San Jose says it might be interested in making a pitch to become Amazon’s second home, but not all Silicon Valley officials are on board.
Rep. Ro Khanna, who represents California’s 17th Congressional District — including San Jose — in Washington, tweeted that tech companies shouldn’t be asking for tax breaks when they want to build a new headquarters. Amazon has said it is looking for financial incentives before deciding where to locate what it is calling HQ2.
“Tech companies, flush w cash, must not demand local tax breaks up front,” the congressman tweeted Thursday. “They shld partner w communities on jobs.”
Does that mean he would oppose a possible bid by San Jose?
“I have great confidence in the leadership of Mayor Liccardo, and certainly hope that San Jose will continue to partner to bring tech jobs and tech companies,” Khanna said in an emailed statement to SiliconBeat Friday. “But I do not think cities should have to give large tax breaks to corporations. Rather, we should focus on building a strong workforce and collaborating with tech companies to create jobs and training programs.”
On Thursday, Kim Walesh, San Jose’s director of economic development, said the city would be “ideal” for Amazon. The massive online retailer had set off an Olympics-style bidding process for a new headquarters earlier that day.
Another tech giant is already planning a big presence in San Jose: Google. The city council has asked for no taxpayer subsidies for the project.
By the way, Amazon, whose current headquarters is in Seattle, isn’t actually one of your typical cash-flush tech companies. It makes money now after many years of not being profitable, but it also spends plenty because it cares most deeply about growth — and conquering the world.
For example, Amazon last month closed a deal to buy Whole Foods for more than $13 billion in cash, which probably left the company with an almost empty piggy bank. (According to Amazon’s most recent filing, it had about $13.2 billion in cash and cash equivalents as of June 30.)
But that’s not Khanna’s point. His point is that Amazon is hitting up taxpayers, which is true but not unheard of.
“Tech companies are treated as royalty these days,” Felipe Caro, a professor at UCLA’s school of management, told CNBC this week. “All these tax breaks and benefits are free money for them.” But he did say the economic benefits to cities usually outweigh the tax breaks they offer companies.
Other high-profile tech companies have received big tax breaks recently. Apple last month got $208 million in tax breaks to build a data center in Iowa, for a promise of 50 jobs. Foxconn, the Taiwanese contract manufacturer that’s promising to bring thousands of jobs to Wisconsin, is seeking $3 billion in tax breaks.
Amazon is envisioning a second headquarters that will cost $5 billion and can hold up to 50,000 new workers over the next 10 to 15 years.
When the company launched the call this week for North American cities to submit their pitches, it generated a lot of excitement, including from Oakland, Concord and, according to other media reports, cities including Los Angeles, Houston and Pittsburgh. But Amazon has a long wish list, and it includes “tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions.”
However, Amazon is hoping cities will want to benefit from its presence anyway. It boasts about its contribution to the Seattle economy, including more than 40,000 employees at its current headquarters. It also says it has helped create an additional 53,000 jobs nearby.
Still, Caro also told CNBC: “I think the name ‘headquarters’ is a little bit of a marketing ploy. I mean they just want to have a big office in another city.”
