Amazon Being Wooed by New Jersey with $7B in State Tax Breaks

Amazon HQ2

Last month, Amazon announced that it is looking for the next city to set up its new headquarters in, which has set off a chain of events that have now led to Newark, New Jersey offering the e-commerce giant up to $7 billion in state tax breaks if it sets up “HQ2” in the city.

What does Newark have that Amazon might want?

For starters, a student population of 60,000 from the six colleges and universities in the city (think part-time employment). There’s also a criss-cross of public transportation availability, the housing is less expensive than in comparable places like Jersey City and, more importantly, New Jersey is ranked 10th in the list of best U.S. distribution logistics locations, according to Christopher Steele, Global COO and North American President, Investment Consulting Associates (ICA).

Why is Newark offering such great incentives to Amazon? That’s because the new headquarters will mean $5 billion in investments and about 50,000 jobs created over the next several years to whichever city wins what’s being referred to as the Amazon sweepstakes.

This Monday, Gov. Chris Christie, former Newark mayor Senator Cory A. Booker and current Mayor Ras J. Baraka gathered at the Rutgers Business School (which incidentally shares building space with Amazon-owned Audible Inc.) to announce that Newark would be the official entrant in Amazon’s hunt for the perfect location for their second headquarters.

Though there has been some controversy over cities falling over themselves to attract Amazon’s attention, there’s no doubt that the company helps the local economy wherever it sets up shop. New Jersey already has a considerable Amazon presence through its distribution centers, and there are already more than 5,000 people working at these locations. Amazon will be adding two more distribution centers, which means an additional 2,000 jobs. And Audible already has 1,000 employees.

The bone of contention appears to be about what kinds of benefits are being offered Amazon. For example, according to Jon Whiten, vice president of New Jersey Policy Perspective:

“They’re talking about doubling already generous corporate tax breaks. 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.”

But the city is taking another angle. Mayor Baraka says:

“We have exactly what Amazon is looking for, in terms of expanding their company in a city that will help them grow and where it would have real social impact. Newark is an opportunity to make a real statement, about what they’re trying to accomplish in the United States in the age of Trump.”

Several independent entities have already started ranking cities as most likely to be picked by Amazon. In fact, the New York Times already has a map of ideal locations around the country.

NYT Amazon HQ2 map
Source: New York Times

Others have come forward as well. Moody’s Analytics ranks Pittsburgh, Rochester, Philadelphia, Atlanta, Austin and New York, in that order, as the top contenders. Anderson Economic Group ranks New York as the No. 1 location for Amazon’s HQ2.

Interestingly, Newark hasn’t been identified on anyone’s top 5 or top 10 list of ideal locations. But it does have several advantages aside from the ones we’ve already mentioned. Commercial rents are half or less than what you’d see in New York City, which is less than 20 minutes away by train. Newark also straddles the massive fiber optic line that runs down the Eastern Seaboard, not to mention having attractively priced high-speed broadband connectivity.

Newark may not be the best place for Amazon’s new headquarters, but the city can certainly use a major boost to local economy. With nearly 25% of the city’s population living below the poverty line, this could be a windfall that further validates Mayor Baraka’s election to office in 2014.

And Mayor Baraka is certainly doing his bit, pushing for more jobs for Newark residents at development sites, attracting companies like Panasonic, developing the downtown area and facilitating other initiatives. Specific to wooing Amazon, the city is offering existing office space to the company for the first phase of its HQ2 project, and even proposing locations for future phases.

As for Amazon, it is now in the role of the customer, and the customer is king. It is accepting bids from all over the country, from cities that are well-qualified to cities that are desperate to revive their economies. The choice will be made next year, but it looks like Amazon will already have a full list of cities and their bids to base its decision on by the end of 2017.

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