In an effort to convince Amazon.com Inc. to operate a second headquarters in Detroit, the state of Michigan is offering extensive tax breaks for three decades, according to a proposal submitted to the online retail giant in October. That would be in addition to $106 million in taxpayer subsidies from Windsor, which is also part of the pitch.
A letter accompanying a 242-page spiral-bound proposal reads like a sales pitch in which Dan Gilbert, head of the Amazon bid committee, says Detroit offers the “lowest prices” and overall cost structure, “biggest selection” when it comes to real estate downtown and “fastest delivery” meeting the company’s office requirements.
“The road has been paved for Amazon,” Gilbert said in the letter dated Oct. 19. “There is no better place for you to innovate and continue to improve the delivery of your customer experience.”
As a financial incentive, the state of Michigan, Wayne County and the city of Detroit have made available to Amazon an incentive package that would include the Michigan Thrive Initiative and Good Jobs for Michigan programs. The dollar amount for the incentive package was redacted from documents obtained by The Detroit News on Wednesday.
The programs would allow Amazon to capture 100 percent of the state personal income tax paid by its employees within key development sites for the first 10 years and an additional 50 percent for the next 10 years. Under the Renaissance Zone Program, Amazon’s real estate and personal property tax would be abated, as well as the City of Detroit corporate income tax and utility users tax for 30 years.
The book and a nine-page summary were the result of a collaboration among business, civic and political leaders throughout Southeast Michigan, as well as Windsor. The group, led by Gilbert, worked five weeks to prepare the proposal.
Detroit Mayor Mike Duggan tapped Gilbert for the role shortly after Amazon announced plans to invest $5 billion and create 50,000 high-paying jobs averaging $100,000 a year in a second headquarters that Amazon calls “HQ2.” Company officials say the new site would approximate its Seattle campus.
“I think one of the strongest aspects of it is we have a regional and bi-national proposal which really addresses the long term needs of Amazon,” said Sandy Baruah, president and CEO of the Detroit Regional Chamber of Commerce. “I think we did a great job with the intel we got of what they’re looking for. What we know they wanted for this initial review, we think we nailed it.”
According to Amazon, it received 238 proposals from cities and regions throughout North America by its Oct. 19 deadline. The final site selection will be announced next year.
Baruah said he expects Amazon to release a list of finalists from 10 to the high teens by early next year – and for the Detroit region to be on that list.
Details of Detroit’s proposal with the theme “Move here. Move the world.” were closely guarded until this week when Crain’s Detroit Business reported on a copy it had obtained.
The nine-page executive document summarizes the pitch, focusing on Amazon’s preferences in its request for proposals. Among the criteria Amazon sought were labor and business services, cost of doing business and ease of transportation.
The proposal highlights downtown Detroit as a walkable campus in the heart of a major American city. It plays up the two-nation component of the pitch, stating that Detroit and Windsor have committed to operating a ferry that would provide nearly door-to-door service between riverfront offices on both sides of the international border.
The proposal promises to meet aggressive timetables, with proposed sites including 3.2 million square feet in existing buildings, 1.3 million square feet of development projects already underway and 91 acres of development sites that could be planned and permitted. As Gilbert has previously stated, the proposal notes that Bedrock would be willing to move tenants that are within its family of companies to make space for Amazon.
Mass transit is thought to be a weakness for Detroit. The proposal counters that Detroit roadways have ample capacity to absorb additional traffic.
“We address things we have done, like the QLine, and plans going forward to have a more robust transit network,” Baruah said.
After reviewing the summary, Patrick Anderson, CEO of East Lansing-based Anderson Economic Group, said he thinks Detroit could appear on Amazon’s short list. This fall the business consulting group ranked Detroit 32nd out of 35 metro areas, mainly because of its uncompetitive mass transit.
“I’m pleased to see they put together a very strong bid that accentuates Michigan’s strengths,” Anderson said. He points to a reasonable cost of doing business, trained workforce, proximity to research universities, access to an international border with Windsor and an excellent international airport.
“The reason I think Detroit has a chance is because we have the other elements that are more important than having mass transit,” he said.
Anderson said the state’s offer of tax incentives is appropriate given the potential investment. He notes that other states are competing with similar incentives.
“This would not be a wasteful use of tax benefit resources,” he said. “We should using tax incentive to sweeten the pot, but not complete subsidize the operation.”