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Pennsylvania, Philadelphia offered more than $5B in tax incentives for Amazon HQ2

From watchdog.org

For the past year, Pennsylvania state and local officials have touted the strength of the commonwealth’s bid for the much-anticipated Amazon HQ2 – a second headquarters for the dominant online retailer.

Now that Amazon has split its HQ2 plans between New York and Virginia, the details of Pennsylvania’s failed bid efforts are starting to emerge, leading some observers to breathe a sigh of relief that the expensive incentives the state was willing to provide will not be implemented, while others lamented the missed opportunity to host the tech behemoth.

According to a pair of letters released by the governor’s office, the state-level incentives for Amazon included $4.5 billion “through a new performance-based grant program” and another $100 million for transportation improvements.

“The concept of this new incentive program is straightforward,” wrote Pennsylvania Department of Community & Economic Development Secretary Dennis Davin. “A grant award will be made available on an annual basis for up to 25 years, and will be based on the amount of personal income tax collected annually from Amazon employees.”

Davin noted that Gov. Tom Wolf and legislative leaders supported the proposal, and indeed, the second letter was signed by Wolf, House Speaker Mike Turzai and Senate President Pro Tempore Joseph Scarnati, all in support of the state’s proposal.

“We support the creation of a new performance-based program which would be formulated on revenue collected from Personal Income Tax and for a period of up to 25 years,” the joint letter from Wolf, Scarnati and Turzai to Amazon CEO Jeff Bezos read. “This new program would be available to a qualified business anywhere in Pennsylvania. For Amazon, it is estimated that several billion dollars could be generated to support your HQ2 project.”

According to online news site Billy Penn, the city of Philadelphia was prepared to offer another $1.1 billion in incentives to Amazon to locate its facility there. Pittsburgh also was bidding on the HQ2, but the details of its incentives have not yet been made public.

In a news release after Amazon’s decision was announced, the Pennsylvania Chamber of Business and Industry suggested that the state’s regulatory and business climate need to be improved to land such projects in the future.

“Our prime location, vast resources, world-class educational institutions and strong work ethic are all reasons why we felt that Pennsylvania would have been an ideal location for Amazon’s second headquarters,” the chamber’s president and CEO, Gene Barr, said. “However, we have long recognized that there are areas for improvement – including the state’s uncompetitive tax structure, legal climate and regulatory environment. Amazon’s decision necessitates a strong examination of Pennsylvania’s overall business climate.”

Nathan Benefield, vice president and chief operating officer of the Commonwealth Foundation, argued that incentive packages like those offered to Amazon amount to “corporate welfare” that could be better used elsewhere to spark economic growth.

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PA Workforce Development Association