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.
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  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 how Julius Berger built Abuja, while Lagos is suffocating.
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.
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.
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.
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.
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"
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.
These things are bigger gambles