To convince Amazon to locate its second North American headquarters in the Sacramento region, local officials put together an elaborate package of architectural drawings, produced a virtual reality video and purchased a 30-second radio ad in Amazon’s hometown of Seattle asking for a meeting with CEO Jeff Bezos.
But the core of the bid was a financial incentive package likely larger than any other produced in the Sacramento region.
Local governments offered more than $500 million in job grants, land donations and infrastructure financing to lure Amazon. Despite those offers, Sacramento was not among the 20 finalists for Amazon’s HQ2, losing out to cities and states willing to spend even more to recruit the online retail giant. More than 200 cities bid, seeking to land Amazon’s promise of 50,000 jobs and a $5 billion investment.
Though there are few companies like Amazon, the details shed light on how far local officials are willing to go to attract a high-caliber private employer and offer a blueprint for future bids. They also show how cities within the region might stack up against one another if they have to compete for the same company.
Despite losing out, Sacramento-area officials said they were pleased their effort received national attention. Sacramento was named a dark horse candidate by several online publications. Amazon officials called Greater Sacramento Economic Council CEO Barry Broome after choosing finalists and told him the company was impressed with the bid, Broome said.
“I was really disappointed and I was really surprised” Sacramento was not a finalist, Broome said last week, sitting in a conference room of GSAC’s 25th-floor office on Capitol Mall. “They obviously weighed incentives heavier than I thought.”
The largest local incentive was offered by Elk Grove, where economic development officials put together a package worth $281 million. Elk Grove pitched a 267-acre site in the southern part of the city along Kammerer Road that has been zoned for corporate office development and has the required environmental and design reviews already in place, said Darrell Doan, the city’s economic development director.
Elk Grove’s incentive package included a $110 million job creation grant that would offer a $2,200 subsidy for each of Amazon’s promised 50,000 jobs. Elk Grove was also willing to fund $100 million in infrastructure and defer $71.5 million in development fees. Most of it would have required City Council approval.
“In very unique situations, where the economic benefits are off the charts, it makes business sense to make that investment,” Doan said. “That’s the key word. It’s an investment in the future of the city. We’re going to be aggressive and, rightly or wrongly, that includes incentive packages. We try to be smart about it. If you create the jobs that benefit our city, we are willing to talk.”
West Sacramento’s bid was “probably our most compelling,” Broome said. Architectural drawings of a new Amazon headquarters in the Bridge District, along the banks of the Sacramento River, showed a series of gleaming skyscrapers. The city of West Sacramento partnered with Bridge District developer Fulcrum on its proposal.
Besides its impressive graphics and the district’s proximity to downtown Sacramento, the West Sacramento plan also came with more than $180 million in incentives.
The city has already approved a tax increment financing district for the neighborhood, meaning a share of property taxes generated by new development in the Bridge District are spent on infrastructure and other public projects. In the case of Amazon, that contribution was expected to reach an average of $9.1 million a year over 20 years for parking structures, streets, sidewalks, utilities, transit facilities, parks and public art.
West Sacramento City Manager Martin Tuttle said it was disappointing the Bridge District wasn’t a finalist.
“But I think we showed well and this is a long-term effort,” he said. “If not Amazon, it will be someone else. It’s only a matter of time.”
Roseville was willing to donate land to Amazon worth over $39 million, according to its proposal. The city offered an 11-acre plot on Conference Center Drive near the Westfield Galleria and 160 acres on Phillip Road on the city’s western border.
The city of Sacramento pitched two locations: the downtown railyard and the site of the former Sleep Train Arena in North Natomas. The railyard was touted as an innovation district with strong fiber bandwidth capacity. City officials also promoted the district’s location in the urban core, proximity to recreational amenities, and direct access to light rail and Amtrak.
The city was offering a job creation subsidy and wrote in the GSAC proposal that “projects similar to Amazon could see anywhere from $13.4 million to $16.7 million over 10 years.” The City Council recently approved an incentive offer for Fortune 500 health care company Centene that could provide up to $13.5 million to the company if it builds a headquarters in North Natomas and meets job creation benchmarks.
While significant, the incentives offered here were far smaller than in many regions chosen as finalists.
New Jersey offered up to $7 billion in tax credits if Amazon builds its campus in Newark. The governor of Maryland is expected to offer $5 billion to lure the company to Montgomery County, outside Washington, D.C.
Incentive deals worth at least $1 billion are also being floated in Columbus, Philadelphia, Chicago and Atlanta.
University of the Pacific economist Jeff Michael said the level of incentives offered locally were significant, “but everything about (the Amazon bid war) was unprecedented. The scale of investment they were talking about was just so beyond the magnitude of what we’ve seen.”
The deals that cities here offered may have been worth it, Michael said. There was little risk in making the offers, considering Sacramento was considered a long shot. And Amazon was offering to bring thousands of jobs and invest billions of dollars in the winning region – an amount that could support an argument for offering the level of incentive floated by Elk Grove and West Sacramento.
Still, Michael cautioned that large incentives can have adverse impacts. “You’re creating employment opportunities not just in your community but in nearby communities,” he said. “Sometimes, it can be difficult for cities to recapture all of that.”
Michael said there’s also a matter of fairness: Most job generators are homegrown and “it can be unfortunate if smaller businesses and other types of employers don’t have the same capacity to get these incentives from communities.”
And, as income inequality continues to grow, “some people are starting to point to increasing monopolies of power and concentration of wealth as a cause. Are (incentives) another mechanism through which this can occur?”
Broome said there was far more to Sacramento’s bid than incentives. He said he tried to sell Amazon on Sacramento’s access to tech-savvy talent. He said more than 100,000 Sacramento-area residents work for Bay Area companies, suggesting thousands of local residents already work in the tech industry. He also pointed out that Sacramento is more affordable than Seattle, has a younger population and has 16 direct flights a day to Amazon’s hometown.
“I’m not a big fan of throwing incentives around, I don’t think you build an economy around incentives alone,” he said. “But you want to be able to compete on things that really matter to you. If somebody can change your entire trajectory as a market or open you up to economic benefits in a way you can’t do on your own, you need to have the capacity to compete on that.”
Broome and others said they intend to use the Amazon bid – including the incentives – as a foundation for trying to lure other major corporations to the region. Apple recently announced plans to build a second headquarters and Sacramento is expected to bid on the project, even though the company has already said it won’t build the facility in California or Texas. Broome said he expects more companies to conduct public bidding wars for headquarters, given the attention the Amazon sweepstakes drew.
“We are constantly running what we call a familiarization and awareness campaign, and this will be the template,” he said.