Fox Files: ‘Amazon incentives’

Team Utah has had the good fortune of announcing some major projects this summer.

Amazon announced a $200 million, 855,000 sq foot, 1,500 employee fulfillment center to be located in the Northwest Quadrant of Salt Lake City in June, and July brought the announcement of Adobe’s decision to double down on its Lehi campus by adding another 1200 jobs and $90 million in cap ex. This summer has been scorching hot in more ways than one — it makes you wonder, what will August bring?  

I wanted to touch on the Amazon announcement. There’s been a lot of ink spilled over whether our partners at the Governor’s Office of Economic Development needed to offer an incentive and whether they cut a good deal. There are a few things that seem to be missing from the analysis I’d like to highlight: 

  1. This is a regional fulfillment center that will service multiple states. Yes, ultimately Amazon would have needed a presence in the Utah market but this fulfillment center was competitive in the sense that it could have been located in any one of several states to service an entire region. There’s something to be said for accelerating a project and getting it on the tax rolls sooner rather than later. 

  2. EDCUtah and GOED do a tremendous amount of competitive research on other states’ incentive programs. We think it’s good practice to know what other states might put on the table. When GOED structured this deal they looked at the other publicly available data on Amazon incentives from 2015 to current and offered an incentive that was right in the middle. That’s not a bad place to be — as a state, we don’t want or need the richest incentive program, but I would posit that we don’t want to have the worst incentives either. A graph below illustrates how Utah stacked up against other states.

  3. Incentives can serve several purposes, including incentivizing capital investment. Why incentivize cap ex and not just jobs? An expanded property tax base and economic multipliers, that’s why. In this case, the State offered ~$5 million in a post performance incentive in exchange for ~$200 mil in private capital expenditure. Not a bad public/private ROI. 

  4. Amazon jumpstarts growth in the NWQ of SLC. We’ve talked for months about the exciting economic opportunity in SLC’s NWQ. Amazon’s announcement gives us a major brand name to go out and market off of, legitimizing our claims that Utah will be a major player in the economic sectors of the future. I for one am excited about that. 

  5. While not all of the Amazon jobs exceed the Salt Lake County average, the per capita income in Salt Lake City is $29,972. Amazon is creating jobs that will provide an advancement opportunity and portable training for many individuals in the Salt Lake region that may not currently have the skillset to work in a high wage position. Amazon will offer a path to prosperity for many. 

Tax credits should be used to achieve a goal. In this case, if the goals were to incentivize capital expenditure, jumpstart growth in a promising region, and provide opportunities for people all across the economic ladder, GOED hit the mark.