Brower: Amazon not moving headquarters to Grand
Grand Enterprise Initiative
Amazon is not moving its new headquarters to Grand County. It’s not even moving its new headquarters to Colorado.
In case you haven’t heard, the behemoth company, which has come to dominate commerce in the United States, if not the world, chose a borough of New York City and a suburb of Washington, D.C., as the two “shared” sites for its new headquarters.
To all that news I uttered a big sigh of relief because the Colorado Front Range did make an offer (shrouded in secrecy) to lure Amazon to Colorado. For big-time economic developers around the nation, the new Amazon headquarters process was considered the greatest opportunity ever and cities and states across the region got into a bidding war, essentially, to try and get Amazon to their locales.
The amount of money being offered to Amazon, largely through tax breaks, is mind-boggling. Consider the facts of what happened.
Reuters reported that the company said it will receive performance-based direct incentives of $1.525 billion from the state of New York, primarily for creating 25,000 jobs. That works out at $48,000 per job. It can also apply for other tax incentives, including New York City’s Relocation and Employment Assistance Program that offers annual tax breaks of $3,000 per job, potentially worth $900 million over 12 years for Amazon. What benefit the company would actually get was unclear.
In Virginia, Amazon will receive performance-based direct incentives of $573 million, based on 25,000 jobs at $22,000 in benefits per head, again according to Reuters.
Overall, Amazon will get a boost worth more than $2 billion for the new offices, on top of $1.6 billion in subsidies it has received from across the United States since 2000, according to a database from the Washington-based government watchdog Good Jobs First.
Amazon said it has invested $160 billion in the United States since 2010, including in warehouses, data centers and employee compensation.
The new offices will generate more than $14 billion in extra tax revenue for New York, Virginia and Tennessee over the next two decades, Amazon said. The company expects an average wage of more than $150,000 for employees in each new office.
What bearing does all this have on little ol’ Grand County? Well, it points to the peril and problems of what I call big-time economic development. For many people, economic development is seen as luring and enticing businesses to locate in their town or community, usually with incentives such as tax breaks and outright cash donations. But in places like Grand County, and much of Colorado, this sort of big-time economic development is probably not such a good idea, mainly because it’s extremely expensive.
It’s fine and dandy to attribute benefits for a new company in exaggerated tax breaks. And although these companies claim they will generate huge amounts of tax revenue to offset those breaks, the truth is that the offset revenue (more income tax revenue) doesn’t always replace where the money has come from.
Many times the result is that funding for schools, streets and other basic operations gets sapped, leaving existing residents and property owners to make up the difference for many years down the road.
I think the way that our towns and the county handle “economic development” makes much more sense for us. Towns offer incentives to new businesses on main streets who want to upgrade. They fund their chambers of commerce and they fund efforts to help retain existing and new businesses. They encourage the establishment of homegrown artistic and recreational endeavors. Both Granby and Winter Park have offered very generous deals on land they own to get developers to purchase and invest locally. The focus is not so much on luring (begging) big players to come here . . . it’s more about nurturing the people who are already here or the people who want to come here on their own volition.
This is key. We work with people who want to be here, whether they are already here or not. The result is a more stable economy that doesn’t bankrupt local government.
The result is also happier and stronger communities.
Patrick Brower is the Enterprise Facilitator for the Grand Enterprise Initiative. He offers free and confidential business management coaching to anyone who wants to start or expand a business in Grand County. He can be reached by calling 970-531-0632 or at email@example.com.
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