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  #2621  
Old Posted Feb 11, 2019, 2:01 PM
OrdoSeclorum OrdoSeclorum is offline
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Originally Posted by emathias View Post
But perhaps you're okay with local companies underpaying tech workers simply because they can?
I believe there are many, many ways that employers unfairly extract value from their employees. And I broadly support legislation that helps employees bargain collectively so that benefit negotiations happen in a non-distorted marketplace.

But if there's an industry where that field seems to be level, it's tech in the U.S. Tech workers are well informed about what's possible and there's a very active marketplace for their services. My three friends who work in Chicago as senior programmers regularly decline offers to move to the bay area for quality of life reasons. The pay in the Bay Area basically balances out the pain of leaving Chicago, which is exactly what should happen in an efficient market.

That being said, better for Chicago if Amazon were to invest here and increase the demand for tech talent. I'd be excited and it would be good for Chicago.
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  #2622  
Old Posted Feb 11, 2019, 2:47 PM
the urban politician the urban politician is offline
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Originally Posted by marothisu View Post
They moved it to "West Loop Gate" which is at 540 W Madison, near Ogilvie. Maybe I'm in the minority, but there's a clear difference between that area and the area west of I-90.
I think the city and local journalists need to be better about not blurring the lines and finally come to a consensus about neighborhood names. West Loop Gate as a term has been around for a long time, and I believe it refers to the part of the WL that is east of the expressway. I don’t know what its eastern border is, though.

WL proper, I think, would then consist of the blocks west of the expressway. I think it would be a lot easier if everybody started using that lingo.
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  #2623  
Old Posted Feb 11, 2019, 4:34 PM
Chi-Sky21 Chi-Sky21 is offline
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Originally Posted by the urban politician View Post
I think the city and local journalists need to be better about not blurring the lines and finally come to a consensus about neighborhood names. West Loop Gate as a term has been around for a long time, and I believe it refers to the part of the WL that is east of the expressway. I don’t know what its eastern border is, though.

WL proper, I think, would then consist of the blocks west of the expressway. I think it would be a lot easier if everybody started using that lingo.
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  #2624  
Old Posted Feb 11, 2019, 10:40 PM
Mr Roboto Mr Roboto is offline
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Originally Posted by marothisu View Post
I don't think you understand what the state actually offered. It's called EDGE. You don't get any tax breaks until you actually hit an agreed upon level of jobs creation AND retention. You could promise 25,000 jobs all you want, but if you "only" provided 10,000 at the end of the day, and the agreement was 25,000 jobs created, you would get literally none of your tax incentives. That's how it works, and this has been done in Illinois for a long time. It's entirely possible that they would have taken years to even get any tax benefits due to how hard it is to actually hire 25,000 skilled workers at one employer. Quite honestly, it's insane. It could have taken them a decade before getting anything in the form of incentives.

Based on your comments, it seems like this is news to you and you don't actually understand the structure of what was offered.
Well what you said really doesn't make a difference to me. If he gets 25000 employees, whether in 10 years or in 20, if he has a successful HQ2 here in Chicago (benefiting from the local infrastructure and workforce that already exists, I might add) then that should be incentive enough for his company.

Yes, I know incentives are used to lure major HQs etc here, and in some cases, it may make sense. Government has to intervene at times to encourage investment, stimulate growth, and yeah they utilize public resources to do that. However, most companies are not Amazon, and most companies are not asking for $3B+ in incentives and parading themselves around. Amazon's now posturing and threatening to leave NY because the legislators there are reconsidering giving them such a huge package, and who can blame them, especially when their region doesn't even need Amazon.

My whole argument is, its too much for Illinois (and yeah Chicago doesnt need to bend over for this guy).

Quote:
Originally Posted by emathias View Post
Maybe in whatever industry you work in you're getting overpaid compared to the rest of the country but tech, in Chicago, is not one of those industries. Relative to what Chicago offers, existing tech employers practically cheat Chicago workers with low salaries and equity participation that would be laughable on the West Coast.

