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West Michigan’s pitch for Amazon HQ2 project included over $2 billion in state, local incentives COURTESY PHOTO

West Michigan’s pitch for Amazon HQ2 project included over $2 billion in state, local incentives

BY Wednesday, March 07, 2018 03:45pm

GRAND RAPIDS –– In choosing sites other than West Michigan, Amazon.com Inc. walked away from more than $2 billion offered by three West Michigan municipalities to the Seattle-based online retailer to locate in the region.

New details released publicly today for the first time pertaining to the region’s pitch for Amazon’s second headquarters — or HQ2 — show the company received a bid including three sites around the area, according to a summary of economic development incentives.

The documents show Grand Rapids-based The Right Place Inc. pitched undisclosed sites in downtown Grand Rapids, a campus on the grounds of Gerald R. Ford International Airport in Cascade Township and Wyoming’s Site 36, the 92-acre former General Motors plant now marketed for redevelopment by Franklin Partners LLC.

Amazon has promised to bring $5 billion in investment and up to 50,000 jobs as part of its HQ2. In January, the company narrowed down its list of candidates to 20 North American municipalities after receiving 238 applications.

In the hopes of getting consideration for the HQ2 sweepstakes, officials with The Right Place, municipal partners and the Michigan Economic Development Corp. (MEDC) came together to offer a variety of sites and incentives for the company.

In speaking with reporters today at The Right Place’s offices, executives noted the extreme circumstances surrounding the Amazon process, and the fact that they were releasing incentive information after not being selected.

“Obviously, Amazon did this very differently from the very beginning,” said Birgit Klohs, president and CEO of The Right Place. “To have a company of that magnitude … throw open the gates and the doors and anyone who wants to bid can bid, that was a shock to our system, quite honestly.”

Klohs said the organization’s decision to release the incentive information stemmed from Freedom of Information Act requests news outlets filed with the MEDC.

“This is not how we’re used to it,” Klohs said. “Sharing this kind of information … is extremely rare. And to be quite honest, it’s not in our best interest to share some of this information.”

Right Place executives were quick to note the incentive packages offered to Amazon were all performance-based and in no way offered the company cash. Additionally, all the incentives came from existing economic development programs at the state and local levels, not programs created specifically for Amazon.

Releasing the information caused a bit of uneasiness for economic developers, said Right Place VP of Communications Tim Mroz. That’s because releasing the information violated the confidential nature of the incentives offered by the three municipalities, which were briefed on today’s press meeting.

Billions offered

In total, the Site 36 proposal offered the most generous incentive package totaling more than $2 billion. The airport pitch offered a package of nearly $1.7 billion, while the downtown plan would have offered the company almost $776 million.

Each of the three sites carried with them an estimated $200 million from the state’s Good Jobs for Michigan incentive, based on Amazon’s job creation figures.

The incentive, which became law last year, allows for large employers to capture up to 50 percent of employees’ income taxes.

Other incentives offered at various sites included personal property tax abatements, the state’s “transformational” brownfield plan and Renaissance Zones at the airport and at Site 36.

Each site also offered $40 million spread over four phases from the state’s Business Development Program, a job creation performance-based grant.

A February report from the Midland-based Mackinac Center for Public Policy, a free market think tank, was critical of the program, saying that it had “failed to spark job growth in Michigan counties where the state-subsidized projects are located.”

The report noted for every $500,000 in incentives handed out by the state over a period of 10 quarters, employment rates actually fell by about 600 jobs.

“State planners are not effective at picking winners and losers in the marketplace and the publicly available data suggests that there is not an overall positive economic impact from this spending,” according to the report.

‘A new normal?’

The West Michigan bids are somewhere in the middle of the pack considering the other HQ2 proposals that have been made public. According to reports, Newark, N.J. offered $7 billion in tax incentives to bring the company to the city located just across the Hudson River from New York City. The Chicago Tribune reported that Chicago offered $2 billion to Amazon — incentives that could go higher. Other municipalities are betting less on tax incentives and instead offering free development sites and other potential perks.

No real estate was included in the West Michigan proposals.

Subsidy critics like Good Jobs First have called on the 20 North American regions to band together and strengthen their own bargaining ability so that no one region vastly outspends the other in the hopes of landing the second headquarters.

The Washington, D.C.-based organization that seeks to act as a watchdog for large economic development deals believes that Amazon has done some public good with its HQ2 process and the large amount of public interest its generated.

“Amazon has performed a great public service by dragging the obscure site location process out of the shadows and into a harsh public spotlight,” the organization’s executive director Greg LeRoy said in a January statement when the shortlist was released. “Many Americans are rightly aghast at what they see: a secretive process in which billions of taxpayer dollars are hastily offered to a large corporation with no public input. The HQ2 auction marks a new era in economic development, one in which people expect more transparency and accountability.”

For her part, Klohs at The Right Place agrees that the Amazon model of dropping a Request for Proposals online and seeking bids is certainly unique and could make for a sea change in how economic development deals get done. Whether that’s for the better or worse remains to be seen, she said.

“We were all taken by surprise that a company of that sophistication and magnitude just dropped this and took a very different way of gathering data,” Klohs said. “What we’re wondering as an economic development profession, is this the new normal or is this an exception? We don’t know that yet.”

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