Amazon Has Honed Its Site-Hunting Expertise With In-House Team
Amazon.com Inc. is no novice when it comes to getting good deals.
As the Seattle-based company is set to close on Thursday the request for proposals for its second corporate home, its in-house economic development team shows how important tax-incentive deals have become to its business model and gives a window into why the company took the step of pitting cities against each other to win the biggest subsidy package possible.
Starting in 2013, for instance, the team helped central Florida officials advocate for allowing Amazon to build fulfillment centers on agricultural land in Davenport and Lakeland.
Sean Malott, president of the Central Florida Development Council, who worked with Amazon, says together the centers employ 1,000 workers. The company received $5.3 million in tax incentives in return, according to the state's economic-development group.
"In our case, they're taking agricultural property that had a very small taxable base," he said, making the tax breaks well worth it to the community.
Amazon has been promised roughly $1 billion in tax subsidies since the team's founding five years ago, according to data collected by Good Jobs First, a group that advocates against tax incentives.
The Seattle-based company said last month it plans to invest $5 billion in a second North American headquarters over nearly two decades, some of which it could recoup through hefty tax breaks.
Promises of incentives for HQ2, as Amazon calls its new headquarters, are already coming in. New Jersey Gov. Chris Christie on Monday announced the state and the city of Newark will offer a potential $7 billion in tax incentives over 10 years, tied to Amazon's pledge to create 50,000 new corporate jobs.
While Amazon is considering many factors such as the labor pool, cultural fit and access to airports and major highways, its emphasis on taking advantage of incentives is part of the retail giant's culture of frugality.
Amazon's approach differs from most other companies, which often rely on outside consulting firms to scout locations and negotiate tax incentive deals with state and local governments. Instead, Amazon in recent years has brought those services in-house and made them the responsibility of its economic development team, a sign of the company pouring resources into new, promising initiatives.
Amazon's team is led by specialists who come from different parts of the economic development world. The group finds sites for new projects and negotiates tax breaks to help fuel Amazon's rapid expansion, acting as liaisons with local and state governments.
Mike Grella, who worked at PwC before joining the web giant, joined Amazon as director of economic development in 2012. He was joined by Eric Murray, who had worked in-house on real estate and economic development at Lockheed Martin Corp., in 2014, and Holly Sullivan, who worked on economic development for local governments in Maryland and Tennessee, in 2016. Mr. Grella leads economic development for the company's cloud-services business, while Ms. Sullivan, also a director of economic development, is responsible for the rest of the company.
"Amazon is a kind of unique situation," said Mark Sweeney, senior principal with McCallum Sweeney Consulting, which provides site selection services and economic-development consulting for other companies, and whose firm hasn't worked for Amazon. "Most companies, even large companies, don't build an automobile facility or an aircraft facility every year."
Over the past three years, Amazon has built out dozens of warehouses and hired tens of thousands of people, with plans to add 100,000 new full-time U.S. positions by mid-2018. The tax breaks Amazon has attained for the openings give a critical boost to Amazon's bottom line. When the company ekes out a profit, it is usually small compared with its sales because the company pours money back into expansion.
Amazon said it has invested more than $100 billion in its U.S. fulfillment network between 2011 and 2016, including compensation. It declined to comment further.
Local economic-development officials believe tax breaks and other incentives are an important tool for attracting jobs and other investments to their region. Northern Kentucky and Boone County plans to pay roughly $40 million in tax incentives to draw Amazon's new $1.5 billion air cargo facility to the Cincinnati airport, which is expected to create more than 2,000 jobs when it eventually opens.
"When a project comes along like this that has competition, we're going to use the resources that we have available to try to secure that operation," said Daniel Tobergte, president and CEO of the Northern Kentucky Tri-ED economic development group, which worked with Amazon on the deal.
For some, the cost of attracting Amazon is too high. The public courting for Amazon's new headquarters "is, intentionally or not, creating a bidding war amongst states and cities," wrote San Antonio officials in an open letter last week addressed to Amazon Chief Executive Jeff Bezos. "Blindly giving away the farm isn't our style."
Critics of such deals argue that it isn't worth the taxpayer dollars, adding companies are likely to pick the location that makes most sense with or without incentives. The current record tax break awarded to a company is the $8.7 billion the state of Washington gave Boeing Co. in 2013 to build planes there.
Florida is ready for more Amazon, Mr. Malott said. "We would love to have the opportunity to have additional facilities, whether in fulfillment or operations center, or we would love to see HQ2 within the region."
Write to Laura Stevens at laura.stevens@wsj.com and Shayndi Raice at shayndi.raice@wsj.com
Amazon.com Inc. is no novice when it comes to getting good deals.
As the Seattle-based company is set to close on Thursday the request for proposals for its second corporate home, its in-house economic development team shows how important tax-incentive deals have become to its business model and gives a window into why the company took the step of pitting cities against each other to win the biggest subsidy package possible.