Bringing in a big West Coast employer would put much-need competitive pressure on local companies taking serious advantage of local tech workers. That would not only benefit current workers but help attract top-tier talent here, which would attract more tech firms, etc.

But perhaps you're okay with local companies underpaying tech workers simply because they can?
I am all for the healthy competition. If Bezos wants to bring in Amazon and pay his workers more than other tech companies, that's terrific. But again, I am not for the state forking over billions (whether in 5 or 20 years down the road) for them to make it happen.

Im not some businessman or a techie, Im a lowly civil engineer. But I think even an average person could see that the cost in dollars per job, even if you factor in potential indirect growth for the region (projections for which really varies and is an unknown) is not justifiable, especially when you are talking about a company with a near-monopoly and simply doesn't need the incentives.

I realize this is an unpopular opinion around here, especially when so many were hopeful for HQ2, but I honestly think we are probably a bit better off.
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  #2625  
Old Posted Feb 12, 2019, 12:20 AM
marothisu marothisu is offline
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Originally Posted by Mr Roboto View Post
My whole argument is, its too much for Illinois (and yeah Chicago doesnt need to bend over for this guy).


...

Im not some businessman or a techie, Im a lowly civil engineer. But I think even an average person could see that the cost in dollars per job, even if you factor in potential indirect growth for the region (projections for which really varies and is an unknown) is not justifiable, especially when you are talking about a company with a near-monopoly and simply doesn't need the incentives.

Well, of course you have to make it work in the favor of the state/city/etc - otherwise it's pointless. When I did the math months ago, it would have worked out for the state. Can you show me the math in how it won't work out in your mind? I assume because you're talking about it and have an opinion, you've actually done the math before and aren't just regurgitating things you read once in an article you agreed with.
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  #2626  
Old Posted Feb 12, 2019, 1:55 AM
Mr Roboto Mr Roboto is offline
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Originally Posted by marothisu View Post
Well, of course you have to make it work in the favor of the state/city/etc - otherwise it's pointless. When I did the math months ago, it would have worked out for the state. Can you show me the math in how it won't work out in your mind? I assume because you're talking about it and have an opinion, you've actually done the math before and aren't just regurgitating things you read once in an article you agreed with.


So out of the 2.5B (we know it would have been more like 3B to win), it appears 1.5B was intended to be a straight tax giveaway (or EDGE credit) for 25,000 potential jobs, which is $60K per job that is now paid for by the states taxpayer. Lets say the workers there average a salary of $80K per job, that means $4K per year of income tax is now going directly to Amazon instead of to the state. And this will go on for at least the next 20 years assuming Amazon hires everyone within 5 years, but probably 30 because even optimistically it will take realistically that long for HQ2 to get to 25,000 workers. Only then will the state reach break-even point and earning income tax, without any interest repaid to the state of course - another disadvantage. They are given a free ride for decades on the tax payers back.

Also with the property taxes, free infrastructure (sewers, roads, transit stations etc) and free property essentially given to Amazon to develop as part of the package, the city forgoes hundreds of millions over the years for that as well.

So sure we now have a small economic engine that supplies us with 25,000 workers who generate sales tax etc for the next 30 years, people renting apartments, and buying homes, and paying their personal property taxes. New jobs are created for these people who go to restaurants, have childcare, laundry done etc. Sure that's great, it truly is. But does that offset the fact that their company is essentially squatting for free for 3 decades, and putting wear and tear on the infrastructure? Does the state really have the patience in this economic climate to wait for decades before getting a return on such a huge investment? In 3 decades does Amazon become Sears and fall apart?

Its unnecessary. Its not organic growth, and I see a downside. There is upside sure, dont get me wrong, its not a Foxconn. I personally would love to see the 78 grow much faster and have a huge anchor like Amazon fill that space with beautiful shiny new highrises. I don't see it all as doom or gloom, but many make it sound like this is a no-brainer, that Amazon should get billions in corporate welfare and that the city and state is that desperate. I dont see a return in investment for a long time, and I dont think the state can or should wait that long. Let Chicago be their home on its own merits as a great city, not some chump city who prostituted itself to some supposed sugar daddy.
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  #2627  
Old Posted Feb 12, 2019, 2:05 AM
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bnk bnk is offline
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Originally Posted by Mr Roboto View Post

I realize this is an unpopular opinion around here, especially when so many were hopeful for HQ2...
Yes you and your anti Amazonian diatribes are unpopular to at least me.

