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D.C. offers glimpse at how lucrative a deal it offered Amazon for HQ2

Wednesday, January 17, 2018

Washington Business Journal by Daniel J. Sernovitz

The District has offered Amazon.com Inc. (NASDAQ: AMZN) an incentives package that would far exceed the record-setting deal it offered to retain The Advisory Board Co. in a bid to win the Seattle-based firm's second headquarters.

Among the perks, Amazon could qualify for relocation reimbursements of up to $7,500 per worker that moves to D.C. and wage reimbursements of up to $30,000 per new job it fills locally with military veterans; a five-year corporate franchise tax exemption capped at $15 million; a five-year freeze on property taxes on every building the e-commerce and cloud computing firm occupies in D.C. as long as Amazon occupies at least half of that building; a 10-year exemption on personal property taxes on qualified property and equipment; and a sales tax exemption in perpetuity on its investment in qualified new purchases.

The incentives were revealed in a heavily redacted response to a Freedom of Information Act request filed by WAMU, which was obtained by the Washington Business Journal. The disclosure comes as Amazon prepares to announce later this year its pick for a new headquarters location from among 238 responses to the request for proposals it issued in September. Amazon envisions investing more than $5 billion over time in the new campus, which could ultimately grow to 8 million square feet and 50,000 employees earning an average annual wage of more than $100,000. Amazon's initial investment will be a smaller footprint of around 500,000 square feet starting in 2019.

The offer is just the starting point in what the District hopes will be more formal negotiations, provided Amazon picks the District for the requirement, said Andrew Trueblood, chief of staff with with the D.C. Office of the Deputy Mayor for Planning and Economic Development. For that reason, it's too soon to say whether Amazon will seek more specific concessions that would require D.C. Council legislation or could be granted by-right under the District's current incentives programs.

"This is an initial sizing, an initial response, and we haven't even started negotiations yet and that's when we would start to put pen to paper and figure out exactly what Amazon needs," Trueblood said.

The incentives were part of the District's larger bid response, drafted in consultation with a number of parties and consultants. Among them, the District worked with the various property owners the District identified for HQ2, the business improvement districts for those areas, and consultant Chris Ahn, managing principal at Echelon Economic Development LLC who helped craft the Advisory Board package.

The driving goal, Trueblood said, is to ensure a second Amazon headquarters in D.C. benefits the city and its residents. To that end, the proposal offers things such as Amazon University, a collaboration with the colleges and universities that could craft education programs to create a pipeline of future Amazon employees.

A major part of the District's pitch is its Qualified High Technology Companies incentive program, which DMPED used to offer the Advisory Board up to $60 million in tax breaks, provided it meets certain performance-based targets. The company will only be able to reap the full benefit of the package if it creates at least 1,000 new jobs and leases no less than 425,000 feet over a 15-year term.

Assuming all 50,000 of the employees that will ultimately work from HQ2 followed their jobs from other Amazon locations and made the District their permanent home, which almost certainly would not be the case, it could qualify for up to $375 million in relocation reimbursements.

All in, the package could likely exceed a half-billion dollars, possibly in excess of a billion, but the District blacked out sections of the disclosure that might have provided a clearer picture of the total value; nearly all of the final two pages of the six-page document have been redacted. Trueblood declined to offer an estimated value range.

 

https://www.bizjournals.com/washington/news/2018/01/17/d-c-reveals-part-of-amazon-hq2-bid.html