Starting in 2013, for instance, the team helped central Florida officials advocate for allowing Amazon to build fulfillment centers on agricultural land in Davenport and Lakeland.
Sean Malott, president of the Central Florida Development Council, who worked with Amazon, says together the centers employ 1,000 workers. The company received $5.3 million in tax incentives in return, according to the state's economic-development group.
"In our case, they're taking agricultural property that had a very small taxable base," he said, making the tax breaks well worth it to the community.
Amazon has been promised roughly $1 billion in tax subsidies since the team's founding five years ago, according to data collected by Good Jobs First, a group that advocates against tax incentives.
The Seattle-based company said last month it plans to invest $5 billion in a second North American headquarters over nearly two decades, some of which it could recoup through hefty tax breaks.
Promises of incentives for HQ2, as Amazon calls its new headquarters, are already coming in. New Jersey Gov. Chris Christie on Monday announced the state and the city of Newark will offer a potential $7 billion in tax incentives over more than 10 years, tied to Amazon's pledge to create 50,000 new corporate jobs.
While Amazon is considering many factors such as the labor pool, cultural fit and access to airports and major highways, its emphasis on taking advantage of incentives is part of the retail giant's culture of frugality.
Amazon's approach differs from most other companies, which often rely on outside consulting firms to scout locations and negotiate tax incentive deals with state and local governments. Instead, Amazon in recent years has brought those services in-house and made them the responsibility of its economic development team, a sign of the company pouring resources into new, promising initiatives.
Amazon's team is led by specialists who come from different parts of the economic development world. The group finds sites for new projects and negotiates tax breaks to help fuel Amazon's rapid expansion, acting as liaisons with local and state governments.
Mike Grella, who worked at PwC before joining the web giant, joined Amazon as director of economic development in 2012. He was joined by Eric Murray, who had worked in-house on real estate and economic development at Lockheed Martin Corp., in 2014, and Holly Sullivan, who worked on economic development for local governments in Maryland and Tennessee, in 2016. Mr. Grella leads economic development for the company's cloud-services business, while Ms. Sullivan, also a director of economic development, is responsible for the rest of the company.
"Amazon is a kind of unique situation," said Mark Sweeney, senior principal with McCallum Sweeney Consulting, which provides site selection services and economic-development consulting for other companies, and whose firm hasn't worked for Amazon. "Most companies, even large companies, don't build an automobile facility or an aircraft facility every year."
Over the past three years, Amazon has built out dozens of warehouses and hired tens of thousands of people, with plans to add 100,000 new full-time U.S. positions by mid-2018. The tax breaks Amazon has attained for the openings give a critical boost to Amazon's bottom line. When the company ekes out a profit, it is usually small compared with its sales because the company pours money back into expansion.
Amazon said it has invested more than $100 billion in its U.S. fulfillment network between 2011 and 2016, including compensation. It declined to comment further.
Local economic-development officials believe tax breaks and other incentives are an important tool for attracting jobs and other investments to their region. Northern Kentucky and Boone County plans to pay roughly $40 million in tax incentives to draw Amazon's new $1.5 billion air cargo facility to the Cincinnati airport, which is expected to create more than 2,000 jobs when it eventually opens.
"When a project comes along like this that has competition, we're going to use the resources that we have available to try to secure that operation," said Daniel Tobergte, president and CEO of the Northern Kentucky Tri-ED economic development group, which worked with Amazon on the deal.
For some, the cost of attracting Amazon is too high. The public courting for Amazon's new headquarters "is, intentionally or not, creating a bidding war amongst states and cities," wrote San Antonio officials in an open letter last week addressed to Amazon Chief Executive Jeff Bezos. "Blindly giving away the farm isn't our style."
Critics of such deals argue that it isn't worth the taxpayer dollars, adding companies are likely to pick the location that makes most sense with or without incentives. The current record tax break awarded to a company is the $8.7 billion the state of Washington gave Boeing Co. in 2013 to build planes there.
Florida is ready for more Amazon, Mr. Malott said. "We would love to have the opportunity to have additional facilities, whether in fulfillment or operations center, or we would love to see HQ2 within the region."
Write to Laura Stevens at laura.stevens@wsj.com and Shayndi Raice at shayndi.raice@wsj.com
Corrections & Amplification
This article was corrected October 24, 2017 at 5:18 p.m. EST to show that New Jersey and its largest city, Newark, are offering Amazon $7 billion in incentives over more than 10 years. The original version of this article incorrectly said the time frame for the incentive package is 10 years.
New Jersey and its largest city, Newark, are offering Amazon $7 billion in incentives over more than 10 years. "Amazon Has Honed Its Site-Hunting Expertise With In-House Team," published at 5:30 a.m. ET on Oct. 19, incorrectly said the time frame for the incentive package is 10 years in the eighth paragraph. (Oct. 24)
(END) Dow Jones Newswires
October 24, 2017 17:18 ET (21:18 GMT)
