most shocking part is the NDAs with cities for the HQ2 bids require local governments adherence to dynamic pricing contracts. For one CA school district, that system would make them pay 12% more. So on top of the big and extended tax breaks cities have to give to win over Amazon, along with the exceptions to zoning restrictions that most builders have to adhere to, that's not enough. They also have to buy from amazon at inflated prices. Not a bad deal, if you're Amazon.
Surprise, backroom sweetheart deals between businesses and politicians are wildly unpopular.
And it was dumb for Amazon to seek out subsidies anyway. Amazon only needed one criteria to have a successful HQ2: A willingness to accommodate new housing demand. $3B in subsidies would be dwarfed by the increase in salaries from higher costs of living. If a city can allow housing to be built, and keep up with Amazon's hiring demand to keep housing prices flat, that alone would be worth far more than any city or state could ever hand over to Amazon in subsidies.
How is that different from the deals that pretty much every other large company looks for when locating a new facility? Amazon pretty much had local governments humiliating themselves in their HQ 2 'contest' not too long ago.
So the leadership in all the cities falls over themselves to bend over the most for Amazon? Amazon will play them off each other use the offers to leverage the city or cities they "really" want.
I think folks are expecting too much from Amazon.
The cities are hoping for an influx of taxpayers with big incomes, but what will really happen is that Amazon will simply build a campus, the bulk of the "tech workers" will live in a wide swath of exburbs around the city. The commuters will stress the transportation infrastructure of the city and the "tax breaks" will greatly limit the actual benefits the cities see.
Of course even that is contingent on the whims of Amazon. They're soliciting solemn proposals that fork over a lot of benefits and promises. Whereas on the Amazon side, they could change their minds before even building the facility-- or just build a much smaller facility, or build several much much smaller facilities in several cities, all of which leverage the "highest bidder" benefits.
I don't believe them and I don't believe the "50000" jobs number. It is too round a number that seems like it was dreamed up by a PR goon. And what is the point of an HQ2 anyway? Isn't ONE HQ enough? How many HQ's does a company need in one country?
Plus it's a way for cities to start a bidding war, offering the lowest tax rates and property prices. Effectively Amazon will get their new HQ for free, if not have the cities actively pay for it. Because jobs. Free market, competition, etc, yay.
> Finally, it's not a backroom deal. Part of Amazon's competition was for each city to sign an NDA in the process so cities can't see the bids of other cities.
One can imagine if the bid process is sufficiently competitive & transparent, if HQ2 brings $10b in economic good, cities might bid eachother down asymptotically to offer $10b in incentives, which in net would result in nearly zero economic good for the winning city or the parent country, and transfer all that value to Amazon & it's shareholders.
There's also the concern that negative impacts are being ignored, such as increased demand on infrastructure, ala the Olympics, wherein by most accounts the winning city actually winds up economically worse-off.
I'm going to go against the consensus here and agree with you. Sure it would be great if Amazon moved to your city and added jobs, but that's not what they are doing. They are trying to start a bidding war between cities so that in the end the city gets as little value as possible and Amazon gets the most. This is especially true if you end up in a situation where Amazon gets some tax break for X years and the city expects a return in X+5 years, but Amazon just moved again after the tax break is gone.
Cities do better when they set themselves up to be attractive to companies naturally, not when they try to bribe an company to come to them
The crux of the issue is that every big metro center in North America gave Amazon a list of incentives they were willing to provide. Next time Amazon negotiates with any city for any development, it can mine this private treasure trove of extremely potent information about how much each city is willing to bend over.
Politicians aren't quite as stupid as you (and, apparently, everyone else, believes).
The dynamics in such a situation are simply a prisoner's dilemma. Meaning: without cooperation, bidding for and getting HQ2 is net positive for the city. Nobody really sees much of a problem here, and your (and the sibling comment's) tiresome invocation of the lazy stupid-corrupt-politician-cliché is, as always, superfluous.
The actual issue is that, quite obviously, Amazon would expand and hire more employees anyway. This competition exploits the dynamic mentioned above to move money from the public to Amazon in a zero-sum game.
And the total loss of this scheme is even larger than "just" billions in taxes: when Amazon makes this decision based on the subsidies they are promised, they (by definition) must put lesser weight on all the factors that would otherwise dominate the decision. So they will end up at a location with lower quality-of-life, higher prices, or some other trade-offs. Amazon is essentially asking cities to pay them for crippling itself, and for compromising their employees happiness. Which, come to think of it, really does not strike me as the set of priorities one would expect from a stable company with a long-term focus and healthy values.
Anyway, that's why somewhat sane jurisdictions such as the EU put limits on subsidies and bespoke tax deals: it's cooperation that, when managed fairly, benefits everyone.
There's still competition between locations, but it's about quality-of-life, infrastructure, or education, instead of a voluntary effort to impoverish.
The fault, therefore, is the American fetishisation of market-based mechanisms[0], the seemingly endless willingness to starve public administrations of resources without any regard to their actual, absolute levels, and a somewhat pathological fear of showing weakness by treating any situation cooperatively, instead opting to turn everything into some sort of competition that at least guarantees the sweet payoff of others losing even worse.
