that they are able to collect the data from whoever/whatever tenants move in, from both commercial entities as well as private citizens, and data mine it. It is in no way something Google is doing "for" Toronto. Toronto has enough property developers. The land that this is to take place on belongs to the city, and that's why it's never been really developed.
I would think data of this kind is worth enough that Google should actually be paying the city. At least then there's a proper exchange.
I would also welcome it if the city opened it up to a proper bidding process to let others put in their vision as well.
I kinda get what's happening. The Reuters article distills over 12-16 months of civic debate and consultations into one small article that entirely misrepresents what Sidewalk Labs is trying to do.
Google wanted a way to see what people are doing on a macro-and-micro city level - like being able to apply Google Analytics on a real-life basis.
So they started discussions with Toronto to plan a kind of smart city. These discussions have been going on in the background for about a year, with media blitz, public discussions, etc and that's what the last sentence in the Reuters article is about: " Toronto City Councillor Paula Fletcher expressed concerns about the proposal.
“I was terribly shocked because this was not within the scope of the project. I think it’s a big credibility problem for everybody.”
The article is deliberately hiding critical parts of the project that has been front and center in Toronto civics debate - indeed, the scope of the project (the new Google office, the data collection, etc) has been on vice motherboard, major tech media, and has been on hacker news multiple times. Mostly centered around the Google/Alphabet/Sidewalk Lab's vision of what a "smart city" within the city of Toronto would look like.
You are missing huge pieces of the puzzle, entirely the goal of what they wanted to do, and various posters have been linking facts about the project, and not just the misrepresentations stated in the Reuters article.
in the article
" The Quayside project will span 12 acres of Toronto and, while still in the consulting stages, is shaping up to be a sensor-laden information smorgasbord for Sidewalk Labs and any other company collecting data in the area. "
....
"a member of a municipal advisory panel on data usage resigned from her position over data collection and transparency concerns with the project."
Her resignation letter is linked and it contains real information - first hand primary source information. There are also city council meeting minutes talking specifically about Sidewalk Lab's very explicitly stated data collection goals if that's not enough "sourcing" for you.
Are you arguing purely because you think Google is never doing nothing wrong and that all residents of Toronto are kidding when they say they know what's going to happen in their city? Do you live in Toronto and do you have a vested interested in how the city operates? To be upfront, I live in Toronto, and bike through the Port Lands on a weekly basis.
I'm trying to find some common ground here but it appears you have not done any research on this project but are speaking only in general terms. I have not spoken ill about google except in specifics about what they actually want to do with this city experiment, and all you've stated are handwaving without any references.
Perhaps you're unaware, but a major part of the Waterfront Toronto project is, in fact, a Google office. A decent chunk of the higher class housing built there is also likely to be for Google employees. An article from 2017 suggests teams from unrelated branches of Google, such as Google Brain, may have personnel relocated there. So, yes, it's actually very comparable to the Amazon situation.
And again, this isn't Toronto contracting out for infrastructure they want or need. This is Google, who set out to experiment with running cities, seeking a location to let them use as a testbed. The buildings and infrastructure assembled there will be for Google's benefit, not for Toronto's.
Do you have a source for that? The linked article states:
> Sidewalk Labs outlined its project for a light railway transit, 2,500 homes where 40 percent would be below market price, and a tall-timber factory they project will create 4,000 jobs.
Unless Googler's are planning to work at a timber factory, something doesn't line up.
> Google (googl, -0.84%) will move some 300 employees in Toronto to the new space, one of the sources said, including a team from its Google Brain unit led by artificial intelligence pioneer Geoffrey Hinton.
Why should the public pay for this project? Is it a project the government set out to do and ended up hiring google as a contractor? No? It's something google wants to do and Toronto is allowing them to do? Why should the city pay for the privileged of letting google make money?
Nobody bought anything from Google. This is like Apple coming to you saying "we're making you a laptop, pay up" and you saying "But I never ordered one from you"
If they're going to finance it with taxes anyway, there's no benefit to the local government which already has access to low-interest debt financing with that same property tax revenue stream. It's not as if Toronto can't afford the Waterfront East LRT without Google fronting the money.
short questions: does the public "need" these "high-cost developments"? Is there any advantage for the public or is it all about Alphabet having a giant playground where they don't have to deal with pesky customers but can have their small herd of citizen-sheep they are not directly accountable to? Is such a village more sustainable than just taking the same building without tech?
