AMAZON CHANGE OF HEART

Amazon Reconsidering Plan to Put Campus in New York City Amazon Reconsidering Plan to Put Campus in New York City – The Wall Street Journal

On principle, government should focus on creating environments attractive to all businesses, not crafting sweetheart deals to lure select entities. Governments should not pick winners or losers, but provide a fair and equal shot at success or failure. In the case of Amazon, New York City and the State of New York gave a significant incentive package that has some lawmakers raising questions.

In response, Amazon is rethinking its commitment to bring $2.5 billion worth of investments and jobs to Long Island City in Queens. Essentially, it may walk away from the reported $3 billion in incentives to choose another site with less local uproar. There were many other places where Amazon probably could receive a good incentives package while making an impact on the local community. But, Amazon went with a pretty strong sweetheart deal. If reports are correct, pay $2.5 billion for $3 billion of government incentives, not including revenues, is not a bad deal.

Amazon is not the first private sector entity to make local government’s bid on attaining their business. The practice is common for sports teams and other corporations seeking incentives to move significant lines of business to new cities. Many sports teams request financing deals from state and local governments, threatening relocation. The economics of these financing projects are highly questionable at best. Some instances are worth it. Sometimes not.

Understandably, city governments and local politicians want the jobs and the tax revenues. The publicity today can propel political careers for years to come, while local taxpayers deal with the financial ramifications. In the case of Amazon, one can reasonably assume much of the required infrastructure upgrades will run over-budget and create great burden to the already congested area. Over a ten year period, will the economic boom be felt only by Amazon or by the taxpayers as well? We will have to wait and see.

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