Will Amazon pick underdog Newark for its HQ2? Experts worry the city cannot afford to win.
By Jonathan O’Connell
Among the 20 finalist cities on Amazon.com’s list for its second headquarters, Newark stands out for all the wrong reasons: It has the highest poverty rate, high tax rates and low numbers of college graduates and tech workers.
Newark is the hard-knock contender that for six decades has watched its population slide and its commercial corridors clear out. Analysts dismiss the city’s chances at landing the project, called HQ2. Bookies will give you 50-1 odds.
So Newark is going in big, partnering with New Jersey to offer the company a $7 billion incentive package to lure the project and its 50,000 jobs.
The offering is among the most lucrative of any known Amazon bid and among the largest that experts say they’ve ever seen extended to a corporation.
Critics say the win-at-all-costs proposal risks overwhelming Newark’s $660 million budget and further sinking New Jersey’s disastrous credit rating, which already places it among the nation’s worst business climates, according to an index by tax experts.
Greg LeRoy, executive director of Good Jobs First, a D.C. advocacy group that tracks corporate subsidies, said the package could be a “final dagger to New Jersey’s fiscal health” if Amazon accepts it.
“There’s no question it’s of a magnitude that it would be a net loss for taxpayers,” he said.
Business and civic leaders see a once-in-a-generation chance to change the city’s fortunes. Former governor Chris Christie (R), who assembled the bid, said winning would provide “jet fuel” to Newark’s nascent revival.
Yet Seattle, the original benefactor of Amazon’s furious expansion, offers a cautionary tale. The city’s economy has boomed, with rapid growth in incomes and tax revenue. But that success has come with dramatic rises in home values and in the city’s homeless population.
So it’s an open question how Amazon would shape “Brick City.”
Newark native Ana Baptista, an urban planning expert and assistant professor at the New School, joined residents huddled over folding tables and chicken wings on a recent evening at a City Hall meeting about development in the area.
“People here are terrified of being gentrified,” she said. “We do not have a great track record as a city of making deals that generate wealth for the people who need it most. So I worry. And I do think we’re in a moment where we can ask for more.”
Newark’s mayor, Ras J. Baraka, recently addressed that anxiety before an audience of civic and business leaders in a downtown hotel ballroom.
“There is a sense that with the challenges that Newark has had over the decades, that people have grown accustomed to struggling,” he said. But, he added: “You can’t be afraid to move forward because there is risk involved. You can’t walk away from 50,000 jobs.”
But as Amazon and other tech powerhouses assume growing dominance in the nation’s economy, they are coming under increased scrutiny. Critics point to wages, workplace environments and consumer protections. That has Newark leaders thinking that Amazon founder Jeffrey P. Bezos (who owns The Washington Post) may want to align himself with an underdog.
And there is broad agreement that things are on the upswing in Newark, which is now adding people every year, luring workers who have been priced out of Manhattan and its close-in suburbs. One of the most extensive fiber-optic networks in the country runs beneath its streets. Elected leaders including Christie and Sen. Cory Booker (D) got behind Newark’s bid early, and other companies have expressed interest in the city after seeing Amazon’s interest.
Spend a day in downtown Newark, and evidence of a comeback, supported already in part by Amazon’s tentacles, is on display. In renovated Military Park, people play kickball and table tennis until dusk. A 22-story apartment tower is advertised as “the first new ground-up residential construction in the city in several decades.”
Audible, a Newark-based audiobook subsidiary of Amazon, employs more than 1,000 people here, and its chief executive is leading a pack of others championing the city. The company is renovating a long-vacant 108-year-old church as a technology center. It has also offered to pay a year’s worth of rent to entice workers to relocate. Whole Foods (newly acquired by Amazon) recently opened in a renovated department store.
Prudential Insurance and Panasonic have large and growing offices here, and the infrastructure that made Newark a hub of American industry in the 1950s remains, including the nation’s third-busiest port and 14th-busiest airport.
But outside downtown, many of the neighborhoods that burned during widespread racial protests in 1967 remain destitute. More than 23,000 of the city’s children, about 37 percent, live in poverty, although that number has fallen in recent years.
Growing up in Jersey City, Krystal Watson said she thought of Newark “as a place where people got robbed.” But after rents in her home town kept rising, she moved into an apartment above the Whole Foods almost two years ago.
She said Amazon would help Newark, even if it pushed rents higher.
“Things are getting better here, but it’s slow,” she said.
Gloria Thornton, a social worker whose husband works at an Amazon loading dock and whose children attended Newark schools, was also supportive. “We can’t keep being a welfare city,” she said. “You have to pay your own way sooner or later. It’s time for a change.”
‘A net benefit to New Jersey’
The incentives package for Amazon’s HQ2 won approval from both political parties. Christie called it “a layup” for the state if it lands Amazon. New Jersey Gov. Phil Murphy (D), in office since January, said the incentives are more than he would have offered but backed the proposal.
“When you look at the scale of the potential investment and the potential employment,” he said, “I look at it as a once-in-a-generation-chance opportunity.”
