Amazon HQ2 RFP

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Shepard said:
What's the gist of the article? (I can't and won't read the globe)
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I believe the gist of the article is that we need to pick up the pace of making Boston better regardless of Amazon. And like the Olympics, Amazon provides an exercise to think about all the things we need to do but we need to get to work doing them regardless.

I disagree with the sentiment to some degree. I think the Amazon proposal(s) (and the Olympics) should be an exercise in thinking about all the things we don't need to do. Utilizing all of our current strengths and not some fanciful exercise in long term planning based on unsustainable amounts of public and private spending to fulfill everyone's bucket list of wishful thinking or promises to do better.

Amazon is looking for some prime real estate, not some public planner's cloud city of false promises... which does come across in the article to some extent.

My response is that Boston (area) has lots of great real estate projects with millions of square feet in the pipeline ready to choose from, lots of great people, lots of great universities, lots of transit and road infrastructure, some great waterfronts and great parks, great sports teams, and a history of innovation combined with a grounded sense of the possible.

Certainly in some specific examples we need more execution and less "vision" and the part about making the trains run on time is well taken... and I suppose that could be taken as one point of the article that I think we can agree on.

Overall though whenever I hear Widett Circle mentioned I cringe not because it was a lost opportunity... but that anyone thought or still thinks it is an opportunity to do anything other than waste a lot of taxpayer money on a boondoggle project. Widett Circle was a dumb idea for the Olympics and it remains a dumb idea.
 
i strongly object to the over-played naysayers.

Amazon will be a great thing for Boston.

In the end, 15-20,000 workers, improved infrastructure, a slightly fuller urban zone.... enlivened neighborhoods with more amenities, much improved retail activation... and far fewer empty storefronts.

There's a hundred thousand more reasons. But the spoken words will be; "business is good," as in really good.

What a change when developers scream "full speed ahead," instead of being averse to interface with the public... and walking on eggshells in the company of the bankers, and wondering if they'll need to pull back.

The City will come alayyve.

Possibly the single best event to happen in a century, (at least)
 
odurandina said:
i strongly object to the over-played naysayers.

Amazon will be a great thing for Boston.
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Will be. We're a confident bunch. New Jersey has just offered 7 billion dollars in tax breaks. I have a hard time believing that Massachusetts will match that, and Newark is part of the NYC metro area talent pool.

That's 140k per job, assuming that every one of the 50k jobs are created I still think that's insane. I'm in favor of some tax breaks, however I don't want Massachusetts to offer that much.
 
tysmith95 said:
Will be. We're a confident bunch. New Jersey has just offered 7 billion dollars in tax breaks. I have a hard time believing that Massachusetts will match that, and Newark is part of the NYC metro area talent pool.

That's 140k per job, assuming that every one of the 50k jobs are created I still think that's insane. I'm in favor of some tax breaks, however I don't want Massachusetts to offer that much.
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I'm curious if that sticks. Christie's fat ass is out of office in a few months so his mouth might be writing checks that his state can't cash.
 
tysmith95 said:
Will be. We're a confident bunch. New Jersey has just offered 7 billion dollars in tax breaks. I have a hard time believing that Massachusetts will match that, and Newark is part of the NYC metro area talent pool.

That's 140k per job, assuming that every one of the 50k jobs are created I still think that's insane. I'm in favor of some tax breaks, however I don't want Massachusetts to offer that much.
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Let's tackle this quantitatively for Mass. Obviously Jersey's numbers are different.

50,000 jobs x average salary of $100,000 = $5 billion dollars per year of personal income added to Mass tax rolls. With our income tax that is 50,000 x $4871 (https://smartasset.com/taxes/massachusetts-tax-calculator#4Har3MVwBd) = $244 million per year the state gets just in income taxes. Cities and towns will get property taxes (the state median is $3800 per year which is obviously low-balling these highly paid workers https://smartasset.com/taxes/massachusetts-property-tax-calculator) of approximately $190 million a year. The state and municipalities get even more through sales tax when those people spend their money. PLUS there is the job multiplier of approximately 2x. If we are pessimistic and say those are all minimum wage job at $15/hr ($30k/year) we get another 50,000 x $1300 = $65 million in income taxes from them.

