$7 billion to bring Amazon to Newark. Its not a deal I would want to see. What do you think?

BG9 said:

cramer said:

BG9 - $7 billion (really $5 billion from the state) is not being added to the debt - this is not $5 billion in revenues that was there and is now being taken away, leaving NJ $5 billion further in debt. The $5 billion was never there. 

To some degree you're right, depending how its looked at.

Take the payroll tax waiver. Amazon will be excused for about a billion in payroll taxes even though the business will use city services. In a tight market, those same employees can be working in Newark for a firm that did not get a break and is therefore paying its share for city services. 

Amazon is really asking the State of NJ (and Newark) to pay the cost of building and establishing its headquarters. Corporate welfare at its best.

If I were to move to Newark from NY and be willing to work there with a high income and promise to spend my money there, would NJ and Newark offer me a 100,000 tax break to help buy my house or condo? Of course not. They would tell me I'm being ridiculous. Yet they will do it for a corporation because they promise 50,000 jobs. 

Why? Because its supposedly 50,000 jobs?

Suppose I tell them I can get 50,000 NY residents to move to Newark, to work there and spend their money there provided government give each resident a 100,000 tax break. Would government jump at the offer? 50,000 jobs. Of course not, ridiculous. But when a corporation does an offer they fall over each other to bidding on it.

I....don’t think that example offers much in terms of being economically equivalent, or even relevant.

Government has offered big breaks on taxes to buy, rehab and develop abandoned properties, as an aside. It seems like a reasonable strategy to generate long term growth in government revenues. Part of something or all of nothing. 

But again, there is no reasonable economic equivalence to this example.

https://statisticalatlas.com/place/New-Jersey/Newark/Employment-Status

If this site is accurate, there are 108k employed ppl in Newark. According to this article, there are 138k jobs IN Newark.

https://www.google.com/amp/s/articles.nj.com/essex/index.ssf/2017/04/report_says_newark_residents_dont_get_fair_share_o.amp

In either case... 50,000 jobs. Only 18% of jobs in Newark are held by Newark residents. If it were 18% at Amazon that would be 9,000 jobs, or a boost of  around 10% in total employed ppl in Newark. Hardly not worth talking about.

As an aside, I have been tremendously impressed with Ras Baraka. He seems to really have his heart in it and has been wonderful for Newark. It's not about him - it's about Newark. 

I agree about Ras Baraka. Given his father I had low expectations of how he would approach being Mayor but he has done a real good job so far.

If the tax breaks are per employee, then inflating the number of employees is of no benefit to Amazon.

BG9 said:

NJ's credit has been down rated nine times under Christie. And yet, lo and behold, NJ can manage to give up seven billion in taxes to benefit a business. 

Eleven times.

cramer said:
What do you think the chances of Newark attracting Amazon without state and local incentives are with 34 other cities bidding for it?  I think they are zero. 

Amazon is already substantially invested in Newark through Audible.

Don't forget $742,025,050 in state aid for Newark's schools during the 16-17 school year.

cramer said:

Red_Barchetta said:

The state has been subsidizing Newark in many ways for many years.  If I were in the position of making this decision, I would want to know how this would make Newark less dependent on the rest of us.

2017 is the last year that Newark will be receiving state aid. Newark's financial picture has been steadily improving since Ras Baraka took office in 2014. When he took office, he was faced with a $93 million budget deficit, inherited from Booker. In 2014, because Newark received $10 million in state aid, Newark's finances were placed under state oversight. 

"Baraka said this will be the last year the city prepares its budget under state supervision. The budget includes $8 million of transitional aid from the state, about $1 million less than last year. Baraka said city finances are healthy enough that it won't need to request such aid next year. 

"The city has completed the last two years under state supervision with a healthy surplus. We have been using the surplus to pay down the debts we inherited when we took office," he said. "We are whittling down a fifty-million-dollar deficit and a myriad of unpaid bills."

http://www.nj.com/essex/index.ssf/2017/07/newarks_666m_budget_wil_hire_200_cops_raise_taxes.html

Steve said:

BG9 said:

NJ's credit has been down rated nine times under Christie. And yet, lo and behold, NJ can manage to give up seven billion in taxes to benefit a business. 

