Sunday, March 17, 2019

Arlington County Board approves $23 million incentives package for Amazon

Patricia Sullivan Reporter covering government, politics and other regional issues in Arlington County and Alexandria March 16 at 4:24 PM The Arlington County Board prepared to vote Saturday on giving Amazon $23 million and other incentives to build a headquarters campus in Crystal City, but only after hearing from scores of residents and advocates testify for or against the project. The five-member body began its hearing at 1 p.m. in a board room jammed with more than 140 citizens. Many carried signs, with some praising Amazon for promising to create jobs, and others lambasting it for its potential to raise housing prices and encourage gentrification. The board is expected to support the plan, which was announced amid much hoopla on Nov. 13. The proposed county incentives are part of an agreement in which Amazon would occupy significant office space and bring at least 25,000 high-paying jobs to Arlington in coming years. Opponents hope to postpone the vote until after additional public hearings, where they want representatives of the online retail giant to answer questions directly from anyone in the community. Halfway through a schedule of more than 100 speakers, supporters of the agreement with Amazon outnumbered its critics. Backers argued for the value of the jobs and economic boost they expect it to bring to the county and region. Amazon’s arrival will “grow our economy, expand our tax base and diversify our economy away from the federal government,” Charles Wagner said. June O’Connell, a 30-year resident, said Amazon’s presence would ensure that Arlington would get state money for transportation improvements and investments in higher education. “I want that money from the state,” O’Connell said. “Without Amazon, we wouldn’t get a penny of it.” Opponents said that Amazon didn’t need or deserve public subsidies, that its arrival would displace low-income communities, and that it had not engaged well with the community. When Kinsey Fabrizio, a member of the Consumer Technology Association, praised Amazon’s outreach to the community, Amazon opponents in the crowd laughed raucously, drawing a rebuke from board chair Christian Dorsey D. Resident Ibby Han told the board that by supporting Amazon, “You’re just repeating Virginia’s history of prioritizing elites over working people.” Officials from the local chapter of the NAACP and the regional AFL-CIO objected to the unwillingness of the online giant to sign a project labor agreement with wage and benefit safeguards for workers hired to construct the new Amazon buildings. “This request was expressed by virtually every elected official in Northern Virginia,” said Virginia Diamond of the Northern Virginia AFL-CIO. The first witness at the hearing was Christina Win, a director at Arlington Economic Development, who said direct financial subsidies to Amazon were necessary to win the project because of the “highly competitive national site selection process.” Before the hearing opened, a couple dozen protesters rallied on the steps of the county building. A smaller number demonstrated in favor of the project. “We’re fighting to make sure people who live here are not priced out by wealthy people,” said Danny Cendejas, an organizer with the “For Us, Not Amazon” coalition. Signs opposing Amazon read, “Affordable housing 1st, not Amazon,” and “Don’t be the opposite of Robin Hood.” Supporters wore stickers saying, “Amazon is prime for Arlington,” and carried a sign reading, “Crystal City welcomes Arlington.” Because so many people signed up to speak, Dorsey reduced the time allowed per speaker from the normal three minutes for individuals to two minutes, and from the normal five minutes for people representing organizations to four minutes. County officials expected a vote no earlier than 6 p.m., although the testimony appeared to be moving more quickly than expected because people who signed up to speak did not appear. In the four months since Arlington won a much-publicized, nationwide contest to attract the facility known as HQ2, Arlington residents