Google is not 'evil' in this context, it's just that their vision is probably inconsistent with what real communities mean.
Why on earth anyone thinks a bunch of software engineers from the Valley (who can't even build a reasonable Social Networking UI) are going to 'rethink' communities is beyond me.
Have we seen any specifics as to what this actually means?
What is this money going to go towards, exactly?
I doubt Google will make a dime from this. If anything, the city could materially gain.
Second - AWS was not pulling the wool over anyone's eyes, the deal was not perfect but net great for NYC.
They have so many hundreds of billions of dollars in offshore accounts they don't know what to do with it, and they want to tax you to invade your privacy too.
In this particular case, it appears to be the reverse, since the company is footing the bill, and expecting to be paid for it later, when it's actually viable and is generating taxable revenue.
As a resident of the GTA, I wish Sidewalk Labs would just take a hike into the lake already. There's no way I'd go into any neighbourhood they've big-brothered up knowingly and willingly.
This is one of the largest piggy banks in the world of cash just sitting there.
If our councillors had any brains, they'd get Google to pay for nearly everything, make sure privacy is protected, and let G have their little $20B experiment with a few data points.
Councillors should be tapping that piggy bank like a broken ATM.
There is a public-private investment model used in Australia which explicitly monetizes the imputed rise in value to local business from an activity, and includes it in the model for upside benefits, including increased rates and taxes. Queensland recently ran into a federal-state (partly party political) accounting model gap around this, and other cost/benefit assumptions which made funding a city centre underground system very difficult.
I think its cute for Alphabet to try and leverage some takeback on this. I think when the corporation shows its not using double-dutch-irish sandwich accounting methods to do transfer pricing and shift income offshore by fanciful IPR licencing and other tricks, it would be worth discussing.
In the meantime, until these entities pay their full tax component anywhere, let alone in Toronto, I think the answer should be "no"
Since I don't want to give Google one dime more than I absolutely have to, this would pretty much guarantee that I'd never do business with anyone in that area.
I'd say that it would also prevent me from setting foot in the area, but I was already unwilling to do that.
Well if you had taken the time to read the article, you would know that they are offering this as a way of getting paid for doing real construction. The other option is getting paid in a single sum.
The tax route is not only better for the city's financing, it also means that if Google's vision isn't as successful, they get less money back. So they will be invested in making it succeed.
Why would you pay a private company to build highways? I can't think of a job more suited to a public agency. Next your going to tell me how great tolls are.
How do you think roads get built? The vast majority these sorts of projects are built by contractors, where the public largely just employs full-time workers for the design/finance side of things and then also maintenance.
Civil service rules make it very difficult for the government to hire people for limited periods of time. What would the government do with highway construction workers after the job was done? Sure there might be another project three states away, but it’s not reasonable to tell workers they have to move every few years.
The article (and Sidewalk’s blog post https://medium.com/sidewalk-toronto/sidewalk-toronto-project...) has few details, so everyone is only responding to the suggestion that tax increment will be paid to Sidewalk Labs. It’s odd to see the outrage over that; it is one of only a couple ways that a government can pay a developer for public works:
1. Government buys land (including surrounding land), pays for development, and takes the risk that the increased rents don’t pay back the bonds
2. Private developer buys land (including surrounding land), pays for development, and takes the risk that the increased rents don’t pay back the bonds
Property taxes (and tax increment) let the government take partial equity in the surrounding land rents, allowing the government to make any linear combination of how much ownership to give to existing landowners, the developer, and the government. It seems odd that there should be moral outrage over having the developer take more of the risk vs. the government taking more of the risk.
Alphabet is not going to directly own any of the data. The proposals have been that it would be owned by the city, and only made available to partners in limited ways through a process with government oversight.