So we are up to AT LEAST $500 million (not counting sales tax) PER YEAR in taxes collected from Amazon employees and their multiplier effect.

We know those 50,000 won't be here all on day 1, so to make the math easy let's let the employee population raise linearly over 20 years. Also let's ignore inflation and do everything in today's dollars. That gives a grand total of $5 billion in tax revenue over 20 years.

Obviously those taxes go to state and local services consumed by Amazon employees and it is no easy thing to figure out how much. However, since we are talking about salaries much hire than the state average ($68k), I think it is safe to assume there is a hefty net gain for tax rolls. I have to make some kind of guess, so I'm going to assume the average person's services consumption is the same, but Amazon employees are paying taxes roughly 47% more than the average ($100k/$68). So approximately $1.66 billion of the $5 billion is gravy - net revenue to the state/municipalities that can be spent on anything.

Furthermore, beyond the multiplier effect, we have the spouses of Amazon employees and, most importantly I think, we'll have all the other software/tech giants increasing their presence in Boston to poach pissed-off Amazon employees as they jump ship. There is no way for me to quantify this, but I think it justifies rounding $1.66 billion up to $2 billion.

So, from my reckoning I see incentives up to about $2 billion being totally reasonable for Massachusetts. You might call that $40,000 per job, but I call it breaking even.

I would welcome anyone to poke holes in or add to this analysis.

EDIT: I don't even know where to start on the corporate tax side of things. I would appreciate any insight.
 
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fattony said:
Let's tackle this quantitatively for Mass. Obviously Jersey's numbers are different.

50,000 jobs x average salary of $100,000 = $5 billion dollars per year of personal income added to Mass tax rolls. With our income tax that is 50,000 x $4871 (https://smartasset.com/taxes/massachusetts-tax-calculator#4Har3MVwBd) = $244 million per year the state gets just in income taxes. Cities and towns will get property taxes (the state median is $3800 per year which is obviously low-balling these highly paid workers https://smartasset.com/taxes/massachusetts-property-tax-calculator) of approximately $190 million a year. The state and municipalities get even more through sales tax when those people spend their money. PLUS there is the job multiplier of approximately 2x. If we are pessimistic and say those are all minimum wage job at $15/hr ($30k/year) we get another 50,000 x $1300 = $65 million in income taxes from them.

So we are up to AT LEAST $500 million (not counting sales tax) PER YEAR in taxes collected from Amazon employees and their multiplier effect.

We know those 50,000 won't be here all on day 1, so to make the math easy let's let the employee population raise linearly over 20 years. Also let's ignore inflation and do everything in today's dollars. That gives a grand total of $5 billion in tax revenue over 20 years.

Obviously those taxes go to state and local services consumed by Amazon employees and it is no easy thing to figure out how much. However, since we are talking about salaries much hire than the state average ($68k), I think it is safe to assume there is a hefty net gain for tax rolls. I have to make some kind of guess, so I'm going to assume the average person's services consumption is the same, but Amazon employees are paying taxes roughly 47% more than the average ($100k/$68). So approximately $1.66 billion of the $5 billion is gravy - net revenue to the state/municipalities that can be spent on anything.

Furthermore, beyond the multiplier effect, we have the spouses of Amazon employees and, most importantly I think, we'll have all the other software/tech giants increasing their presence in Boston to poach pissed-off Amazon employees as they jump ship. There is no way for me to quantify this, but I think it justifies rounding $1.66 billion up to $2 billion.

So, from my reckoning I see incentives up to about $2 billion being totally reasonable for Massachusetts. You might call that $40,000 per job, but I call it breaking even.

I would welcome anyone to poke holes in or add to this analysis.
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I like it. Well done.
 