have been asking questions about its impact on their neighborhoods and community. Noisy, decisive showdown foreseen for Arlington County Board meeting on Amazon. People have looked at the county’s five online Q&A sessions 14,000 times, and about 400 attended community events to discuss the provisions in the Amazon agreement. Board members and county staff also met with scores of civic organizations, served on multiple panels and appeared on television, online and in news articles to discuss the deal. Both Amazon and the real estate company JBG, the main contractor for the project, have met with business groups, school leaders, 50 nonprofit groups and others. However, these sessions have not satisfied critics’ calls for an open public meeting for anyone with questions or criticisms. Amazon founder and CEO Jeffrey P. Bezos owns The Washington Post. Most Arlingtonians, Northern Virginians and residents of the Washington region support Amazon’s arrival, several surveys have found. Business organizations, universities and nonprofit groups came out strongly for the deal. But a small, vocal group of activists has sought to block the project, saying that the county and commonwealth should not give any incentives to one of the world’s most valuable companies. They also have demanded housing and job protections for existing residents. These opponents — including left-wing organizations and immigrants groups — felt empowered after Amazon canceled plans last month to build a headquarters facility in New York City, also with 25,000 jobs. The company withdrew after criticism of the plan from some elected leaders, unions and community activists. In Virginia, however, such opposition did not appear to catch fire among the broader public. Open-records advocate questions Amazon-Arlington disclosure clause. Officials estimate that the Amazon project’s net fiscal impact on Arlington could be worth additional revenue of $162 million over 12 years and $392.5 million over 16 years. The incentives agreement promises the world’s largest online retailer cash grants estimated at about $23 million if it occupies 6.05 million square feet of office space in Crystal City and Pentagon City through 2035. The money would come from an expected increase in the hotel, motel and lodging tax paid by visitors; Amazon would get up to 15 percent of that increase, pegged to how much floor space is in active use by the company each year from 2020 to 2035. Amazon’s offices will be located within an already-established special tax district where a portion of the property tax revenue goes toward infrastructure improvements such as parks and wider sidewalks. The incentive agreement says that half of any new revenue from that district starting in 2021 will go specifically toward improvements around the Amazon buildings for the following 10 years. That grant is worth an estimated $28 million but the county says it’s not a grant just for Amazon, because the improvements will benefit other companies in the immediate area. Amazon will have a chance to express its opinion on how the county uses the money, although the board will make the decision. Amazon seeks ‘good neighbor’ image in Arlington, but opponents aren’t impressed. The county also offered Amazon the possibility of using its fast, fiber-optic network connection, which would be the subject of a separate agreement if the company chooses to use it. It’s not yet clear whether Amazon will pay the local business license tax because that tax is levied only on certain types of business, and Amazon has not yet announced which of its business units will be based in Arlington. If the company does pay the license tax, then some of its operations could be eligible for a discount of up to 72 percent under an existing program designed to attract technology companies. While Arlington pored over the details, the Virginia General Assembly passed, and Gov. Ralph Northam D signed, an incentives package worth up to $750 million for Amazon. This is a developing story. Local newsletters: Local headlines 8 a.m. | Afternoon Buzz 4 p.m. Like PostLocal on | Follow postlocal on Twitter | Latest local news

