DC offered Amazon up to $1 billion for headquarters

Jonathan O’Connell Reporter covering economic development with a focus on commercial real estate and the Trump Organization November 19 at 4:40 PM The District offered Amazon.com up to $1 billion in tax incentives to open a second headquarters with 50,000 jobs in D.C., likely the largest subsidy ever offered by the city to a single employer but also far less than other jurisdictions agreed to provide to the tech giant. The package, released Monday by Mayor Muriel E. Bowser (D), offered a combination of discounts on property, sales and corporate franchise taxes over a 15-year period as outlined in an existing city law aimed at luring tech jobs to the city. Bowser’s office estimated the package’s value at between $488 million and $1.053 billion, depending upon the number of jobs Amazon would have created, how many were filled by District residents, how much office space the company occupied and other factors. (Amazon’s chief executive, Jeffrey P. Bezos, owns The Washington Post.) Unlike states including Maryland and New Jersey, which approved much larger subsidies directly for Amazon, all the incentives the city offered to Amazon were available to other employers considered “Qualified High Technology Companies” under a 2000 law, Bowser’s top economic aide, Deputy Mayor Brian Kenner, said in an interview. “It’s something that every single company that qualifies as a high-technology company could qualify for,” Kenner said. [Read the District’s proposal here] Virginia Gov. Ralph Northam (D) speaks at a news conference after the announcement that Crystal City had been selected as home to Amazon’s new headquarters. (Kevin Lamarque/Reuters) The District offered other benefits to Amazon, including “one-day permitting” for developers constructing Amazon’s new buildings, a dedicated liaison between the city government and the company, a pilot program for autonomous cars, expansion of the city’s fiber-optic network and the integration of Amazon technology into the company’s campus. Bowser additionally vowed to invest “extra revenue” provided by the Amazon project to affordable-housing initiatives, which the proposal said would allow for the creation of an additional 20,000 affordable units over the course of the project. [Amazon to benefit from more than $2.4 billion in incentives from Va., N.Y. and Tenn.] Debate about public subsidies has continued beyond the company’s announcement last week that rather than building one 50,000-job location it would target 25,000 jobs each for Crystal City in Northern Virginia and Long Island City in New York. Maryland offered more than eight times what the District did, an estimated $8.5 billion, while Virginia and Arlington County agreed to provide the company with $573 million for 25,000 jobs plus $223 million for transportation improvements that should also benefit the community. In addition, Virginia agreed to help provide $1.1 billion over 20 years to expand tech-related higher education in the state, including a new Virginia Tech graduate campus in Alexandria within walking distance of the Amazon site. [For universities in Virginia, Amazon came at the perfect moment] When Amazon announced its decision, Bowser issued a statement applauding it as a “win for D.C.” and calling for the region to improve public transit and invest in affordable housing, a top priority for her administration since she entered office in 2015. Kenner said Amazon had clearly made access to the nation’s capital a priority. He said he had already heard from local universities that are interested in updating their curriculum to fit Amazon’s needs. “I think they got as close to Washington, frankly, as they could,” he said. “We know that some of the reasons that they chose this region are highly educated workforce and great public transit, and frankly we’re in a region that is growing.” Amazon’s decision prompted soul-searching in many of the jurisdictions that, like the District, did not win any of its jobs. But it also prompted some hand-wringing among the winners, particularly New York City. New York offered tax credits equal to $48,000 per new job, while Virginia agreed to workforce cash grants of $22,000 per job. Virginia leaders have reacted mostly positively to the deal crafted by Gov. Ralph Northam (D). But prominent New York City politicians have criticized the package negotiated by Gov. Andrew M. Cuomo (D). “If New York has what Amazon wants, why is it paying the company so much to make the move?” the New York Times editorial board wrote last week, calling it “a bad bargain.” Cuomo responded by writing that the Times had received significant tax benefits from the city and state for its headquarters. “Should the Times not apply the same rules and theory they operate under to the Amazon transaction?” Cuomo wrote. To qualify for incentives as a high-tech company under District law, a company must make more than half its business from Internet-related services, e-commerce or similar activities. Those companies can get tax credits of up to $5,000 for each employee who relocates to the area for the company and up to $7,500 for each employee who relocates to D.C. proper for the company. The law also provides wage reimbursements of up to $10,000 for each new hire or up to $30,000 for newly hired veterans, drops the corporate tax rate to zero for the first five years and exempts the sales tax on purchase of hardware and software. [Amazon splits prize between Crystal City and New York] D.C. Council member Jack Evans (D-Ward 2), speaking last week after the decision but before Bowser’s offer became public, called the Crystal City choice the “best of all worlds.” Other council members quickly turned their attention to more citywide issues. Charles Allen (D-Ward 6) said the top priority for the city should be planning for infrastructure and transportation overhauls. David Grosso (I-At Large) said the city’s progressive policies places it in a “pretty good position” to attract companies such as Amazon without relying on subsidies. One handicap for the District’s bid was that, unlike other contenders, it lacked a single site to accommodate the entire Amazon development. Bowser’s economic team instead proposed four neighborhoods that are already experiencing rapid growth and assembled bids including a mix of public and private sites in partnership with developers. One site incorporated properties on both sides of the Anacostia River, in the Navy Yard neighborhood and Anacostia, while the other three included parcels of land near Union Station, U Street Northwest and RFK Stadium. Unlike Maryland and Virginia officials, Bowser made much of her proposal — including the locations — available to the public, though she closely held the details of the subsidy package for months. Rather than focusing on what could have been, Kenner said, it was time to return to the work of making the region more affordable to more people — an increasingly acute need with Amazon’s first employees scheduled to start next year. “We are going to continue to be very aggressive on housing and push our regional partners to be aggressive on housing as well,” he said. Peter Jamison, Robert McCartney and Fenit Nirappil contributed to this report.
Read More