Amazon.com Inc.’s decision last week to install a second and third headquarters in New York and Northern Virginia ended a yearlong saga that saw cities across the nation – including Los Angeles – scramble to offer the tech giant economic incentive packages worth billions in exchange for the promise of tens of thousands of jobs.
The spectacle underscored the growing influence of the Seattle-based company. Under the stewardship of founder and Chief Executive Jeff Bezos, who is the world’s wealthiest individual, it has risen from a niche online bookseller to the second largest company in the United States with a market cap of more than $800 billion.
The deals also underscored growing questions about corporate welfare and whether – and to what degree – state and local governments should subsidize company operations.
All told, Amazon secured $5.5 billion in concessions from the state and local governments where its two new headquarters will be located. New York’s winning bid provides Amazon nearly $3 billion in exchange for the company’s promise to bring 25,000 jobs to the city. Virginia forked over some $2.5 billion to land another 25,000 jobs. The governments ostensibly will recoup the money in the form of additional tax revenue, infrastructure investments by Amazon and ancillary economic activity provided by the additional jobs.
In California, where state taxes and rising labor costs have often been blamed for a corporate exodus, the question is whether such generous packages will be needed to attract big names, such as Amazon, going forward. The Los Angeles bid for the new company headquarters remains a somewhat nebulous affair – the Los Angeles County Economic Development Corp.-led proposal has not been made fully public – so it’s hard to compare with what New York and Northern Virginia offered.
The LAEDC is putting a positive spin on the bidding process, choosing to focus not on the loss of potential jobs but instead on the connections formed by various L.A. stakeholders.
Left unsaid, however, was whether Los Angeles need participate in these pageants at all.
L.A. is still the world’s entertainment capital, with established studios remaining here and new media players – such as Amazon itself – setting up shop to be close to the action. The county’s manufacturing base, much lamented as close to death’s door, is still the nation’s largest, despite declines in the last decade. Silicon Beach’s rise has provided the region with a new industry hub, and the growth of the region’s biotech market has pushed it past traditional powerhouses such as San Diego in terms of funding and jobs.
The growth of the L.A. economy in recent years comes without any major deals struck with corporate interests and coincides with a substantial hike in the minimum wage pushed through by City Hall. A strong national economy is certainly a contributing factor, but it seems that our local community of business is, at the very least, keeping pace.
It remains to be seen how the newly struck Amazon deals play out. But from our perspective, losing out on subsidizing the company’s expansion is a win.