[0]: This is particularly interesting here: The dedication to a free market runs so deep, that voters and politicians are essentially turning down the possibility to form a cartel amongst themselves. I one were to believe they are doing this knowing- and willingly, one would have admire it as a rather rare display of altruism in the service of a larger principle.
...what the cities did to try to get Amazon to them should be
Oh, there's some karmic payback for the cities doing what they did. You see, all that inside information that the 236 other cities gave away to Bezos? He gets to keep that:
"Amazon now has a treasure trove of non-public information about America’s future, in addition to knowing how much cash cities are willing to part with to land an Amazon facility. And it got all that, along with a giant PR benefit from the bidding war, for free.
If you knew a city was going to build a road in a particular place, you could make a lot of money buying up the real estate there. Imagine that on a national scale and you can see how Amazon will grow far wealthier from the data it collected than even the raw dollars extracted from HQ2’s big winners. In fact, this was the real reason Amazon orchestrated the whole charade."
Honestly I think Amazon is as or more interested in the cities' overall plans than just tax incentives being offered. There's a lot of logistics to build a campus as large as they're planning with as many employees as they're planning. I think they're also very interested in zoning and regulatory hurdles. They're probably looking for a city that won't bog the project down in zoning permits, etc. Kinda like how Google Fiber was killed by regulation rather than capital or technical concerns.
The tax incentives play into the overall cost to Amazon for their location, but so does the rest of the plan.
"The Indy cleanup was just a small example of the lengths some of the 20 finalists went to in order to land HQ2. Pittsburgh offered Amazon nearly $10 billion in financial incentives. Maryland pitched $8.5 billion and Newark pledged $7 billion. Dallas said it would build an Amazon University, a joint project between local colleges to train engineers in a facility next to city hall, and Atlanta promised Amazon a private car on its MARTA rail system and an executive lounge at Hartsfield-Jackson airport. While New York and Virginia offered Amazon $2.8 billion and $573 million in tax breaks, respectively, the fact they didn’t offer the highest amounts—and that New York is paying so much more than Virginia—is proof that Amazon was eager to play one city against another."
This entire thought process assumes that tax incentives and such are the difference maker in this process. That it's an auction that goes to the highest bidder. This is highly inconsistent with Amazon's approach for long-term projects.
Do they want their HQ2 home to have some skin in the game? For sure. But what form does that take?
Suppose a city could offer Amazon $50MM in tax credits over some duration of time. Suppose another city offered to invest into local infrastructure investment -- roads, transit, broadband, etc. While $50MM is a lot of money (even to Amazon), the second alternative is much more appealing.
The HQ2 winner is going to be someone who is forward-thinking, not just whoever rounded up the best gift basket.
Amazon was built upon the competitive edge of pricing devoid of state and local sales tax. Now it is soliciting tax breaks from state and local governments.
>The subsidies offered to Amazon in New York include performance-based direct incentives of $1.525 billion based on whether the company created 25,000 jobs. This included a refundable tax credit through the state's Excelsior Program of up to $1.2 billion, calculated as a percentage of the salaries Amazon expects to pay employees over the following 10 years. Additionally, the Empire State Development Corporation would give Amazon a cash grant of $325 million based on the occupancy rates of HQ2 buildings over in the following 10 years.[47][73] Under an agreement with New York City's government, half of the property taxes for the city's HQ2 campus would be waived, and the exempt amount would go to the city's PILOT (payment in lieu of taxes) fund to pay for infrastructure improvements in New York City.[74][75] Both states proposed that Amazon be given access to a helipad, and the New York state government also promised to upgrade infrastructure in conjunction with HQ2's construction there.[73]
Seems completely reasonable to me.
Then, some local politicians made public statements that showed that they either did not understand how the incentives would work or that they were willing to lie to get Amazon to leave.
Ex:
>New York governor Andrew Cuomo blamed Democrats in the New York State Senate for the cancellation, and New York City mayor de Blasio said that Amazon "threw away that opportunity," by making the announcement.[84][85] In response, Ocasio-Cortez stated: "If we were willing to give away $3 billion for this deal, we could invest $3 billion in our district ourselves if we want to. We could hire more teachers, we can fix our subways, we can put a lot of people to work for that money if we wanted to."[86][87][88] Mayor de Blasio, among others, criticized her, and those who had made similar remarks, for suggesting the money, mostly in the form of tax credits, was now free to be spent elsewhere.
My entire point is that Amazon has likely already chosen its HQ2 location for unrelated business reasons.
But if the finalist cities think that it has not made up its mind yet, and that tax incentives are the primary criterion it is using to make up its mind, then Amazon benefits from them thinking that. It still gets the HQ2 in the city it wants, but on top of that it gets highly competitive tax incentives.
It's not going to chose that place in Idaho (or in my tiny state of Delaware, which also made a proposal) just to spite them.
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