Amazon's Ransom Vs. Stadium Deals: Which Is Worse?

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Illustration: Jim Cooke (GMG)

Four billion dollars, I think we can all agree, is a lot of money. It’s more than the combined annual budgets of Barbados, Bermuda, and Belize. It’s enough to buy a few dozen private Caribbean islands. It’s two Giancarlo Stantons, each with another Giancarlo Stanton stuck on top, with Giancarlo Stantons attached to each of those four Giancarlo Stantons’ arms and legs. (That’s a thing.) If someone gave you $4 billion, you would instantly be the 160th richest person in America. It’s a chunk of change.

So when Amazon announced on Tuesday that Jeff Bezos would be building two new headquarters in New York City and the Virginia suburbs of D.C.—and collecting $4 billion in tax breaks plus a pair of helipads as part of the bargain—it set off alarm bells all over. (Nashville will kick in another $100 million to land a smaller Amazon base with the Monty Burns–esque moniker “Operations Center of Excellence.”) Elected officials and residents from Amazon’s targeted New York neighborhood of Long Island City greeted the news with a protest rally, while the New York Post ran a front-page illustration of a moneybag-clutching Bezos above the headline “Queens Ransom.”

The Amazon bidding war has been conducted in a fashion more than a little reminiscent of sports stadium shakedowns: Declare your team (or company) a free agent that is ready to move wherever it likes, then wait for local elected officials to scurry for any much public cash as they can stuff into unmarked briefcases. It’s not quite fair to say that sports team owners taught their non-sports brethren the rules of the extortion game—he first big wave of corporate subsidies came in the 1980s, as car companies and computer chip plants realized that Reagan-era cuts in federal development aid to cities were leading desperate mayors to open their city treasuries to any passing private company. But Bezos’s Amazon sweepstakes, like the one conducted by Elon Musk for a Tesla factory before that, clearly owes a debt of gratitude to the biannual Olympic circus, which in turn learned from the sports team owners who have collectively extracted tens of billions of public dollars for stadiums and arenas in recent decades.


The futility of trying to boost your city’s economy by throwing money at pro sports is well-established, even if it hasn’t always sunk in with elected officials (after all, they’ll be long out of office when the final bill comes due). But does the same calculus hold for other corporate sweetheart deals? After all, many of the arguments that economists point to as reasons why sports subsidies are pointless—local sports spending cannibalizes money that would be spent elsewhere in your city anyway, the prime beneficiaries are a few rich folks who won’t spend much in your local economy, the jobs created are mostly low-wage and part-time—don’t hold true for a corporate headquarters employing as many as 25,000 full-time workers at a projected average salary of $150,000 a year. Is spending billions to land Amazon a better deal? Or just a different breed of boondoggle?

Let’s do a side-by-side comparison:

How much will it cost? While the final numbers are still being calculated, it looks like Amazon will rake in around $3 billion from New York, and up to $1 billion from Virginia. That’s way spendier than any single sports venue in history—the new Yankee Stadium holds the current record at $850 million in state and city costs, with the Atlanta Falcons and Las Vegas Raiders right behind.


Of course, state and local spending isn’t the only way the public underwrites sports deals: Thanks to the use of tax-exempt bonds, the federal government has contributed something like $4 billion to stadium and arena deals since the turn of the century. (This is such an obvious shonde that even Congressional Republicans talked about outlawing the practice, though not so seriously so that they actually went through with it.) Likewise, New York has designated Amazon’s Long Island location as a federal “opportunity zone,” a Trump creation that allows developers to use their real estate investments as capital-gains tax shelters. So taxpayers in cities that lost out on Amazon should know that some of their federal tax dollars will be going to aid the company anyway, just like Red Sox fans’ IRS checks helped build the new Yankee Stadium.

What will New York and Arlington County get for their money? If an Amazon headquarters costs more in subsidies, than a sports venue, it also comes with more benefits. Unlike a stadium or arena, which offers relatively few jobs, and those mostly seasonal, Amazon is offering real jobs—up to 40,000 of them, if Amazon wants to qualify for all of its boodle. And those workers will be there 40 hours a week and year-round, not just during games, and unlike athletes can be expected to fan out into the neighborhood for lunch and maybe post-work drinks, at the very least supporting a whole lot of new jobs running food trucks. (Though expecting much more than that proved too ambitious in Amazon’s Seattle neighborhood.)