The entire project will be a giant social experiment that would make BF Skinner cream his pants. There is not one bit of info about the residents that they wouldn't want to have. Every doorway will be fitted with state of the art facial recognition. Google will know everything about who comes and goes and why. They will know how often you use the bathroom and nag you when you keep the lights on. But, most of all they will know how you think, and how your thinking affects your actions, and which of those actions they can monetize.
Something I don't get here. The normal model of RE development is you build stuff, you rent it out or sell it, you collect the rent or sale proceeds, hopefully earn a lot, move on. The property taxes and fees go for developing public infrastructure - roads, schools, parks, etc. Now why Google would need to get part of property taxes? Are they going to build road and schools? Why?
I am not sure why there needs to be a model where private company collects taxes. They're building private light rail? Excellent, charge to ride it and recoup your costs. You're building timber factory? Excellent, factory should be financed by selling its output, not by collecting taxes. What am I missing? What is so special in this particular development that it requires Google to get part of the taxes?
This is no different than Toronto issuing a bond based on property tax revenue and giving the proceeds to Sidewalk Labs to construct what they proposed.
I think this story is completely missing the point. Most companies would be risk adverse and would want the city to shoulder the risk with a bond and increased taxes to pay for it. It sounds like Google is proposing a form of equity compensation where they are paid based on performance. The metric for that performance just happens to be tax revenue generated by the project. It could just as easily be some non-monetary metric correlated to city revenue.
With the convenient side effect that you have to cancel some megacontract if performance is not what you expect. With everything else it's: "hey, your contract has run out after x years, reapply and make sure you do it better". Alphabet seems more like: "well, you have to pay us for our expenses 20 years back. you know, you owe us. do you really want to break the contract". It's all about power and making a dent into public law which today is basically quite good at preventing Manchester-like capitalism (at least in the developed world, even post-Reagan)
The Toronto smart city project by Alphabet is a modern infrastructure project and totally makes sense that they follow PPP model for payments. Why do people here think it is a bad idea? IMO, it is a win-win for both Toronto & Alphabet.
Because in the US, is is not a proven model. The vast majority of public-private partnerships really end up being "public eats the costs, but private entities win all the benefits". It's gotten to the point that the mere existence of the phrase "public-private partnership" is a red flag that something corrupt is happening. (If it was a good faith effort and all above board, then it would all be done publicly in the first place).
> it saves govts. from spending large money upfront and not only ensures that private corporations finish the projects but also makes them liable for quality as they are liable for future maintenance.
Sure, but it usually accomplishes this by transferring some amount of public assets over to the private corporation in the process, which is a net loss for everyone. It's a backhanded way of looting the public's funds under the veneer of "progress" and "cooperation".
Or for a simple analogy, public-private partnerships are usually the governmental version of a reverse mortgage.
On the other hand, a private partner can always fold, go bankrupt, etc. while the state isn't going anywhere and it's obliged by law to abide by it's commitments. So this asymmetry almost guarantees a strong survivor bias towards very bad deals for the public.
Except when everything goes exactly to plan for decades, PPPs tend to either fail or be detrimental to the public, by their innate nature. If we bring a bit of corruption into discussion in the initial tender phase, you get the full picture.
https://en.wikipedia.org/wiki/Public-private_partnerships_in...
Then they leased it to a private consortium for 99 years for $3B, claiming that it was a win because it "cost" $1.5B to build. That consortium has since made a windfall charging ludicrous toll fees -- the public pays again -- privatizing the profits.
PPP is overwhelmingly a sign of a bad deal. Where politicians trying to get a short term "win" end up costing ratepayers multiples.
Btw, do you ever watch TRNN or Economic Update?
With every attempt of privatization of public services, I point out that:
* Public services are sometimes just that - they won't be profitable
* Privatization not only incentivizes skimping on services and deferring infra investment to save costs, but you now have the insult of a profit margin built into prices on often vital services. The "private sector efficiency" privatizations are sold on almost never end up aligning with the public interest
* Undoing privatization almost always costs more than was made privatizing.