You make my ears hurt!

Can you stop this already?
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  #2628  
Old Posted Feb 12, 2019, 2:09 AM
tjp tjp is offline
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Originally Posted by bnk View Post
Yes you and your anti Amazonian diatribes are unpopular to at least me.

You make my ears hurt!

Can you stop this already?

Speaking of things that should stop...perhaps you should stay out of the Amazon - Long Island City thread in the project forum, bnk
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  #2629  
Old Posted Feb 12, 2019, 4:15 AM
marothisu marothisu is offline
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Originally Posted by Mr Roboto View Post
So out of the 2.5B (we know it would have been more like 3B to win),
What they offered was estimated at 2.3B. I know it's a "small" difference of $200 million, but still.

Quote:
Lets say the workers there average a salary of $80K per job, that means $4K per year of income tax is now going directly to Amazon instead of to the state.
First of all, boy you really weren't lying when you said you were not in tech of business. $80K for a company with over $232 Billion in revenue and over $10B in profit per year, that is a tech company looking to hire skilled workforce? Man..that's damn low. Hell, even people with just a Bachelor's degree coming straight out of undergrad college in this industry as consultants in Chicago make more than that at big companies (IBM, Accenture, Deloitte, etc), and Amazon pays better than most of those places (but not all).

This tells me you weren't reading very carefully, because Amazon stated many times that the jobs would all be 6 figures. In fact, it's come out now that the average salary of these new jobs will be $150,000/year. In fact, even they stated that the new center in Nashville with the 5000 new jobs will average over $150,000 per year (https://www.bloomberg.com/news/artic...lle-hot-streak).


Quote:
And this will go on for at least the next 20 years assuming Amazon hires everyone within 5 years, but probably 30 because even optimistically it will take realistically that long for HQ2 to get to 25,000 workers. Only then will the state reach break-even point and earning income tax, without any interest repaid to the state of course - another disadvantage. They are given a free ride for decades on the tax payers back.


Also with the property taxes, free infrastructure (sewers, roads, transit stations etc) and free property essentially given to Amazon to develop as part of the package, the city forgoes hundreds of millions over the years for that as well.
Okay, so I'll cut to more of the chase here. I think what your analysis shows, other than showing that you estimated the average salary of these jobs by basically half, is the ripple effect that it would have.

So let's pretend for a minute that at the end of the day, 25% of people Amazon hires are from the area already (aka 6250 of the 25,000 total). For a minute let's say that it takes Amazon only 5 years to hire this, or 5000 hires per year, of this 1250 per year come from the Chicago area and 3750 come from outside of the area. As the average salary in tech in Chicago is around $100K, we'll use the $150K average that's been stated by Amazon as that increase baseline. Everything else is new money to the area and let's just assume the current 4.95% income tax

Year 1
5000 hires. 3750 are new to the area, which is a new $27,843,750 in income tax revenue. The other 1250 with their raises is another $3,093,750. Combined this is $30,937,500 in tax revenue.

Year 2
Another 5000 new hires, with the same percentage of workers already from the area and the reality of how much more they'll get with Amazon. Another $30,937,500 for the year.

Combined 2 years is now at $92,812,500 income tax revenue. Think of this calculation from now on as a sort of opportunity cost.

Year 3
Another 5000 new hires. Same situation - another $30,937,500 on top of what's there with the now 15,000 workers. Now we are at $185,625,000 for the 3 combined years

Year 4
Same deal with 5000 new hires and $30,937,500 and now up to 20,000 workers. Combined tax revenue for the 4 combined years is now at $309,375,000.

Year 5
Same deal. Combined tax revenue is $464,062,500 for the 5 years.

