WaPo attempts to identify the categories of Winners and losers from Amazon’s HQ2 decision. But those of us out here on the taxpayer side of the incentive question wonder whether it's worth it to pay dearly for a company to move to their neighborhood.
How dearly? WaPo answers that question with this: Amazon HQ2 to benefit from more than $2.4 billion in incentives from Virginia, New York and Tennessee. Add that to the $1,613,000,000 in enticements Amazon has already received across the nation.
Nathan M. Jensen in the Wall Street Journal made an interesting observation about that. SeeThe Amazon HQ2 Fiasco Was No Outlier. (Alternate link). Excerpt:
When Amazon announced last month that it would split HQ2 between New York City and Arlington, Va., losing applicants cried foul: They accused Amazon of an extraordinary bait-and-switch, enticing dozens of bidders to increase the competition and the incentive offers, only to end up with two of the most obvious candidates all along.
The reality is that this sort of competition for big projects, while unusually large in the Amazon case, is the rule not the exception in economic development and has been for a long time. It has been happening in the U.S. since Alexander Hamilton received local tax exemptions in 1791 to build up the city of Paterson, N.J. as an industrial center. What’s different in our own era is that most companies aren’t actually changing their decisions based on incentives but are pocketing substantial benefits anyway.
Studies show that the cost and frequency of incentive packages—which cities and states typically offer companies to either relocate or stay put—have been rising. Secrecy surrounding many of the deals makes a full accounting difficult, but a new database assembled last year by the Upjohn Institute for Employment Research covers programs for 47 cities in 33 states. It found that the cost of such incentives more than tripled from 1990 to 2015, to $45 billion.
Numerous companies applied for incentives after they had already broken ground and, in some cases, after they had completed building. ...
This points to the open secret of economic development: Though incentives are rarely effective in changing firms’ investment decisions, they do allow politicians to attend ribbon-cutting ceremonies where they can highlight their own role in attracting a new company (or retaining an old one) and creating jobs.
Our own little city of Midland, Texas, had the experience of watching politicians hi five each other when the local taxpayer funded Midland Community Development Corporation bought into the idea that XCOR would build a space plane and take high paying passengers on a low orbit flight. When the company went bankrupt the MCDC was left scrambling to perfect liens on property left behind by the high flying dreamers who sold them on the idea.
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3:33 PM 12/17/2018
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