GeekWire Podcast: Brave Amazon employee quizzes Bezos; GeekWire Awards preview; Peter Sagal’s input on input 

Jeff Bezos at a past Amazon all-hands meeting. File Image We’re preparing for the GeekWire Awards, our annual event recognizing the best in Pacific Northwest tech and innovation, coming up May 2 at MoPOP in Seattle. On this episode of the GeekWire Podcast, we provide an update on past Startup of the Year winners and preview this year’s contest. Find out more, submit nominations, and buy tickets at geekwiremawards. Plus, a brave Amazon employee asks Jeff Bezos if his tumultuous personal life is distracting from his work at the company. The author of “The Everything Store,” Brad Stone, is reportedly working on another book about Bezos and the tech giant. In a highlight from our latest Numbers Geek podcast, Peter Sagal of “Wait, Wait … Don’t Tell Me” offers his input on getting less input in our lives. And on the 10th anniversary of the closing of the Seattle Post-Intelligencer, we reflect on our time working at the paper, and how the tech boom has changed Seattle in the meantime.

Better Buy: Shopify vs. Amazon 

No company better defines the e-commerce industry than Amazon NASDAQ:AMZN, the online retail giant that commands about half of online sales in the U.S. A close second may be Shopify NYSE:SHOP, whose cloud-based platform powers the software behind many of the small and medium-sized business that sell online. E-commerce has proven itself to be a huge, long-tail growth market, with U.S. e-commerce sales growing about 15% annually since the financial crisis, yet it still accounts for less than 10% of total retail sales. Nevertheless, Amazon and Shopify stocks have both electrified the market. Amazon has been the best-performing stock over the last generation, gaining a whopping 85,000% since its 1997 IPO, and Shopify is no slouch either, having returned nearly 700% since it debuted in 2015 -- even outperforming Amazon over that time frame, as the chart below shows. SHOP data by YCharts The similarities don't end there. Both have a history of generating losses as they have invested to gain market share, though Amazon has recently shifted to profitability thanks largely to the success of Amazon Web Services, its cloud computing division. Given their impressive histories of growth and the potential of e-commerce, investors looking for exposure to e-commerce may have trouble choosing between the two. Let's take a closer look at both stocks in order to determine which is the better buy today. Image Images. Unstoppable growth  With the exception of several months of volatility last year, Shopify shares have been rising almost constantly since they first hit the market in 2015. The stock is already up 45% this year, and it just topped $200share for the first time ever. Few stocks have delivered the kind of top-line growth that Shopify has throughout its history. Revenue jumped 59% last year to $1.07 billion, and gross merchandise volume GMV, or the total value of the goods sold on its platform, rose 56% to $41.1 billion.  Shopify's growth is steadily moderating, however, coming in at only 54% in the fourth quarter, its slowest quarterly growth as a publicly traded company -- and the company sees revenue rising only 36%-38% over the next year. Shopify is not profitable on a GAAP basis, but delivered an adjusted profit of $39.2 million, or $0.38 a share, last year as it spent more than $95 million on stock-based compensation. Shopify's service has clearly resonated with the SMBs, which make up the majority of its sellers. They use its tools to manage their businesses across multiple channels, and do things like accept payments and assist with shipping.  Through its four subscription levels -- Basic, Shopify, Advanced, and Plus -- Shopify's services scale up with its customers' needs, allowing it to grow with them.  Shopify's most valuable customers are its more than 5,300 Shopify Plus subscribers, including Unilever, Allbirds, and Kylie Cosmetics, which pay between $2,000 and $40,000 a month for the service. In the fourth quarter, Shopify Plus subscribers contributed $10.4 million in monthly recurring revenue, or 25% of total MRR, up from 21% a year ago.  Dominating e-commerce and more Though Amazon is best known for its e-commerce prowess -- more than 100 million people around the world subscribe to its Prime loyalty program -- the company is much more than just an online retailer. AWS is its most profitable and fastest-growing business segment, delivering $7.3 billion in operating profit on $25.6 billion in revenue, up 47% from the year before. AWS rivals Microsoft'sAzure for title of biggest cloud service in the world. Meanwhile, Amazon is investing heavily in areas like voice-activated technology through Alexa as well as logistics and shipping, and it continues to expand its brick-and-mortar presence. Less than two years after acquiring Whole Foods, the company is reportedly seeking to launch its own banner of grocery stores, and could expand the nascent Amazon Go chain, its cashierless convenience store concept, to as many as 3,000 stores. It also seems to be focused on establishing more of a permanent presence in malls beyond its handful of Amazon Books and 4-Star stores, as it just announced it would close all 87 of its pop-up locations. Amazon is also leveraging its market power by building its higher-margin marketplace and fulfillment service, and has even stopped ordering from some major vendors, instead telling them to sell directly to customers on Amazon's marketplace. Like Shopify, however, Amazon has seen its once-blockbuster growth rate cool off. In its most recent quarter revenue increased 20% to $72.4 billion, and the company finished the year with $232.9 billion in revenue, making it one of the biggest companies in the world by sales. However, the company expects revenue to grow just 10%-18% in the first quarter, though it sees stronger growth in operating profit. It's hard to doubt Amazon's massive market power, but the question for investors at this point seems to be if the company can shift from revenue growth to profits fast enough to justify further share appreciation. Who wins this e-commerce war?  As you might expect from stocks with strong growth rates, both stocks trade at lofty valuations. Amazon trades at a PE of 83, while Shopify is valued at a PE of 527. In other words, investors expect significant profit growth from both companies. Perhaps the biggest difference between these two companies is their size. Amazon is one of the biggest companies in the world at a market cap of $820 billion, while Shopify is valued at just $22 billion. Given Amazon's size, it will be harder for the stock to deliver the kind of blockbuster growth that both stocks have posted in the past. At only $22 billion, Shopify has much more room to double or triple its value. However, Shopify's business, which is concentrated in one industry and sensitive to the vulnerabilities of its merchants and therefore the broader economy, is significantly riskier than Amazon's. Considering Shopify's valuation, the stock is also more at risk of a recession or other kind of market sell-off. Therefore the better buy here may come down to investing style: More risk-averse investors would be better off with Amazon over Shopify, while investors with higher risk tolerance may prefer Shopify. Over the long-term, I think Shopify is more likely to outperform Amazon given its greater growth potential, its leadership position in its industry, and its direct exposure to its market; however, the stock is also more at risk of a sell-off in the shorter term.  