Year 6
Although the last year was hit, EDGE has to do with retention as well, so we add another $154,687,500 in tax revenue for a total of $618,750,000 over these 6 years. Essentially now let's just say Amazon gets $2.3B after this in tax revenue, so the state is in "the hole" something like $1,681,250,000 when adjusting for the income tax revenue. However, we didn't account for inflation. A company like Amazon is going to raise the average employee around the inflation which has been a little over 2% lately. If you say 2% per year in this, then in reality that $618M+ is actually $649,758,349 after 6 years and thus "in the hole" $1,650,241,651 after this.

The $2.3B is not really per year. So if we assume 2% inflation per year in average salary, then it would take just under 9 years to break even.

Even if we assumed flat inflation and the income taxes stay flat at something like $154,687,500 per year opportunity cost, it would take about 10.87 years to break even from this alone.


However, this is just income tax. The reality is that there will be property purchases from employees, sales tax (not that much, but still), as well as new business that pops up due to these new workers being in an area, new residential buildings being built, cost of bringing in visitors for the business and staying at hotels, etc.

1) Property purchases. If we say that 20% of the new-to-Chicago-area workers purchase property, then we need to take this into account. The average property tax bill in Cook County alone was $5964 per year (https://www.chicagobusiness.com/arti...ggest-counties) and higher in other counties. At the end of 5 years, that would be another $67,095,000 in property tax revenue in Cook County - opportunity cost. Per year, that would be $22,365,000 in property tax revenue.

2) Many people could want to live downtown, but there might not be enough room for what they want. If there's 3750 people new to the area per year, and 750 buy new properties per year, let's say that 1000 of these 3000 people want to live downtown. This is enough to drive 3 new 333 unit towers per year of construction - or 15 total over 5 years.

Now let's think about the property tax that is generated from these new buildings coming up. The apartment building at 805 N LaSalle for example, which is a handful of years old, paid $51,668 in property taxes last year ($93,941.82 the year before). Just using the $51,668 as a baseline, that's an extra $155,004 new per year until the 15 are built. After those 5 years, it's a total of $2,325,060 in property tax from these 15 new buildings. Opportunity cost. Per year from that point on, it's $775,020 from those 15 buildings.

3) A business like this would bring in a lot of business travelers per week - whether vendors, internal training, internal normal work, etc. There would be hundreds (if not more) people traveling into the city and staying at hotels.

So pretend there's 500 people per week over 48 weeks traveling and staying at hotels at an average cost of $175 per night for a hotel room, and an average of 3 nights per visit. The current hotel tax overall is 17.4% in Chicago. That works out to another $2,129,400 per year hotel revenue - over 5 years that is $10,962,000 in hotel tax revenue.


So with these 3 things alone after 5 years, that's an extra $80,382,060 in various tax revenues. Per year, it works out to another $25,269,420 in tax revenue after that. So in reality with the income tax per year after it's just under $180,000,000 assuming no inflation whatsoever. This works out to about 9.17 years to "break even"

This isn't even taking into account so many other things, like new retail/commercial buildings built and the tax revenue generated from them. It doesn't account for any new jobs that are needed because of new construction, more retail/commercial/other business services. It doesn't account for perhaps a few more hotels being built in the area and the property taxes from that. It doesn't account for the fact that Amazon raising the average salary as emathias has stated, would force other tech companies to pay their employees more - meaning that there's an even greater impact on income tax as it would increase as a result. It doesn't talk about other companies that very well set up shop in Chicago because - damn 25,000 new tech workers? "Chicago must actually be the place to be - and many people are going to want to leave at various points too - that's a lot of talent." It's also not accounting for sales taxes in the city on anything from these new people, but after 5 years that's probably only a handful of million dollars. It's not accounting for the taxes generated from the new businesses, all of the taxes from B2B services (i.e. a new building needs to hire architects, contractors, etc, etc), etc.

There are so many things this could spawn off it's not even funny that you did not think about in your post. The ripple effect is a lot greater than you can even imagine from increasing an already big tech work force's average salaries outside of this company to attracting other high paying tech companies to set up shop in the city making more people come.

