Examining Shakopee’s Amazon warehouse subsidies

By Mike Kaszuba

By most standards, the sprawling Amazon warehouse facility that opened in Shakopee a year ago has been a success.

The building totals 850,000 square feet, employees thousands of workers, and recently has been hiring full-time warehouse associates at a starting pay of up to $15.50 an hour, plus health care benefits and a 401k savings plan.  Shakopee officials have touted how the city did not provide any direct public money to Amazon to get the company to build its warehouse in the city.

But documents reviewed by Public Record Media (PRM), a non-profit based in St. Paul, show how one of the most successful companies in the world still benefited from millions in taxpayer money because local officials announced that the project would not happen without public assistance.

Amazon had global sales of $43.7 billion in the third quarter of this year, and chief executive Jeff Bezos is now reported to have a net worth of $100 billion.

Shakopee’s warehouse project offers a lesson as Minnesota now competes to land another Amazon facility – this time a secondary corporate headquarters for the company that could house 50,000 employees.  In the latest case, Minnesota Governor Mark Dayton has said that the state would be “restrained” in its approach to the national competition to win the Amazon bid.  However, the details of Minnesota’s proposal have so far mostly been kept secret – largely at Amazon’s request – according to state officials.

Subsidies provided for Amazon warehouse

A draft financing plan put together for Shakopee’s economic development authority in May of 2015 outlined how local officials approached the Amazon warehouse project – and how they argued that the entire proposal hinged on what amounted to a relatively small public subsidy.

According to a cooperative agreement signed in 2016, the project resulted in Shakopee and Scott County spending $5.7 million as part of the Amazon development – mostly for roadway improvements surrounding the new warehouse.

Separately, Amazon was given another public subsidy in September of 2015.  Shakopee and the Metropolitan Council provided the company with 124 sewer access charge credits – a value of $183,520.  In return, Amazon promised to create a minimum of 13 full-time jobs within two years of finishing the warehouse.  According to the development agreement, the jobs would need to pay at least $14.50 an hour, “exclusive of benefits, if any.”

The subsidy, while small, was likewise deemed critical to making the project move forward.  “Absent the subsidy provided in this agreement, the expansion would likely occur in another city,” a development agreement between the city and Amazon stated.

Plan stated that warehouse was contingent on financial assistance

The 2015 financing report (prepared by the consulting firm Springsted, Inc.) stated that Amazon’s proposed project was “anticipated to include approximately 750,000 square feet of warehouse processing space, and 70,000 square feet of office space, which is necessary and related to the eligible activity in the building.”

The report also noted that the city’s economic development authority had “determined that the proposed development would not occur but for the financial assistance provided in this [tax-increment financing, TIF, plan] because of the increased costs related to public infrastructure and street improvements necessary for the construction of the proposed new facility.”

“Due to the high costs of investment for the proposed development, including site improvements and infrastructure costs incurred by the developer in conjunction with development of the project, in addition to the public infrastructure costs, the developer has stated that the project as proposed would not occur without the financial assistance provided by the City, as it would not be economically feasible without financial assistance,” the report added.

“The Authority finds the use of tax increment necessary,” the Spingsted report noted.

Shakopee:  “No tax benefit” to Amazon

Even though roads and other infrastructure were driven by the Amazon warehouse development, a top city official emphasized that the company received “no tax benefit” from the city.  “The TIF funds were used specifically for public improvements [roads and trails] in the general area including [the] county’s rebuilding of Hwy. 83,” Michael Kerski, Shakopee’s director of planning and development, told PRM via a November e-mail.  “All of those roads serve numerous other businesses,” he noted.

“The TIF agreement is between the City of Shakopee and Scott County.  Amazon receives no tax benefit from the city,” added Kerski, who said an independent study has shown that Amazon received less public help in Shakopee than it had in other parts of the country.  “The TIF revenues go to the county and per the development agreement, the city receives about 45 percent towards the repaving and rebuilding of the surrounding roads.”

In an October e-mail to PRM, Kerski stated that at a recent meeting, Amazon “said they employed over 2,000 people” at its new warehouse facility.  “Wages range from $14 [an hour] to much higher,” he added.  “They have cut way back on temporary workers except at holiday times.”

Kerski also said he had “no idea” how local officials concluded the project would not go forward without public help.

Tax increment financing, a commonly used public subsidy tool, allows local governments to temporarily divert – sometimes for decades – future property tax revenue increases from a defined area or district and instead use them to bring about a particular development.  The subsidies can also be used for public improvements to aid specific developments.

Shakopee:  Sewer access charge credits contingent on job creation

At the time Amazon’s warehouse opened, the City of Shakopee noted that the multi-billion dollar company’s receipt of sewer access charge credits was contingent upon job creation, although the minimum number of jobs was small.

Samantha DiMaggio, the city’s then-economic development coordinator, said the sewer access charge credits given to Amazon – and the requirement that the company create just 13 full-time jobs – were in line with city policy.  “The 13 jobs puts them in compliance with the City of Shakopee’s business subsidy policy,” DiMaggio told PRM in an May 2016 e-mail, just before the warehouse opened.

Shakopee’s business subsidy policy required the creation of at least one full-time job for every $15,000 in public assistance.

Scott County sites offered for Amazon corporate headquarters

As Amazon studies where to build a second corporate headquarters – a move that has launched an intense competition among cities and states across the U.S. – Scott County has downplayed its push to bring the latest project to the county.  But multiple sites in Scott County have been submitted to Amazon, according to public announcements and e-mails provided to PRM.

“Scott County itself put forth no effort to secure the second headquarters here, and merely responded to a request for information from the business development manager at the First Stop Shop,” Lisa Kohner, a county spokesperson, told PRM in an e-mail.  The First Stop Shop, she added, is “not under any county authority.”

First Stop Shop is, however, an arm of the Scott County Community Development Agency, an organization whose website states that it “partners with Scott County in many ways.”  According to its website, First Stop Shop notes that its role is to improve “the ability of our communities to quickly respond to business requests” and to put “a new spin on how economic development has historically been handled within the county.”

First Stop Shop “erases borders between jurisdictions to provide the best service possible to those who are considering Scott County for their business’ location.”

E-mails obtained by PRM show how Scott County was kept appraised of Shakopee’s attempts to use already-planned local roadway improvements to try to lure Amazon’s corporate headquarters.

In a September 18 e-mail, Stacy Crakes, the business development director for First Stop Shop, asked a top Scott County official to help provide input into the latest Amazon proposal.  “We met with Shakopee this morning and learned which sites they are planning to submit.  First is the Canterbury [Park] site.  Second is out at 169/CR 41 – south of 169 and east of 41,” Crakes told Lisa Freese, Scott County’s transportation services division director.

“Could you, me and Jo connect for more info on the timing of the interchange at 41?” Crakes asked.  “Do you have layout drawings we could include?  Same thing for Elko New Market – are we able to include the agreed upon design?  Last – anything specifically we should call out transportation-wise about the Canterbury site?”

Freese replied with a lengthy message the next day, noting that a second Amazon development could mean more public infrastructure upgrades.  “Depending on the size of the Amazon facility and its traffic impacts,” Freese stated that additional improvements “most likely will be necessary to accommodate the change in intensity.”