Amazon can afford to give Big Apple one more shot


By Amanda Gomez

(The author is a Reuters Breakingviews columnist.)

NEW YORK, Feb 11 (Reuters Breakingviews) - New Yorkers aren't known for their avoidance of conflict. Amazon has waded into a spat with the city over incentives it won in return for choosing New York as the location for half of its second headquarters, known as HQ2. The fact that other big companies have created jobs without such fanfare weakens Amazon's hand, but the Big Apple deserves one more shot.

State and city lawmakers have been scrutinizing the deal Jeff Bezos' e-commerce giant made behind closed doors with Governor Andrew Cuomo and New York City Mayor Bill de Blasio. New York City Council members are concerned about the lack of independent analysis over the deal. State Senator Michael Gianaris, who represents the Queens neighborhood that Amazon selected, was nominated to a committee that could veto the agreement, which also includes a $2.5 billion investment from the company.

The $3 billion in incentives Amazon stands to achieve look generous, even if they are based on performance. Consider the $1.2 billion in tax credits through the Excelsior Jobs Program for the 25,000 jobs the company plans to add. That represents $48,000 per job, about six times more than what Morgan Stanley received between 2013 and 2015. While the comparison is rough, Apple got about one-tenth as much from Texas between 2012 and 2017.

Amazon doesn't really need anything like what it's getting. The $780 billion company is expected to generate $25 billion in pre-tax profit in 2020, according to I/B/E/S estimates from Refinitiv. Being close to a fertile market for talented young professionals is its own reward. And Google, the search engine that's part of Alphabet, is investing $1 billion in a new campus in Manhattan and renting space elsewhere in the city, but hasn't availed itself of goodies like the Excelsior program.

Bezos' firm is considering walking away, according to Reuters and the Washington Post. But offering to halve the incentives would be more sensible. After all, New York has a reason not to let Amazon get away too easily: if the company's plans come off, it will be the fifth-biggest private employer in the city, according to 2017 data from Crain's New York Business.

More importantly, Amazon is negotiating the beginning of a relationship that could last for decades. If New York's lawmakers are determined to make life tough, it's a sign that Amazon is probably better off elsewhere.

On Twitter

CONTEXT NEWS

- Amazon executives are exploring alternatives to New York as a location for its second headquarters, according to Reuters and the Washington Post. The e-commerce company has encountered local opposition to its plans to set up a new base in the city.

- Amazon announced in November it would split its second headquarters between New York and Arlington, Virginia. Virginia's government in January approved legislation that allows for up to $750 million in incentives for Amazon.

- New York State Senator Michael Gianaris, who represents the neighborhood where Amazon plans to house its headquarters, was nominated in February to the Public Authorities Control Board, a committee that has veto power over the deal, according to the New York Times. His confirmation requires approval by Governor Andrew Cuomo.

- Google announced in December that it would invest $1 billion to build a new campus in Manhattan. The search-engine firm, part of Alphabet, is seeking enough space to be able to double its workforce of more than 7,000 in New York over the next 10 years.

New York Timesarticle




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of NASDAQ, Inc.