New York State estimated that the HQ2 would bring in $27.5B in new revenue over 25 years (https://ny.curbed.com/2018/11/16/180...city-explained). Even if you halve that to $13.75B, after 25 years if your incentive is even $3B, then you are up nearly $11B. With anything business, you have to think about both the short and long term. But thinking only about the short term for something like this is going to make you see the bigger picture, which I believe there are many people who miss this. I think people like New Jersey who offered something like $8B or $9B is kind of dumb. It will take them awhile to break even. For what Chicago offered though - definitely under 10 years to make that back after the initial 5 years of "building" and retention. This could very well be closer to 7 or even less with a ripple effect that I didn't even calculate from all the other jobs created for this. So let's say that they come to town next year, and 2025 is when the tax incentives hit. It's very possible that in 2032 the state, city, etc basically starts making its pure profit from that point on.

And look, don't get me wrong. The entire premise in and of itself of companies asking for this is kind of weird. In a perfect world, I'd totally say "up yours - do it without doing any of this." However, we're in a capitalist society so essentially they've learned how to more or less game state/local governments in the short term BUT those same governments have figured out, usually, how to make it work in their favor in the long run. That is essentially the key here. I think states like New Jersey offered way, way, way too much. It's ridiculous. A few billion - if Amazon really does go for that long, it'll work greatly in your favor if you look 25 years into the future. However, it's a risk you might have to take sometimes - and the risk is scary of course.

Last edited by marothisu; Feb 12, 2019 at 4:37 AM.
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  #2630  
Old Posted Feb 12, 2019, 7:16 AM
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Originally Posted by the urban politician View Post
I think the city and local journalists need to be better about not blurring the lines and finally come to a consensus about neighborhood names. West Loop Gate as a term has been around for a long time, and I believe it refers to the part of the WL that is east of the expressway. I don’t know what its eastern border is, though.

WL proper, I think, would then consist of the blocks west of the expressway. I think it would be a lot easier if everybody started using that lingo.
At least for business relocations the preferred term for west of the Kennedy is “Fulton Market” even for Lake, Randolph or Halsted addresses. Even Washington addresses. So there is some logic. The area around the train stations is more nebulous but it ain’t the Loop since there is a river in the way, ergo “West Loop”. I agree the Kennedy is a bigger psychic barrier than the river but it seems we are stuck with the current nomenclature since the area around the train stations is a pretty generic part of downtown without a strong identity of its own. With all the bland mid rise econoboxes it could just as easily be Washington DC.

Also historically the Skid Row of West Loop did jump the Kennedy and came right up to the doorstep of Northwestern Station (now Ogilvie) in the years before Presidential Towers were built and many other buildings torn down. The fact that so much of the West Loop Gate area is a parking crater is no accident, 1970s and 80s planners were trying to create a buffer zone between the Loop and the “wild, lawless” West Side. This is also why the United Center is so auto-oriented, they had to provide huge amounts of easy, safe parking or nobody would have felt comfortable going.
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  #2631  
Old Posted Feb 12, 2019, 3:43 PM
Baronvonellis Baronvonellis is offline
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Great analysis, Marothisu! Really appreciate breaking it down like that for the tax breaks.
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  #2632  
Old Posted Feb 14, 2019, 1:20 AM
Mr Roboto Mr Roboto is offline
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Originally Posted by marothisu View Post
What they offered was estimated at 2.3B. I know it's a "small" difference of $200 million, but still.



First of all, boy you really weren't lying when you said you were not in tech of business. $80K for a company with over $232 Billion in revenue and over $10B in profit per year, that is a tech company looking to hire skilled workforce? Man..that's damn low. Hell, even people with just a Bachelor's degree coming straight out of undergrad college in this industry as consultants in Chicago make more than that at big companies (IBM, Accenture, Deloitte, etc), and Amazon pays better than most of those places (but not all).

This tells me you weren't reading very carefully, because Amazon stated many times that the jobs would all be 6 figures. In fact, it's come out now that the average salary of these new jobs will be $150,000/year. In fact, even they stated that the new center in Nashville with the 5000 new jobs will average over $150,000 per year (https://www.bloomberg.com/news/artic...lle-hot-streak).




