Press Club

County Unveils Amazon Incentive Deal, Sketching Out How Company Can Earn $23 Million in Grants

Arlington officials have, at last, unveiled a detailed version of the county’s proposed incentive package designed to bring Amazon to the county.

A draft copy of the county’s “Economic Development Incentive Grant Agreement” posted online for the first time today (Tuesday) sketches out the exact amount of office space Amazon will need to occupy in Arlington in order to win $23 million in incentive cash over the next 15 years.

The agreement also reveals additional details about how the county plans to work with the company to add infrastructure improvements in the Crystal City and Pentagon City neighborhoods, which Amazon hopes to soon call home, and lays out the procedure for either side canceling the incentive arrangement.

County staff are unveiling the incentives agreement 11 days before the County Board is set to vote on the deal, the last hurdle for the company to clear before it can start to officially set up shop in Arlington. Gov. Ralph Northam signed off on $750 million in state incentives for the company last month, amid persistent complaints from critics on both sides of the political aisle that government officials shouldn’t dole out grants to a company run by the world’s richest man — proponents of the deal argue that the incentives are well worth it, given Amazon’s potential to send hundreds of millions to county coffers in tax revenues.

Notably, Amazon has agreed to only use the incentive money to build its new Arlington facilities, including any expenses associated with “construction,” and “furniture, fixtures and equipment.”

Under the terms of the proposed deal, Amazon will need to lease 60,000 square feet of space in the county by June 30, 2020 to start qualifying for the cash. Arlington plans to draw the money from an expected increase in revenue from a tax on hotel stays, with Amazon’s arrival projected to juice hotel tax revenues in the area.

That office space occupancy target jumps to more than 567,000 square feet by 2021, and regularly creeps upward from there. By 2026, when the company expects to have new buildings built near Metropolitan Park in Pentagon City, Amazon will need to occupy about 1.8 million square feet of space. By 2028, when its new buildings at the former “PenPlace” site are set to be ready, it will need to hit a 2.69 million-square-foot target.

The timeline included in the incentive agreement tops out with a 6 million-square-foot target in 2035. The company has said it intends to build and lease a minimum of 4 million square feet in the county, and could reach 8 million square feet by the time it reaches its peak of roughly 38,000 employees stationed at the new headquarters.

The proposed deal stipulates that Amazon will earn 15 percent of any increase in hotel tax revenues generated over the next 15 years or so, as long as it meets all those occupancy goals. If it can meet anywhere between 50 percent and 90 percent of those office space goals, the company is eligible to get some portion of the incentive cash; if it falls below 50 percent, it could lose out on all of the grant money.

The draft agreement also provides more details on how the county plans to spend cash collected through a special tax levy on Crystal City, Pentagon City and Potomac Yard properties. The County Board created the “Tax Increment Financing Area” to finance infrastructure improvements across those neighborhoods, and county officials expect to devote a quarter of all the tax money collected through that levy on projects “in and around the Amazon Arlington facility.”

State officials have already agreed to millions in spending on transportation projects designed to make the Crystal City and Pentagon City areas more desirable to Amazon, like a second entrance for the Crystal City Metro station and the realignment of Route 1. But the county is also committing to its own spending through this program, on projects specifically identified as desirable by Amazon.

The agreement states that county staff members from a variety of departments will meet annually starting in October 2022 to provide “a forum for Amazon to offer insights on the company’s transportation, open space and other public infrastructure needs and for the county to discuss development within and around the Amazon Arlington facility and to provide information on county infrastructure projects, priorities and processes.”

Amazon executive Holly Sullivan revealed last week that the company was planning such regular meetings with the county, dubbing such a group a “steering committee.”

The company will also “periodically engage with the County Board and county manager to advise on Arlington’s economic development strategies, such as highlighting important industry trends and/or business development opportunities, (e.g. target companies or projects) that Amazon may wish to pursue,” according to the agreement.

Much like the hotel tax revenue, Amazon will be responsible for hitting office space goals to guarantee the county’s spending on infrastructure projects. Should it miss those targets, it can still earn proportional amounts of local improvements.

The proposed deal requires Amazon to regularly release tax data to the county, but Arlington will be barred from releasing that information publicly, except as part of “composite” statistics. Arlington will be able to release other information that company submits to county officials in response to Freedom of Information Act requests — however, the company will receive a two-day heads up about any information before its released “to allow Amazon to take such steps as it deems appropriate.” The company extracted a similar concession from state officials, and such a procedure is not unusual for major employers in states across the country.

If either side wants to walk away from this deal, as Amazon just did in New York City, the agreement can only be terminated with 30 days notice, and the cancellation process has to start before the end of each given fiscal year.

Arlington has yet to release additional details beyond the draft agreement, such as a staff report offering a recommendation on the proposal, but plans to do so as March 16 approaches.

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