Some other bad example:
Chicago selling decades of parking meter collection for pennies on the dollar
German Railways going private and the continual gutting of rural services that came along with it
Enron's market manipulation of California electric grid, causing blackouts and skyrocketing prices while they profited
I should add another important point about the 407 -- the route was chosen to be a traffic release, and an industrial corridor. Because of the very high toll roads it has become essentially an "executive" highway ($41+ one way trips), and the trucks and other traffic it was supposed to offload clog up the existing highways. The public benefit has been completely destroyed because the highway has been re-purposed for private benefit.
It is a debacle from top to bottom. But for one brief moment a government could claim a balanced budget (though they were actually $10B in the red).
An in-depth study, conducted by the National Audit Office of the United Kingdom [33] concluded that the private finance initiative model had proved to be more expensive and less efficient in providing hospitals, schools and other public infrastructure than public financing.
EDIT: A different UK report, extensively damning, this time a 2018 Select Comittee: https://www.parliament.uk/business/committees/committees-a-z...
Just look at the German "Toll Collect" system. 5 years late. 10 years later, couldn't be delivered to the public (breach of contract...), because of "patents", while the private parts still happily collected their royalities. State had to meet in arbitration (WTF, it's tax money spent/collected here). Currently owned by the public, waiting the next successful PPP. Or look at the Genova-bridge-disaster. Basically most of the times PPP seems like the worst of both "worlds" combined, wielding an enormous shield of public bureaucracy which keeps all the private elements save from any public scrutiny reaping their maximized profits... Or look at healthcare in the US, ... Or ... Or how Julius Berger built Abuja, while Lagos is suffocating. Or ...
Just name one PPP project, which stayed in its cost envelope (isn't that the argument: public always is inefficient...) and was delivered to the public after the contract ended.
No, they aren't. The PPP model is one of many ways of organizing infrastructure projects, and it isn't dominant even in the UK, where it has a disproportionately large penetration into the infrastructure provision market by number of projects.
If we look at infrastructure project models by dollar spend, PPP fares even worse.
This isn't to say there isn't merit to the model, but the main functional difference in the PPP model in comparison with standard procurement isn't the disjointment between the design/build and the maintain/operate steps. It's the financing - the who and the how.
I recommend reading their proposal. It’s so tiny that all this noise over it is so pointless. Heated sidewalks would be nice though. Especially this week. But no, our city should not be investing in this.
Paying a company for 25 years and at the end of it owning a 25 year old hospital isn't great, especially when there was no reason for the govt to not own it outright the whole time.
Neoliberal schemes like this impoverish governments over time by selling off the country's wealth one project at a time. It doesn't actually make sense, it just looks good enough in the short run for politicians.
Literal quote: "They think they're getting a Cadillac, but they're getting a Toyota." Now the CEO-at-the-time has been charged with corruption and the Prime Minister is involved.
Fuck Public-Private Partnerships.
> Sidewalk Labs, which provides urban technology infrastructure, is planning a 4.9-acre smart city along Toronto’s harbor front, a project that has already faced opposition from locals over concerns of data privacy.
> [...]
> Sidewalk Labs outlined its project for a light railway transit, 2,500 homes where 40 percent would be below market price, and a tall-timber factory they project will create 4,000 jobs.
So is it a "smart city" or just a light railway, homes, and a factory? If it is the latter how does that invade privacy? If it is the former then the article is super light on details.
This article is just all over the place. Hard to form any kind of opinion on this without more facts.
Lack of details and vagueness describes all the communication about sidewalk lab's project, not just this article.
If I had to guess the reporter doesn't really know and can't really find out.
Note that from the quotes in this article this most recent iteration seems to be a surprise to the city as well.
There's been a huge turnover this year, with people quitting the committee out of protest for an absolute lack of oversight into how Google will be using the "smart data" and piss-poor management by the city.
From what I can gather, some politicians want to add a "success" to their career with zero care about the long term consequences. I'd like to see every politician involved in this put their entire net worth into the project so that they have to care about the long-term success. People simply don't care about other people's money.
I'd have loved to see Kathleen Wynne go bankrupt over the hydro projects.
It's hard to get good numbers for a cities values, but City of Toronto property taxes are a 4.3 billion dollar line item in the budget and are probably less than 2% assessed value on average (it varies from 0.6 to 2.4 depending on building type). That's a pretty easy lower bound on the real estate in the city being worth 200 billion. Even Google can't afford that.
