Across the country, the search for HQ2 is shrouded in secrecy. Even civic leaders cannot find out what tax credits and other inducements have been promised to Amazon. And there is a growing legal push to find out, because taxpayers could get saddled with a huge bill and have little chance to stop it.
Jared Evans, a member of the Indianapolis City-County Council, is proud that the city is among 20 finalists for one of the most coveted prizes in the country: the planned second headquarters of Amazon.
He does, however, have one small question: What financial incentives did his city dangle in front of Amazon?
“What have I been told?” Evans said. “Absolutely nothing.”
Across the country, the search for HQ2, as the project has been nicknamed, is shrouded in secrecy. Even civic leaders cannot find out what sort of tax credits and other inducements have been promised to Amazon. And there is a growing legal push to find out, because taxpayers could get saddled with a huge bill and have little chance to stop it.
“The only time the public may become aware if the city has promised Amazon incentives is if we win and then we need to get those incentives passed,” Evans said.
A primary reason for the information blackout is that, in many cases, the bids were handled by local private Chamber of Commerce affiliates or economic development groups that are not required to make their negotiations public. Many of the groups are also not covered by Freedom of Information Act or state open-records requests.
But another reason is gamesmanship. Some cities say they want their Amazon proposals to remain confidential to avoid showing their hand to rivals. And Amazon required the finalists to sign nondisclosure agreements that forbid the local groups to release proprietary information about the company.
“I don’t know what we offered Amazon in terms of financial incentives, but I believe Amazon wants to see the biggest incentive package that any city will offer them,” said Leslie Pool, a member of the Austin City Council in Texas. The city, also a finalist, submitted a bid put together by the Greater Austin Chamber of Commerce, which had no consultations with the City Council.
With so much secrecy — and bids like Austin’s that involve unelected officials making promises — there is the risk that taxpayers and their civic leaders will be forced to accept the proposed terms or live with turning down an enormously lucrative opportunity. Amazon, which is expected to make $235 billion in revenue this year, promises to bring the winning location up to 50,000 high-paying jobs and a $5 billion investment in construction.
When the competition was announced last year, 238 places vied to be considered. In January, that list was winnowed to 20 finalists, which are now waiting to find out whether their communities will land the project. There is widespread speculation that the company could cut the field down again as soon as this month, asking for best-and-final offers. Amazon has not offered any updates, and a spokesman declined to answer questions about the process or the company’s plans on the record.
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 tax incentive and infrastructure bid, and local and state officials in New Jersey got legislative approval to offer Amazon $7 billion in tax credits and incentives to pick Newark.
But that kind of transparency is the exception.
“We are not releasing documents related to Amazon HQ2. We are not subject to FOIA,” Michael Finney, the president and chief executive of the Miami-Dade Beacon Council, a public-private partnership that handled the Amazon bid, said in an email. Similar requests to Austin, Atlanta and Indianapolis met with similar responses.
And when officials in Montgomery County, Maryland, did respond to a request for information on their bid, they delivered, among other items, a 10-page document of incentives — with every single line of text redacted.
Newark released its proposal only after a citizen filed a lawsuit, and officials in other places are fighting legal challenges. The mayor’s office of Chicago is pushing back against a transparency-seeking public advocacy group; Pittsburgh, Philadelphia and Pennsylvania are challenging rulings by the state Office of Open Records that said the cities’ pitches should be made entirely public.
Companies are often stealthy when searching for a location for a critical factory or relocating a headquarters, as General Electric or Bechtel have done in recent years. And it has been reported that Apple has been meeting behind closed doors with government leaders as it shops for a new corporate campus.
It is also not unusual for states to offer up significant tax credits and incentives to attract businesses to their region. Tesla was wooed with as much as $1.3 billion in tax breaks and incentives to build its $5 billion lithium-ion battery cell factory outside Reno, Nevada, and Foxconn has received close to $4 billion in incentives to build its $10 billion megaplant in southeastern Wisconsin.
In the case of Amazon, it is the size and scope of its search that some officials find shocking — and galling.
“Typically, you see companies bid a couple of places against each other as they try to land a corporate deal,” said Brad Lander, a member of the New York City Council who has not seen the city’s proposal to Amazon. (New York is a finalist.) “This process is highly unusual. It creates a real race-to-the-bottom aspect with the potential of companies bidding multiple cities against one another.”
It is unclear how much promised tax credits and financial incentives will weigh into Amazon’s decision. Three of the first four questions Amazon asked cities to answer in their proposals were centered on incentives. But the e-commerce giant also sought information on possible building sites, the local labor force, transit options, computer science programs in local schools and cost-of-living data.
Most Read Business Stories
- Boeing delivers first 737 jet from completion center in China
- Judge's ruling on 'Obamacare' poses new problems for GOP
- Huawei casts shadow over T-Mobile-Sprint deal
- As America retreats, China moves to create a new world order | Jon Talton
- 8 million people work illegally in the U.S., and here's why that’s unlikely to change
In what it did make public, Washington, D.C., pitched the idea of Amazon University, with a customized curriculum developed in partnership with Amazon and local universities. Boston, in its 218-page proposal, provided a sleek rendering of how Amazon’s second headquarters would look at Suffolk Downs, a former horse track in East Boston.
And Toronto’s pitch highlighted its high quality of life, including low crime rates and universal health care, and Canada’s progressive policies, including embracing same-sex marriage and remaining a signatory of the Paris Climate Accord. “We build doors, not walls,” the proposal said.
The cities see more at stake than just the jobs and investment that Amazon’s second headquarters would bring. Amazon says its presence and investment in Seattle have created an additional 53,000 jobs beyond its own direct hires, and added $38 billion to Seattle’s economy from 2010 to 2016.
But there have also been serious downsides for the city. In a be-careful-of-what-you-ask-for address to the U.S. Conference of Mayors this summer, Mayor Jenny Durkan of Seattle said that housing prices in her city average $824,000, rents have soared 57 percent in the last five years and there are 4,000 homeless people on the streets every night.
Those are the types of concerns raised by Pool, the Austin councilwoman. Pool said that she thought her city lacked the infrastructure and housing to accommodate 50,000 high-paying jobs and that such fast growth would alter the city’s socioeconomic makeup and quality of life.
“This is a city where you want to put down roots,” Pool said. “The people here are the friendliest. The parks are beautiful. But if someone like Amazon comes in, a big con is the massive amount of dislocation it causes. You put out the small businesses and longtime property owners, the very businesses and people that give the city its flavor and, I would argue, its brand.”
Still, the project is too good to pass up, even for some of the nation’s mayors who are most focused on housing and affordability, such as Bill de Blasio of New York and Rahm Emanuel of Chicago.
“They are about ending inequality and creating more inclusive cities,” said Richard Florida, a professor at the School of Cities and the Rotman School of Management at the University of Toronto. “Now they’re in a game competing with one another to throw money at one of the most powerful companies in the world run by one of the world’s richest men.”
Florida was on the board of directors for Toronto Global, whose bid is one of the 20 finalists, but he said he resigned this year so he could raise concerns about the general lack of transparency in the bidding.
“I think the lack of transparency of this whole process is galling,” he said. “This has to be all out in the public. This is taxpayer money.
Eventually, the taxpayers whose area wins will have to be told how much money Amazon was promised. And when they discover how much they will have to hand over, Florida said, “there is going to be hell to pay.”