
Alphabet’s Sidewalk Labs seeks share of property taxes for Toronto smart city - pseudolus
https://www.reuters.com/article/us-alphabet-canada/alphabet-unit-seeks-share-of-property-taxes-for-toronto-smart-city-idUSKCN1Q423Z
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rajeshp1986
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.

~~~
maxsilver
> Why do people here think it is a bad idea?

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.

~~~
pm90
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.

~~~
yholio
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.

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Someone1234
This article is very strange.

> 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.

~~~
gpm
Torontonian here.

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.

~~~
mpg33
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?

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JeremyBanks
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.

~~~
nostromo
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.

~~~
gpm
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...

~~~
ehsankia
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.

~~~
gpm
> why is it suddenly "evil"

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".

~~~
ehsankia
> it obscures the amount we are agreeing to pay

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.

~~~
gpm
> I'm sure they have target numbers

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.

~~~
ehsankia
> 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.

~~~
gpm
> I was talking about the city's targets.

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...](https://www.nationalobserver.com/2019/02/15/news/alphabets-
sidewalk-labs-was-secretly-considering-big-plans-toronto-neighbourhood)

> 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, [...]

~~~
ehsankia
> 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.

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](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.

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ocdtrekkie
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.

~~~
gammateam
The point is to always invest with other people's money.

The point of that is the risk matrix is substantially diffused.

~~~
int_19h
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.

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coldacid
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.

~~~
sonnyblarney
No way.

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.

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nostromo
> Sidewalk Labs, which provides urban technology infrastructure

Sidewalk Labs is by and large an advertising company. It's basically Clear
Channel with a quirky moonshot division.

~~~
hinkley
So they want to build the city from Minority Report.

Just threw up in my mouth a little.

------
ggm
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"

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dsr_
Today I learned Alphabet views OCP as a role model.

[https://en.wikipedia.org/wiki/RoboCop_(franchise)#Omni_Consu...](https://en.wikipedia.org/wiki/RoboCop_\(franchise\)#Omni_Consumer_Products)

Really, Detroit and Toronto aren't that far apart.

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JohnFen
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.

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typeformer
Corporations should pay taxes, people should not pay taxes to corporations.

~~~
skybrian
Is it your position that governments shouldn't pay businesses to build
highways and bridges? Which government contractors do you think are okay?

~~~
wolco
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.

~~~
zjaffee
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.

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Animats
Now, from the people who blew it in fiber to the home, another infrastructure
project.

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whynyc
Amazon+Google should just team up and lease an uninhabited land somewhere. Max
autonomy, max speed. No doubt they can create a singapore in < 5 years.

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yonran
The article (and Sidewalk’s blog post [https://medium.com/sidewalk-
toronto/sidewalk-toronto-project...](https://medium.com/sidewalk-
toronto/sidewalk-toronto-project-update-d44738cdb239)) 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.

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...](https://pedestrianobservations.com/2017/09/07/meme-weeding-land-
value-capture/)

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dpflan
I’m not that familiar with the project. What are the privacy issues with
regard to personal information that is shared in the ecosystem?

~~~
JeremyBanks
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.

~~~
dwiel
What kind of data are they collecting?

~~~
typeformer
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.

~~~
rrix2
Wow that sounds scary! can you link to any documentation/media coverage about
this level of collection?

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maxxxxx
After a while there will be an update "Saying Goodbye to Toronto". "We have
learned a lot. Thanks for your support.".

~~~
CharlesColeman
> After a while there will be an update "Saying Goodbye to Toronto". "We have
> learned a lot. Thanks for your support.".

By that point the city police will be a wholly owned subsidiary of Alphabet,
and they'll have renamed Toronto to "Delta City."

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smsm42
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?

~~~
sonnyblarney
They are going to build services and infrastructure beyond just what a
contractor would do.

~~~
smsm42
Why? And how - aren't all services and infrastructure ultimately built by
contractors? (except those that are built by Army Corps of Engineers).

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jelliclesfarm
On a slightly related note, is the ‘4.9 acre’ a typo? How is it possible to
build 2500 homes and infrastructure in 4.9 acre?

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anth_anm
I'm confused.

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.

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tunesmith
Is this precedented, for private companies to get a percentage of government
tax revenue like this?

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gammateam
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.

Just optics.

~~~
deckar01
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.

~~~
fock
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)

~~~
typeformer
Exactly right

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rrcaptain
Kind of rich for a company which pays hardly anything (if anything T all) in
taxes to ask for tax revenue.

