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Amazon accused of obscuring HQ2 incentives

Hey there, time traveller!
This article was published 16/11/2018 (557 days ago), so information in it may no longer be current.

Backlash is brewing against taxpayer-funded incentives offered to Amazon.com by Virginia and New York, with some lawmakers pledging action to block the subsidies.

Amazon, in announcing its second and third headquarters locations Tuesday, outlined about US$2.2 billion in expected direct incentives for the initial phases of its expansion, predicated on the creation of 25,000 high-wage jobs in each location. That total includes US$102 million related to a 5,000-job operations center in Nashville, Tenn.

But Good Jobs First, which tracks economic-development subsidies, suggested that the company could receive much more, particularly as it avails itself of New York City programs meant to spur job growth in places such as the Long Island City neighbourhood of Queens.

Greg LeRoy, executive director of the Washington, D.C.-based group, suggested that Amazon was trying "to obscure just how lavishly it is being subsidized."

Part of the discrepancy between LeRoy’s estimate — of subsidies in excess of US$4.6 billion — and Amazon’s stems from what is considered a subsidy. LeRoy counts the US$1 billion that Virginia Tech pledged to develop a new graduate campus near the company’s Arlington County headquarters location, but presumably the education provided there would benefit students and other employers, not just Amazon.

Other subsidies will directly benefit Amazon, but there are questions about their value.

New York City projects that could benefit Amazon include existing economic-development programs — including one focused on spurring job growth outside Manhattan — to the tune of US$897 million through 2038, though it was not immediately clear what level of employment or investment that projection was tied to. The city, in a release, said the company could be in line for property-tax abatements related to real-estate development worth US$386 million.

Amazon said in a release it intends to apply for those incentives, but did not quantify them.

New York state offered US$1.2 billion in tax credits through a program called Excelsior, tied to the creation of at least 25,000 new jobs and US$2.3 billion in Amazon investment. A further US$505-million capital grant was offered should Amazon grow to 40,000 new employees there over 15 years.

New York City cites economic-impact studies suggesting that Amazon’s expansion there will generate more than US$27.5 billion in new city and state tax revenue over 25 years.

Amazon has sought to downplay the importance of incentives to its headquarters-expansion process, saying that access to a talented workforce was paramount. The company said the incentives are performance-based, meaning they materialize only if the company creates the jobs and makes the investments.

One close observer of Amazon’s HQ2 process and the broader landscape of corporate-location strategy said the mounting scrutiny of incentives has the potential to weigh on the company’s brand.

"Amazon is a consumer company. It depends on the allegiance of its customers. Its brand is everything," Richard Florida, a professor of urban studies currently at the University of Toronto said on Twitter. "Amazon’s top leadership needs to wake up and see the damage this is doing, and simply say no to incentives."

— Seattle Times

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