The cost-per-job ratio of the Amazon deal is still a moving target: The company says it will create one new job for each $48,000 in taxpayer money, while corporate subsidy expert Greg LeRoy of Good Jobs First has estimated more like $112,000 per job for the New York HQ. But either one would still a great deal compared to the average stadium, notes sports economist Victor Matheson of College of the Holy Cross: “A $500 million handout to the Vikings’ stadium for maybe 400 jobs works out to over $1 million per job, and that is assuming the Vikings would have moved [out of Minnesota] absent the new stadium.”

Who’ll get those jobs? No one comes out looking great here. At stadiums and arenas, the vast majority of the benefits go to a relative handful of owners and players, who may not even live in town, while locals are forced to scramble for a few low-paid hot dog vendor positions. With Amazon, the jobs are well-compensated, but also highly skilled—the cardboard-box shufflers will remain in lower-wage climes—so a large share of workers will likely be imported from other parts of the globe. That’s good for the local economy—more people means more spending at those food trucks—but less great for New York or D.C. locals who were hoping to land an Amazon paycheck.


Are there any hidden costs? One of the hallmarks of sports deals has been that the reported subsidy figure is almost never the actual final public cost: University of Michigan researcher Judith Grant Long has estimated that extra goodies like property-tax breaks and bonus lease provisions boost the average taxpayer contribution by 40 percent. (The poster child for sneaking public cash out under his waistband is probably Falcons owner Arthur Blank, who augmented $200 million in direct cash with a half-billion-dollar slush fund for future stadium upgrades.)

Amazon, too, has some subsidy cards up its sleeve. In New York, half of its future property tax payments (really payments in lieu of property taxes, or PILOTs, since the land will be taken over by the state and so made tax-exempt) will go to a special Infrastructure Fund to pay for improvements around its headquarters; this will amount to an estimated total of $600 million over 40 years, according to the New York mayor’s office, which would be enough to finance about $225 million in special intern buses or what have you. Virginia, meanwhile, quietly augmented its bid with a new $1 billion campus for Virginia Tech to supply Amazon with a steady stream of engineers.


What are the potential side effects for host cities? Here sports deals actually look a little better, because for all the complaints about stadium-spawned traffic jams, stadiums and arenas are just big empty sheds for much of the year, without much impact on their neighbors. Amazon’s arrival, meanwhile, brings with it a host of potential headaches, from more crowded trains at rush hour to a repeat of the soaring housing prices that have made Seattle increasingly unlivable for those not on an Amazon salary. You can certainly argue that this is the price of success—if Amazon jobs paid crap wages, they wouldn’t lead to soaring rents, but they also wouldn’t contribute as much to the local economy—but that’s little comfort to someone whose landlord is seeking to evict them to make way for deep-pocketed Amazonians.

Who gets to make the decision? Many sports deals are arranged in secret with little public input, and Amazon nimbly replicated that, as neither winning bid was revealed until after the company’s decision was announced, and both will be largely immune from public oversight. And while in Virginia the state legislature and county board will get to vote on the new headquarters, in New York the state will take control of the project, allowing it to exclude the city council from any decisions whatsoever.


Was any of this necessary? The most important numbers in the Amazon deal may not be those in the winning bids, but rather the losing ones: New Jersey offered $7 billion, and Maryland $8.5 billion, but both were passed up for neighboring states that offered significantly less. This is an indication that for corporate headquarters as for sports teams, owners go where they want to be anyway—it’s just that they make sure to extract as much public cash as possible along the way.

“Many people were expecting a D.C. headquarters for Amazon solely for the political connections before even a dollar is put down,” notes Matheson. “This is like New York City paying hundreds of millions to keep the Yankees when there was literally no chance of the Yankees moving.”


So while Arlington may be deemed the relative winner here for landing the same number of Amazon jobs as New York at a fraction of the cost, and even New York can pat itself on the back for a marginally less horrific deal than it agreed to for the Yankees and Mets, ultimately the losers are everyone in America. The Amazon deal is ultimately another step in the legitimization of government by extortion, where the nation’s richest men can withhold “job creation” as a condition of not having to pay taxes, or commute without a helicopter. This may indeed be business as usual, but that’s not an argument in its favor, like so many Amazon-backers seem to think it is.

Neil deMause has covered sports economics for more publications than even he can shake a stick at. He’s co-author of the book Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Profit, and runs the website of the same name.