I don't mean to ridicule Worcester - they have no chance, but it is fine that they are trying. But flipping through that document the picture of the minor league ballpark and the guy in the hardhat made me cringe.
 
WormtownNative said:
If you want a laugh, here's Worcester's pitch.

No freaking way is this happening in Worcester.
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What a waste of everyone's time. It's annoying that this is drawing even the slightest bit of attention away from a Boston/Cambridge bid; the state should be unified around the Boston metro area.

"World class restaurant scene" is laughable hyperbole. I wouldn't even put Boston at that level (but it's getting close).

"7 million people within a 50 mile radius" ... hmm, I wonder where the majority of that 7 million work and live?

The table on page 22 is full of typos, inconsistent formatting, and nonsensical numbers. Total amateur hour. E.g., their -237% metric shows a basic lack of understanding of how math works.

I wouldn't be surprised if Amazon spent less than 15 minutes total looking at this bid.
 
I'd love to see amazon locate to a place like Worcester or Providence. Acutally Providence would be the best cause it wouldn't involve mass tax credits. However I doubt that will happen.

And fattony, love your analysis. However one thing your leaving out is the additional costs involved. Those include schooling, infastrcture, and other additional costs that the state and cities will endure.
 
fattony said:
Let's tackle this quantitatively for Mass. Obviously Jersey's numbers are different.

$250 million per year the state gets just in income taxes. Cities and towns will $200 million a year in property taxes
$100 million in sales taxes (assume they spend ~30% of income @6.25%)
$ 65 million in income taxes from low wage "multiplier" jobs

I would welcome anyone to poke holes in or add to this analysis.

EDIT: I don't even know where to start on the corporate tax side of things. I would appreciate any insight.
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I added a sales tax line, and applied a little "significant digits" rounding

For all of these numbers, though, the question is how many are "net new" versus "life sucked from other enterprises, either existing or sapped from start-ups that will now not find talent and therefore 'not happen'"

For the worker-direct numbers, I'd apply a "1/2" across the whole thing: half of the Amazon people are grads who would have stayed anyway, and only half are "net new" (those that an offer from Amazon would keep in Boston (keep from leaving for NY/DC/CA)).

For property taxes, the "net new" number is even smaller, basically the "net new property value" created exclusively by/for the "net new people", either in whole units that would not have been created otherwise, or in % appreciation in the market that would not have happened without the extra demand from Amazonians.

So I'd get numbers like:

Earnings-Direct Tax Revenues
$125 million per year the state gets in net new income taxes on net new jobs
$100 million in general wage increases on non-new jobs
$ 50 million in sales taxes (assume they spend ~30% of income @6.25%) on net new expenditures
$ 10 million in spending of other people's raises (in "non new" jobs)

Indirect New Taxes
$ 10 million in income taxes from low wage "multiplier" jobs
$ 20 million a year in property taxes in "new employee housing"
$ 20 million a year in taxes on general "added" market appreciation

So I get a number more like $300m/yr instead of $600m/yr in the year that Amazon finally hits 50k employees.
 
I think a big thing these analyses are missing is increased property value from the increased demand that 50,000 jobs would bring. As an anecdote, my property taxes have gone up roughly 50% in the past couple of years due to this most recent boom. I would imagine Amazon coming to town would cause a similar effect, though the magnitude is unclear.

To put some numbers around it, the City of Boston alone collects over $2B in property taxes per year (source, page 8). Even a 5% net increase in assessed values would yield $100M/year for the City of Boston alone.
 
tysmith95 said:
I'd love to see amazon locate to a place like Worcester or Providence. Acutally Providence would be the best cause it wouldn't involve mass tax credits. However I doubt that will happen.

And fattony, love your analysis. However one thing your leaving out is the additional costs involved. Those include schooling, infastrcture, and other additional costs that the state and cities will endure.
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I accounted for that by figuring about 2/3 of taxes paid by amazonians accounts for all the services they consume. This is because they make about 50% more money than the average Masshole.

