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Amazon.com Inc. will receive $20 million in performance-based tax incentives to locate a 359,000-square foot administrative office in a New York City real estate development property.
The package, offered under the state Excelsior Jobs Program, will bring in 2,000 high-paying jobs in finance, sales, marketing, and information technology at the facility within the Hudson Yards development on the West Side of Manhattan, New York Gov. Andrew M. Cuomo (D) said in announcing the package Sept. 21.
“Amazon’s further expansion in New York is proof positive that our strong economic climate, diverse workforce and talent, are helping to attract top-notch companies from around the world,” Cuomo said in a statement. “We will continue to support the growth of this state’s business sector, which in turn supports economic growth and the creation of quality, good-paying jobs across the Empire State.”
The newly created jobs, Cuomo said, will average $100,000 in annual pay. The company will also spend $55 million to outfit the office space using energy-efficient standards, he said.
The new development adds to Amazon facility investments in New York undertaken since 2012, the governor said. The company has received $2 million in tax credits for a 50-job fashion photo-video studio in Brooklyn. And in 2014, the state gave Amazon $5 million in tax credits for a 350,000-square foot, 500-job office across the street from the Empire State Building, a few crosstown blocks from the new Hudson Yards location.
Also, on Sept. 6, Cuomo announced a new $100 million Amazon fulfillment center in the Staten Island borough of the city, which he said will support 2,250 new, full-time jobs. The 855,000-square foot facility will be Amazon’s first fulfillment center in New York, he said.
“We’re excited to expand our presence in New York,” said Paul Kotas, Amazon’s senior vice president of worldwide advertising, in a statement. “We have always found great talent here.” He said the expansion was part of an Amazon plan to create 100,000 full-time, full-benefit jobs in the U.S. by mid-2018.
Tax credits and incentives can play a large role in economic development, but their impact can be hard to measure, said Morgan Scarboro, a policy analyst at the Tax Foundation, a Washington, D.C.-based think tank.
“Every state wants a company like Amazon, but states should instead fix their tax code for everyone instead of arbitrarily picking winners and losers,” she told Bloomberg BNA in a Sept. 22 email. “Tax incentive programs cannot, by design, be a wide-reaching, long-lasting way to achieve economic growth, but a well-structured tax code can be.”
She called for states to employ “strict evaluation methods” for tax incentives to make sure the gains are worth the large amounts of forsaken revenue they represent.
Incentives under the Excelsior Jobs Program, an arm of the state’s economic development financing operation, provide a tax credit equal to 6.85 percent of wages per net new job over 10 years. The program is part of Empire State Development, the umbrella body for the state Urban Development Corp., a public authority, and the state Economic Development Department.
The program includes “strict accountability standards to guarantee that businesses deliver on job and investment commitments,” according to its website. Companies can only get the credit by meeting and maintaining established thresholds laid out in the program’s eligibility criteria.
New York’s Excelsior Jobs Program has the advantage of tying the credits specifically to the number of jobs created and retained, said Steve Carter, a Grant Thornton LLP managing director in Philadelphia who leads the firm’s credits and incentives practice.
Under the New York program, companies have to file annual compliance reports for evaluation by the state, Carter told Bloomberg BNA Sept. 22. “If the job’s not there that year, you don’t get the credit,” he said. “That’s different from a big cash grant up front.”
Performance-based standards represent a growing trend in economic development packages, Carter said. “The state can provide the incentives, but if you don’t perform, you don’t get the benefits,” he said. “You see a lot of states moving in that direction.”
Carter said that based on his work on incentive packages around the U.S., “in my opinion, Excelsior Jobs is a pretty good program.”
Unlike New Jersey’s Grow NJ program, the New York scheme offers refundable credit payments for meeting targets in years where a company has no tax liability, he said. In New Jersey, a company with no tax liability can’t use its credits but can sell them to other companies in an open market.
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More information on the Excelsior program is at http://src.bna.com/sMR.
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