Amazon Local Incentives Not Worth A Revolution

Artist rendering of possible Crystal City to Reagan National Airport pedestrian bridge. Source: Crystal City Business Improvement District.  Click for larger view.

One of the self-styled revolutionaries seeking to prevent Amazon from planting its second headquarters in Arlington County complains the local incentive package offered is $23 million.  A research fellow at the Mercatus Center at George Mason University puts the total at $51 million.  The actual monetary value is elusive and still to be determined.

Both critics appear in a story from the politically-charged “news” outlet The Blaze, showing Amazon’s local incentives are national news.  So far, the much-larger state package, now approved by the 2019 General Assembly, has been the focus.  That was before a band of New Yorkers spit out their piece of Amazon Pie, inspiring Northern Virginians of similar ideological bent to step up a local battle.

UPDATE (2 p.m.):  The Arlington Board of Supervisors is set to vote on its agreement with Amazon on March 16, and here is the draft of the contract, just posted. 

While probably more than previously discussed, unless there are some deep secrets yet to surface, the local package in Virginia is a sliver of the offer from New York City: $897 million from the city’s Relocation and Employment Assistance Program (REAP) and $386 million from the Industrial & Commercial Abatement Program (ICAP).

Arlington county has assembled much of the available information about its Amazon deal on one web page.  As Amazon’s plans take firm shape more detailed projections should be possible, perhaps before the Board of Supervisors gives formal approval to the deal.  The City of Alexandria is less specific about incentives, based on what it has shared on that Arlington web page.

The revolutionaries are gearing up for a public hearing in Arlington on May 19, which is better information on timing about the local decisions than I can find elsewhere.  Arlington officials are in the middle of a long series of neighborhood meetings set to end in a few weeks, with their standard Amazon 101 presentation also on the website.

Arlington’s known incentives are mainly a share of new revenue streams which won’t exist if Amazon bails.  Some of the incentive programs have been on the books for years and are available to other local businesses.   Many of the proposed transportation assets, such as the footbridge to Reagan National Airport seen above, will help far more people than simply Amazon staff.

The $23 million figure for Arlington incentives, which has been cited in several places, is based on a single element.  The county has offered 15 percent of the incremental growth in the transient occupancy tax (TOT), to be provided to Amazon as a grant for 15 years.  Any headquarters operation will be filling up hotel rooms and other short-term rentals.  The $23 million estimate could be off in either direction.

The $51 million figure apparently includes that TOT rebate plus $28 million from another source tapping into expected tax growth, a tax incremental financing (TIF) district.   The TIF district has been around since 2010, dedicating 25 percent of the revenue growth to infrastructure projects.  The county is offering to hike the take to 50 percent.  Again, that $28 million additional revenue over 10 years could easily be a low estimate.

According to the incentive package description, Arlington had $360 million in transportation improvements already in its plan for those areas, with $215 million committed and $145 million more being sought.  Elsewhere Alexandria mentions $330 million.  The transportation proposals were described in more detail in an Arlington Now article Monday.  Perhaps the TIF revenue goes there.

There are two other major incentives mentioned in the county’s document, both of which already exist. Arlington offers discounted rates for its Business, Professions and Occupations License (BPOL) Tax for companies setting up in a defined technology zone, if the activity is “creation, design and/or research and development of technology hardware or software.”

For a company with more than 1,000 employees the tax on gross receipts from those tasks drops from 36 cents to 10 cents per $100 in taxable revenue.  That’s a tax break of $2,600 per $1 million in revenue, or $2.6 million for each billion, a reduction available for ten years.

Just how much taxable revenue is Amazon going to have sourced to that location, from those activities? That will be the fun part, figuring out what revenue from the multi-national behemoth gets sourced to National Landing.  That will also be important for state tax purposes, as well.

The county offer package also mentioned financing support for investments in energy efficient buildings under the county’s Commercial Property Assessed Clean Energy program (C-PACE).  It is easy to imagine all the new buildings at least will be LEED Silver.

“With C-PACE, building owners receive up to 100 percent financing for existing building projects or 20 percent financing for new construction projects – for soft costs (energy audits, for example) and hard costs (equipment) – with attractive repayment terms consistent with the useful life of the improvements (up to 25 years).“  Again, whether Amazon would even care about such an opportunity is not clear, nor is the marginal value of the benefit.