Booker said that even with the subsidies, an Amazon deal would “be a net benefit to New Jersey.” He said he would like to see the company set an example for how to operate with an eye on making positive contributions to society as well as its own bottom line.
But the offer also rankles liberals leery of corporate giveaways and conservatives focused on the state’s dismal budget status. Among the reported offers to Amazon (not all have been made public) only Maryland’s, at $8.5 billion, is larger.
“New Jersey shouldn’t be in the business of picking winners and losers, nor should we give special tax breaks to a company that’s driving our mom-and-pop shops out of business,” Republican state Sen. Mike Doherty of nearby Warren, N.J., said after the legislature approved the package in January.
If Newark lands Amazon, it would fall to Baraka to explain to residents why an $805 billion company needs another $7 billion from such a cash-strapped corner of America.
The son of a local activist, Baraka was a collaborator with hip-hop star Lauryn Hill, a high school principal and community advocate before running for City Council from the poorest of the city’s five wards. While Booker is a star in national Democratic politics, many locals never forgot that he was raised in suburban Bergen County; Baraka is homegrown and was reelected with 77 percent of the vote in May.
In the 200-page proposal Newark officials sent the company, they included a hypothetical Wired magazine article from the year 2027. The fictional story has Bezos selecting Newark for the project and crediting the city for “creating a new sense of purpose for Amazon.”
The proposal suggests areas in and around downtown where developers have assembled vacant or underutilized property. Last year, the city broke ground on a $10 million park, Mulberry Commons, with space for Amazon office buildings adjacent to it. Two years ago, the city sold a minor-league baseball stadium to a developer after the team left town. Another developer has bought 79 storefronts and other parcels and produced designs for skyscrapers.
The incentives being offered amount to breaks on taxes that Amazon would pay, but it’s not cash in hand to fix things. Many Newark families send their children to failing schools in crumbling buildings, with trash blanketing the sidewalk and potholes ravaging the streets.
In an interview, the mayor made a calculation similar to that of other elected leaders offering subsidies to corporations to relocate.
“We are definitely going to get as much out of it as we put in,” he said. “It’s like if you buy a car that’s expensive, you’re going to drive the hell out of it until the wheels come off that thing. If they come to this region, we are going to use the brand, the wealth, the resources to help us develop this town.”
A cautionary tale in Seattle
Newark used to be a bigger city, with 442,000 residents in 1930. Its vacant land could accommodate thousands of new housing units without redeveloping existing neighborhoods.
“It’s got the bones for growth. It’s got the capacity for growth,” said Murphy, the governor. “You can see how an employer with 50,000 jobs here could work. You don’t have to squeeze other people out the other end of the tube.”
But the challenge of leveraging white-collar job growth to benefit far less educated residents is one cities further along the growth curve are already facing, with uneven results.
Seattle provides troubling precedents. Despite the city’s efforts to quickly add new housing and infrastructure, the Seattle area has led the nation in home-price increases every month for 20 months in a row, according to the Case-Shiller index.
In Newark, where the median household income is $33,025, the arrival of six-figure jobs from Amazon — or other tech companies — could create opportunities for people with college educations and skills but also lead to displacement of residents.
Community organizers are focused on managing growth in Newark neighborhoods such as the Ironbound, a working-class enclave of 40,000 people, including many Portuguese American families in two- and three-story buildings with businesses on the first floor. In recent years, swanky new restaurants have joined the many longtime small groceries and family-owned eateries.
Easy access to Newark Penn Station and a new riverfront park have drawn home buyers, and Mars Wrigley plans an office of at least 500 people nearby. When Amazon officials toured the city, Murphy, Baraka and Booker took them to dinner at Mompou, a tapas restaurant in the Ironbound. (“We charmed them and got drunk a little bit,” Baraka said.)
The Ironbound is still reeling from the environmental costs of serving the New York area and much of the East Coast. The neighborhood is home to the port and an industrial area that produces mass amounts of chemicals, metal parts, food and household items such as plastic cups and cigarette lighters.
“The ghosts of industry’s past come back to haunt you all the time here,” Baptista said.
With an eye on what happened in Seattle, Baraka and Newark officials have begun instituting protections. Last year, the mayor signed two policies, one requiring developers to include below-market-rate units in new apartment buildings and another requiring builders who get tax breaks to hire city residents and make community contributions.
“What’s great is to have a mayor who is thinking about these issues,” said Arnold Cohen of the Housing and Community Development Network of New Jersey. “We live in a capitalist society, so you can’t shut the door, and in a city like Newark, you want growth to help the city as a whole. The question is how you manage that.”
Booker said Newark’s chance lies in the possibility that Amazon and Bezos decide they want to do something unexpected.
“There is a moral case that Chicago and New York just don’t have,” Booker said. “And that is the very idea of America and being part of a city that is standing up and saying, ‘Look at us, we are here to rekindle and repair the idea that the American Dream can thrive everywhere.’ ”
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