We continue our series on the Amazon HQ2 incentive offers by moving on to the local agreements, starting with Arlington, Virginia.
What is incentivized
Arlington has proposed to provide an annual pay-for-performance grant to Amazon to be funded through the Transit Occupancy Tax (TOT). The TOT is a tax on hotel rooms or other paid lodging. The money for the grant will come from 15% of the incremental TOT revenue generated for 15 years, using 2019 as the baseline.
To receive the grant, Amazon must meet office occupancy targets. The expectation is that Amazon will occupy 6 million square feet of space in Arlington by 2034. The estimated value of the grant is $23 million, spread over 15 years.
Arlington may also use tax increment financing (TIF), devoting a portion of incremental property tax revenue generated by Amazon to finance infrastructure around the National Landing area. In its October 2018 proposal letter to Amazon, Arlington suggests that 50% of the incremental tax revenue would total approximately $28 million over ten years (2021-2030).
Amazon may also be eligible for the county’s Technology Zone incentive program, which provides a 50% (at a minimum) reduction in the Business, Professional and Occupational License (BPOL) tax rate for up to 10 years. The BPOL is essentially a gross receipts tax with differential rates for various types of businesses.
Process
The TOT grant process is pay-for-performance, without repayment provisions. To receive the annual grant, Amazon should provide an annual report on the total square feet that are “leased/owned/occupied” and its total number of full-time employees. However, the incentive is only connected to total square feet. Amazon must also be current on its taxes in order to receive the grant payment. The disbursement procedures would allow a full grant payment if 90% of the target is met, a prorated grant if 50-89% of the target is met, and no payment if less than 50% of the target is met. It is our understanding that the annual targets have not yet been formally approved.
The TIF area referenced above has been in existence since 2010, and the portion of the increment set aside for infrastructure improvements has been set at 25%. The Amazon proposal suggests setting a new baseline in 2021 and dedicating 50% of TIF revenue to public infrastructure projects in the National Landing area for 10 years. The specific projects to be funded have yet to be determined in collaboration with Amazon. This is not a grant and would not be subject to a company performance agreement.
The Arlington County Board and Arlington County Industrial Development Authority must both approve the terms of each of these incentive agreements. As indicated, a signed performance agreement will be required.
To obtain the Technology Zone incentive, Amazon would need to apply and be deemed eligible by the County’s Commissioner of Revenue in order to receive the benefit.
Reporting and transparency
Arlington has already held multiple well-attended community meetings and an online learning series. Additional events are scheduled. Information is available on the project, proposal, and incentives through the following websites:
https://www.arlingtonva.us/amazon/
https://www.arlingtonva.us/amazon/engagement/
https://www.arlingtoneconomicdevelopment.com/about-aed/major-initiatives/amazon-selects-arlington/
In a public letter, the Chair of the Arlington County Board also explained that the County Board “will proceed with our standard performance agreement process for companies that stand to receive financial incentives from the County, a process which includes public review and comment.” The County Board will vote on the draft agreement in February 2019, and the agreement will be available for review prior to the meeting.
Other important local elements
This post has focused on the local incentives available to Amazon in Arlington. Community attention, however, has emphasized understanding the housing, transportation, and education impacts of HQ2. Further, neighboring Alexandria, Virginia, is supporting and will be home to a new Virginia Tech Innovation Campus near the HQ2 location – a critical element of Virginia’s overall proposal to Amazon. We will address these important topics in a future article.
We invite you to follow the links below to read the previous articles in our series.
Tennessee’s incentive agreement with Amazon
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