By Don C. Brunell
Last year, Seattle Times aerospace reporter Dominic Gates wrote about the similarities and differences between Boeing’s corporate office move to Chicago and Amazon’s plan for a second headquarters. Boeing wanted to leave Seattle in an effort to separate its corporate leadership from manufacturing sites, while Amazon, with an unusual strategy, plans to keep its headquarters here but set up a parallel operation elsewhere. Boeing hoped to find a more conservative business climate, while Amazon wants a city which is a “cultural fit.”
Gates reported that in March 2001, Boeing shocked then-governor Gary Locke and then-Seattle mayor Paul Schell, announcing its headquarters since 1916 would leave Seattle and named Chicago, Dallas and Denver as the leading destinations. CEO Phil Condit invited each city to submit proposals.
Chicago won after Illinois agreed to provide Boeing with up to $41 million in tax breaks and various state grants over 20 years. The city offered an additional $19 million in property tax relief over a similar period and a $2 million grant.
Chicago also promised to establish a downtown heliport that could shuttle executives to and from the central city, and contributed $1 million to retire the lease of the existing tenant in the space that Boeing now occupies. Chicago’s proposal was that detailed.
Amazon publicly announced its desire for a second headquarters. The world’s leading online retailer estimates what is called “Amazon HQ2” is worth $5 billion and will bring with it 50,000 jobs.
The company accepted bids from metropolitan areas with good roads, high-quality education, mass transit, and a business-friendly environment. However, the decision may hinge on which city, state or, in the case of Canada, federal government has the richest package of incentives.
New Jersey Governor Chris Christie proposed $7 billion in potential credits against state and city taxes if Amazon located in Newark and sticks to its hiring commitment. Georgia is offering $1 billion, and California, Florida and Colorado have $100 million-plus packages. Many cities submitted multi-million dollar bids, as well.
Who would pass on a $5 billion, 50,000 jobs deal? Not many, but San Antonio, Texas officials sent an open letter to Amazon CEO Jeff Bezos, saying it is not entering the bidding war. “Blindly giving away the farm isn’t our style.”
While tax breaks are part of most corporations’ DNA these days, Amazon has taken them to a new level. It assembled a group of highly talented and experienced people who actively work for taxpayer incentives in areas it plans to locate.
“Since its beginnings as an online bookseller in 1994, Amazon has had a savvy approach to taxes, collecting no sales tax for many purchases until recent years, and now pitting governments against each other to win tax breaks,” Reuters recently reported.
Unfortunately, as distasteful as these public incentives are, they entice companies to cities, states and other countries. The best remedy to counter them is to focus on improving the business climate so corporate leaders won’t look elsewhere.
In 1991, Boeing CEO Frank Shrontz warned that unless Washington's business climate improved, the Puget Sound region could become “an aerospace rust belt in the 21st century, complete with padlocked factories, unemployment lines and urban blight.”
While Amazon has not been as open in its criticism of Washington and Seattle’s taxes and regulations, it wants a city which has lower operating costs.
Boeing, Amazon and other Washington companies are coveted by other states and countries. The key to keeping them here is to have reasonable regulations and taxes, good education and transportation, safe streets and a high-quality environment – and, a place where people can afford to live.
Don Brunell is a business analyst and a former president of the Association of Washington Business.
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