Amazon is coming

Jeff vonKaenel

Amazon is coming to Sacramento. And the corporate behemoth will be bringing 1,000 to 1,500 new jobs with it. These exciting facts about the new Amazon robotic fulfillment center at the airport were the major takeaways from the annual Sacramento Metro Chamber State of Sacramento County lunch last week.

A thousand new jobs is a big deal. It means that between 1 and 2 percent of Sacramento-area paychecks will have an Amazon logo on them. And what’s even better is that these are not retail or service jobs. The problem with bringing new retail or services jobs into our region is that they usually compete with existing jobs. People are only going to buy so many clothes, eat at so many restaurants and buy so many cars. So when a new restaurant or clothing store opens up, people eat less at existing restaurants, and simply buy their clothes at a different store. Usually, an equal number of jobs will be lost to balance out the new ones.

But it’s different when a manufacturing, distribution or state government job comes here. These bring new money from outside the area. These jobs don’t compete with existing jobs. Amazon currently pays non-Sacramento residents to send goods to Sacramento. When the fulfillment center opens, those wages and benefits will be paid to employees in Sacramento. This will bring approximately $40 million more into our region.

And, even better, this new money will multiply. These 1,000 Amazon workers will eat out, shop and go to the dentist here. The end result is that this additional $40 million will actually translate into a $200 million boost to the local economy.

That is why manufacturing jobs are so much more important for our region than retail and service jobs. So, one would think that city governments would put a high priority on bringing manufacturing and distribution jobs to town. Unfortunately, this is not the case.

Relying on local sales tax revenue for their general funds, city planners focus on where people shop. If a person shops at the Arden Fair mall, the Roseville Galleria or the new Elk Grove mall, this brings sales tax revenue to their respective local city governments. So city planners focus on retail development. And housing creates other problems for the city bean counters. New residents need expensive support like police and fire services. On the other hand, shoppers from elsewhere need very few services. They deposit their sales tax revenue and leave. As you might expect, these economic realities can make for poor city planning, with too few resources going to encouraging manufacturing and housing development and the focus staying on retail.

What is needed is reform, either at the state or local level. In 2002, when incoming Sacramento Mayor Darrell Steinberg was in the state Assembly, he proposed Assembly Bill 680, the Sacramento Regional Smart Growth Act, which would have our Sacramento regional governmental agencies pool their sales tax revenue. The goal was to end the retail arms race and encourage better city planning for the entire region, which would encourage developing housing and encouraging manufacturing jobs. Cooperation instead of competition, to solve our regional problems as a region.

It was a good bill then. Not surprisingly, it was opposed by city governments who wanted to protect their sales tax revenues. So it never passed. We should reopen this discussion.

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About the Author

Jeff vonKaenel
Jeff vonKaenel is the president, CEO and majority owner of the News & Review newspapers in Sacramento, Chico and Reno.