Pennsylvania Won’t Say What’s In Its Amazon Bid, But There Are Clues

Jul 3, 2018

Trust is a touchy subject with Jules Lobel.

“I’ve sued every president since Reagan. And they all said ‘Trust me.’ I don’t believe in trusting executive officials.”

On a recent afternoon, Lobel lingered on the steps of Pittsburgh’s City County Building after a mild protest in which demonstrators demanded to see the city’s bid for Amazon’s second headquarters, or HQ2. He held still-warm copies of an amicus brief filed earlier that day urging a county court to compel officials to release it. Lobel teaches law at the University of Pittsburgh and badly wants to see what the city and state promised in exchange for Amazon’s commitment to invest $5 billion and employ 50,000 people.

Unfortunately, for Lobel—and he argues, for the public—elected officials have refused to share that information, though they promise they haven’t given away the farm. And while an Allegheny County Court of Common Pleas judge ordered city and county officials to send the region's proposal for his review, there’s still no guarantee it will be made public.

“I believe that democracy is checks and balances, public disclosure, public debate and not ‘trust us,’” said Lobel. ‘“Trust us’ is a concept that’s for monarchies or dictatorships, not for democracies.”

It’s been nine months since Amazon kicked off its continent-wide search for a second home, and eight months since Pittsburgh, Philadelphia and 236 other cities sent hopeful entreaties winging to the company’s central office in Seattle, proposing a long and happy life together.

Of the 20 cities shortlisted by Amazon in January, most divulged at least part of their bids: some from the get-go, others as a result of public pressure or in response to freedom of information requests. On the other side of the state, Philadelphia released its proposal, though it lacked any details about local and state incentives.

Pennsylvania offered Pittsburgh and Philadelphia the same state-level incentives to include in their bids, according to emails received by 90.5 WESA through a partially granted Right To Know request. But officials withheld details of those offers because “the records contain confidential and proprietary information.” If made public, those details would “place the Commonwealth and the [cities] at a competitive disadvantage,” according to a determination letter from the governor’s chief counsel, Mike Adams.

Graffiti in Pittsburgh’s Strip District neighborhood. While local and state officials say they haven’t given away the store to attract Amazon, people worry about how HQ2 may deepen Pittsburgh’s housing crisis or harm public transit.
Credit Margaret J. Krauss / 90.5 WESA

In addition, state officials believe the bidding process is not yet over. Adams writes, “it is expected that the 20 remaining metropolitan areas...will continue to supplement their offers until Amazon accepts one city’s proposal.”

Still, there are three clues that hint at what Pennsylvania may be willing to offer.

Clue No. 1: Shell’s Ethane Cracker Plant

Ken Majors bought an abandoned hotel in Rochester, Pennsylvania last year. Wearing bright, white sneakers he climbed two flights of stairs to the building’s roof to point out why.

“There’s your Shell plant, right down the river,” he said, gesturing toward a scrum of cranes on the horizon.

In 2016, Shell Chemical Appalachia announced it would build a petrochemical plant in Beaver County, just northwest of Pittsburgh. The decision was based in part on state help: Pennsylvania promised a $10 million grant and what could amount to $1.6 billion in tax credits. The deal followed years of wooing in which Pennsylvania had to contend with the advances of Ohio and West Virginia. Majors thinks the state’s investment could bring prosperity to the region and customers to his hotel.

“You know, it’s a common practice to give something in order to get something,” he said. “So it’s probably a good deal.”

The Shell plant is expected to create 6,000 construction jobs and 600 permanent jobs. Brent Vernon is one of the people who decided those jobs—and their anticipated ripple effect— merited state investment. Vernon heads the Governor’s Action Team, an economic development group that works to cultivate businesses in Pennsylvania and to attract new ones.

“Companies have choices, nationally or internationally, in their decision-making process of where to make investments, where to grow and expand,” he said. “And they usually want to go down a pathway of least resistance.”

Vernon’s team pinpoints what he called a “one-time deficiency.” What’s that one problem keeping a business from moving to Pennsylvania? And what’s the benefit of solving that problem? Vernon said Shell’s big hurdle was finding enough flat, affordable land to build a new ethane cracker plant.

Shell’s decision to build the plant in Pennsylvania was hailed as a once-in-a-generation opportunity. Vernon didn’t expect another one of those so soon, but he said working on the Amazon bid wasn’t that different from working on the Shell deal, except that his team had 30 days to put the deal together instead of five years.

“We need to adjust...to any given business, any given project opportunity, and do what it takes to respond effectively,” he said.

Although Vernon declined to comment on what the state offered Amazon, he said numerous times that the Governor’s Action Team is keenly aware that they’re working with taxpayer money. He said they carefully analyze the potential returns on any state incentives, and strive to be fair and responsible.

Clue No. 2: Looking At Other States’ Math

In the absence of Pennsylvania’s bid, it’s instructive to look at what other state governments put on the table. New Jersey offered $5 billion; Maryland greenlighted $5.6 billion and passed a brand new law to do it. The whole frenzy makes Greg LeRoy nervous. He’s chief executive of nonpartisan economic watchdog group, Good Jobs First, and he wonders about Pennsylvania.

“Where would the state go to find additional money in this claim that it’s making now that there’s something secret and super-duper and proprietary about it’s bid for the HQ2 project?”

LeRoy said there’s already a significant amount of money that could go to Amazon through normal channels, such as grants, loans and tax credits.

“The one place where we know some states have found big pots of new money to give away are these personal income tax diversions,” he said.

LeRoy’s group calls it “paying taxes to the boss” — employers withhold state income tax from their employees’ pay, but instead of sending it to the state, they get to keep the money. That would be new for Pennsylvania, but Maryland’s legislature, at the governor's request, agreed in April to forego 10 years of income tax revenue in exchange for HQ2.

Clue No. 3: The Painful Process Of Self-Discovery

Nationally, incentives spur heated debate: Do they really work? Do they unfairly extend government help to some businesses and not to others? Can they really influence a business’s decision, or merely sweeten a decision that was already largely decided?

Toby Lennox opposes incentives, but he understands the impulse. Lennox leads Toronto Global, a nonprofit group that assembled that region’s bid. For Lennox, the evaluation of incentives—what’s worth offering and why—comes down to that old nugget: know thyself. Toronto offered nothing special to Amazon. Just the standard Canadian package of a highly educated workforce, dependable infrastructure and universal healthcare.

While preparing Toronto’s proposal, Lennox said regional leaders realized something: they don’t need Amazon.

“Come to join the party, come and join the success,” he said. “And if you don’t come, that’s OK, we’ve got a whole bunch of other people that are going to come in your place.”

Lennox said what a state, or province, offered Amazon says a lot about what it thinks about itself: what it needs, what it wants and what it can comfortably sustain.

Financial incentives are not Amazon’s main priority, said Dennis Davin, secretary of Pennsylvania’s Department of Community and Economic Development.

“They want places that are attractive and can attract people. That’s really the No. 1 thing.”

Davin is confident either Pittsburgh or Philadelphia will be selected as Amazon’s HQ2 on the strength of their merits.

Davin declined to comment on state incentives.