Eleven times.

cramer said:
What do you think the chances of Newark attracting Amazon without state and local incentives are with 34 other cities bidding for it?  I think they are zero. 

Amazon is already substantially invested in Newark through Audible.

How many employees does Audible have in Newark? It has a total of 1000 in Newark and Jersey City. 

When Audible relocated its headquarters to Newark in 2006,  it had 170 employees and occupied the top two floors of 1 Washington Tower, with 50,000 sq. ft. 

There is roughly 15 million square feet of office space in Newark.  Assuming the 50,000 jobs are standard office jobs, Amazon will need about 12 million square feet of space.

The office space capacity will need to almost double if Amazon came to Newark. 

yahooyahoo said:

There is roughly 15 million square feet of office space in Newark.  Assuming the 50,000 jobs are standard office jobs, Amazon will need about 12 million square feet of space.

The office space capacity will need to almost double if Amazon came to Newark. 

There are 40,000 people working at the Seattle campus. The campus is 8 million sq. ft. So your number sounds about right, perhaps a little on the high side. 

There is certainly a lot of vacant land in Newark - it's one of the things that is most noticeable. What's so bad if Amazon builds on the vacant land?

No idea, but it has its name on a building and all over the Broad Street Station.  Apparently, it is behind some sort of business incubator in Newark, too.

Even if it’s off by 1/2 that’s 25,000 friggin’ jobs. 

ska said:

History shows that the job estimates pitched by companies are far more often than not wildly overstated.

I'm not saying it's bad. I'm saying a lot of capacity will need to be built.

cramer said:

yahooyahoo said:

There is roughly 15 million square feet of office space in Newark.  Assuming the 50,000 jobs are standard office jobs, Amazon will need about 12 million square feet of space.

The office space capacity will need to almost double if Amazon came to Newark. 

There are 40,000 people working at the Seattle campus. The campus is 8 million sq. ft. So your number sounds about right, perhaps a little on the high side. 

There is certainly a lot of vacant land in Newark - it's one of the things that is most noticeable. What's so bad if Amazon builds on the vacant land?

yahooyahoo - Got you. It really is painful when I drive into Newark and see all of the vacant land. If Amazon were to build on some of it, that alone is enough to provide the incentives. 

Amazon currently has about 40,000 employees in the state of Washington. That includes people at fulfillment centers in addition to those at headquarters. Amazon currently has about 15,000 employees in NJ, most in fulfillment centers. I do not see how they would add 50,000 at an new second headquarters.

yahooyahoo said:

There is roughly 15 million square feet of office space in Newark.  Assuming the 50,000 jobs are standard office jobs, Amazon will need about 12 million square feet of space.

The office space capacity will need to almost double if Amazon came to Newark. 

I am thinking more warehouse space than office space -  I think it could be an incredible boost to newark and the surrounding towns.  Those employees will all use local services, restaurants, buy/rent homes, and many other positives.  

And as much as I dislike corporate welfare, I think of this much more as making an investment in Newark by Amazon and government.  It would see the positives outweigh the negatives.

A piece on NPR about Amazon's second headquarters: 

http://www.npr.org/2017/09/07/549250141/amazon-plans-to-open-second-headquarters-with-50-000-jobs

the big corp giveaways make me sick-but, I would love to see newark get this.

oots said:

the big corp giveaways make me sick-but, I would love to see newark get this.

Agreed! I no longer live in New Jersey, but I really love the idea of Amazon putting this in Newark, even better than NYC, where I now live. Newark has lots of undeveloped space. It has lots of transit. It has colleges and universities. It's commuting distance from NYC. In fact, I could commute there in 45 minutes on public transit, whereas my job in the Bronx has a 60 minute commute time. (But I couldn't ride my bike to Newark.)

I just wish there were a way to woo them without corporate welfare. If there is a less deserving company, I can't think of it.

@Steve, the Amazon logo is on that building because that's where Audible is, which Amazon bought a few years ago. The Audible logo used to be there.

conandrob240 said:

it’s not exactly giving it up if they don’t have it currently. So, yes you’d be giving up a larger piece of the pie but, right now, there’s no pie at all.

This. 

If I'm reading this correctly, the $7 billion comes from taxes generated by Amazon coming in, not from existing taxes.  So it isn't that we lose funds, but rather that we don't gain as much as we would without the tax credit, right?  (But we likely wouldn't succeed in getting them to come without it, so that might be a moot point.) And that tax credit is limited time also, right?