Okay, so I'll cut to more of the chase here. I think what your analysis shows, other than showing that you estimated the average salary of these jobs by basically half, is the ripple effect that it would have.

So let's pretend for a minute that at the end of the day, 25% of people Amazon hires are from the area already (aka 6250 of the 25,000 total). For a minute let's say that it takes Amazon only 5 years to hire this, or 5000 hires per year, of this 1250 per year come from the Chicago area and 3750 come from outside of the area. As the average salary in tech in Chicago is around $100K, we'll use the $150K average that's been stated by Amazon as that increase baseline. Everything else is new money to the area and let's just assume the current 4.95% income tax

Year 1
5000 hires. 3750 are new to the area, which is a new $27,843,750 in income tax revenue. The other 1250 with their raises is another $3,093,750. Combined this is $30,937,500 in tax revenue.

Year 2
Another 5000 new hires, with the same percentage of workers already from the area and the reality of how much more they'll get with Amazon. Another $30,937,500 for the year.

Combined 2 years is now at $92,812,500 income tax revenue. Think of this calculation from now on as a sort of opportunity cost.

Year 3
Another 5000 new hires. Same situation - another $30,937,500 on top of what's there with the now 15,000 workers. Now we are at $185,625,000 for the 3 combined years

Year 4
Same deal with 5000 new hires and $30,937,500 and now up to 20,000 workers. Combined tax revenue for the 4 combined years is now at $309,375,000.

Year 5
Same deal. Combined tax revenue is $464,062,500 for the 5 years.

Year 6
Although the last year was hit, EDGE has to do with retention as well, so we add another $154,687,500 in tax revenue for a total of $618,750,000 over these 6 years. Essentially now let's just say Amazon gets $2.3B after this in tax revenue, so the state is in "the hole" something like $1,681,250,000 when adjusting for the income tax revenue. However, we didn't account for inflation. A company like Amazon is going to raise the average employee around the inflation which has been a little over 2% lately. If you say 2% per year in this, then in reality that $618M+ is actually $649,758,349 after 6 years and thus "in the hole" $1,650,241,651 after this.

The $2.3B is not really per year. So if we assume 2% inflation per year in average salary, then it would take just under 9 years to break even.

Even if we assumed flat inflation and the income taxes stay flat at something like $154,687,500 per year opportunity cost, it would take about 10.87 years to break even from this alone.


However, this is just income tax. The reality is that there will be property purchases from employees, sales tax (not that much, but still), as well as new business that pops up due to these new workers being in an area, new residential buildings being built, cost of bringing in visitors for the business and staying at hotels, etc.

1) Property purchases. If we say that 20% of the new-to-Chicago-area workers purchase property, then we need to take this into account. The average property tax bill in Cook County alone was $5964 per year (https://www.chicagobusiness.com/arti...ggest-counties) and higher in other counties. At the end of 5 years, that would be another $67,095,000 in property tax revenue in Cook County - opportunity cost. Per year, that would be $22,365,000 in property tax revenue.

2) Many people could want to live downtown, but there might not be enough room for what they want. If there's 3750 people new to the area per year, and 750 buy new properties per year, let's say that 1000 of these 3000 people want to live downtown. This is enough to drive 3 new 333 unit towers per year of construction - or 15 total over 5 years.

Now let's think about the property tax that is generated from these new buildings coming up. The apartment building at 805 N LaSalle for example, which is a handful of years old, paid $51,668 in property taxes last year ($93,941.82 the year before). Just using the $51,668 as a baseline, that's an extra $155,004 new per year until the 15 are built. After those 5 years, it's a total of $2,325,060 in property tax from these 15 new buildings. Opportunity cost. Per year from that point on, it's $775,020 from those 15 buildings.

3) A business like this would bring in a lot of business travelers per week - whether vendors, internal training, internal normal work, etc. There would be hundreds (if not more) people traveling into the city and staying at hotels.

So pretend there's 500 people per week over 48 weeks traveling and staying at hotels at an average cost of $175 per night for a hotel room, and an average of 3 nights per visit. The current hotel tax overall is 17.4% in Chicago. That works out to another $2,129,400 per year hotel revenue - over 5 years that is $10,962,000 in hotel tax revenue.


