Economic Development, Human Resources, and Real Estate

Amazon bid reveals area’s weaknesses

Economic development agency’s 108-page proposal included three possible sites for Amazon HQ, with the greatest package worth $2.6B.

March 9, 2018
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Amazon Proposal
Talent and transportation emerged as stumbling blocks to Amazon's desire to locate in West Michigan. Courtesy The Right Place

West Michigan has some work to do if it wants to attract a major employer to the region.

The Right Place Inc. last week revealed details regarding its attempt to lure Amazon’s second U.S. headquarters to Grand Rapids and speculated financial incentives had very little to do with the retail giant’s decision to leave this region off its list of finalists.

Instead, talent and transportation emerged as stumbling blocks to Amazon’s — and potentially any other firm’s — desire to locate in West Michigan.

Right Place President and CEO Birgit Klohs said she believes the biggest reasons that kept West Michigan from being considered are talent and transportation. She noted the tax structure did not appear to be a deciding factor: some of the 20 finalists are “not exactly low-tax states.”

She said she believes the top issue was lack of talent. With a project that spans over 10 years, Amazon needs 50,000 highly educated workers. 

“You have to remember we’re a relatively small region with 1.5 million people, so even over a 10-year period to get 50,000 folks is a stretch,” Klohs said, pointing out most of the finalists are large metropolitan areas.

In Michigan, reading, math and science levels are near the bottom. In 10 years, all the current 8-year-olds will be 18 and getting ready for college or the workforce, Klohs said.

“Large companies like Amazon are making that calculation,” said Tim Mroz, Right Place vice president of marketing and communications and the person in charge of West Michigan’s Amazon bid.

Klohs said the organization has been working with local partners for years to improve this issue.

“Locally, yes, we’re looking with our partners, but statewide, we’ve got to do a way better job,” she said.

As for transportation, she said Amazon was looking for a system that is “way more regional” than that in West Michigan. That would include a “very large” international airport with nonstop flights across the Atlantic Ocean.

The 108-page Amazon proposal included three packages of possible sites and incentives offered by the areas, the greatest package worth $2.06 billion.

Sites proposed include several undisclosed areas in downtown Grand Rapids, Site 36 at the former GM stamping site on 36th Street in Wyoming and a property for lease at the Gerald R. Ford International Airport. The proposal was based on Amazon’s parameters over 10 years, which included a $5-billion capital investment, up to 50,000 new jobs and a need of up to 8 million square feet.

Downtown Grand Rapids incentives totaled $775.84 million: Good Jobs for Michigan for $200 million, Business Development Program for $40 million, PA 328 for $171.3 million and Transformational Brownfield for $364.55 million.

Site 36 incentives totaled $2.06 billion: Good Jobs for Michigan for $200 million, Renaissance Zone for $1.82 billion and Business Development Program for $40 million.

Gerald R. Ford International Airport incentives totaled $1.7 billion: Good Jobs for Michigan for $200 million, Renaissance Zone for $1.46 billion and Business Development Program for $40 million.

Amazon would have been required to purchase or lease the real estate at each site.

Klohs said the incentives are performance-based deals that happen through tax-abatements that do not go into effect until “they pull the trigger.”

If changes happen with the project, then incentives are renegotiated, she said.

Mroz added the economic incentives in the proposal already have been in place and approved legislatively. 

“There was nothing in here that was specially earmarked for the Amazon proposal,” he said.

The top 20 finalists for the headquarters project were released in January. Grand Rapids was not on the list. Incentives packages from other cities included $1.7 billion in Chicago; $2 billion to $2.3 billion in Philadelphia; $2.3 billion in Columbus; $5 billion from Montgomery County, Maryland; $7 billion from Newark, New Jersey; and $15 billion in Dallas for a proposed bullet train from the city to the suburbs. Many of these other packages included real estate. 

The Right Place released the Amazon bid information following FOIA requests submitted to the Michigan Economic Development Corp. by the Detroit Free Press and Crain’s Detroit Business. 

This is the first time the organization has released details about a proposal without a company making its move to the area public, but since the FOIA requests were submitted, The Right Place decided to get in front of the issue and be “transparent.”

“Sharing this kind of information that we’re sharing with you today is extremely rare, and to be quite honest … it’s not in our best interest to share some of this information,” Klohs said, adding it gives away a competitive advantage. 

She said it was a very “clever” move for Amazon because they now have something no one has: details about what 238 cities all over the country have to offer. 

The good news is The Right Place was able to work with notable entities in the area to create a “great collaborative piece of work” it already has used in other proposals. 

“It allowed us to realize some of the assets we have on a large scale but also some of the gaps that we need to address,” Mroz said. “So, overall it was a good exercise.”

Amazon aside, Klohs said the area needs to think about mobility issues going forward as growth moves into the northwest and southeast parts of the region.

“Neither one of those two challenges are short-term fixes,” Mroz said.

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