Minnesota to offer 'modest' incentives in high-stakes Amazon competition

While other states are preparing incentive packages worth $1 billion or more to attract Amazon's second headquarters, Minnesota officials confirmed this week that the only sweetener the state's opening bid spells out is up to $3 million from existing programs.

Gov. Mark Dayton said Tuesday that Minnesota is deliberately taking a different tack from others in the quest to land Amazon's highly sought facility, which could one day employ 50,000 people.

The state submitted its bid Wednesday, ahead of the Thursday deadline, without releasing any details.

Dayton said the state's proposal focuses on Minnesota's workforce, educational opportunities and transportation systems.

"I think it's a very professional proposal, one we were told conforms to the kind of proposal they'd like to receive," Dayton said. "It's a businesslike proposal without the gimmicks and the gadgetry, the sensational PR stuff we were told is not going to be persuasive."

Shawntera Hardy, Dayton's commissioner of employment and economic development, acknowledged that Minnesota's incentive package is "modest" compared with some other states. But she said Minnesota has other assets, including a world-class airport and a highly educated workforce, that will allow the state to compete successfully for Amazon's mammoth project. "Financial incentives are not necessarily the only thing the company is looking for," Hardy said. "We have a lot to offer. … We have a great story to tell."

Dayton previously said the state's proposal would be "restrained," and he said he was sensitive to how a deal with Amazon could affect major local employers like Target and Best Buy. The governor said Tuesday that he called the leaders of both companies after Amazon announced its plans to build a second headquarters, but that he has not been in contact as the state finalized its pitch.

When Amazon issued its highly unusual request for proposals last month, the company ignited a public bidding war for what many officials are describing as the biggest economic development prize in U.S. history.

So far, the most valuable incentives package comes from Newark, N.J., where state and local officials have teamed up to offer $7 billion in tax breaks. The deal would be the second-richest ever offered by a state to attract or keep jobs, according to a Star Tribune analysis of incentives tracked by Good Jobs First, a national policy research center.

The only bigger deal was an $8.7 billion package approved by Washington state legislators in 2013 to keep Boeing's 80,000 jobs from moving elsewhere. "Let any state go and try to beat that package," New Jersey Gov. Chris Christie said Monday in announcing the bid. "We are not for participation trophies."

Other communities also are rushing to approve tax breaks before Amazon's Thursday deadline for bids.

In Chula Vista, Calif., the City Council approved $400 million in tax breaks for the project on Tuesday night. Earlier this month, the Memphis City Council approved $60 million in tax breaks. And a spokesman for the governor of Maryland is bragging that his state will produce the "biggest incentive offer in the state's history" to lure Amazon, which would mean incentives topping the $660 million approved last year for an urban redevelopment project in Baltimore.

State officials said no communities in Minnesota have committed to providing incentives to Amazon, but they said local governments could be reimbursed for infrastructure work related to the project. About 18 Minnesota sites are featured in the bid, according to legislators who have been briefed on the matter.

Economists say the public nature of Amazon's bidding process is aimed at maximizing the size of any incentive packages the company is offered. Typically, they note, companies keep quiet about site searches and consider just a handful of candidates.

"They are obviously interested in increasing their incentives or they wouldn't have structured the RFP [request for proposal] the way they did," said Timothy Bartik, an economist at the W.E. Upjohn Institute for Employment Research. "But the notion that every location decision is driven by incentives is not true. There are a lot of other factors that drive location decisions."

In the past, Amazon has lobbied hard for tax breaks when building distribution centers and other facilities. Since 2000, the company has received more than $600 million in incentives, according to a Star Tribune analysis of Good Jobs First data. In the current request, Amazon asked government officials to break out the amount of money it could recover through various incentives on the $5 billion project, noting such assistance would be a "critical" consideration.

Many economic development experts believe Amazon will receive multiple bids topping $1 billion for HQ2. In the past 10 years, the typical incentive package in the United States cost taxpayers about $30,000 per job, according to multiple studies and a Star Tribune review of Good Jobs First data.

At that rate, the HQ2 deal would be worth about $1.5 billion in incentives. In Nashville, a group of city employees concluded last month that it would require $1.7 billion in incentives for the city to mount a successful campaign for the project.

"Given how aggressive Amazon has been with their distribution centers and other locations, I bet their final location [in the HQ2 battle] will be a location that offers $1 billion or so," said Nathan Jensen, a professor at the University of Texas at Austin who does research on economic development. "I think most cities will be putting a huge amount of money on the table, even if they know they are going to lose. It's a great way to minimize the blame if they lose or take the credit for economic development if they win."

Minnesota legislators said they were not asked to support a larger package of incentives for Amazon. Rep. Tim Mahoney, a St. Paul Democrat who was recently briefed on the state's bid, said Minnesota's approach to luring economic development is "stupid."

"I don't think we have to match dollar for dollar, but it is really important for us as a region to be in the competition, and to be reasonable in our competition," Mahoney said. "A lot of companies don't look at us because we don't do these kind of corporate subsidies. If you are not growing — if you are standing still — you are losing in this world."

If Minnesota makes it to the next round, Mahoney said he would be willing to support an incentives package worth $1 billion to attract Amazon's HQ2.

"That's a big investment," Mahoney said. "But at the end of the day, it is a huge win."

State Rep. Kurt Daudt, the Republican speaker of the House, said he would be willing to consider supporting a larger package of incentives for Amazon, but is not sure if he'd be willing to go as high as $1 billion. That would be larger than any other incentives package in Minnesota history, including an $838 million package approved for Northwest Airlines in the early 1990s.

"I think there are creative ways to do this," Daudt said. "That is why I would never say I wouldn't support something that would give $1 billion to Amazon. But it would have to be incentivized right — and not create an unlevel playing field for competitors who already have invested here in Minnesota."

Staff writer Erin Golden contributed to this report.

Jeffrey Meitrodt • 612-673-4132