Amazon’s list of finalists for the location of its second headquarters holds few surprises. Following months of hype in cities and small towns across America, the 20 that made the final cut are altogether expected—major business centers and transit hubs like New York, Boston, Atlanta, and Los Angeles, mixed in with some political powerhouses, like Washington, DC and Northern Virginia. Amazon’s picks for its so-called HQ2 are, with a few exceptions, already thriving. Newark is one of those exceptions.
At 7.9 percent, Newark’s unemployment rate sits at roughly double the average of the other cities on the list. It has the highest poverty rate, too, with nearly one-third of its population living under the poverty line. Essex County, which includes Newark, has New Jersey’s largest homeless population.
That means that of all the cities in Amazon’s sights, Newark may have the most to gain from the economic development the tech giant promises. It’s also offering to give the most away, with up to $7 billion in state and local tax incentives—more than the $5 billion Amazon promises to invest in whatever city it picks. That’s the largest financial incentive any of the cities have publicly announced.
This dichotomy of Newark’s extreme need and the proposal’s extreme generosity provides a striking illustration of what cities stand to gain—or lose—from Amazon’s decision.
Tax incentives for corporations are inherently controversial, but the media frenzy surrounding Amazon’s move has magnified the issue in Newark. Conservative critics of the proposal like Americans for Prosperity – New Jersey have called Newark’s proposed tax breaks a “corporate welfare scheme,” while liberal think tanks including the New Jersey Policy Perspective argue that money would be better spent on the public transit system and higher education.
But elected leaders in the city and across the state, including Newark mayor Ras Baraka, former New Jersey governor Chris Christie, and the city’s former mayor and current senator Cory Booker, say the long-term upside of attracting a juggernaut like Amazon to Newark makes the substantial price tag worth it.
“A Newark HQ2 would mean tens of thousands of local jobs, a boost to our regional economy and small businesses, and an opportunity for Amazon to take a tremendous stake in the continued transformation of our great city,” Booker said in a statement to WIRED.
‘This is the kind of investment that these cities need, and we’ve been looking for that for the last five decades.’
Newark Mayor Ras Baraka
To Baraka, the move would have implications far beyond Amazon. He sees HQ2 as potentially jumpstarting the labor market throughout Newark. The city recently launched a program called Newark 2020, through which major businesses in town—including Verizon and Prudential—commit to hiring local residents. Mayor Baraka says that Newark’s proposal ties its tax incentives to Amazon’s participation in Newark 2020, hiring not exclusively transplants from nearby New York, but also local, currently unemployed Newarkers. Audible, a Newark-based company owned by Amazon, already participates in the program.
“This is the kind of investment that these cities need, and we’ve been looking for that for the last five decades,” says Baraka.
Baraka also has high hopes for the supplemental employment that will grow around an Amazon relocation. The Newark Community Economic Development Corporation estimates the headquarters could bring more than 70,000 additional jobs to the area, as Amazon workers frequent local businesses and invest in the local economy.
Still, the mayor acknowledges that $7 billion is a high price to pay, even given that expected infusion. “Yeah, it is a big number,” he says, “But we wanted to let them know we’re serious, and the entire state of New Jersey is centered on one city.”
Indeed, the state would bear the brunt of the costs, offering $5 billion in tax breaks on top of the roughly $2 billion anted by Newark itself. Christie played a key role in formulating the Amazon proposal; in one of his last acts as governor before handing over his seat to the newly elected Democrat Phil Murphy, he signed a bill authorizing those tax breaks. “Today’s bipartisan action proves that nobody in any other state wants Amazon’s HQ2 more than New Jersey and the City of Newark, and there is nowhere better for this tremendously innovative job creator to grow and thrive,” Christie said at the time.
The bill received bipartisan support, but during the gubernatorial election, Murphy expressed reservations about the size of New Jersey’s gift to Amazon. “If you’re in Alabama, you’re selling tax incentives—with all due respect to Alabama—because what else are you going to sell?” Murphy said in an interview last fall. “In New Jersey, you’ve got location, public education, highly educated workforce, density, diversity, infrastructure.”
Most opponents of the proposal don’t object to Amazon moving to town in principle. The job growth and investment Amazon would bring are almost unanimously seen as a force for good in the area. The debate centers instead around whether Newark has overextended its offer and minimized its upside. For all of its vulnerabilities, after all, Newark provides a close proximity to New York, but without the high land costs. It’s home to several higher education institutions, an international airport, and a fiber internet network.
“As a state we have to step back and say: What have we done?” says Jon Whiten, vice president of New Jersey Policy Perspective, which has monitored the state’s spending habits for 21 years. “Do we need to be this generous, or are we out there selling ourselves short and begging, by sheer size of these tax breaks, for anyone to come ask us to the dance?”
For Whiten, this deal extends Christie’s reign of austerity in New Jersey, which he argues has prevented the state from fully bouncing back from the economic downturn. “There’s been state disinvestment in pretty much anything related to the social safety net or things that help people rise out of poverty,” Whiten says.
‘Are we out there selling ourselves short and begging, by sheer size of these tax breaks, for anyone to come ask us to the dance.’
Jon Whiten, New Jersey Policy Perspective
Others question the extent to which current Newark residents—especially the impoverished and unemployed—might benefit from Amazon coming to town. Wealthy suburbs surround the city, and could absorb the skilled workforce the company plans to hire. And some worry that despite any vague Newark 2020 promises, Amazon will ultimately hire transplants who move to the city for a cushy job.
“The vast majority of job takers will not be Newark residents or people who are currently unemployed,” predicts Greg LeRoy, executive director of Good Jobs First, a policy shop that analyzes economic development programs. “There’s a real risk the jobs will be taken from outsiders, and the jobs will rapidly gentrify housing prices. Locals could lose from this issue instead of gaining.”
Anti-poverty advocates also worry about residual effects. According to the National Low Income Housing Coalition, New Jersey is already short 212,237 affordable homes for low income residents. Renee Koubiadis, executive director of the Anti-Poverty Network of New Jersey, suggests that Amazon could spur a sharp uptick in housing costs that would displace low-income residents, as has happened in tech-centric cities like San Francisco. “While the boost in jobs is much needed in our state, certainly the money could be better spent,” Koubiadis says.
While it’s especially acute in Newark, this cost-benefit analysis is, no doubt, playing out in all 20 cities on Amazon’s short list. As for Newark, Mayor Baraka agrees that the city needs funding, but he draws a distinction between state-sponsored tax breaks and a blank check. “If Amazon’s not here, we don’t have that money anyway,” he says. “If Amazon paid taxes, it’d all be in the state’s coffers, and we’d be arguing with the state legislature about how to spend that money.” At least this way, he figures, Amazon would be making a specific commitment to Newark.
And yet, for some, the tremendous tax giveaway remains hard to reconcile in a city very much in need of tax dollars. That’s especially true given that so many details of Newark’s pitch to Amazon—like most of the proposals in cities across the country—remains secret. “If I were a Newark tax payer, I’d want to see the details of the bid,” says LeRoy.
Amazon is expected to make its final decision later this year. When it does, the inner workings of that decision will most likely remain behind a veil of praise for whatever city it chooses: praise for its commitment to sustainability, perhaps; its transportation infrastructure; its diverse and talented workforce. You can bet the dollars and cents of the deal won’t make their way into the company’s marketing materials about HQ2. If Newark gets picked, you can bet they mattered anyway.