Amazon's art deco building in Seattle. Phoenix failed to convince Amazon to pick us as the location for the company's second headquarters.EXPAND
Amazon's art deco building in Seattle. Phoenix failed to convince Amazon to pick us as the location for the company's second headquarters.

What Phoenix Promised Amazon to Woo HQ2

When Amazon announced it was taking pitches from cities to become the home of Amazon’s second headquarters, Phoenix eagerly jumped into the fray. But the city downplayed any specific incentives it promised Amazon in return for the tech jobs, economic development, and caché associated with luring the online shopping-and-streaming giant.

Through a public records request, Phoenix New Times obtained documents that show how Phoenix’s Office of Community and Economic Development sought to win over Amazon using some fairly significant public-sector incentives that appear targeted to the company's bottom line. The details have not previously been released publicly.

Local incentives on the table included a 20-year tax-sharing agreement as well as a recommendation to the City Council that Phoenix invest in the public infrastructure required for Amazon's mammoth project. At the same time, Phoenix offered to pay Amazon for certain eligible jobs created in Phoenix a result of the second headquarters.

However, as for the specifics of the tax rebate — arguably the biggest giveaway that Phoenix dangled in front of Amazon — the city doesn’t want you to know. Citing other business prospects that Phoenix is attempting to woo, the city redacted the portions of the incentives document. In all likelihood, the redactions obscure the specific tax rebate rate that we offered to Jeff Bezos and Co.

It's all somewhat ironic considering that Phoenix was unsuccessful in the end. Last month, Amazon released a 20-city shortlist, which included no Arizona cities. Phoenix said Amazon should build at the Park Central Mall complex near downtown Phoenix; Tempe suggested the company look at land near Arizona State University. A trio of West Valley cities also submitted bids.

“I never like to lose,” said Christine Mackay, Phoenix's director of community and economic development. “I’m a highly competitive person, and that broke my heart. I wanted a tour.”

Phoenix, like other cities in the Valley, first submitted information to the Greater Phoenix Economic Council, which fine-tuned the pitches. The Arizona Commerce Authority then finalized the proposal before it submitted the Valley’s package to Amazon.

We now know these are the key components of Phoenix’s pitch to Amazon:

Tax-Sharing Agreement

A 20-year tax-sharing agreement would have allowed Phoenix to rebate a percentage of taxes to Amazon. In theory, the company would then invest that money in the Innovation District and other areas of the city.

The exact tax-sharing rate isn't laid out in the document, but those details are probably what the city redacted. Assistant to the Director of Economic Development William Bessette explained in an email, “Disclosure would violate the best interests of the City, as it would jeopardize the City’s ability to bring these prospects to Phoenix.”

(Bessette and others in the Office of Community and Economic Development did not immediately respond to questions as to why the city’s future business prospects supersede Arizona public records law.)

City Hall evidently felt that our local representatives were fine with tax dollars going into Amazon's pocket for the company to invest in downtown Phoenix as it saw fit. From the incentives document: "This item is based on City Council approval at a future public meeting. However, our elected officials have been briefed, and are extremely supportive of this program."

The incentive structure of Phoenix's proposal was "designed to augment offerings at the state level," according to the document.

Some important context: Various states and cities offered huge tax incentives for Amazon's HQ2. New Jersey floated an insane $7 billion in tax incentives and California ponied up $300 million in tax breaks. It makes Phoenix's tax giveaways seem small in comparison, and Phoenix's tax-sharing proposal is cleverly designed to encourage Amazon to pour that money back into the city's much-touted "innovation district" downtown.

But 20 years for a tax-sharing agreement is a long time. We also don't know what would've happened during negotiations or when Amazon took the reins on how to spend those dollars.

Moreover, this is after the incentive discussion was repeatedly downplayed or marked as confidential. Chris Camacho of the Greater Phoenix Economic Council told the Arizona Republic during the proposal phase that the Valley's pitch "will have a comprehensive evaluation of market value as opposed to a big incentive package.”

