Win or lose, Amazon quest gives Worcester a boost

Oct. 19--WORCESTER -- The city officially jumped into the race for Amazon's second headquarters -- dubbed HQ2 -- Tuesday night, offering up to $500 million in tax savings and other benefits to lure the online giant to Central Mass.

But the eye-popping incentives offered prompt a related question: What is the benefit for the homeowner on Vernon Hill?

"We're expanding the pie," said Worcester Regional Chamber of Commerce President and CEO Timothy P. Murray. "At the end of the day, it's around $1.5 billion in additional revenue that we would never have, that would otherwise take decades to attain. That reduces the tax burden on the businesses and the individual homeowners across the city and that, to me, is a worthwhile investment."

The city is proposing nearly 100 acres along Route 20 as the potential site where Amazon should build HQ2.

The city said it is also prepared to offer Amazon a number of incentives to come to Worcester, including up to $500 million in local real estate tax savings, a 100-percent personal property tax exemption over 20 years, an investment tax credit through the state, and research and development tax credits.

Other incentives offered include $1 million in job creation grant funds; District Improvement Financing funding; Massworks Infrastructure Program funding; Workforce Central Career Center business services; and a quick and streamlined permitting approval process.

For comparison, Boston gave General Electric Co. a property tax break of $20 million over 20 years when it relocated from Connecticut to Boston in 2016, while the state offered up to $125 million in incentives, according to The Boston Globe.

But while cities across the country are lining up to offer Amazon incentives, the question becomes: How would Amazon incentivize its new home?

The online giant said it expects to invest $5 billion in construction of the new headquarters and employ up to 50,000 people there, according to its website. The average annual wage would be over $100,000.

City Manager Edward M. Augustus Jr. said that landing the headquarters would yield an estimated $1.3 billion in additional tax revenue over 20 years.

"We're talking about a net benefit of $1.3 billion in taxes. The city budget is like $650 million. We're talking about being able to generate twice the city budget," said Mr. Augustus in an interview Wednesday. "If I had the opportunity to offer $500 million and get $1.3 billion in return, I'd say, 'Yes, sign me up.' "

And as Mr. Murray noted, this could be used to lower the tax burden on residents and businesses.

Janet A. Pierce, executive director of the Central Massachusetts Regional Planning Commission, said Amazon would bring "an influx of money" into the area.

"There would be revenue coming into the city just from the number of people working and living in the city," Ms. Pierce said.

Ms. Pierce said an influx of workers and residents would also provide a critical mass for burgeoning efforts in the region.

For instance, more residents downtown would make that emerging neighborhood successful. More patrons in the seats of the Hanover Theatre for the Performing Arts would promote the local arts and cultural scene. And more residents would increase demand for transportation infrastructure and services: meaning the city, state, and company would likely invest in more roads and the commuter rail, and the Worcester Regional Transit Authority would see more riders.

But more people than Amazon employees would economically benefit from the new headquarters.

"Those (jobs represent) people buying houses, buying cars, going to Rotmans and Percy's buying furniture and appliances for their new homes," said Mr. Augustus. "The ripple effect of that many people with that high an income ... being concentrated in the city, it's almost hard to imagine that impact."

Amazon has tried, saying its HQ2 is expected to create tens of thousands of additional jobs and tens of billions in additional investment in the surrounding community.

"They are going to need electricians and technicians to pull the wire and make the systems, people in construction industries to build the buildings and rehab the buildings, they are going to need restaurants, and there will be legal and accounting services that will be created," said Mr. Murray. "It creates an economic opportunity and momentum that we wouldn't have without this. Economic activity generally speaking generates more economic opportunity."

Robert W. Baumann, chairman of the economics department at the College of the Holy Cross, agreed.

"Wherever Amazon goes, outside money is sure to follow," Mr. Baumann said.

Ms. Pierce also saw luring Amazon as a way to encourage more college graduates to stay in the city and to improve the region's housing stock.

"I'm thinking of all the abandoned mills and resources in the region that could be converted to housing," Ms. Pierce said.

But there are some concerns about whether landing Amazon might lead to gentrification. Seattle's affordable-housing crunch is notorious.

"I don't know if the housing stock, as it currently stands, is enough to withstand the tens of thousands of people who would be coming," said Mr. Baumann. "Housing stocks take a while to catch up to how many people are in the city, and what happens in the meantime is housing prices rise."

But for our homeowner on Vernon Hill, that might not be a bad thing. It's the renters who may be priced out, Mr. Baumann said.

Mr. Baumann also noted that the incentives offered are a risk. Amazon may not dominate the marketplace in five years as it does now. Moreover, $500 million is "an aggressive" bid, he said. The Dallas Cowboys, for instance, were given some $300 million in incentives for their new stadium, he noted.

That being said, Mr. Baumann said he supports the Amazon bid.

"Usually as an economist, you would say you would take the opportunity of investment over the risk of gentrification and the risk that Amazon is not the same business (in the future) as it is now," Mr. Baumann said. "The potential problems down the road of gentrification are worth the economic growth and the growth in the budget that can be spent on schools."

And even if Worcester doesn't land Amazon (Mr. Augustus notes 700 to 1,000 other entities are submitting applications) the application process and headline-making incentives have helped the city hone its message and its image to businesses that may be looking for a new home in the future.

"All the attention that it's been getting and all the buzz that it's been getting has helped to tell Worcester's story to a bigger audience," Mr. Augustus said of the city's proposal. "If we land Amazon, great, but if we don't, we just got hundreds of thousands of dollars worth of publicity for marketing the city."

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