Whiskey Business tickets are now on sale. Buy yours before prices go up!

Monday, March 11, 2019

People are Mad about Cleveland's $3.5 Billion Amazon HQ2 Bid for the Wrong Reasons

Posted By on Mon, Mar 11, 2019 at 8:31 AM

click to enlarge The first page of Cleveland's Amazon bid. - SAM ALLARD / SCENE
  • Sam Allard / Scene
  • The first page of Cleveland's Amazon bid.

Thanks to a lawsuit filed by WEWS Channel 5 and investigative reporter Sarah Buduson, the city of Cleveland was compelled by the Ohio Court of Claims to release the full, unredacted bid for Amazon’s second headquarters late Friday.

Much of the bid, which was completed in the fall of 2017 with input from dozens of public and private partners, had been released last year. It was then that we learned, among other things, that the local nonprofit tech startup known as The Unify Project was one of the region’s top selling points. The bid proclaimed that the Unify Project was the world’s most “broad reaching effort ever mounted” to use advanced tech to end poverty. (Nearly two years later, the Unify Project is still in “development mode” and has yet to mount anything.)

But the new, previously redacted material demonstrates the extravagant lengths leaders were prepared to go to entice the retail giant to Cleveland.



Though the bid never stood a chance — Amazon knew where it was headed all along — residents should be mindful that incentives of the sort offered to Amazon may now be offered to other corporations considering new or supplemental locations. The bid had been classified as “proprietary” on precisely those grounds.

"The content of the proposal will remain a protected business trade secret,” a statement from the economic development organization Team NEO read in January, 2018. “[It] will be deployed to benefit Cleveland [sic] in other nationally competitive economic development discussions.”

That should give us all pause, because these incentives are bonkers.

All told, as much as $3.5 billion was on the table, including more than $1 billion from the state of Ohio. For its part, the City of Cleveland was offering more than $800 million in incentives, including a 50 percent tax credit on all wages for 15 years.

Cuyahoga County offered roughly $650 million in incentives, the bulk of which entailed giving Amazon the sales tax revenue generated by the project for 20 years. Additionally, the county was ready and willing to sell $200 million in bonds to finance the construction of an energy microgrid that would give Amazon a power supply independent from the city’s primary grid. The region’s “maxed out credit card” notwithstanding, these bonds would theoretically have been paid off with “portions of future sales taxes.”

Among the more unconventional incentives offered to Amazon was a Tax Increment Financing (TIF) arrangement that literally would have given the project’s property taxes … right back to Amazon. This TIF was estimated to be worth $314 million over 30 years. In most TIF arrangements, taxing authorities allow property owners to pay off construction debt using taxes on the increased value of the property.

Cleveland State University was also in on the perk party. Per the bid, CSU offered 10 acres for what would be called “Amazon University.” Educational partners across the region would have helped develop bespoke curricula to train a local Amazon workforce.

It was previously known that the location for the proposed HQ2 site was downtown and included Tower City, but the newly available material explains the vision for a phased build-out. While nearly 900,000 square feet of prime downtown office space could accommodate Amazon’s immediate needs, the bid offered the current surface parking lots on Superior Avenue just west of Public Square, where a massive Amazon building could theoretically be constructed.

Joe Marinucci, President of the Downtown Cleveland Alliance, told cleveland.com that the city offered Amazon the most “iconic” space available, the last remaining developable land adjacent to Public Square.

Scattered downtown waterfront sites were also offered for “complementary live-work communities” on Lake Erie and the Cuyahoga River.

In aggregate, these incentives are insane. 

But the commentary from local leaders — and even the framing of the story by local media outlets — has communicated disbelief for the wrong reasons: Look at what Amazon passed up! Etc. Both Joe Roman, of the Greater Cleveland Partnership, and Cuyahoga County Executive Armond Budish extolled the strength of the incentive package and expressed dismay that Amazon would forego such a tremendous opportunity.

Never mind that these comments betray ignorance of Amazon’s “sweepstakes” scam — i.e., the tech giant managed to obtain what one national writer called a “treasure trove of non public information” from 236 American cities before locating precisely where it would have anyway — they also suggest that leaders consider this strategy valid.

But it is dangerously short-sighted.

Given that Northeast Ohio cannot compete in crucial areas, (readily available high-level talent, notably), it is forced to offer the farm in the form of outlandish financial incentives to compensate.

That’s not a sustainable model.

And while the Amazon bid is among the more extreme imaginable cases, packages of this nature, (hatched in private by mostly private leaders, with the potential to radically reshape the contours of the central business district while crippling the city and county for years into the future) are a rotten plank in the region's economic development platform.

(Enduring gratitude to Sarah Buduson and Channel 5 for taking a stand and suing the city of Cleveland for the full bid. Doing so was vital public service.)   

Tags: , , , , , , , ,

Comments (4)

Showing 1-4 of 4

Add a comment

 
Subscribe to this thread:
Showing 1-4 of 4

Add a comment

Newsletters

Never miss a beat

Sign Up Now

Subscribe now to get the latest news delivered right to your inbox.

Calendar

© 2019 Cleveland Scene: 737 Bolivar Rd., Suite 4100, Cleveland, OH 44115, (216) 241-7550
Logos and trademarks on this site are property of their respective owners.


Website powered by Foundation