However, even that is pretty conservative because the typical Amazon employee will be young, highly educated, and highly paid - exactly the demographics that consume the least amount of state and local services.

You may not want an employer in your community that churns through young people. Maybe you prefer long-term, stable jobs. But you have to admit all those healthy, young people are good for your tax/budget situation!
 
FenwayResident said:
I think a big thing these analyses are missing is increased property value from the increased housing demand that 50,000 jobs would bring.
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The problem is, we don't know how many of the 50k are net new:

A net new job is one that was re-located to Boston from another city (eg relos from Seattle), or created here and filled by a person who would have left town (grads who stay who would have otherwise gone anyplace outside of Boston). These are the true "Jobs Amazon Creates to Boston"

vs

Competitively-filled jobs, which are recruited away from competitors in town (constraining their ability to grow) or denied to the pool from which new businesses might otherwise form (and create new jobs). These are not net new jobs. They are "net filled by poaching" and "net filled by pre-emption" Jobs filled this way are simply "Jobs Reallocated Within Boston", which probably only have 10% of the impact of a truly "created" job.

Out there somewhere, are jobs where Amazon recruits away a "local" and then THAT position is filled with someone moved in or kept-from-leaving (but sometimes that position will be deleted or left unfilled...or spend a long time just triggering local seat-changes rather than local seat creations).
 
FenwayResident said:
I think a big thing these analyses are missing is increased property value from the increased housing demand that 50,000 jobs would bring. As an anecdote, my property taxes have gone up roughly 50% in the past couple of years due to this most recent boom. I would imagine Amazon coming to town would cause a similar effect, though the magnitude is unclear.

To put some numbers around it, the City of Boston alone collects over $2B in property taxes per year (source, page 8). Even a 5% net increase in assessed values would yield $100M/year for the City of Boston alone.
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That is not at all how property taxes work. If the budget (expenses) stays the same and assessments go up, then tax rates must go down. They actually calculate the tax rate based on the required expenditures. Cities are only allowed to increase their total tax receipts by maximum 2.5% per year. In other words, total tax revenue only goes up when the city increases spending. It has nothing at all to do with assessments.

If your taxes went up a lot in recent years, it means that your assessment grew faster (as a percentage) than the assessments for other homes in your city. In fact, people in Beacon Hill could have been seeing tax cuts while your (presumably Fenway) home has seen increases.

For example - I live in Davis Square with probably the highest assessments in Somerville. I'm eagerly anticipating GLX increasing the values of other homes in Somerville faster than mine (by percentage, not absolute value). That could result in my tax bill going down, even if my assessment goes up. The other people in Somerville will be paying a greater proportion of the total city revenue as the desirability (home values) of the city becomes more geographically diversified.

Edit: See page 6, figure 6 of your link to see how the tax rate has changed over time.
 
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Moody's Economy.com did their number crunching:
MZ_101217_1t.GIF


Compared with NYT Upshot which called its filters:
Areas where job growth is strong …
… and the right labor pool is large and growing …
… and the quality of life is high …
… and workers can easily get around — and out of town …
… and there is space and a willingness to pay to play.

I'm not going to say Moody's is wrong, but...

Moody's has relatively underweighted the "international airport" (which Austin technically is, but not the Global airport that Boston is). You can also see this difference in how well Rochester NY did in Moody's (and that Dallas did not make Moody's list at all)

Moody's relatively overweighted the "is it easy to start/license a business" aspect of being business-friendly, which for a company like Amazon is probably better stated as Upshot did of just "are busiensses doing well?" (versus Moody's "is it easy to start a business"...which is hardly Amazon's concern)

In the end, I'd say you could make a good top 4 by taking cities that did relatively well in both rankings:
  • Atlanta
  • Austin
  • Boston
  • Miami
 
This whole thing reminds me of Willy Wonka's golden ticket.
 
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