So with these 3 things alone after 5 years, that's an extra $80,382,060 in various tax revenues. Per year, it works out to another $25,269,420 in tax revenue after that. So in reality with the income tax per year after it's just under $180,000,000 assuming no inflation whatsoever. This works out to about 9.17 years to "break even"

This isn't even taking into account so many other things, like new retail/commercial buildings built and the tax revenue generated from them. It doesn't account for any new jobs that are needed because of new construction, more retail/commercial/other business services. It doesn't account for perhaps a few more hotels being built in the area and the property taxes from that. It doesn't account for the fact that Amazon raising the average salary as emathias has stated, would force other tech companies to pay their employees more - meaning that there's an even greater impact on income tax as it would increase as a result. It doesn't talk about other companies that very well set up shop in Chicago because - damn 25,000 new tech workers? "Chicago must actually be the place to be - and many people are going to want to leave at various points too - that's a lot of talent." It's also not accounting for sales taxes in the city on anything from these new people, but after 5 years that's probably only a handful of million dollars. It's not accounting for the taxes generated from the new businesses, all of the taxes from B2B services (i.e. a new building needs to hire architects, contractors, etc, etc), etc.

There are so many things this could spawn off it's not even funny that you did not think about in your post. The ripple effect is a lot greater than you can even imagine from increasing an already big tech work force's average salaries outside of this company to attracting other high paying tech companies to set up shop in the city making more people come.

New York State estimated that the HQ2 would bring in $27.5B in new revenue over 25 years (https://ny.curbed.com/2018/11/16/180...city-explained). Even if you halve that to $13.75B, after 25 years if your incentive is even $3B, then you are up nearly $11B. With anything business, you have to think about both the short and long term. But thinking only about the short term for something like this is going to make you see the bigger picture, which I believe there are many people who miss this. I think people like New Jersey who offered something like $8B or $9B is kind of dumb. It will take them awhile to break even. For what Chicago offered though - definitely under 10 years to make that back after the initial 5 years of "building" and retention. This could very well be closer to 7 or even less with a ripple effect that I didn't even calculate from all the other jobs created for this. So let's say that they come to town next year, and 2025 is when the tax incentives hit. It's very possible that in 2032 the state, city, etc basically starts making its pure profit from that point on.
First off, I want to say thanks for your analysis. I appreciate you taking the time to walk through this. You've obviously spent considerable time on your own thinking about it.

I think the difference in what it boils down to is optimism vs pessimism in terms of projections. You believe the incentives can be made up in less than a decade, whereas I am doubtful the return in investment will be realized for over two or more decades. You also did not mention that the tax breaks are mostly in the form of the workers income tax going straight to Amazon.

Other factors like salaries certainly have an effect, and I admit its likely I underestimated them, although 25,000 techies seems both unrealistic and incongruous with what I have read as far as the workforce (less than half are actually in tech, so the 140k average is also inflated substantially). Lastly, much of it depends on the success of Amazon, and how rapidly they hire in Chicago. 5000 per year is doubtful.

Also you have to consider the opportunities forgone by giving Amazon so much of our investment as opposed to other investments - say pure infrastructure, or incentives for other smaller companies that could grow and occupy spaces that were staked out like the 78. The analysis really could go extremely deep in that regard as well. What other improvements in the city do we lose out on by giving so much to Amazon?

In other words, we simply dont have an exact figure because they are all merely projections. Either way, I havent swayed your opinion, and you havent swayed mine. I still think the negatives slightly outweigh the positives and I honestly dont believe Amazon is worth the trouble at $2-3B. If they wanted to come for a much lower incentive, or no tax breaks, that obviously would be ideal. but again, its all a futile exercise. They are using other cities as leverage to get the deal they wanted out of NY.