I really doubt that any sort of real 'company town' effect will happen.
And how would that work in practice? The city cuts a deal to lower taxes for just that development? Or the treasury cuts a check to Google every year?
The original piece that reported the leaked presentation is paywalled, but here is the link: https://www.thestar.com/news/gta/2019/02/14/googles-sidewalk...
A non-paywalled but more detailed summary is here: https://www.nationalobserver.com/2019/02/15/news/alphabets-s...
Tax Increment Financing https://en.wikipedia.org/wiki/Tax_increment_financing
As a resident of the neighborhood under discussion, I would love to see it developed. I'd rather not offer Alphabet this incremental tax revenue, but I'd accept it: that would be a tiny fraction of the value the project would create for the city, and potentially for the world if some of the experiments are successful and spread.
Google is a developer like any other here. They should be able to make enough money from the project on its own. If they can't, then don't move forward with the project.
Why we wouldn't just pay them a dollar amount and be done with it though...
No idea how they're going to square that up with Metrolinx and the provincial government.
If the flat amount is roughly equal to the tax revenue from a successful development, why is it suddenly "evil"? It also spreads the payment over a longer period of time, making it easier to finance.
If it fails, Google gets less money, so they will try their best to make it work.
You're putting words in my mouth, I never said anything approaching that.
It's somewhat problematic because it obscures the amount we are agreeing to pay, and it lets politicians play accounting games to make themselves look better. That's not to say it's "evil".
Not necessarily. I'm sure they have target numbers in mind in terms of how much returns this construction will bring. So instead of paying in a single sum, they simply adjust the percentage to add up to the same amount, assuming the place is as successful as they had hoped.
If it ends being more successful, it's a win-win situation because Google makes more, and so does the city. If Google fails, then they also get paid less for it, and it's less of a loss for the city.
Lastly, paying over 30 years seems far easier to handle than a single sum too. In almost every way this seems like a better choice.
And we trust Google's target numbers to decide how much Google should get paid?
Any reliable baseline numbers here are basically impossible, because
- The land is massively underutilized right now consider it's location, with or without Google's help it is going to become more utilized and property values are going to go up.
- The government is pouring billions of dollars into this area, which is going to have returns with or without Google's help.
> it's a win-win situation
Paying someone more money is not a win-win. Developing the land is, but the negotiation over how much you get paid is approximately zero sum.
I was talking about the city's targets.
> The government is pouring billions of dollars into this area
Right, and Google is proposing to instead of taking billions as a flat sum, taking it over 30 years instead, because they believe in the success of the project.
> which is going to have returns with or without Google's help.
They clearly want Google's help, as this project is already 1-2 years in the working, and has already gotten approval from all 3 levels of government. If they didn't want Google, they could've very easily refused the offer. No one is forcing anything on anyone.
> Paying someone more money is not a win-win.
Who said more money? Why do you instantly assume the worst? Take any amount of money you were going to pay them for their work. Take any target you had for how successful the project was going to be, and calculate the percentage distributed over 30 years. No one is talking about paying them more than they are owed.
Ok, the next part addressed why it's not really possible for those to be accurate either.
Also see the whole 407 thing discussed elsewhere in the thread. Trusting the cities numbers to be accurate/not just a version of Google's numbers is foolish.
The fact that you have to trust someones numbers at all is sufficient proof of my original statement, that this obscures the actual cost of the project.
> and has already gotten approval from all 3 levels of government.
That's a gross exaggeration. All the levels of government are talking to them, but as discussed in the article they are hardly on board.
Edit (2m post posting): Sorry, this article: https://www.nationalobserver.com/2019/02/15/news/alphabets-s...
> Who said more money? Why do you instantly assume the worst?
You did. I don't appreciate the accusation of dishonesty.
> it's a win-win situation because Google makes more, [...]
Sure, but you can make a good estimate, and if it ends up being more, then everyone wins. Google makes more, but so does the city and all businesses involved. And let's not ignore the other side of the coin, where if they do poorly, they will make less money.
> as discussed in the article they are hardly on board.
That's about this specific proposal, I was talking about the project as a whole, which was announced October 2017.