Other portions of the basic document discuss the county’s investments in affordable housing (with a top range income target of $135,000) and promises to expedite the planning and approval process and help with employee relocation.  Arlington seems to be simply moving forward with previous housing plans, while Alexandria commits to add $1 million a year to that process.

Alexandria’s incentive discussion focuses on the Virginia Tech Innovation Campus, mentioning but not promising local property tax breaks, tax exempt bond financing and possible direct financial support. No specific dollar figures are mentioned with everything apparently still to be negotiated when this material was put out.

For both localities the local incentives appear minor and without local risk.  Arlington will see no additional transient occupancy tax without Amazon.  The TIF revenue on the property tax likewise won’t materialize without the project and is going to public facilities, not Amazon.  There may be major BPOL tax breaks on tech development work at the new location, but any other company inside the zone could seek the same benefit.

Hardly the stuff of revolution.

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22 responses to “Amazon Local Incentives Not Worth A Revolution

  1. I think the opponents are asking WHO benefits from Amazon and who gets harmed.

    Sure – the state and local govt will get more revenues… but in the end – just as with New York – people are challenging whether or not people who already live there – will benefit or get harmed.

    Will Amazon increase congestion? Will Amazon increase the price of housing and make it less affordable?

    These are not unreasonable questions and yet the responses to them seem to be that there are “lots” of incentives… almost as if the “incentives” are the answers to these questions!

    😉

    So the State and local taxpayers are going to pay for the “incentives” that are supposed to mitigate congestion and housing affordability?

    I’m sorry. I LIKE the “idea” of Amazon but we’re all fools if we don’t actually deal honestly with some of these questions.

    Oh.. and Mercatus is hardly the bastion of anti Capitalist leftists!

    Bonus “Oh” – is this also the time to talk about all those restrictive zoning policies that hurt black folks owning homes?

  2. Restrictive zoning in Arlington? That would be news….

    I didn’t flat say it, but I’m still persuaded Amazon was coming somewhere near DeeCee anyway, so yes, it makes sense that the focus is on mitigating the impacts on the greater community, most of which – again – would be the same with any major employer bringing growth to that attractive location.

    • BINGO!!!!

      Plus rebuild Arlington County into its original sustainable Nacotchtank village, Nameroughquena, of a few too often miserable pagans living in huts of grass woven into mats.

  3. I think New York should banish banks, financial firms and stock exchanges from Wall Street and nearby areas. Just vote them out of town. Send them elsewhere. After all, the overpaid employees and executives of these firms drive up housing prices, add congestion to already crowded streets, etc.

    Meanwhile, the citizens of DC, NoVa and the DC suburbs of Maryland should officially petition the government to move the national capital elsewhere. Think of how much more affordable housing there would be in Arlington if the federal government was in Kansas City.

    Liberalism truly is a mental disorder.

  4. Just to be clear – no major urban cities are run by Conservatives. Liberalism and urban productivity and success seem to go hand in hand.

    Having said that – we also need to acknowledge that urban areas need service workers to function and in turn places for them to live. They’re not going to live in penthouse apartments for sure – but there needs to be
    places they can reasonably afford that is close “enough” to where they work.

    Right now – we have congestion hell on most interstate highways in our region – primarily because NoVa workers cannot afford to live in NoVa and so they commute 50-100 miles a day – at rush hour – and in doing so -everybody’s life – even those that live in NoVa has become a living hell.

    Does anything really think that Amazon will move in and things on the housing and transportation front will “improve”? ‘

    I don’t have a problem with the incentives per se – which seems to be a problem primarily with Conservatives not liberals – you pay the money to get the jobs – but how much more congestion and less affordable housing do you also give up?

    “un” Liberals don’t seem to care much about any of this – it’s the “principle” of the incentives that sticks in their craws… the rest is okay because it is “the market”!!! Make no mistake – Conservatives do not govern urban areas – they are temperamentally unfit to perform that job!

    • “Right now – we have congestion hell on most interstate highways in our region – primarily because NoVa workers cannot afford to live in NoVa and so they commute 50-100 miles a day – at rush hour – and in doing so -everybody’s life – even those that live in NoVa has become a living hell.”

