Is Your City in the Running?

For the past several months, cities all across the country have been competing for the opportunity to host Amazon’s second headquarters which promises $5 billion in capital investment and 50,000 new jobs over a period of time.  And now that the bids are in, we have the opportunity to review some of the staggering tax subsidies offered to one of Silicon Valley’s biggest companies.

New Jersey apparently ‘wins’ the prize for ‘biggest tax cuts’ after offering $7 billion in state and city tax credits, or roughly $140,000 per job promised by Amazon…which should be plenty to once again thrust Bezos to the top of the world’s richest list. Per Reuters:

New Jersey proposed $7 billion in potential credits against state and city taxes if Amazon locates in Newark and sticks to hiring commitments, according to a Monday news release from the governor’s office.

Across the Hudson River, New York City made a proposal without incentives special for Amazon, though the state is expected to offer some, a spokesman for the city’s economic development corporation said on Wednesday.

And across the country, California is offering some $300 million in incentives over several years and other benefits, the governor said in an Oct. 11 letter to Amazon’s Chief Executive Jeff Bezos, published online by the Orange County Register.

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But, while dozens of cities and states have submitted proposals for Amazon’s “HQ2”, credit ratings and research company Moody’s has ranked Austin as the most likely to win based on its labor pool, costs of doing business and quality of life, among other criteria.

That said, here are the 9 other cities that Bloomberg says also have a good shot:

Atlanta: The southern U.S. city, home of Amazon delivery partner United Parcel Service Inc., is a major flight hub, and the greater metro area houses a dynamic population of almost 6 million, as well as the headquarters of major corporations like Coca-Cola Co. and Home Depot Inc. Still, Atlanta is a relatively suburban city, compared with the urban HQ1 of Seattle.

Boston:  Several Amazon executives have already advocated putting HQ2 in Boston, due to its proximity to Harvard University and Massachusetts Institute of Technology; an airport with nonstop flights to Seattle and Washington D.C.; and a lower cost of living than some other large urban areas. Amazon has ties with Boston already, having purchased local robot maker Kiva Systems Inc. for $775 million in 2012. The city also won General Electric Co.’s 2015 new headquarters bid, and has provided more than $100 million in grants, property tax relief and programs for GE – though the city has said it won’t negotiate any incentives with Amazon until Boston makes it past the first round of the selection process.

Chicago:  The Windy City ranks second in Anderson Economic Group’s analysis of 35 cities competing for the precious HQ2, focusing on its talent, diverse ecosystem and access to transportation in its bid. Just last month, Illinois Governor Bruce Rauner reauthorized the Economic Development for a Growing Economy (EDGE) tax-credit program, which provides special tax incentives to companies relocating to Illinois or expanding operations in the state when another state is actively competing, according to BNA. One issue? The city isn’t known as a center of technology.

Denver:  Denver has a busy international airport and is surrounded by a highly educated workforce. It’s also home to a surge of millennials looking for high-tech and energy jobs in Colorado, and boasts an outdoorsy lifestyle that’s an easy fit for Amazon’s quality-of-life considerations. Colorado has also chosen eight sites that meet Amazon’s requirements for HQ2. Still, other cities are offering larger tax breaks than Denver.

Detroit:  Detroit offers low rent and the potential for larger tax breaks, because the city and the state of Michigan are still trying to turn themselves around and diversify from manufacturing. Michigan is also home to three big universities that produce a broad pool of talent. According to Michigan State University, 70 percent of its engineering graduates remained in the state. Even so, Governor Rick Snyder has said he will not ask the state legislature to approve additional incentives just for Amazon, according to Crain’s Detroit Business. The city’s mass transit system also isn’t on par with some other cities in the running, and Detroit has a smaller tech scene.

New York:  In its bid for HQ2, the Big Apple is pitching its diverse workforce, robust university ecosystem and access to advertising, fashion and other industries. Brooklyn is emerging as an attractive component of the bid, with its building boom and throngs of young residents. New York is so serious about HQ2 that Mayor Bill de Blasio had landmarks around the city, including the Empire State Building and One World Trade, lit up in “Amazon orange” on Wednesday night. (Neighboring Newark, New Jersey, is also jumping in to bid, offering practically the same workforce with $7 billion in potential tax credits.) The bid by the biggest U.S. city may be at a disadvantage because of limited space for construction and already-high housing costs.

Pittsburgh:  The city is home to a large labor force and well-respected research institutes like top AI and robotics university Carnegie Mellon. It’s also close to major distribution hubs and has an industrial manufacturing background that could be useful for Amazon’s warehousing projects. Yet it’s far from other major metro areas and tech hubs.

Toronto:  Canada’s biggest city is already home to 800 Amazon employees and boasts a large population of computer science, engineering and artificial intelligence graduates and programs. Municipalities in the Toronto region have teamed up to increase their chances at scoring Amazon’s HQ2, and Ontario just announced a plan to boost STEM graduates, saying that it can offer talent at 30 percent less than other big tech jurisdictions. Yet going to Canada holds political risks: Moving integral operations and workforce from the U.S. may step up tension with President Donald Trump.

Washington:  The U.S. capital city’s urban location, highly educated workforce and public transportation are top selling points for its HQ2 bid. Not to mention Jeff Bezos already has a strong presence there: the Amazon founder owns the Washington Post, and last year purchased the largest home in the city. Washington didn’t disclose what it may offer Amazon in financial incentives, but the district has been active in providing taxpayer dollars to corporations in the past, according to the Post. Cons include the city’s expensive housing market and limited space for building.

And while most large companies employ an army of consultants to negotiate with state and local municipalities, tax incentives are so important to the Amazon business model that the company decided to hire it’s own internal army.  Per the Wall Street Journal:

While Amazon is considering many factors such as the labor pool, cultural fit and access to airports and major highways, its emphasis on taking advantage of incentives is part of the retail giant’s culture of frugality.

Amazon’s approach differs from most other companies, which often rely on outside consulting firms to scout locations and negotiate tax incentive deals with state and local governments. Instead, Amazon in recent years has brought those services in-house and made them the responsibility of its economic development team, a sign of the company pouring resources into new, promising initiatives.

Amazon’s team is led by specialists who come from different parts of the economic development world. The group finds sites for new projects and negotiates tax breaks to help fuel Amazon’s rapid expansion, acting as liaisons with local and state governments.

Mike Grella, who worked at PwC before joining the web giant, joined Amazon as director of economic development in 2012. He was joined by Eric Murray, who had worked in-house on real estate and economic development at Lockheed Martin Corp. , in 2014, and Holly Sullivan, who worked on economic development for local governments in Maryland and Tennessee, in 2016. Mr. Grella leads economic development for the company’s cloud-services business, while Ms. Sullivan, also a director of economic development, is responsible for the rest of the company.

Amazon has said it will announce a decision for its second campus, in addition to its Seattle headquarters, next year.

Reprinted with permission from Zero Hedge.

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