Arizona probably didn't want to give other states an edge in the competition, so all parties involved stayed mum on these incentives. But when your city invites a tech company to dinner, it's important to know what's on the menu.

Fast-Track Plan Review and Permits

Phoenix offered to roll out the red carpet for Amazon's project when it came to construction permits and annual review. "We are committed to working with your design and construction team to identify the occupancy date and intend to utilize a combination of these programs to ensure your project timeline is met," the proposal states.

The city explained that "self-certification" in an expedited permitting process "virtually eliminates traditional plan review."

Payments to Amazon from a Strategic Job Fund

Although it required City Council approval, Phoenix was prepared to negotiate payments to Amazon tied to the number of jobs created at the headquarters. "There is no cap on the fund, however it is based on the number of jobs meeting a negotiated, eligible salary," according to the pitch document.

Amazon would receive payments one year after it hired employees for these eligible positions. Phoenix explained their giveaway in the pitch by citing the costs associated with hiring the right people for a desired company culture.

"While we cannot guarantee the outcome, it is important to note that City Council has been extremely supportive of creating quality jobs in the Community," the document says. "We will be happy to pursue this confidentially with our elected officials at your direction."

During the HQ2 bidding war, Amazon said that the winning city can expect up to 50,000 well-paying jobs.

Investment in HQ2-Related Infrastructure

According to the pitch, if Amazon picked Phoenix, the city would recommend to the City Council that they invest in the public infrastructure needed for the second headquarters. "The final determination requires a site plan and a detailed overview of the public infrastructure required."

Like the aforementioned payment based on jobs created in Phoenix, this one would have required the Council's stamp of approval.

Workforce Development Programs

Phoenix emphasized its in-house team of workforce development staff who said that Amazon could take advantage of federal funds and grant programs that subsidize companies that train employees. Under one such program, employers can get reimbursed for up to 50 percent of an employee's wages, with certain conditions, as long as the employee is taking advantage of on-the-job-training.

Amazon employees who relocated here also could have looked forward to in-state tuition at Arizona universities, the pitch stated.

Quality of Life

Parks, coffee bars, and restaurants were all a part of Phoenix's proposal to Amazon in hopes of luring a young tech crowd. Elements of the proposal include maps of breweries, coffee shops, and nightlife options. Phoenix also included information on hiking, golf, and parks.

Another page of Phoenix's pitch showed apartment locations in one and three-mile rings around Park Central Mall, the proposed location of HQ2.

The city also listed crime stats, sustainability goals, and "smart city" bona fides.

Transportation

Another lengthy part of Phoenix's pitch had to do with transport by air, bus, and rail, something that was reportedly a top priority for Amazon when selecting HQ2.

Phoenix shared the number of weekly flights from Sky Harbor to other major airports along with a ranking that showed Phoenix's congestion relative to to other cities.

Phoenix also laid out the Transportation 2050 plan and its implications for the city. "By 2023, you will be able to board Valley Metro Rail from Baseline Road, travel to a concert at Talking Stick Resort Arena in downtown Phoenix and complete the evening in north Phoenix at destinations around Metrocenter Mall," one page of the proposal says.

A spokesperson for GPEC said that the organization signed a nondisclosure agreement with Amazon and could not release any elements of the Arizona package.

Representatives for the economic organization and for Phoenix had hoped the warm weather could sway Amazon from what most analysts said was a foregone conclusion of an East Coast location. Amazon’s headquarters is in Seattle, so it wouldn’t make much sense for the company to build in the Southwest when the mothership is in the Pacific Northwest.

During their postmortem, officials identified outdated perceptions about Phoenix as something that hamstrung their pitch to Amazon. It rings true — "tech hub" isn't the average person's first thought when you mention Phoenix.

"We’ve been moving so quickly in our business growth that we overlook the fact that that national perception of the antiquated Arizona needs to change," Mackay said. "We thought it had changed more significantly than apparently it has.”


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