      Absurd. DC is not America’s most expensive city and the Washington Metropolitan Area is not America’s most expensive region.

      https://www.usatoday.com/story/money/economy/2018/09/12/cost-live-america-most-expensive-cities/37748097/

      NoVa traffic is a mess because The Imperial Clown Show in Richmond is dominated by rural Republicans whose idea of the modern world ended with the last episode of the Dukes of Hazard. These so-called politicians funnel vast amounts of money out of NoVa to support hopelessly flawed economies in rural and small city Virginia.

      • that’s funny DJ – you’re blaming Richmond for NoVa traffic – like you guys play no role in it that Richmond is the fault!

        You say money is the problem. You guys just got a regional tax – and all that money stays in NoVa.

        the money that goes to RoVa is a drop in the bucket… compared to what you guys get.

        Let’s assume you could get more money. What would you spend it on? I just don’t see what else you’d build – and where … would you make the beltway 24 lanes or 395 20 lanes or build more bridges to DC?

      • well, I never claimed NoVa was the most expensive city. I asked about affordable housing and why so many of your workers have some of the longest commutes in the country to exurbs 50 or more miles away – not only Fredericksburg but Caroline county, Culpeper , Facquier and even counties in West Virginia.

        Bacon keeps talking about restrictive zoning practices being the cause of less housing and less affordable housing. My impression is that Arlington is about as LIBERAL as cities come – right? So you’d think they would be much more tuned in to the need for affordable housing … and because of that -holding Amazon’s feet to the fire to not end up with less affordable housing… that all seems to be in Arlington’s court not Richmond, no?

      • “The money that goes to RoVa is a drop in the bucket… compared to what you guys [in NoVa] get.” Now there’s a piece of BS if I ever heard it. Northern Virginia pays a disproportionate share of the transportation budget; then the State allocates those dollars to RoVa’s Dukes Of Hazzard counties, under skewed formulas for education and transportation and whatever; then NoVa – in desperation for some sort of effective traffic relief construction that the State otherwise won’t pay for – pays A SECOND TIME in the form of dedicated taxation to improve NoVa’s own roads; and you call this a DISPROPORTIONATE BENEFIT TO NOVA? No, that’s called regressive redistribution of the State’s economy; and the next census hopefully will put a substantial damper on it. Do you imagine, Larry, that Spotsylvania, any more than Loudoun, has net-positive Virginia taxation-to-revenue flow? But check out Surrey, or Grayson, or Lee!

        • re: ” Northern Virginia pays a disproportionate share of the transportation budget; then the State allocates those dollars to RoVa’s Dukes Of Hazzard counties, under skewed formulas for education and transportation and whatever;”

          is that something you can point to – to prove it or is it a perception or belief?

      • And Larry, you mention holding Arlington’s feet to the fire on affordable housing. As noted here many times, affordable housing is primarily a casualty of restrictive zoning practices — huge lots, ridiculous setbacks, inadequate road grid, inadequate densities to support public transit — in the suburbs. Arlington is built out and essentially urban. If someone wants to live inside the Beltway in Arlington or adjacent Falls Church or Fairfax, let alone even denser Alexandria, of course they expect to pay more than in Prince William or Loudoun; even so those inner jurisdictions including Arlington have managed to set aside and budget for substantial subsidized and designated low income housing. But what is Prince William or Loudoun doing about affordable housing? Electing reactionaries like Corey Stewart, that’s what.

        • @Acbar –

          “restrictive” zoning policies in the suburbs? Au Contraire!

          If that were true – then why are all these folks commuting from their NoVa jobs 50 miles south to the Fredericksburg area?

          Our problem is that we have much lower taxes and land for development is freely available and easily zoned!

          What Jm is talking about when he says restrictive policies is places like NoVa – that make homes much more expensive and drive them to Fredericksburg for “affordable” homes.

          Now, there is a problem with the word “affordable” because service workers “affordable” is not the same as GS-14 govt worker “affordable”. They’re different things.

          but I’ve heard a lot of talk about “restrictive” but I’ve never heard it precisely quantified in terms of specifics as to what restrictions cause which shortages – and ranking cities according to restrictive policies and affordability.

