What Corporate Welfare Is Amazon Getting From Virginia And NY?

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Written by Dana Sanchez

When Amazon invited cities more than a year ago to make a pitch for landing its second headquarters, the e-commerce retailer wanted skin in the game, setting off a frenzy of competition between economic developers and municipalities that put taxpayer dollars on the line.

Cities were asked to put their best offers on the table — in cash.

In its initial call for incentives, Amazon said “incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process.”

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Amazon has since decided to split its HQ2 between two locations — Long Island City section of Queens, New York, and Arlington, Virginia, south of Washingon, D.C. In addition, Amazon has chosen Nashville for a new operations center responsible for customer fulfillment, transportation, and supply chain.

In a blog, the online retail giant said that it will invest $5 billion and create more than 50,000 jobs in the two new headquarters, with more than 25,000 employees each in New York City and Arlington. Nashville will get more than 5,000 jobs.

How much did it cost taxpayers in those cities to attract Amazon, and what price will they pay down the road?

Combined incentives from New York and Virginia totaled about $2.8 billion, CNN reported. That’s almost equal to the $3 billion in profit Amazon earned in 2017, which helped make founder Jeff Bezos the richest man in the world.

The winning cities weren’t even the highest offers.

Here are the nine cities or metro areas that made their HQ2 incentive packages public, Business Insider reported in April:

1. Montgomery County, Maryland — $8.5 billion in tax and infrastructure incentives

2. Newark, New Jersey — $7 billion

3. Columbus, Ohio — nearly $2.3 billion

4. Philadelphia, Pennsylvania — $2 billion to $3 billion

5. Chicago, Illinois — At least $1.7 billion

6. Atlanta, Georgia — $1 billion

7. Los Angeles, California — $300 million to $1 billion

8. Denver, Colorado — $100 million or more

9. Raleigh, North Carolina — over $50 million

If Amazon exceeds the promised 25,000 jobs in New York City, tax breaks and other qualifying subsidies could go as high as $5.5 billion, according to CNN.

However, there’s a good chance the retail giant won’t collect on the full amount of incentives, NBC reported. “These packages will be reworked under this current (development] model),” location consultant John Boyd told NBC.

Promises are often broken. In 2016, Boston and Massachusetts offered GE $1 million in customized training, $25 million in property tax reductions over 20 years, and a reported $250 million in infrastructure investments for the company’s new headquarters and 800 jobs that were to follow. But GE fell on harder times: Two years later, the number of positions has only reached about 235.” — NBC

Amazon says it will bring NYC high-paying jobs, $2.5 billion in Amazon investment; up to 12 million square feet of office space and estimated tax revenue of$10 billion over 20 years. Arlington can expect an estimated incremental tax revenue of $3.2 billion over the next 20 years. Nashville can expect $1 billion in tax revenue over the next 10 years.

Economic incentives weren’t the only factor in its decision, Amazon said in a blog. “Attracting top talent was the leading driver.”

Masterful at extracting tax incentives, Amazon knows how to play local governments off against each other as they vie for job-producing fulfillment centers and offices, CNN reported. However, the competition for HQ2 got so fierce that it triggered a petition signed by more than 750 economists, policymakers, and urbanists calling for a non-aggression pact by Amazon.

HQ2 incentives
Photo: KEITH WONG

Some of the incentives are subject to state and local approval by legislators, and a political fight is anticipated over how much public money taxpayers should give away in exchange for high-paying tech jobs.

There’s reasonable evidence that tax incentives don’t benefit the locality that offers them that much, said Amihai Glazer, an economics professor at the University of California, Irvine.

Big-sounding job numbers are useful for politicians to present to their constituencies, but in general, tracking and measuring the economic effect is tricky.

It’s “money for the ‘haves,’ who have the least need for this but are being paid in essence a ransom or bribe to come or stay here,” said David Lewis, a human resources consultant in Norwalk, Connecticut, according to NBC.