If I'm wrong, please correct me; but if I'm right, then it seems like it may well be worth it to attract a major tech employer.

exactly. They’d be taxed a certain amount- all new taxes. Basically this deal just cuts those new taxes so they benefit and Newark/NJ get less than they would have if fully taxed. If fully taxed, there’s nothing though because Amazon won’t come

sac - You're correct. 

Not an expert, but think it's a myth that bringing these large corps to town with massive tax cuts, will benefit the city.  Here is an excellent site that studies the subject:

https://www.goodjobsfirst.org/

I also want jobs to go to locals, and not just menial jobs.  Plenty of Newark residents make it through college and can't find good jobs.  They don't need white, middle-aged, suburban professional folks commuting in for every job.  They need to hire local for management positions too.

FilmCarp said:

I also want jobs to go to locals, and not just menial jobs.  Plenty of Newark residents make it through college and can't find good jobs.  They don't need white, middle-aged, suburban professional folks commuting in for every job.  They need to hire local for management positions too.

Boston, NY, and Chicago are long shots. Newark is a backwards full court shot in the dark...with a half-flat ball. 

They'll end up in Austin or Atlanta or something. 

Tom_Reingold said:

@Steve, the Amazon logo is on that building because that's where Audible is, which Amazon bought a few years ago. The Audible logo used to be there.

Steve said:
Amazon is already substantially invested in Newark through Audible.

Yes, Tom, I know.  See my posts above - they were in reference to Audible (and it's Audible's name on the building unless something has changed recently).

I stand corrected. Thank you.

The New Jersey Policy Perspective is not a good government group and Jon Whiten certainly isn't an economist.

The NJ Policy Perspective is a social justice group that is funded by the NJEA and liberal foundations.  I consider a "good government" group to focus on the process of government itself.  The NJPP focuses on policy outcomes, not policy making processes.

Jon Whiten is somebody who majored in sociology, worked in journalism, and then got a job as a spokesperson for the New Jersey Policy Perspective.

Although there are bona fide economists who share his view on corporate tax incentives, Whiten is no more an economist than the people commenting on this thread.  His opinions shouldn't be taken as authoritative.

BG9 said: Some good government groups and economists have criticized the offer.

“They’re talking about doubling already generous corporate tax breaks,” said Jon Whiten, vice president of New Jersey Policy Perspective. “They’re not saying, we’ll invest billions in New Jersey Transit so workers can get to work on time, or in affordable housing so workers can have a decent place to live.”

https://www.nytimes.com/2017/10/16/nyregion/newark-amazon-headquarters.html I'd be in favor if NJ had the luxury of being able to afford this instead of being sunk in a pit of debt.

I agree with the people here who think that the positives of this deal outweigh the negatives.

Amazon has reported that the average salary of an HQ2 employee will be over $100,000.  Even if Amazon effectively gets back the income taxes those workers pay, NJ could still come out ahead based on the other taxes the workers will pay eg, sales taxes, property taxes, taxes on their personal investment earnings, and then taxes generated by the workers' and Amazon's own corporate spending power.  

Since these employees will be high earning and some will live in New York anyway, the service load from their being in NJ is relatively light.  If even a few hundred or a few thousand Amazon employees end up taking the Newark light rail to work that service could become more profitable and perhaps justify expanding Newark's light-rail system.

There are huge social benefits to this too if Amazon actually chose Newark, instead of some thriving suburb, since Amazon would ignite development in a place in NJ where everyone wants it to go.  

As a regular NJ taxpayer I guess I'd be picking up some of the slack since Amazon will suck up its own employees income taxes, but to see Newark's skyline grow and for it to become a 24 hour city would give me a happiness greater than whatever the annoyance is from having to (theoretically) pay higher taxes.

And since I live in SOMA, the increase in the value of my house from another 50,000 people working in Essex would probably be greater than whatever extra tax burden I have to shoulder.

IMO, having Amazon here is worth even more than $7 billion.

Of course the challenge is this situation is a competition with many other cities. Perhaps $7B is too high relative to other offers, perhaps it is far too low. I thought it was odd to reveal the number before the actual application deadline, which is tomorrow. Why show your hand?