          Seems like you should be able to quantify each type of restriction and generate a number as to “loss” of potential homes and do that for major cities then rank them according to whose policies are less restrictive and the result – more houses at lower costs.

          But what we get is a generic claim of causation without ever really getting to real data… If we had real data – we could develop “model” zoning ordinances for “affordability” just like we develop “model” ordinances for other desired things.

  5. https://arlington.granicus.com/MetaViewer.php?view_id=2&event_id=1355&meta_id=184229

    I just put an update in the text. The Arlington BOS will vote on the Amazon MOU on March 16. The county today posted a draft of that MOU, linked at the above address.

  6. “I don’t have a problem with the incentives per se – which seems to be a problem primarily with Conservatives not liberals”

    Huh? What happened in New York/Brooklyn when it lost Amazon?

    • wat happened in New York was not about the incentives – it was about impacts… right?

      ” The opposition to the project united an array of advocacy groups, elected officials and activists rallying over concerns about affordable housing, infrastructure, environmental causes and labor. ”

      https://www.washingtonpost.com/nation/2019/02/14/how-amazons-big-plans-new-york-city-were-thwarted-by-citys-resurgent-left-wing/?utm_term=.97e8cd7b9dab

      and that’s the same issue with left-leaning activists in Arlington.

      Conservatives, on the other hand, tend to be opposed on the grounds of the subsidies and incentives… not things like affordable housing.

      • “wat happened in New York was not about the incentives – it was about impacts… right?”

        No. Larry, if you read the comments from people like Rep. Ocasio-Cortez (and others), you can see that they directly challenge the incentives. Granted, New York was offering more of a sweetheart set of incentives than Virginia, but the incentives were definitely challenged.

        • Likely for good reason. On the basis of a cursory look, NY and NYC did a very poor job of creating incentives built into the dynamics of the deal that made it work more efficiently to create value to state and city that would have been otherwise potentially lost or under-realized. Virginia did reverse, their incentives juiced the deal greatly, in my view.

  7. re: ” Arlington is built out and essentially urban. If someone wants to live inside the Beltway in Arlington or adjacent Falls Church or Fairfax, let alone even denser Alexandria, of course they expect to pay more than in Prince William or Loudoun; even so those inner jurisdictions including Arlington have managed to set aside and budget for substantial subsidized and designated low income housing. But what is Prince William or Loudoun doing about affordable housing? Electing reactionaries like Corey Stewart, that’s what.”

    Jim B claims that Arlington could have a lot more affordable homes if it had less restrictive zoning policies – and in doing so – people would not have to commute to the suburbs.

    I keep asking him to define which policies – specifically because I’m a heavy skeptic that the average person who commutes to Fredericksburg for a typical subdivision home – is going to find that home in Arlington for cheap no matter how loose their zoning policies.

    Fredericksburg does not have that problem. You can get 3 or 4 times as much house in Fredericksburg for the money that you can in NoVa.

  8. In answer to Larry’s question about the connection between restrictive zoning and unaffordable housing…. Larry, let me introduce you to the concept of supply and demand. Restrict the supply of a certain commodity and hold the demand constant (or let demand increase), and the price of that commodity will increase. Larry thinks that law magically suspends itself when it comes to thinks like zoning laws, housing, minimum wage and other things that liberals like.

    Over the years, I have cited numerous studies on this blog documenting the strong connection between restrictive zoning and housing costs, and I don’t have the energy to re-hash them now. In all likelihood, you’ll just say, well, that was a Cato Institute study or a Reason Foundation study, consider the source, and you will continue to believe what you want to believe.

    For others who wish to pursue the subject, here are a few Bing citations to get you started:

    Study: Anti-sprawl laws big role in unaffordable housing …
    oregonbusinessreport.com/2019/01/study…laws…unaffordable-housing
    Additionally, existing and new programs for addressing housing affordability rely on other regulation and spending programs that will not have the designed effect of providing affordable housing. This study strongly recommends, instead, relaxation of regulations that limit the land area available for housing development.

