Point Austin: Amazon in Austin’s Pocket

A business model built on public subsidies shouldn’t have its hand out

Point Austin: Amazon in Austin’s Pocket

Amazon CEO Jeff Bezos has a net worth of about $100 billion. Take that down to $99.5 billion and nobody working at any Amazon facility in America would need assistance to eat. – David Dayen

Well, we made the cut. Austin is one of 20 cities still under consideration by Ama­zon Inc. for the site of its second headquarters, after 238 cities in all supplicated themselves before the God of Online Tax Exemp­tion. In substance, it's the equivalent of those magazine-promoting lists of "The Top 10 Cities for … Pico de Gallo," and it would have been a surprise if a tech hub that is also the country's 11th largest city would not be getting a second look.

Unlike many of my neighbors, I have no great fear that Austin could not absorb the HQ2 influx over its 10-year projections of 50,000 new highly paid employees (and many more ancillaries). But I don't believe we should have to pay to make them welcome, and I was pleased to see that among the 20 cities profiled by The New York Times ("Where Amazon May Build Its New Headquarters," Jan. 18), Mayor Steve Adler was one of the few officials deflecting notions of official bribery.

"I still not have heard any conversations about offering incentives," Adler told reporters, and reiterated his plaintive hope that an Amazon expansion might serve to catalyze regional "mobility and affordability." Since the productive debate over the Domain and Samsung, the city has not been profligate with incentive deals, and by ordinance they must be "performance-based" and "cash-positive" – that is, certified as contributing more in direct economic returns to the city than the cost of the initial incentives – and require an open debate and public decision by City Council.

Thriving on Subsidies

But such assurances ring a little hollow in this instance, since it is the state government in concert with the Greater Austin Chamber of Commerce that has submitted "Greater Austin's" bid to Amazon, so the prospect of a suburban giveaway with few direct benefits (and many imposed costs) to the city appears very real. Amazon's business model (including largely tax-free online sales) has in fact depended on generous tax breaks, mostly for its countrywide network of warehouses. "Since 2000," reports David Dayen in The New Republic, "Amazon has received $1.115 billion in 129 communities in the U.S., rocketing past the previous leader in this category: Walmart." ("Amazon Is Thriving Thanks to Taxpayer Dollars," Jan. 9.)

The total is likely greater, since many of the giveaways are hidden behind nondisclosure agreements. Localities in Texas alone provided Amazon with incentives (generally long-term tax waivers) estimated at $269 million, including $11 million from San Marcos, $7 million from Houston, a half-million from Dallas – and the company also enjoys confidential deals with Katy and Coppell, and Harris and Dallas counties. These incentives generally underwrite facilities that Amazon needs for its quick-delivery premise – without the waivers, the company couldn't simply walk away – yet Dayen reports that many of these warehouse workers can't get by without food stamps.

Hobson's Choice

My uninformed guess is that the Cham­ber's bid offers both potential sites and Texas Enterprise Funds for Amazon's consideration, and if Austin survives the next cut and the bids are finally made public, the city would be expected to become a requisite "local sponsor," as was the case for Circuit of the Americas. Under that scenario, the city wouldn't be out any cash, but would be under substantial political (and business) pressure not to be a fly in the ointment – and perhaps expected to provide at least token, "welcoming" incentives.

Between that political rock and hard place is the very real consideration that if the HQ2 is headed Austin's way, better it be inside the tent – that is, within city limits – rather than outside. If the latter happens (and that remains highly speculative) Austin proper will be enduring much of the affordability and congestion costs (etc.) of all those new people, and few of the economic benefits. In keeping with the increasingly top-down nature of our corporate and governmental arrangements, the City Council would be in the very uncomfortable position of trying to make the best of a business it would have had little or no role in negotiating.

As I've written before, I still think Austin and Central Texas remain long shots in this nationwide supplication, primarily because our limited mass transit would be daunting to those thousands of highly paid commuters yearning for ever-speedier accommodation. It's savvy of Mayor Adler to propose that predicament as one of the "challenges" he would like to address in partnership with Amazon. Certainly out of his own pocket, Jeff Bezos could underwrite an Austin rail line – hell, even a subway system – and barely notice the expense.

Challenge or not, I doubt that's what Amazon has in mind. But they should at least pay their own way.

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Amazon, Amazon headquarters, Jeff Bezos, incentives, Steve Adler, Greater Austin Chamber of Commerce, Texas Enterprise Fund, Good Jobs First

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