Here's the conference where Trudeau, as well as the representatives for the province and city all welcome it quite happily: https://www.youtube.com/watch?v=A_yg_BsJy_o
They are clearly onboard with Google as a whole, but yes, this specific proposal is obviously new and being looked at.
They are a developer, but they are proposing a model where they sacrifice up front returns and absorb more of the downstream risk.
I'm not sure why this is a bad thing, unless the share of revenue they are suggesting is out of line with the the effective subsidy level and absorbed risk.
Whether the project is worth what they're asking is a separate question. This is about a private company fronting the cost of infrastructure development and being paid back with revenues over time. That doesn't feel shady.
Google ripped up the roads in Louisville to install fiber with an experimental methodology, and then abandoned it after it became clear the experiment failed. Rather than fix it, they're just going to leave. Louisville spent a ton of money fighting to bring Google in, gave them tons of allowances to do things nobody else would've been allowed to do, and got left holding the bag.
Since Google's fiber install was bad, Louisville can't even use the network after they leave. It's just trash.
Especially given the Louisville example, Toronto residents should fight like heck to not end up paying for Google's experiments.
https://www.wdrb.com/in-depth/google-fiber-ending-service-in...
New York decided it didn't really need to pay for Amazon to come there. Wisconsin learned how well paying Foxconn to set up a factory there worked out. Governments need to stop selling out their citizens to big tech companies, and start using tax dollars to benefit their constituents. Companies with tens or hundreds of billions of dollars in reserve cash do not need handouts.
It's not Google's "job" to build your house, and you calling it "their own project" doesn't mean they should do it for free. If you don't want their help, go ahead and say no, but to expect this to be done for free is ridiculous and naive, and also in no way comparable to the Amazon situation.
Google wanted to harvest data from citizens of Toronto so that they can understand what people do in a city.
It's a part of their data collection goal, and so they asked Toronto "what would it take for you to let us do this" and Toronto said "we need xyz, transport, etc" and then Google came back with the proposal, with the caveat that they are able to collect the data from whoever/whatever tenants move in, from both commercial entities as well as private citizens, and data mine it. It is in no way something Google is doing "for" Toronto. Toronto has enough property developers. The land that this is to take place on belongs to the city, and that's why it's never been really developed.
I would think data of this kind is worth enough that Google should actually be paying the city. At least then there's a proper exchange.
I would also welcome it if the city opened it up to a proper bidding process to let others put in their vision as well.
Google wanted a way to see what people are doing on a macro-and-micro city level - like being able to apply Google Analytics on a real-life basis.
So they started discussions with Toronto to plan a kind of smart city. These discussions have been going on in the background for about a year, with media blitz, public discussions, etc and that's what the last sentence in the Reuters article is about: " Toronto City Councillor Paula Fletcher expressed concerns about the proposal.
“I was terribly shocked because this was not within the scope of the project. I think it’s a big credibility problem for everybody.”
The article is deliberately hiding critical parts of the project that has been front and center in Toronto civics debate - indeed, the scope of the project (the new Google office, the data collection, etc) has been on vice motherboard, major tech media, and has been on hacker news multiple times. Mostly centered around the Google/Alphabet/Sidewalk Lab's vision of what a "smart city" within the city of Toronto would look like.
You are missing huge pieces of the puzzle, entirely the goal of what they wanted to do, and various posters have been linking facts about the project, and not just the misrepresentations stated in the Reuters article.
https://motherboard.vice.com/en_us/article/vbknkj/google-wan...
in the article " The Quayside project will span 12 acres of Toronto and, while still in the consulting stages, is shaping up to be a sensor-laden information smorgasbord for Sidewalk Labs and any other company collecting data in the area. " .... "a member of a municipal advisory panel on data usage resigned from her position over data collection and transparency concerns with the project."
Her resignation letter is linked and it contains real information - first hand primary source information. There are also city council meeting minutes talking specifically about Sidewalk Lab's very explicitly stated data collection goals if that's not enough "sourcing" for you.
