Amazon And GE Cutbacks Are A Lesson For Cities Offering Big Incentives

Two of the world's biggest companies — Amazon and GE — have cut back on major promises this week. It's a tale of incentives and two corporate headquarters.

Amazon bailed on New York City after fierce local opposition to the nearly $3 billion in tax incentives it was offered to bring its second headquarters there.

General Electric has scaled back its plans for a Boston headquarters and will pay back the state the $87 million it got in incentives to bring the company to Boston.

Local business leaders and officials say GE and Amazon offer important lessons for Boston.

"What a wild back-to-back with two of the largest companies in the world. Amazing," said Jeff Bussgang, a general partner at Flybridge Capital, shortly after the two companies announced the changes Thursday.

Bussgang said the pullback of Amazon and GE is a lesson that tax incentives aren't everything.

"The lesson for cities is to focus on creating a great environment, a great infrastructure and a great ecosystem and not use tax incentives to focus on one particular company or another because those companies are going to change," Bussgang said. "There's a natural ebb and flow to the market. And cities don't want to be dependent on the ebbs and flows, and the competitive positioning of any one company."

So it was notable when Boston and Somerville didn't offer up tax incentives in their bid for Amazon's HQ2.

Somerville Mayor Joe Curtatone is proud of that. He said what's happening now with the GE and Amazon headquarters is a reminder to the region of the downsides of tax incentives.

"The challenge for us is to take a deep breath, understand what we're trying to accomplish and not just lead with giving away the resources that are so critical for our communities' success," Curtatone said.

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There has been plenty of criticism over cities offering companies massive incentives for the promise of new jobs and major development.

Jesse Mermell, the president of the Alliance for Business Leadership, said a lesson for cities is to involve communities when trying to woo a company.

"Community engagement, community engagement, community engagement. It needs to be something that doesn't feel like it's being done to people but rather being done with people," Mermell said.

Others say that's a lesson for companies too when they choose to move into a new community.

Chris Dempsey, the director of the Transportation for Massachusetts, compares the Amazon fallout and backlash in New York to Boston's failed 2024 Olympics bid. He helped lead the opposition to that bid, and says in Amazon's case there was a disconnect between the company and the local community.

"I think Amazon bought into its own hype a little bit too much," Dempsey said. "It got so much attention for the process that it was running and it had elected officials all over the country bending over backwards to try to give it bigger tax incentives. And it really lost touch with the fact that ultimately there is a political process that needs to happen and that should happen frankly."

GE isn't losing touch with Boston. The company will just have a smaller presence here. It won't build the gleaming 12-story tower it planned. And it will create just 250 jobs, around a quarter of the 800 jobs it promised.

The scale-back is part of an agreement with the state. Jim Rooney, the president of the Greater Boston Chamber of Commerce, said it's good that the state will get its money back.

"There's two parts to a deal and they're not going to deliver their part so they're paying back what incentives were already provided to them," Rooney said.

That's exactly how deals with incentives should work, he added.

Clarification: The information about GE's incentive repayment was broadened to bring more context to the situation.