    Zoning, Land-Use Planning, and Housing Affordability …
    https://www.cato.org/publications/policy-analysis/zoning-land-use
    Zoning, Land-Use Planning, and Housing Affordability … from housing affordability problems. This study uses regression analysis to examine the link between housing prices and zoning and land-use …

    Zoning restrictions are making housing unaffordable and …
    https://www.illinoispolicy.org/zoning-restrictions-are-making
    Zoning restrictions are making housing unaffordable and shrinking the middle class in Chicago. Bad zoning laws drive up the cost of home ownership and put a middle-class lifestyle out of reach for …

    Why Middle-Class Americans Can’t Afford to Live in Liberal …
    https://www.theatlantic.com/business/archive/2014/10/why-are
    I asked Kahn if he had a pet theory for why liberals, who tend to be vocal about income inequality, would be more averse to new housing development, which would help lower-income families.

    Growth boundaries, regulation help keep housing unaffordable
    https://pagetwo.completecolorado.com/2018/07/10/growth-boundaries
    All over the country, unaffordable housing is associated with similar rural land-use restrictions. Major cities California, Oregon, and Washington have drawn urban-growth boundaries. Montgomery County, Maryland relies on conservation easements to prevent urban expansion.

    [PDF]Zoning Barriers to Manufactured Housing
    landuselaw.wustl.edu/Articles/Article Final_ Zoning Barriers.pdf
    Zoning Barriers to Manufactured Housing … ports show a growing increase in excessive rental costs and housing prices that make housing unaffordable for a significant number of … COMMISSION ON HOUSING 204 (1982) (noting zoning restrictions and concluding that “[e]xclusionary zoning provisions based on type of manufacture are arbitrary and …

  9. Oh Jim, I’m totally familiar with supply and demand – which can and does happen – with and without restrictions whether it’s housing or gasoline or kumquats.

    And I do not rule out your basic premise.

    But what I AM saying is that you’re making (again) an unsubstantiated claim without real evidence to prove your point.

    Because if you really did provide evidence – we could see WHAT specific “restrictions” actually cause how much shortage which would allow us some important things.

    First, it would allow us to identify the urban areas that have MORE affordable housing BECAUSE of less restrictions.

    And that would allow us to actually RANK cities according to how well they release restrictions and end up with more affordable housing.

    Finally, it would allow us to develop model ordinances that would point cities to best practices for zoning so that they could be judged by voters and others on that basis.

    What you are providing is CLAIMS of it – not empirical data that supports or proves it and that’s my complaint and challenge to you!

    Provide real evidence not just assertions from various sources – none of which are actually providing real data – evidence to prove the point.

    Finally – “affordable” housing for well-paid folks who commute 50 miles to a traditional subdivision for the kind of house they want that would cost 4 times as much nearer to their job is NOT the same kind of “affordability” issue for much more basic apartment-type housing for service workers.

    In other words – it’s LAND availability that drives up costs for traditional single family subsdivisions and most urban areas are simply pretty much OUT of that kind of land. It’s not caused by govt restrictions – it’s a simple matter that raw, greenfield type land is pretty much exhuasted in SUPPLY.

    That’s a totally different issue than apartments and that kind of housing for people whose income is much lower and much nearer to minimum wage and even if those folks lived in rural areas – where there is plenty of land available – they still live on the margins because minimum wage is simply not enough to pay for even minimal housing.

    So – here’s the bottom line –

    If what you claim is true – then where is the REAL evidence of it – actual data that shows a correlation between specific practices and affordability?

    Don’t you think if your premise is true that there would be at least SOME places with less restrictive zoning and the result would be more affordable housing? Can you point to some places like that – that you’d advocate other places – like Arlington – to produce more affordable housing?

  10. Jim – go to your link for CATO where they claim they are using “regression analysis” to prove their assertion.

    Regression analysis is a reliable method of determining one or several independent variables’ impact on a dependent variable

    but they’re not doing that at all.

    They list out the “restrictions” but nowhere do they establish a correlation between each practice and it’s effect on supply.

    They just hand-wave their results – which is done on a STATE basis not a locality basis.

    Now you tell me how a STATEs zoning practices work at local levels – because they sure did not.

    So apparently the CATO study presumes the “restrictions” are done at the State level.

    This is the kind of foolishness that pervades issues like this and the supposed “Think Tank” “studies” which are just plain bogus.

    So – did you actually go read that article? How about doing that and then come back and explain it and why you think it is valid.

    Thanks.

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