Fresno Offers Amazon a Say on How to Spend Taxes on Potential New Headquarters

Amazon is expected to announced the winner of the competition for its second headquarters this year. Cities across the country are trying to woo the internet giant with all sorts of enticements — billions in tax breaks, free land, even personal tax exemptions for Amazon employees.

The city of Fresno has a different pitch. It would still collect taxes from Amazon, but it would give the company a big say in how the taxes are spent. The proposal has garnered attention for the Central Valley city in the past few months, which is a big part of the reason the local government threw its hat into the ring for the Amazon headquarters.

Mayor Lee Brand recently took me on a drive around Fresno, the self-proclaimed “best little city in the USA.” Fresno is only around 3½ hours southeast of the Bay Area and all its wealth, but in recent years the city has struggled economically. It teetered on the edge of bankruptcy in 2012, and unemployment is still close to 8 percent.

“We have always been an agriculturally based economy,” Brand said. “For years we have been trying to break that and to diversify that.”

To draw attention to Fresno, Brand made a pitch for Amazon's new corporate headquarters. Amazon predicts it would bring in over 40,000 employees. Cities across the country are chomping at the bit for the headquarters.

“The only way we could compete was to outthink them and offer something innovative and give Amazon the opportunity to be the ultimate corporate citizen, to be the one who is not just the evil empire,” Brand said.

Any city that “wins” Amazon’s second headquarters would have to invest heavily to accommodate all the development that would come along with the project. There would be a large influx of workers who would put a burden on the city’s transportation infrastructure, housing stock and public services. The city would end up paying for things like additional roads, parks, police and firefighters.

A big part of Fresno’s plan would be to set up what it is calling the Amazon Community Fund. Most of Amazon’s tax money would go into the fund, and then a committee of five would decide how to spend the money. Two members would be selected by elected officials, one would be a representative from the community, and the remaining two would be appointed by Amazon.

This kind of arrangement is unprecedented, said Greg LeRoy, executive director of Good Jobs First, a nonprofit focused on responsible economic development.

“I've never seen a proposal to give a company formal control,” LeRoy said. “That's really off the charts.”

LeRoy is critical of the Fresno plan.

“The only thing good you can say about this proposal is that it does envision Amazon paying some taxes,” LeRoy said. Many proposals submitted by other cities are giving the giant online retailer large tax breaks.

LeRoy said the competition for Amazon’s second headquarters has become a race to the bottom. He said cities are willing to give away so much that it negates the economic positives from a big project, or what LeRoy calls “a buffalo.” He said this is a trend in economic development that has been getting worse and worse in recent years.

“The old school of economic development -- the euphemism in the profession is “buffalo hunting” -- really does deserve to go to the dustbin in history,” LeRoy said. “It is less effective than ever because the number of deals to chase like this is fewer and fewer than ever.”

But a city like Fresno might have something to gain by submitting a proposal, even if it fails to catch the elusive Amazonian buffalo.

Michelle Anderson is a law professor at Stanford who writes about economic development. “It's not wrong for Fresno to compete for this,” she said. “Good for them for putting together this package and drawing some attention to their city.”

Anderson said cities that make a bid for a big project often do a lot of valuable work -- things like community engagement and city branding. At the same time, Anderson is skeptical of Fresno’s proposal to give Amazon a large amount of control over where its tax dollars are spent.

“It might help Fresno as long as they lose,” Anderson said. “If they win, it might help as well, but it just becomes a more complicated question that I really think we wouldn't be able to answer for 15 years.”

Larry Westerlund is the economic development director for Fresno. On a bunch of maps hanging in City Hall, he showed me the vacant buildings and parking lots that are potential sites for Amazon's second headquarters.

“It would be a tidal change for Fresno,” Westerlund said.

Westerlund said he understands Amazon will probably go somewhere else, a place with a larger, more educated workforce, or a city offering huge tax breaks. But he said he hopes his proposal will at least bring some attention to Fresno.

“We are the flyover city of California,” Westerlund said. “We'd love to have more people understand the size of Fresno, the opportunity that is in Fresno, particularly when we see all the hyperactivity on the coast.”

It's Westerlund who came up with the idea to give Amazon a say in how it spends its tax dollars. If Fresno doesn’t win Amazon’s favor, he said the city will offer the proposal to other big corporations looking for a home.