Will Amazon headquarters competition set off a bidding war among communities?
Bids are trickling in for Amazon’s coveted “second headquarters,” with contenders large and small offering big money to land the e-commerce behemoth and its potential 50,000 jobs. And that could put pressure on cities like Boston to sweeten their offers.
In advance of Amazon’s midnight (Pacific time) Thursday deadline for pitches, Worcester this week turned heads with an offer of $500 million in property tax breaks, should Amazon settle in the City of Seven Hills. New Jersey says it will pony up $7 billion in state and local incentives to lure the company to Newark. And Maryland Governor Larry Hogan is cooking up the biggest subsidy package his state has ever offered, “by a mile,” should Amazon bless Baltimore with its presence.
So far, leaders on Beacon Hill and Boston Mayor Martin J. Walsh have been more reticent about subsidies, saying they will talk about taxpayer-financed incentives only if Boston emerges as a finalist.
The city plans to file its bid Thursday, offering Suffolk Downs in East Boston as its primary site. Walsh told radio station WBUR Wednesday that Boston’s will be “really focused around one location” in East Boston, suggesting the 161-acre horse track emerged as the city’s top choice, though Boston plans to offer other sites as well, to provide Amazon with a menu of choices.
Part of Suffolk Downs’ appeal, beyond having two Blue Line stops, is relatively straightforward development conditions that may not need as much infrastructure investment as more complex sites in other parts of the city.
Regardless of the site, Walsh and Governor Charlie Baker have been adamant that Boston won’t engage in a bidding war it can’t afford.
Amazon is, after all, a $136 billion company, so it’s reasonable to conclude that incentives in the millions, even the billions, might not tip the balance. Nonetheless, some observers say the enormous numbers being tossed out by long-shot cities hoping to land Amazon could well push some top contenders to dig deeper into public coffers to secure the massive job-creation prize.
A least one skeptic suggests that’s probably been the company’s intention all along.
Amazon is “just using all these hopeless bids as leverage to up the ante on the places where they really want to be,” said Greg LeRoy, executive director of Good Jobs First, a Washington, D.C.-based organization that tracks corporate subsidies.
“Nothing against Newark, but it doesn’t have Harvard. It doesn’t have MIT. Let’s get real here.”
It is not clear how heavily Amazon will weigh subsidies in deciding on a site for its so-called HQ2, which it says could generate 50,000 jobs over two decades, with an average salary topping $100,000 a year.
Its seven-page request for proposals asks for detailed breakdowns of incentive programs, leading some observers to speculate that tax breaks could play a crucial part in the selection process. But it also calls for good schools, transit, and other civic qualities that require a lot of tax dollars.
Incentives may make the difference when it comes down to a few finalists that meet all of Amazon’s other needs, said Patrick Anderson, chief executive of Anderson Economic Group, a consulting firm. But this early in the process — with more than 100 cities and states in the running — it’s more a way for the lesser-knowns to make noise, he said.
“If you’re putting together these big incentives, it’s because you don’t have the fundamentals Amazon is looking for,” said Anderson, whose firm ranked Boston fourth in a recent index of contenders. “Amazon didn’t get as successful as they are by chasing incentive dollars.”
Still, in its RFP, Amazon describes the cost of doing business as “a critical decision driver.” Tax breaks are a way to lower those business expenses. They also send a message, said Timothy P. Murray, president of the Worcester Regional Chamber of Commerce.
“It’s aggressive,” he said of the city’s proposal. “It demonstrates we want to compete. But there’s a real upside in terms of expansion of the tax base, and tens of thousands of jobs that benefit all of us.”
Worcester’s $500 million package is the largest such deal ever offered in Massachusetts, but it would be spread over 20 years, Murray said, and amount to only about one-fourth of the property tax revenue that an Amazon campus in Worcester would be likely to generate.
Worcester was one of several New England cities that had filed bids as of Wednesday, offering Amazon 98 acres on three sites along Route 20. Officials were promoting its universities and relatively low cost of living and the city’s proximity to Boston.
A bit farther east, Marlborough is leading four neighboring municipalities in a bid that includes 10 sites along Interstate 495, one that will probably come with local property tax breaks.
Billerica, Lowell, and Tewksbury are partnering on a pitch that proposes putting Amazon buildings in the Riverview Business Park off I-495, and eventually expanding to nearby office parks. Unspecified tax breaks would also be likely in the pitch by those three municipalities.
Towns in Western Massachusetts, Connecticut, and Maine have also filed proposals. And New Hampshire Governor Chris Sununu is promoting a 600-acre campus in Londonderry. He argues that tax breaks won’t be necessary, because New Hampshire’s assessments on businesses already are low.
“No income tax means real savings to every member of the Amazon team. No sales tax means every purchase, from servers to stand-up desks, is tax free,” the bid reads. “These benefits will translate into more than $500 million in tax advantages that Amazon will realize in New Hampshire.”
It’s not yet clear how Boston and Massachusetts will deal with the issue of incentives. Walsh said that Boston will release its proposal after it’s filed, but won’t get into incentive offers unless the bid advances to later rounds.
The Baker administration said it won’t release the state’s proposal and is focusing on Massachusetts’ “highly rated schools, educated, skilled workforce, and nationally recognized innovation economy.”
City and state leaders have offered incentives before, including $145 million in breaks to lure General Electric’s corporate headquarters to Boston from Connecticut. But that package was smaller than what competing states such as New York and Georgia offered.
That would be a wise approach this time, Anderson said. Whoever lands Amazon will need to pay up, to some degree, he said, but they shouldn’t break the bank.
“There’s a big difference between a smart incentive and a dumb incentive,” Anderson said. “I don’t think that jaw-dropping numbers are going to be what wins this contest.”