Minnesota Offer for Amazon Headquarters Seems Unlikely

September 13, 2017 08:36 PM

Governor Mark Dayton, along with Democratic and Republican legislators, quickly said they wanted to support a Minnesota bid for a second Amazon headquarters campus.

They were dazzled by the 50,000 jobs and $5 billion dollars worth of investment the headquarters could bring.

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The early enthusiasm was tempered a bit this week when Dayton said the state's bid would likely be "restrained" in terms of tax breaks and other financial incentives.

"I'm not ruling anything out," Dayton said at a news conference on Tuesday, "but I'm just raising a cautionary note."

The governor said he spoke with CEO's of Target and Best Buy, two Minnesota companies with headquarters in the state. He said they expressed concern their tax dollars could be used to lure Amazon, a major competitor of both companies.

It seems unlikely Minnesota will offer incentives similar to what the state offered General Motors to build a Saturn car plant in 1985. The legislature approved $1.3 billion dollars in corporate, sales and property tax breaks. Still, the state lost out to Tennessee.

An economics expert told KSTP bidding wars like these can get out of control.

"One thing you don't do is listen to the company," Paul Vaaler, of the University of Minnesota Carlson School of Management, said. "The company's interest is in telling you the sky's the limit on all the benefits."

Vaaler says the track record on these bidding wars isn't great. He points out the state's bailout of Northwest Airlines in the 1990's didn't produce the number of jobs the airline promised in Minnesota.

As for the Saturn plant that ended up in Spring Hill, Tennessee, it did create thousand of jobs. However, the plant closed temporarily in 2009 when GM ceased production of Saturn vehicles. It was re-tooled to manufacture Chevrolets and Cadillacs, with a smaller work force.

Vaaler warns states and cities to look at these projects with a critical eye.

"You can't let the political euphoria of the moment carry the actions that are going to have implications for years and decades to come," he says.

Governor Dayton says the state will offer some kind of a bid to Amazon by the October 19th deadline. It's uncertain how much the public will initially learn about he bid, because the company will likely insist on a confidentiality agreement.


Amazon by the Numbers

Amazon is the most popular online store in the U.S. as measured by annual net e-commerce sales, and it's not even close. The company generated more than $46.3 billion in 2016 via e-commerce sales of physical goods. Walmart.com was second with nearly $11.5 billion. Below are some of the company's key numbers.

Data courtesy of Statista

  • Net Sales Revenue 2016: $135.99 billion (2015 = $107.01 billion)
  • Net Income 2016: $2.371 billion (2015 = $596 million)
  • Number of Employees of Amazon.com 2016: 341,400
  • Biggest Revenue Segment 2016: Retail
  • Year-Over-Year Revenue Growth as of 2016: 27%
  • Outbound Shipping Costs 2016: $16.2 billion
  • Brand Value 2017: $139.29 billion
  • U.S. Ad Spend 2016: $2.6 billion
  • Unique Monthly Visitors Amazon Sites as of December 2016: 189 million

Credits

Tom Hauser

Copyright 2017 - KSTP-TV, LLC A Hubbard Broadcasting Company

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