Amazon's second headquarters clears blocks in Virginia funding vote 

WASHINGTON Reuters - Amazonm ’s planned second headquarters in northern Virginia cleared a key test on Saturday when local officials approved a proposed financial package worth an estimated $51 million amid a small but vocal opposition. People move about in front of the rostrum before a news conference about the announcement that Crystal City has been selected as home to Amazon's new headquarters in Arlington, Virginia, U.S., November 13, 2018. REUTERSKevin Lamarque Amazon in November picked National Landing, a site jointly owned by Arlington County and the city of Alexandria, just outside Washington, along with New York City for its so-called HQ2 or second headquarters. That followed a year-long search in which hundreds of municipalities, ranging from Newark, New Jersey, to Indianapolis, competed for the coveted tax-dollars and high-wage jobs the project promises. Amazon in February abruptly scrapped plans to build part of its second headquarters in the New York borough of Queens after opposition from local leaders angered by incentives promised by state and city politicians. The five-member Arlington County Board voted 5-0 in favor of Amazon receiving the financial package after a seven-hour meeting held in a room filled with up to about 150 citizens and representatives from local unions and minority advocacy groups. There was strong opposition from some residents and labor groups, many of whom chanted “shame” and waved signs with slogans including “Don’t be the opposite of Robinhood,” “Amazon overworks and underpays,” and “Advocate for us and not Amazon.” One protester was escorted out of the meeting by police. A few dozen protesters outside the county office chanted, “The people united will never be defeated.” Danny Candejas, an organizer for the coalition “For Us, Not Amazon,” which opposes the company’s move into the area, said: “We are fighting to make sure people who live here are not priced out by wealthy people.” Some supporters in the meeting held up signs saying ‘vote yes’ and ‘Amazon is prime for Arlington’. One hundred and twelve people were registered to speak, an unusually high number for a local county meeting, forcing board chair Christian Dorsey to cut the talking minutes to two minutes, from three, for every regular speaker, and to four minutes, from five, for representatives of organizations. Many speakers who were opposed to the Amazon headquarters especially opposed direct incentives, citing rising housing costs, the likely displacement of low-income families, accelerated wage theft for construction workers, and lack of investment guarantees in affordable housing funds. “Speculators are already driving up home prices, landlords are raising rents and general contractors are raising their quotes for home improvement projects,” said one resident, Hunter Tamarro. Unions including the AFL-CIO objected to Amazon not signing a project labor agreement with wage and benefit safeguards for workers hired to construct the new buildings. But supporters such as resident June O’Connell said Amazon’s presence would ensure Arlington is allocated state funds for investments in transportation and higher education. “I want that money from the state,” O’Connell said. “Without Amazon, we wouldn’t get a penny of it.” Holly Sullivan, Amazon’s worldwide head of economic development, spoke briefly and said the company will invest approximately $2.5 billion, create more than 25,000 jobs with an average wage of over $150,000, which will generate more than $3.2 billion in tax revenue. “Regarding incentives, Amazon is only eligible for the financial incentive after we make our investments and occupy office space in the community,” she said. Dorsey, the board chair, had said before the vote that he expected the measure to pass. He said that rejecting Amazon would not solve the community’s problems and concerns, and that this was the first deal the county has struck where new revenue growth will be used to fund it. To be sure, the vote approved an estimated $51 million, a fraction of the $481 million promised by the county. Only 5 percent of the incentives are direct. Also, Amazon has been offered a $750 million package by the state that the Virginia General Assembly approved with little opposition. The $51 million includes a controversial direct financial incentive or cash grant of $23 million to Amazon over 15 years, which will be collected from taxes on Arlington hotel rooms. The grant is contingent upon Amazon occupying six million square feet of office space over the first 16 years. Arlington has also offered to invest about $28 million over 10 years of future property tax revenue in onsite infrastructure and open space at the headquarters site. A filing on the county board’s website says the $23 million grant and the $28 million in strategic public infrastructure investments were “instrumental in Amazon choosing Arlington for its headquarters.” Reporting by Nandita Bose in Washington; Editing by Richard Chang and Daniel Wallis

Why Were Facebook, Amazon, Apple, and Google Allowed to Get So Big? 

