We have blogged a few times about Amazon’s quest for incentives in locating its new HQ2, promising a potential of 50,000 jobs. The few bids that have become public are breathtaking financial packages that indicate just how much states are willing to pony up to woo Amazon. Maryland put together an $8.5 billion bid, and New Jersey got legislative approval to offer $7 billion in tax credits and incentives to pick Newark.
Others are not as forthcoming with how taxpayer’s money will be spent. “We are not releasing documents related to Amazon HQ2. We are not subject to F.O.I.A.,” said Miami-Dade Beacon Council. Requests by the New York Times (Aug.5, 2018) to Austin, Atlanta and Indianapolis met with similar responses. The photo reflects the response from Montgomery County, Md.
But today’s post is not about HQ2. It is about Amazon’s cloud computing business–its fastest growing and most profitable division. Data centers come with a lot of ongoing expenses, the biggest of which is electricity. Over the past 2 years, Amazon added dozens of new data centers with vast fields of servers running 24/7. In at least 2 states, it’s also negotiated with utilities and politicians to stick other people with the bills for millions of dollars of electricity.
Amazon stands out for its success in offloading its power costs and also because it dominates America’s cloud business, writes BusinessWeek (Aug.27, 2018). It has gone from nonexistent to using 2 percent of U.S. electricity! Although data centers typically yield few new jobs, politicians desperate to make up for fading manufacturing businesses have worked closely with utility companies to land Amazon data centers. In Virginia, where Amazon operates at least 29 such centers and is planning 11 more, the company’s 78-page application for a special rate agreement has two versions—a heavily redacted public one and another under seal with state regulators.
This is certainly an interesting topic for classroom discussion when covering Chapter 8.
Classroom discussion questions:
- What are the plusses and minuses of providing such incentives?
- What is the alternative?