Dive Brief:
- After the announcement that it would be building a second North American headquarters, online retail giant Amazon snagged 238 bids for its "HQ2" and tax incentives of up to $7 billion, according to Business Insider.
- At $7 billion, New Jersey officials have offered the highest-dollar incentive program, followed by Irvine, CA, at $5 billion, Philadelphia at $2 billion to $3 billion, and Maryland with subsidies "in the billions of dollars."
- Amazon has reportedly received at least $613 million in local tax breaks to construct its warehouses, according to the Institute for Local Self-Reliance, and another $147 million for building data centers.
Dive Insight:
Local incentive offerings aren't uncommon among deals to bring big businesses to the cities and states that want them. And, for mega-retailers like Amazon, those economic deals can be a requirement in the bid selection process.
Earlier this month, Taiwan-based Foxconn Technology Group inked a deal with Wisconsin Gov. Scott Walker that will provide $3 billion in tax incentives for the company to invest $10 billion in a flat-panel display factory. The agreement will see Foxconn create 13,000 jobs throughout the 15-year span of the incentive agreement. It represents the largest economic incentive package offered to a foreign company in U.S. history.
For many state and local entities, the promise of job growth and economic expansion can lead to concerns over their infrastructure's ability to handle an increasing population. Two decades after Amazon planted roots in Seattle, the city's rapid and continuing population growth has driven it to the top rankings of cities with the longest commute times.
Even with strong infrastructure in place, cities that strike deals with big corporations will likely need to expand their existing systems to account for such growth. Foxconn's agreement with Wisconsin aims to address that issue with its request to expand a segment of the state's Interstate 94. If the company gets its way, the highway project would see the addition of a driverless car lane that could be used to provide easy transport for Foxconn's products and employees.
Recent deals with other companies, including Swedish automaker Volvo and South Korean electronics company LG, have leveraged infrastructure improvements to the area surrounding their developments. Part of Volvo's $200 million–plus incentive package from South Carolina will go toward site and road work surrounding the new $1 billion plant, which is set to open next year. As part of its investment in a $250 million washing machine factory, LG has promised infrastructure improvements, workforce training and the recruitment of U.S. veterans for its Clarksville, TN, plant.
