All the numbers involved in Amazon’s search for a new second headquarters city are eye-popping. The Seattle-based company, planning to hire as many as 50,000 people at high salaries, is getting offers of government incentives worth big bucks from eager bidders.
That’s big bucks as in billions.
Scores of cities submitted bid packages last week, most choosing not to divulge financial details. On Monday, we saw the outlines of Chicago’s offer: more than $2 billion in incentives, including $1.32 billion in state tax credits; $450 million in infrastructure improvements; $250 million in education, workforce development and city economic development funds; and $60 million in city and Cook County property tax breaks.
First, allow us to blow off some steam: We don’t like the incentive game because it’s a taxpayer-funded giveaway in hopes of a future economic payoff. Once upon a time employers made investment decisions based on business reasons. Today governments want to sweep those employers off their feet with lavish offers.
OK, back to reality: The game exists, so in some circumstances it can be in Illinois’ interest to participate. That’s true if the incentives are reasonable and tied to certifiable job creation and retention. The more incentive money invested in mass transit and other infrastructure to benefit all residents, the better. Taking a principled stand against all incentives in order to watch good jobs fly by to other states doesn’t make sense. We hope someday Illinois has such an extraordinary business environment that employers won’t need to be bribed — oops, we mean incentivized — to come. That time isn’t now.
Amazon is the big fish Chicago should try to lure. The company will spend an estimated $5 billion to build its headquarters, and the 50,000 jobs, many in software engineering, will have an average salary above $100,000. World Business Chicago says Amazon’s HQ2 would generate $341 billion in total spending for ongoing operations over 17 years, including $71 billion in salaries, and supporting an additional 37,500 jobs in the region annually.
How does the $2 billion offer for Amazon stack up? Illinois recently lost out on a big manufacturing project: Foxconn picked Wisconsin as the site of an LCD panel plant with up to 13,000 jobs, in exchange for incentives worth $3 billion. Michigan bid $3.8 billion, but the Wisconsin offer was more valuable because most of the incentives come in the form of refundable tax credits that could be paid in cash, according to the Milwaukee Journal Sentinel. Michigan’s offer was slanted heavily toward credits that reduce tax bills but can’t be converted to cash.
Compared to Wisconsin’s cash-rich offer, the $2 billion offer to Amazon from Mayor Rahm Emanuel and Gov. Bruce Rauner — depending on how all the details shake out — seems reasonable. We’re still choking on the concept of Illinois giving money to Amazon CEO Jeff Bezos, one of the world’s richest guys, but some poker games are worth the high stakes. As we’ve said previously, If another city wants to outbid Chicago, so be it. We want Chicago to win this contest on its overall merits: This city has the location, educated labor force and quality of life Amazon seeks.
There is one other crucial factor: Emanuel needs to convince Bezos that Amazon won’t be hobbled by the state’s public debts and political dysfunction. USA Today synthesized an assessment several handicappers have raised: “While Chicago’s got much of what Amazon wants, its state economy is a mess.” It’d be easy for Bezos and his lieutenants to wonder if Illinois, with the worst credit rating of any state, can be trusted to fulfill its end of any deal.
That puts the onus on Springfield lawmakers, starting with House Speaker Michael Madigan and Senate President John Cullerton, to make clear they want Amazon in Illinois. Foxconn rejected Illinois. So did Toyota and Mazda, which are searching for a factory site. It’s one thing for Illinois to lose out in the competition to offer the most incentives. It’s another to be bypassed because the state is seen as a lousy, risky place to do business.
The General Assembly begins its veto session Tuesday. What will Madigan, Cullerton and other elected officials do, and what will they say, to make Amazon want to look closely at Chicago’s bid?