When Amazon announced last week that it wants to find a site for its second headquarters and the 50,000 jobs it would create, we pictured cities across the country going to that special drawer where they keep their fishnet stockings and high heels and begin practicing their sidewalk strut. Crude, for sure … but not unwarranted – given the desperate contortions we've witnessed from cities and states when a potential employer dangles the promise of jobs – including companies a fraction the size of Amazon.
Let's be clear: We think Philadelphia is a natural for Amazon's second headquarters. Philadelphia easily aces Amazon's wish list, including a one million-plus population, proximity to an international airport and highway system, and ties to universities. In fact, there is no better city, period. But Amazon is nothing if not savvy, and will also be looking for how sweet a deal it gets, in the form of incentives, tax breaks, and other financial goodies that will help its bottom line.
Cities are already positioning themselves in what will no doubt be a bloody and expensive bidding war.
The city (and the state) has a variety of tools already in use to attract businesses. Keystone Opportunity Zones allow companies moving to certain locations to avoid paying taxes for a period of time. There are tax breaks, credits, and other subsidies that can dramatically ease the burden for a relocating company – at the same time dramatically decreasing the city's tax revenue. There is nothing wrong with using these tools. The city and state, for example, granted $40 million in subsidies to Comcast to help build its second office tower in Center City. But these sweeteners too often lack a level of accountability and transparency. For example, last year, Aramark made the decision to keep its headquarters in Philadelphia, a decision helped by financial incentives, whose details remain a mystery.
In addition, there is little in the way of monitoring whether an investment actually produced the number of jobs that was promised. And there are even-worse-case scenarios, when such incentives become a rat hole of disappearing dollars. In 1997, the shipbuilder Kvaerner got a $430 million public subsidy to supposedly create 1,000 jobs. Two years later, the company announced it would stop building ships, then merged with Aker, who then got an additional $42 million in state subsidies. The company's rocky footing has since become more stable… but it took 20 years.
Recently some lawmakers have called for more accountability. In 2016, Council member Helen Gym sponsored a bill requiring that companies getting financial aid file an annual report detailing any subsidies received and detailed statistics on resulting jobs. And thanks to Council member Allan Domb, the city is about to issue an RFP for a comprehensive analysis of how these tax and incentive investments have actually performed in job creation and other benefits.
Good Jobs First, a national nonprofit center that studies economic development policy, has created a subsidy tracker and issued reports calling for more transparency in government incentives, often called "corporate welfare."