Are you arguing purely because you think Google is never doing nothing wrong and that all residents of Toronto are kidding when they say they know what's going to happen in their city? Do you live in Toronto and do you have a vested interested in how the city operates? To be upfront, I live in Toronto, and bike through the Port Lands on a weekly basis.
I'm trying to find some common ground here but it appears you have not done any research on this project but are speaking only in general terms. I have not spoken ill about google except in specifics about what they actually want to do with this city experiment, and all you've stated are handwaving without any references.
And again, this isn't Toronto contracting out for infrastructure they want or need. This is Google, who set out to experiment with running cities, seeking a location to let them use as a testbed. The buildings and infrastructure assembled there will be for Google's benefit, not for Toronto's.
> Sidewalk Labs outlined its project for a light railway transit, 2,500 homes where 40 percent would be below market price, and a tall-timber factory they project will create 4,000 jobs.
Unless Googler's are planning to work at a timber factory, something doesn't line up.
https://dailyhive.com/toronto/google-sidewalk-labs-waterfron...
> Google (googl, -0.84%) will move some 300 employees in Toronto to the new space, one of the sources said, including a team from its Google Brain unit led by artificial intelligence pioneer Geoffrey Hinton.
http://fortune.com/2017/10/17/alphabet-google-sidewalk-labs-...
So yes, they're moving their Canadian headquarters to the new campus they're building... that they want to tax Canadian citizens to pay for.
Who asked them to build that project?
Regardless, it's ridiculous that every city these companies set upon aren't charging them full m-f'ing freight.
Why on earth anyone thinks a bunch of software engineers from the Valley (who can't even build a reasonable Social Networking UI) are going to 'rethink' communities is beyond me.
Have we seen any specifics as to what this actually means?
What is this money going to go towards, exactly?
I doubt Google will make a dime from this. If anything, the city could materially gain.
Second - AWS was not pulling the wool over anyone's eyes, the deal was not perfect but net great for NYC.
The point of that is the risk matrix is substantially diffused.
They have $109 billion in cash according to their latest financial statements.
What offshore accounts are you referring to that are supposedly holding hundreds of billions of dollars in stolen, unreported shareholder funds?
This is one of the largest piggy banks in the world of cash just sitting there.
If our councillors had any brains, they'd get Google to pay for nearly everything, make sure privacy is protected, and let G have their little $20B experiment with a few data points.
Councillors should be tapping that piggy bank like a broken ATM.
Sidewalk Labs is by and large an advertising company. It's basically Clear Channel with a quirky moonshot division.
Just threw up in my mouth a little.
I think its cute for Alphabet to try and leverage some takeback on this. I think when the corporation shows its not using double-dutch-irish sandwich accounting methods to do transfer pricing and shift income offshore by fanciful IPR licencing and other tricks, it would be worth discussing.
In the meantime, until these entities pay their full tax component anywhere, let alone in Toronto, I think the answer should be "no"
https://en.wikipedia.org/wiki/RoboCop_(franchise)#Omni_Consu...
Really, Detroit and Toronto aren't that far apart.
I'd say that it would also prevent me from setting foot in the area, but I was already unwilling to do that.
The tax route is not only better for the city's financing, it also means that if Google's vision isn't as successful, they get less money back. So they will be invested in making it succeed.
1. Government buys land (including surrounding land), pays for development, and takes the risk that the increased rents don’t pay back the bonds
2. Private developer buys land (including surrounding land), pays for development, and takes the risk that the increased rents don’t pay back the bonds
Property taxes (and tax increment) let the government take partial equity in the surrounding land rents, allowing the government to make any linear combination of how much ownership to give to existing landowners, the developer, and the government. It seems odd that there should be moral outrage over having the developer take more of the risk vs. the government taking more of the risk.
Alon Levy wrote a related blog post discussing taxation vs. ownership in regards to subways here: https://pedestrianobservations.com/2017/09/07/meme-weeding-l...
By that point the city police will be a wholly owned subsidiary of Alphabet, and they'll have renamed Toronto to "Delta City."
Governments already make too many concessions to corporations while at the same time failing their obligations to citizens.
They build infrastructure and get a percentage of revenues as payment?
I'm fine with that.
or they just want giveaways in order to do it at all.
Just optics.
These things are bigger gambles