Online retail-giant Amazon is looking to build a new corporate headquarters, and New Jersey, with several bustling Amazon warehouses already within its borders, could have an early jump on the competition for the billions of dollars in new investment the project is expected to generate.
In fact, a place like Newark, which is blossoming as a technology hub, would seem to be an ideal location for Amazon since the company has listed proximity to major urban centers, high-level tech talent, and a “think big” outlook among its criteria for the new headquarters.
If Amazon does look to Newark, the feeling will be mutual as the city’s economic-development officials say they are interested in submitting a proposal to the company, which announced late last week that it will be collecting formal submissions from locations across the country for what it is calling the “HQ2” project. (Amazon already maintains a massive corporate headquarters in Seattle.) And representatives from other New Jersey cities, including New Brunswick and Jersey City, have also indicated an interest in Amazon’s request for proposals, as has the state itself.
Yet just because New Jersey and several of its cities appear to be well-suited to host the new Amazon headquarters, that doesn’t mean convincing Amazon’s bigwigs to locate here will be a sure thing. High state income and corporate tax rates, a regulatory system that many of New Jersey’s current businesses already complain about, and a cash-starved and at times unreliable public-transportation network could cause Amazon to look elsewhere.
Heavy price for taxpayers
And even if the company does end up choosing New Jersey, it might come at a heavy cost for taxpayers since Amazon, in announcing the nationwide search for a new headquarters, is basically pitting every state and metro area in the country against one another when it comes to the packages of tax breaks and other incentives that may have to be offered in order to seal the deal.
“Taxpayers should watch their wallets as the trophy deal of the decade attracts politicians to a hyper-sophisticated tax-break auction,” said Greg LaRoy, executive director of Good Jobs First, a Washington, D.C.-based tax-incentive watchdog.
Founded in 1994, Amazon was initially aimed at selling books online, but it has blossomed over the past two decades into one of the world’s largest companies, with more than 380,000 employees. Its current headquarters in Seattle, where the company started, covers eight million square feet, and Amazon estimates it generates as much as $1.4 billion in direct and indirect economic activity for the city.
Amazon’s NJ presence
But Amazon also has a pretty significant presence in New Jersey, according to a recent report released by Wall Street credit-rating agency Moody’s Investors Service, opening more than five million square feet of warehousing and distribution space in recent years as the state’s overall warehouse and distribution industry has flourished in the wake of the Great Recession. Existing Amazon facilities are located in Carteret, Florence, Logan Township, Robbinsville, and Woodbridge, and facilities are also opening in Cranbury, Edison and Logan Township.
A big draw for the company’s e-commerce operations, according to Moody’s, is New Jersey’s transportation infrastructure, including the New Jersey Turnpike, as well as the Port of Newark-Elizabeth, the second-busiest seaport in North America. New Jersey also boasts Newark Liberty Airport, 1,000 miles of freight-rail tracks, and is home to several major universities like Princeton and Rutgers.
“Generally speaking, New Jersey is highly educated and perfectly located, making it an ideal location for companies of all sizes, in all industries,” said Virginia Pellerin, a spokeswoman for the New Jersey Economic Development Authority.
The Trenton-based EDA administers the state’s numerous economic-development tax-incentive programs, and Pellerin said on Friday that the agency is “excited for this opportunity” when asked questions about New Jersey’s interest in landing Amazon’s HQ2.
The Newark factor
The city of Newark, meanwhile, is also “very much interested” in the Amazon headquarters project, said Aisha Glover, president and chief executive officer of Newark’s Community Economic Development Center.
Newark, which is New Jersey’s largest city, has been working hard in recent years to make itself over as a major technology hub, an effort that Amazon is already likely familiar with since the city has counted Amazon-affiliated Audible among its corporate residents since 2007. Newark is also home to New Jersey Institute of Technology, providing access to the tech talent that Amazon’s officials say they are looking for. And the city itself has also been investing heavily in tech-infrastructure in recent years, which provides its businesses with easy access to high-speed internet.
“Given the city’s valuable tech/talent pipeline, as a major transit hub with close proximity to New York City and an unmatched tech infrastructure, Newark would be an ideal location for Amazon’s second headquarters,” Glover said.
Yet Amazon could also look further south to places like New Brunswick, a tech-friendly city that also has rail connections and Rutgers’ main campus within its borders. Camden and even Atlantic City could also draw interest since those two cities are designated as “growth zones” under state economic-development law, giving the EDA the ability to award the state’s most generous tax breaks to new developments emerging in those communities.
A cautionary note
But Jon Whiten, vice president of New Jersey Policy Perspective, a liberal think tank based in Trenton, suggested there’s also a good reason for some caution as the Amazon sweepstakes takes off. Although Whiten said it would be a “huge win” for New Jersey if Amazon ultimately chooses to locate its new headquarters here, he also pointed to a state tax incentive worth up to $260 million that was awarded to energy company Holtec International for a new 600,000-square-foot manufacturing facility that just opened in Camden.
The project is creating just under 400 jobs, meaning the company is getting more than $650,000 in tax breaks for each permanent position, Whiten’s organization estimates.
“It’s only going to be a ‘win’ if we don’t give away the store in the process,” Whiten said. “That’s a real concern.”
LaRoy, the leader of the D.C.-based watchdog, suggested Amazon is also doing nothing to dampen concerns that it could drive a hard bargain for taxpayers. Amazon has a record of aggressively seeking tax breaks for its many warehouses and fulfilment centers, and the company’s news release on the HQ2 search stressed in a quote from its celebrity CEO, Jeff Bezos, all the hiring and investment that will occur at the location of the new headquarters.
“We fear that many states and localities will offer to grossly overspend to attract Amazon, even though the business basics — especially a metro area’s executive talent pool — will surely control the company’s decision,” LaRoy said.