Amazon HQ2 Aftershock Reverberates

In the aftershock of the Amazon H2Q failure, a working knowledge of the legal and regulatory environment is not a luxury for developers of real estate projects. It is absolutely essential for survival. As noted in the Wall Street Journal, tax incentives are becoming increasingly politically unpopular and there is a nascent movement among several states to enact legislation prohibiting economic development incentives. Ukueberuwa, Mene. “Amazon, New York and the End of Corporate Welfare” The Wall Street Journal Feb. 18, 2019.

The emerging legislative and political environment is a minefield for even the most experienced real estate developers. The mines are buried in the community opposition groups that are bolstered by 24/7 social media connectivity, the socialist ethos of iGen and politicians seeking to capitalize on an anti-development movement they perceive as progressive.
Ignoring the minefield leads to failure evidenced by abandoned projects and discarded master plans and blueprints. Acknowledging the abundance of mines and adopting a proactive minesweeper strategy early in the development process is the only path to success.

What are examples of these hidden mines? Like Savoir-Faire, they are everywhere. Consider the following:

  • Bills A1261 and S1947 pending in the New York State Legislature (Senate and Assembly). These bills expand the definition of public work to include practically any construction project that receives an economic development incentive from a state or public agency. As a result of the expanded definition, nearly all projects will be required to pay prevailing wages.
  • Bills A05249 and S033061 pending in the New York State Legislature (Senate and Assembly). These bills provide that no compacting state shall permit company-specific subsidies and shall not provide any company-specific subsidy to any company whose headquarters, manufacturing facilities, office space or other real estate developments are located in their state or to incentivize any company to locate their headquarters, manufacturing facilities, office space or other real estate developments in their state. This act shall take effect upon the adoption of the interstate compact prohibiting company-specific subsidies by two or more states;
  • Bill SB0203 pending in the Illinois State General Assembly (Senate). This Bill creates the Company-Specific Subsidy Interstate Compact and enters Illinois into the Compact, which may be entered into by any state and the District of Columbia, in which each member state agrees to not offer company-specific subsidies for companies currently located in or considering locating in the member state, including, but not limited to, for corporate headquarters, manufacturing facilities, office space, or other real estate developments.
  • Bill SB 1322 pending in the Arizona State Legislature (Senate and House) adopting the Interstate Compact to abolish company-specific subsidies for any company considering locating in any member State.

The writing on the wall points to a concerted effort by the aforementioned anti-development governmental officials and community activists to abolish economic incentives. Paradoxically, the sad truth is not that economic incentives exist. The tragedy is that economic incentives are necessary because of high property, income and consumption taxes; tortured approval processes and unstable development environments.

At Economic Development Strategies, we recognize that Project Developers need to prove their individual cases for economic incentives to increasingly hostile juries. Companies must discard the id-driven notion that their Project will cure cancer and be the source of universal world peace. Projects are not built on foundations of cement, steel and wooden piles. Successful Projects are built on a foundation of community engagement, political support and governmental cooperation. Projects only make sense when the benefits to the public outweigh the costs to the community.

We have the tools to navigate the mazes of this emergent hostile development ecosystem. We use our proprietary two-prong approach to clients’ complex real estate projects. On parallel paths, our teams (i) identify every potential economic development incentive and grant program that may be available to a given project and (ii) perform a thorough deep dive metric-driven analysis of a project’s political, governmental, and community support or opposition. We perform a net present cost benefit study of economic benefits and layer the community-based data against our company’s in house analysis of emerging political and governmental trends. What emerges from this process is the Project’s Playbook.

The Playbook is used to formulate a development strategy that consists of financial analytics, charrettes, community surveys, push-polling, meeting with community stakeholders, private-sector marketing techniques and tailored media presentations. We work with the development team every step of the way to bring projects to completion.

We get our clients to Yes. Let us get you there as well!