Quote:
And look, don't get me wrong. The entire premise in and of itself of companies asking for this is kind of weird. In a perfect world, I'd totally say "up yours - do it without doing any of this." However, we're in a capitalist society so essentially they've learned how to more or less game state/local governments in the short term BUT those same governments have figured out, usually, how to make it work in their favor in the long run. That is essentially the key here. I think states like New Jersey offered way, way, way too much. It's ridiculous. A few billion - if Amazon really does go for that long, it'll work greatly in your favor if you look 25 years into the future. However, it's a risk you might have to take sometimes - and the risk is scary of course.
Agreed that its less than ideal. Its a huge risk, and I admit sometimes cities have to take the big risks. But again, with the state budget and the deficit as it is, thats another reason I dont like the idea of swinging for the big home run when we are currently down in the pitch count.
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  #2633  
Old Posted Feb 14, 2019, 4:51 PM
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It's just breaking on TV, Amazon is pulling out of NYC. I saw it on CNBC.
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  #2634  
Old Posted Feb 14, 2019, 4:56 PM
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Its true











https://www.nytimes.com/2019/02/14/n...gtype=Homepage


BREAKING


Amazon Pulls Out of Planned New York City Campus




By J. David Goodman
Feb. 14, 2019






Amazon said on Thursday that it was canceling plans to build a corporate campus in New York City. The company had planned to build a sprawling complex in Long Island City, Queens, in exchange for nearly $3 billion in state and city incentives.

But the deal had run into fierce opposition from local lawmakers who criticized providing subsidies to one of the world’s richest companies. Amazon said the deal would have created more than 25,000 jobs.

Here is the statement released by Amazon:


After much thought and deliberation, we’ve decided not to move forward with our plans to build a headquarters for Amazon in Long Island City, Queens. For Amazon, the commitment to build a new headquarters requires positive, collaborative relationships with state and local elected officials who will be supportive over the long-term. While polls show that 70% of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City.

We are disappointed to have reached this conclusion —….





...
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  #2635  
Old Posted Feb 14, 2019, 4:57 PM
SteelMonkey SteelMonkey is offline
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Appears Amazon has officially bailed on NYC

https://www.cnbc.com/2019/02/14/amaz...s-reports.html
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  #2636  
Old Posted Feb 14, 2019, 5:01 PM
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but no plans to re-open search, so Chicago is still out? wth, was the plan all along for a single city with a smaller footprint than they originally claimed?
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  #2637  
Old Posted Feb 14, 2019, 5:11 PM
the urban politician the urban politician is offline
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Meh, means little for Chicago.

Amazon, when all is said and done, thinks nothing of Chicago. Other than those stupid distribution centers, they don't value Chicago's professional workforce. We all know they can get the exact same results at half the price of their "beloved" east coast if they hired in Chicago, but they are too steeped in the Kool Aid.
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  #2638  
Old Posted Feb 14, 2019, 5:18 PM
The Lurker The Lurker is offline
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Originally Posted by SteelMonkey View Post
Appears Amazon has officially bailed on NYC

https://www.cnbc.com/2019/02/14/amaz...s-reports.html
That doesn't mean anything for Chicago.

Amazon quote from the article:

"We do not intend to re-open the HQ2 search at this time. We will proceed as planned in Northern Virginia and Nashville"
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  #2639  
Old Posted Feb 14, 2019, 5:36 PM
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Amazon says it will hire more at all of its corporate locations. So I am pretty sure they will hire in Chicago. Logically, if they spread those 25k jobs and beef up in regional centers that would mean that Chicago gets a bit more hires. Is it 25,000? No, but it could mean 1000 or more, maybe.

From their official statement:
Quote:
We will proceed as planned in Northern Virginia and Nashville, and we will continue to hire and grow across our 17 corporate offices and tech hubs in the U.S. and Canada.
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  #2640  
Old Posted Feb 14, 2019, 6:29 PM
moorhosj moorhosj is offline
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Quote:
Originally Posted by marothisu View Post
Amazon says it will hire more at all of its corporate locations. So I am pretty sure they will hire in Chicago. Logically, if they spread those 25k jobs and beef up in regional centers that would mean that Chicago gets a bit more hires. Is it 25,000? No, but it could mean 1000 or more, maybe.

From their official statement:
I know for a fact that they are already building out their AWS team in Chicago.
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