Nashville approves $17.5M Amazon incentive - Southern Business Review


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Wednesday, March 20, 2019

Nashville approves $17.5M Amazon incentive

The Metro Council approved a $17.5 million incentive package to Amazon on Tuesday in exchange for the 5,000 jobs the company says it will bring downtown for its new operations hub. 

The tech giant announced in November it will bring its new hub to Nashville, a consolation prize in the national sweepstakes for Amazon's coveted "HQ2." 

It's the largest single new jobs announcement in the state's history. The company plans to invest $230 million with 1 million square feet of energy-efficient office space. It would deliver $1 billion in new tax revenue in the coming decade. 

Community activists and labor union leaders have called for greater scrutiny of Nashville's deal with Amazon in the months since the company announced its move to the city. Several residents spoke in opposition to the incentives ahead of the vote Tuesday while others held signs that said: "No $$ for Amazon." 

"Be patient with this body … behind the scene we ask tough questions,” said Council member Tanaka Vercher, who sponsored the resolution. “Just because the resolution is passed tonight doesn’t mean the conversation ends tonight. When we pass resolutions the accountability doesn’t end.”

“You will still have a voice as we continue throughout this process," she said. 

The city will pay a $500-per-job incentive — up to $2.5 million every year  — for seven years. While there previously was no cap to the number of jobs the city could grant incentives, the council voted Tuesday to limit the positions to 5,000. 

“It is prudent on our part, not saying we don’t want more jobs … just that we are not going to incentivized them,” said Council member Angie Henderson, expressing that the public should know that the city is not committing beyond the $17.5 million. "If they want futher incentives for future jobs, they can come back and ask this council for that.”

The council also voted to make a request to Music City Center to offer surplus money to fund the incentives, mirroring its action earlier this month when approving a $3.6M incentive to AllianceBernstein. 

The council approved $15.2 million in February for infrastructure work around Nasvhille Yards, the downtown mega-development that's the planned home for the Amazon Hub and several other uses. 

The planned infrastructure work includes environmental clean-up in the public right-of-way, traffic signalization, street and sidewalk work at Church and Commerce streets as well as 8th, 9th and 10th avenues, the separation of water and sewer utilities and other utility infrastructure and upgrades.

Metro's $17.5 million incentive represents a small portion of the $102 million in overall incentives promised to Amazon when including the large state of Tennessee contribution. 

The state will award Amazon a $65 million cash grant for capital expenditures based on the company creating 5,000 jobs over the next seven years. That would be equal to $13,000 per job. The state will also provide an additional $21.7 million in job tax credits based on $4,500 per job over seven years to offset state franchise and excises taxes. 

Funding from convention surplus

The convention center, which is just a few blocks away from Nashville Yards, collects millions from tourist-targeted taxes and fees from the downtown area. It collected $92.4 million and $102.54 million in 2017 and 2018, respectively.

The Convention Center Authority, which operates Music City Center, recently approved another $10 million to the city's general fund next year, shouldering some of the financial burden for the crowds it has brought downtown.

Metro, which is asking for the convention center to also pay for the AllianceBernstein package, is working with Music City Center to clarify the legal mechanisms that allow for the convention center to award funds to the city.

"It's complicated," Metro Council attorney Mike Jameson said at the Metro Council's Budget and Finance Committee on Monday afternoon.

Music City Center has a minimum of eight revenue streams that is each subject to separate state laws that spell out how it can appropriate funds, Jameson said.

The center can make disbursements for tourism or convention-related purpose.

"Now is that within the context and within the spear of tourism related or is it broadly business and economic  development?" Jameson said. "We’re working with (the Convention Center Authority) to get greater clarity on those abilities."

Council member John Cooper clarified to council that the appropriations from the convention center won't take place until June 2020. 

“Should (Music City Center) decline the opportunity to invest in the city, the council could take that into account at that time,” said Cooper, discussing that surplus funds from the General Fund could be considered for the incentives. 

No disclosure on key details 

Amazon — under the “Do better” bill passed last year to strengthen transparency of Metro's economic development deals — is required to report "the type and number of jobs that will be created" and "the wages and benefits offered for the identified jobs."

While Amazon officials have promoted a $150,000 average salary, a figure that could be skewed by top-paid executives, they have yet to answer the other questions. 

Instead, Amazon states that 90 percent to 95 percent of its Nashville employees will make more than the county's median income for each occupational group.

The bulk of its Nashville workers — 3,000 out of 5,000 — will fall into the "business and financial operations occupations," the company states in its application, and it projects the vast majority of them will make more than the county's $67,370 median. But Amazon doesn't say how much more.