The rise of global technology superstars like Amazon, Apple, and Google created new challenges for the competition watchdogs who enforce the nation’s antitrust laws. Those companies dominate markets in e-books and smartphones, search advertising and social-media traffic, spurring a global debate over whether it’s time to rein in such winner-take-all companies. The U.S. has largely been hands off, but that may be changing. 1. Are the tech giants monopolies? They’re powerful, for sure. Google and . together control almost 60 percent of digital ad revenue in the U.S. and 64 percent of mobile ad revenue, according to eMarketer. Apple . has about 45 percent of the U.S. smartphone market. About 47 percent of all U.S. e-commerce sales go through Amazonm . But under modern antitrust enforcement, those percentages alone aren’t enough to alarm regulators in the U.S., which long ago stopped equating big with bad. For comparison’s sake, Standard Oil’s market share got as high as 88 percent late in the 19th century. What’s illegal is for a monopoly to abuse its market power to prevent rivals from threatening its dominance. Federal courts ruled Microsoft Corp. did so in the 1990s. 2. How often does the U.S. go after monopolies? The Microsoft lawsuit was the last major monopolization case brought by the U.S. The ensuing 20-year dry spell is often cited by those who argue enforcement has been too timid. President Barack Obama’s administration vowed to get tough on dominant companies in 2009, but it didn’t follow through. The number of monopoly cases brought by the U.S. dropped sharply from an average of 15.7 cases per year from 1970 to 1999 to less than three between 2000 and 2014. 3. Is antitrust thinking outdated? Some lawyers and economists think it’s time to move past conventional antitrust enforcement to consider harmful effects from increased concentration such as lower private investment, weak productivity growth, rising inequality and declining business dynamism, or the rate at which firms enter and exit markets. They’ve gained a high-profile backer in Senator Elizabeth Warren, a Massachusetts Democrat who is seeking her party’s 2020 presidential nomination and who has proposed dismantling tech giants like and Google. 4. Have the tech giants abused their power? As the middlemen for today’s essential products and services, platforms like Amazon and have leverage over both producers and consumers. Amazon used its power over the book market in 2014 to block pre-orders for some Hachette Book titles during a dispute with the publisher over pricing. The tech giants are also growing by snapping up potential rivals that might threaten market share. Data compiled by show the big five — Alphabet, Amazon, Apple, and Microsoft — have made 431 acquisitions worth $155.7 billion over the last decade, according to data compiled by . The companies also have control over vast amounts of data about their customers, raising concerns about threats to privacy. 5. What would actually worry regulators? In the U.S., they’re primarily focused on the harm to consumers from reduced competition. When two companies want to merge, for example, could the deal result in higher prices? That’s usually not an issue in high-tech tie-ups, because big firms are often gobbling up much smaller rivals or buying companies for the purpose of entering new markets. The European Union has been more aggressive, as evidenced by the $2.7 billion fine against Alphabet .’s Google in 2017 for favoring its shopping-comparison service over those of its rivals. Google was hit with an additional $5 billion fine by the EU last year. 6. Why is the EU tougher on tech companies? EU law sets a lower bar for finding dominance by a company, so it’s easier to run afoul of anti-monopoly law. The U.S. chose not to bring charges against Google for the same conduct the EU found illegal. EU enforcers also have been more wary of big companies collecting consumers’ personal data. Strict new privacy rules that took effect in the EU last May under the General Data Protection Regulation gave regulators unprecedented powers to protect people from having their data misused by companies doing business there. Already, Google has been fined 50 million euros $56.8 million for privacy violations — the highest such penalty ever in the EU. Google has appealed. 7. What do the companies say? They argue that their dominance is hardly durable because barriers to entry are low for new competitors. As Google is fond of saying, competition is just “one click away.” Due to the nature of competition in the digital marketplace, tech platforms benefit from network effects: As more people use them, the more useful — and dominant — the platforms become. Network effects can give a company scale quickly and create what investor Warren Buffett calls competitive moats.

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