The New Jersey Performing Arts Center, second right, and the Prudential Financial Inc. building, second left, are seen in the skyline of Newark, New Jersey, U.S. (Photographer: Ron Antonelli/Bloomberg)

Newark Gets Ready to Pitch Amazon a $1 Billion Tax Package for HQ2

(Bloomberg) -- As the battle to land Inc.’s second headquarters comes down to the wire, one of the less glamorous contenders just added as much as $1 billion in tax breaks to its pitch.

Newark, New Jersey, on Wednesday approved the big bag of cash, part of a $7 billion package the state is dangling in front of Amazon to capture HQ2, as it’s called. A trio of ordinances adopted at a city council meeting gives the payroll-tax exemptions to any company that creates 30,000 jobs and invests $3 billion in New Jersey’s largest city over the next 20 years.

Newark Gets Ready to Pitch Amazon a $1 Billion Tax Package for HQ2

The inducements would be applicable to other companies should Amazon decide to build its $5 billion campus elsewhere, said Aisha Glover, president of the Newark Community Economic Development Corp., which oversees business opportunities.

“This is not Amazon legislation,” Glover said in an interview. “This is for transformative projects.”

It is certainly one of the largest known subsidy packages offered by the 20 places on Amazon’s shortlist, which include Los Angeles, Denver, Miami, New York, Boston, three parts of the Washington, D.C., region and, outside the U.S., Toronto. Most of the candidates haven’t disclosed their offers.

The Seattle-based e-commerce company last year announced plans to seek the second headquarters to accommodate as many as 50,000 employees over the next 18 years, triggering the competition in an initial field of 238 locations. The contest has been so intense that St. Louis was eliminated despite a $7.1 billion proposal. Amazon has said it will make a decision by the end of the year.

Passionate Opposition

Many of those attending a public hearing for the ordinances Wednesday had harsh words for them.

“I’m enraged,” Bessie Walker, a former councilwoman, said in an interview after addressing the body. “No one is explaining this mess. Amazon is a billion-dollar corporation. Why do we need to defer their payroll taxes? We’ve got to stop giving away these incentives. Newark is already a mecca.”

The city has four superhighways that run through it or near it, a big port, an international airport and two major commuter rail stations, both connected to New York City. Housing prices are lower than in most of the region. Newark already is home to the headquarters of Audible Inc., an Amazon subsidiary that specializes in audio books.

Of the finalists, Newark and Montgomery County, Maryland, with a package of as much as $6.5 billion, stand out with fat, publicly disclosed incentives. Such large offers are likely to step up the bidding and risk removing any economic gains the cities might have reaped, according to Good Jobs First, a nonprofit group that tracks economic-development spending.

“The whole public auction was staged to make everyone more aggressive,” said Greg LeRoy, the group’s executive director. “They’re trying to take advantage of the huge number of bids that never had a prayer to get leverage on the places that were already on the shortlist before they even announced this.”

Amazon says it has invested more than $100 billion in the U.S. and created 200,000 jobs, and reckons that every dollar it has invested in Seattle has generated $1.40 for the city’s economy. The company says it has contributed tens of millions of dollars to affordable housing.

High-Profile Projects

Newark has transcended a reputation for high poverty and crime rates with several major real estate projects over the last few years. They include a new tower for Prudential Financial Inc., a revived downtown department store with a new Whole Foods supermarket, a high-rise luxury apartment tower known as Theater Square and a residential complex called Teachers Village.

The administration of Mayor Ras Baraka, son of the poet and activist Amiri Baraka, is committed to bringing growth to the city while protecting low-income residents from gentrification and rising real estate values, Glover said.

“We can become a model for equitable development,” she said. “If we don’t do it on the front end, it’s too late.”

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