The fifty nifty states and their major capitals are in a fierce competition to attract Amazon’s new headquarters. The massive online shopping company promises to bring 50,000 high-paying jobs to the winner, one thing is all but certain: the bonanza won’t be cheap.
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The company’s announcement caused a frenzy among states striving for sustained economic development and tax revenue. The other side of the coin? They may have to give steep tax breaks in return.
“The initial cost and ongoing cost of doing business are critical decision drivers,” Amazon’s request for proposals states.
So far, incentive deals are being kept close to the vest as Illinois puts together its final plans for Chicago and the metro-east.
Hud Englehart, a spokesman for Gov. Bruce Rauner, said: “We haven’t revealed any incentives … actual or prospective. All will come out the week of Oct. 16 as bids are being submitted.”
Gov. Bruce Rauner said Wednesday he likes the state’s chances of winning the coveted prize. In his speech at the annual meeting of the Chicago Southland Convention & Visitors Bureau, he said:
“I think we got as good a shot, better shot, than anyone. Amazon loves Illinois,” and “loves our transportation infrastructure.”
The governor said the state would unveil its offer to Amazon next week. Area communities such as Orland Park and Tinley Park are hoping sites in their communities will be among potential locations submitted by the state. Amazon has set an Oct. 19 deadline for submissions.
According to an editorial by union leaders that was published in the Chicago Tribune on Oct. 4, Illinois’ more recent history with incentives does not show a great return on investment. Back in 2011 the state promised Sears $150 million, but now it’s talking about going out of business. Motorola Mobility was given $118 million but later cut workers. And a $3.7 million grant to Mitsubishi did not prevent the company from closing a 1,200-person factory in Normal.
The Tribune also pointed out concerns with how rising house prices could affect working-class neighborhoods. High salaries mean prices could rise, and the tax incentives spent on Amazon could instead be spent instead on communities that are already here. Their solution is to have Amazon commit to a community benefits agreement that would make up for some of the disruptions HQ2 caused to those communities.
The two neighboring Amazon fulfillment centers located in Edwardsville, IL, contain 1.5 million square feet of space and more than 2,000 workers. They just celebrated their one year birthday. The employment is about four times the initial projection when the centers were first announced.
Some in Illinois argue that incentive deals aren’t bad at all but crucial, especially since the General Assembly’s decision to raise corporate income taxes by 33 percent. Instead of “picking winners and losers,” Illinois can “counteract the negative effects of the tax hike,” the BGA wrote. More than $500 million were spent on incentives in the recent fiscal year.
One solution limit the size of state handouts, according to Greg LeRoy of Good Jobs First, a development policy organization, is to limit their size based on the number of workers the company’s expect to bring in. Some government programs already follow this approach, capping incentives at $50,000 per job, but if this same approach were applied to Amazon’s second headquarters, then the total pot would come to $2.5 billion.