Thomas Mulgrew, a spokesman for Mayor David Briley, said the application format submitted by Amazon and AllianceBernstein "complies with the all Metro disclosure requirements."

"“The estimates (Amazon has) are that it be at least 40 percent Davidson County residents," Mayor’s Office of Economic and Community Development Director Matthew said, when asked by Council member Scott Davis on how many employees the company has committed to hiring locally. "Their hope is that it will be higher. They are just unsure at this point of the process.”

CEO of Communities In Schools of Tennessee Hank Clays announced Tuesday night a partnership with Amazon, to increase the number of schools in its program from six to 17, serving 7,500 Nashville students. 

“This will bring in new resources to ensure that our city's most vulnerable students can attend school every day and focus on learning,” Clay said. “They are serving our kids that need services around mental health, physical health care and other issues that keep them from school every day. 

"This shows to me that Amazon is investing in the long term health of our community and making sure that we have a very diverse workforce coming forward," he said. 

Scrutiny of Nashville's Amazon deal

Community activists and labor union leaders have called for greater scrutiny of Nashville's deal with Amazon in the months since the company announced its move to the city. 

The public push back echos opposition seen nationwide, in New York City and Arlington, Virginia, the sites that Amazon had initially selected to split its HQ2. 

Amazon stunned New York officials on Feb. 14, by canceling plans to develop a headquarters for 25,000 high-paid workers in Queens.

Critics have pointed to rallies in Minneapolis about unfair working conditions where workers said they are pressured to work long, hard hours and denied breaks.

They've also questioned what the company's presence would do for the city's growing affordable housing crisis.

Metro officials say 31,000 new low-income homes will be needed in Nashville by 2025. But state leaders blocked cities from offering inclusionary zoning development incentives to encourage new affordable housing. 

“They mistreat workers wherever they go. Rent prices increase wherever they go. Who benefits?” Julio Fernandez, an organizer with Stand Up Nashville said Tuesday night. “If New York people say no, why does Nashville say yes?

Stand Up Nashville is coalition of community organizations and labor unions

“As a city we keep doing the same thing and expecting a different result,” said Michael Callahan-Kapoor, also with the group. “It’s called trickle down economics. Head over the resources we generate to wealthy corporation and developers with a promise that prosperity will trickle down to everyone else, he said. 

“The problem is that it never does,” he said. “This policy choice only benefits a select group of rich people while the majority of us left behind or pushed out.”

Future of Nashville incentives

Meanwhile, the Metro Council is considering legislation that would prevent companies from "double-dipping" with incentive packages.

The ordinance, if passed, would limit the eligibility of companies and projects for Metro's incentives to those that have not received any other publicly funded incentives offered by the city or the state.

This would include payment-in-lieu-of taxes, tax increment financing or participation agreements providing publicly funded incentives.

Council member Bob Mendes questioned Metro's analysis that there would be no immediate impact on the Amazon incentives, citing its state award.

"Is the intention that if someone is simultaneously asking for state incentives, they would not be allowed to get a Metro incentive at the same time?" Mendes asked. "It feels too blunt of an instrument."

Vercher, chair of the Budget and Finance Committee and sponsor of the ordinance, said the her intent was to continue working on the legislation.

"Initially the intent is to having a conversion and have a holistic approach on how we do incentives," Vercher said, adding that it will likely be taken up by Metro's Blue Ribbon Commission. "This legislation came as result form many of you here from this chamber every time an incentive deal is brought before us, it creates heartburn for many of us."

The Mayor’s Office of Economic and Community Development Director Matthew Wiltshire said that in the nearly eight years working with the administraion, that just 15 of the 84 companies that have come to Davidson County after receiving state incentives, were given packages by Metro. 

“It would, as I read it, effectively prohibit this body from ever making an incentive offer to anyone, ever,” he said, adding the administration will work with council to discuss "a very important and overdue conversation" about incentives.

Several council members Tuesday night also called on city officials to make changes to how incentives are done in the city, making Nashville the model city for others to follow.

“It gives me heartburn … that (the administration) want our approval and they have not included us,” said Council member Sharon Hurt. “ The way that its done doesn’t feel good and doesn’t look good. I also think that we need to preventive measures prior to making these negotiations with corporations to make sure we don’t repeat some of the same mistakes that have been made with other cities.”

“If they had regular people at the table, I am sure they would have a better perspective on how it meet or does not meet the needs of our citizenry,” Hurt said, 

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Includes reporting by Sandy Mazza and Mike Reicher

Reach Yihyun Jeong at Follow her on Twitter @yihyun_jeong.