Friday, January 27, 2023 Jan 27, 2023
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Local Government

Let The Amazon HQ2 Incentive Game Begin

Chicago wants to give Amazon its taxes back. Fresno wants the company to have a say in how its taxes are used. How far will we go?
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Over the weekend, while you were hopefully enjoying quality family time and not thinking anything about corporate tax incentives, The Seattle Times published an interesting column on the lengths cities are going to lure Amazon’s second headquarters.

They are astonishing. Chicago is allowing $1.32 billion in taxes paid by employees inside the so-called HQ2 to go to Amazon rather than the city or the state. That comes with the icing of a $60 million property tax break at one of 10 sites, eight of which are in the heart of the city and easily accessible via the city’s rail system, according to the Chicago Reader. Fresno, Calif. takes it a step further: All of the company’s taxes and fees get set aside in a separate fund governed a special board made up of half Amazon, half city officials. They are “supposed to spend the money on housing, roads, and parks in and around Amazon.” Boston sets up a strange task force that assigns city employees to focus on Amazon as if it were its own department, like streets or housing or facilities. New Jersey went whole horse, offering up $7 billion if the company would just go ahead and build it in Newark.

The Dallas Regional Chamber has put together a pitch that, it appears, will include options for every North Texas city that an average Dallasite could name. (And probably a couple that they can’t.) But the DRC, which is overseeing our application process, is just one of the 208 offers throughout the country that is not beholden by a public information act request; the DRC, like the State Fair of Texas and the Dallas Museum of Art, is a private entity that shares a closer-than-average relationship with the city of Dallas.

So we don’t know what’s inside that pitch, and a spokesman didn’t take my bait to comment on what isn’t in it. The city of Dallas is also not commenting about its particulars of the incentive package.

Only 30 of these pitches are currently publicly available, so who knows what kind of wacky propositions live in the other 200-plus. Good Jobs First, a nonprofit research agency that’s been highly critical of corporate recruitment incentives, maintains a running log of the subsidies that cities have offered the company owned by the world’s richest person. We’re up to $1.15 billion in non-secret funds, the majority having gone toward fulfillment centers and warehouses like those found in South Dallas and Coppell. (Fun fact, according to Good Jobs First: Coppell’s incentive deals from 2017 and 2012 are secret, as are Dallas County’s from 2015. The city of Dallas provided $500,000 in 2015.)

Peter Simek has already written about how these sorts of mega-gifts don’t always result in the return cities are betting on, particularly in a region as geographically large and economically diverse as Dallas-Fort Worth. Amazon is dangling big numbers on its hook, like $5 billion in construction investments and 50,000 “high-paying jobs.” It’s promising “a full equal” to the existing campus in Seattle, which has 33 buildings that accounted for $3.7 billion in capital expenditures and has sent $25.7 billion to its employees.

Those numbers appear eye-popping, but they’re bait. This City Observatory piece by Joe Cortwright lays out the strategy; these beauty contests are a way to drum up additional incentives from the locations that HR has already deemed realistic for the expansion. He argues that no company would allow a project requiring 50,000 skilled workers to be determined solely by how a city can sweeten the deal. But when cities begin offering to return income tax to the company or allow the company to determine how that money is spent in the community, it ups the ante for areas that probably would’ve rested on the laurels of a comparatively low cost of living, a light tax burden, and abundance of skilled workers. Sound familiar?

We haven’t seen any incentive offerings from the other Texas pitches, nor has the governor detailed whether he’ll dip into his Enterprise Fund—which has sent more than $600 million to companies since 2004—to throw even more money to Amazon. But if we know Amazon’s game, will we call its bluff?

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