Nevada rethinks ‘innovation zones’ plan to let tech firms run cities


The Las Vegas Strip seen from the 550 foot-tall (167.6 m) High Roller observation wheel, in Las Vegas, Nevada. The draft of the initial Nevada proposal alludes to a more systemic problem, stating that the traditional local government model is ‘inadequate alone’ to attract and retain new forms of businesses and foster economic development. — Reuters

NEW YORK: Nevada this week paused efforts to pass a bill that would allow technology companies to buy land and form quasi-local governments, following criticism that the proposal was part of a troubling trend of “smart cities” run by tech behemoths.

In January, Governor Steve Sisolak unveiled a bill to create so-called “Innovation Zones” which would let companies impose taxes and create school districts and court systems.

Sisolak pitched the plan, which had not yet formally been introduced in the state’s legislature, as part of his broader economic development scheme to pull the state out of a pandemic-induced recession and create about 200,000 jobs.

But after pushback from privacy advocates as well as environmentalists, Sisolak announced that the state would create a special joint committee to study the idea.

“I want people to be enthusiastic about this opportunity, not sceptical about a fast-tracked bill,” he said in a press release.

Legal experts warned against the scheme altogether.

“This whole thing should be scrapped,” Rohan Grey, a law professor at Willamette University in Oregon, told the Thomson Reuters Foundation.

“Rather than looking into ways to further privatise public governance, that energy and time could be better spent working on ways to improve local county governance and administrative capacity.”

The initial proposal would let tech companies buy at least 50,000 acres (20,230 hectares) of undeveloped land for US$250mil (RM1.02bil), according to a draft of the bill.

After that, companies would have to invest another US$1bil (RM4.10bil) over 10 years, the draft said.

Applicants for the zones would be limited to “innovative technology” businesses, which the draft outlines as blockchain, autonomous technology and robotics companies, as well as businesses in artificial intelligence and biometrics.

“We know what privatised public services look like,” Grey said in a phone interview. “They look like cuts. They look like profit being put above universal service delivery.”

Sisolak’s office did not respond to several requests for comment.

When announcing the plan in January, the governor named only one company that has committed to the idea, Nevada-based Blockchains LLC.

The digital ledger had already purchased 67,000 acres of land east of the city of Reno in 2018.

Starting in 2022, it aimed to build a city with 15,000 housing units and more than 30 million square feet of commercial and industrial real estate within 75 years, according to a draft of the company’s plan.

The city would be built with Blockchains’ technology at the core, the document says, allowing residents to use digital currencies to purchase goods and services, as well as log their medical and financial records and personal data.

Blockchains did not reply to several requests for comment.

Public animosity

During the industrial revolution, thousands of company towns – communities built and operated by businesses – popped up across the country, such as Pullman, Illinois, named after the now defunct Pullman Palace Car Company.

The town became embedded in US history for its treatment of workers, who were also residents, most notably by lowering wages while refusing to lower rents, which led to violent protests.

The company towns have all since been dismantled or, like Pullman, absorbed into surrounding cities, but in recent years, tech giants have proposed new “smart cities”.

Urban technology company Sidewalk Labs, owned by Alphabet, Google’s parent company, was planning to build a data-driven city development along Toronto’s lakeshore in tandem with the government-mandated agency Waterfront Toronto.

But after opposition from the public over issues including data privacy concerns, Sidewalk Labs pulled the plug in May 2020, citing “unprecedented economic uncertainty”.

In emailed comments, Alphabet confirmed only that it is “no longer pursuing the initiative”.

Last month, Tesla and SpaceX CEO Elon Musk tweeted that he wanted to create “the city of Starbase, Texas”, without elaborating further.

SpaceX did not respond to requests for comment.

Tech companies have been facing growing criticism, with the chief executives of Facebook, Google and Twitter called before Congress in March to answer questions about the way they moderate the content on their sites.

Nearly half of adults in America say tech companies need stronger regulation and about seven in 10 think social media companies have too much influence in politics, according to research by the Pew Research Center, a Washington-based think tank.

Public animosity toward tech firms will likely quash the Nevada scheme, said Amy Liu, vice president and director of the Metropolitan Policy Program at the Brookings Institution think tank.

“This feels like the government is ceding too much control to an industry that has not consistently proven its commitment to advancing the public good,” she said in a phone interview.

Creating jobs

Charles O’Kelley, a law professor at Seattle University, said those fears are overblown, noting the Nevada proposal is simply another example of states competing for jobs creation in an advanced sector of the economy.

“The people who should be unhappy about it are the people in (Silicon Valley) who see another state that is going to compete with them, perhaps successfully,” he said.

But Willamette professor Grey said that state-to-state competition for jobs and tax revenue is indicative of a larger problem: lack of public investment by the federal government.

“Businesses are using austerity and the starvation of public investment as an excuse to step into the breach and say, ‘We are the only ones left who can do this. If you want running water, you need to give us control’,” he said.

US President Joe Biden has earmarked US$350bil (RM1.43 trillion) for state, local and tribal governments as part of the coronavirus relief bill passed in March, and has also proposed a landmark infrastructure package estimated to cost over US$2 trillion (RM8.20 trillion).

The draft of the initial Nevada proposal alludes to a more systemic problem, stating that the traditional local government model is “inadequate alone” to attract and retain new forms of businesses and foster economic development.

Conor McQuivey, 37, a trivia host who lives in Reno, said that despite the boost they would give to Nevada’s economy, he finds the idea of the innovation zones worrying.

“The tech industry in particular has some troubling aspects that I don’t want to see being used to take advantage of our state and our community,” McQuivey said in a phone interview.

“If whatever company out there has their own government and their own rules, and in the process of building this thing out, they create their own mass surveillance in their innovation zone, that’s something that would worry me a lot.” – Thomson Reuters Foundation

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