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Chicago’s Amazon bid includes $2.25 billion incentive package

Chicago's former main post office is among 10 sites pitched to host Amazon's second North American corporate headquarters. | Sun-Times illustration

The Chicago area’s bid for Amazon’s second North American headquarters includes $2.25 billion worth of incentives — and even more if the company chooses the Thompson Center or the old Michael Reese Hospital site where the city and state could provide free land.

The incentive package includes:

  • Roughly $1.4 billion in state EDGE tax credits. The newly-revised program provides a 50 percent tax break for every job they create in Illinois.
  • $170 million in state sales tax breaks for building materials purchased by and new construction completed by “high-end businesses.”
  • $60 million in property tax breaks through the city and county programs known as Class 7B and 7C.
  • $450 million in site-specific infrastructure improvements that would come from the Illinois Department of Transportation, the Chicago Department of Transportation, the CTA and other agencies.
  • $250 million worth of investments in education, workforce development and “Neighborhood Opportunity Funds” to make certain that all Chicagoans can qualify for the 50,000 high-end Amazon jobs and that businesses that spring up or move here to support Amazon locate in Chicago neighborhoods.
  • Free land worth $100 million, if Amazon chooses to build its second headquarters at the old Michael Reese Hospital site purchased by former Mayor Richard M. Daley as the site for an Olympics Chicago didn’t get. If Amazon chooses either to re-purpose or demolish and rebuild the Thompson Center that the state has been trying desperately to sell, the free land would be worth even more money.

The incentive package pales by comparison to the $9 billion that New Jersey Gov. Chris Christie offered in hopes of luring Amazon to Newark.

But sources close to the negotiations view the package as a good-faith effort to lure the motherlode of all economic development projects and a far cry from the “corporate welfare” so many critics and gubernatorial candidates have decried.

Almost as significant as the incentive package is the fact that Gov. Bruce Rauner, Mayor Rahm Emanuel, County Board President Toni Preckwinkle and the four legislative leaders worked together to craft the bid. They’re all on the same page — for a change.

“The message to Amazon is, `We’re serious. We want this. We’re all together on this. But we’re gonna do it in a way that’s good for all of us,’” said a source familiar with the bid.

“We’re hoping Amazon will appreciate that we want to make this good for people. It’s a fair assessment of the value they bring. It’s not a corporate giveaway. We’re hoping they appreciate that and the idea that corporate giveaways are not really in their best interest. It’s got to be good for everybody.”

The source stressed that Chicagoans and neighborhood businesses — not Amazon — would benefit from the $250 million in investments in education, workforce development and “Neighborhood Opportunity Funds.”

The money would come from City Colleges funding, Workforce Development programs and Neighborhood Opportunity Funds. That’s the share-the-wealth fund Emanuel created to help rebuild long-neglected Chicago neighborhoods with contributions developers make in exchange for being allowed to build bigger and taller buildings in a broader downtown area.

“That money is designed to ensure that everyone participates. It’s so people can get educated to work there and you don’t have to come from MIT to qualify. It’s also designed to make sure that businesses that support Amazon can locate in Chicago neighborhoods,” the source said.

Last week, Emanuel and Rauner disclosed that the Chicago area bid gives Amazon 10 sites from which to choose.

They include a Downtown Gateway District that includes Willis Tower and the Old Main Post Office; a River District where Tribune Media wants to build 15 office and residential towers; Lincoln Yards that includes the old Finkl Steel plant among 100 acres along the Chicago River; the Burnham Lakefront that includes the old Michael Reese Hospital site; the 78, a 62-acre site at Roosevelt and Clark once owned by convicted felon Tony Rezko where Rauner dreams of building an innovation center led by the University of Illinois; the Illinois Medical District; a City Center campus that includes the Thompson Center; the Illinois Medical District and the fast-growing and transformed Fulton Market District.

Suburban sites include the Oak Brook headquarters of McDonald’s and the former Motorola Solutions campus in Schaumburg.

The Thompson Center was included in the bid, even though Emanuel and Rauner have yet to reach agreement on Rauner’s demand for “maximum zoning” on the site and have not resolved the thorny issue of who will be stuck with the $100 million tab to rebuild the busy CTA station there.

“They wouldn’t have put it in there if they didn’t think they could reach agreement. Obviously, they think they can agree,” said the source familiar with the bid.

“The message here is, `We’re all working together. We’re cooperating.’ This is literally the first time that all of these people have put aside their differences and agreed that this is bigger than all of us to tell Amazon, `We want you. We’re serious. We can play. But we’re also determined to do something that’s good for taxpayers where everybody benefits.’ ”

Rauner spokeswoman Patty Schuh disputed the idea of the Thompson Center representing free land.

“Everything offered in round one of the Amazon bid is consistent with current state law,” she said. “The state offered nothing for free. ”

Ald. Pat O’Connor (40th), the mayor’s City Council floor leader, said he does not view the $2.25 billion incentive package as corporate welfare.

It’s more like anteing up just to get in the corporate version of a game of poker.

“It’s a lot of money. But, if you believe what’s also being reported as the job creation and benefits that come along with it, you get that money back pretty quickly and then, you’re on the net-plus side,” O’Connor said.

“I happen to think that, if we want to compete with these other areas, we have to do something that makes it look competitive. And I don’t think it’s too much in that circumstance.”

Ald. Scott Waguespack (32nd), chairman of the City Council’s Progressive Caucus, argued that Emanuel is wrong to keep the Chicago area bid shrouded in secrecy.

“Every city is doing it. But, we don’t know if it’s too little, too much or what it is because there is no disclosure about the facts of what it means and for which location,” Waguespack said.

Ald. John Arena (45th) questioned whether Chicago and Illinois taxpayers would get a real return on the $2.25 billion investment.

“I’m not a big fan of corporate subsidies. Especially incredibly wealthy ones like Amazon that are eating into our sales tax base,” Arena said.

“First and foremost, they need to pay sales tax. If they’re gonna pay into our sales tax base, we can talk. But, if we’re talking about an entity that’s not paying sales tax and we’re giving them subsidies, that’s a non-starter for me.”

Civic Federation President Laurence Msall called the decision to rely on “existing programs, including the EDGE credit, to help offset” Amazon’s expenses a reasonable approach to the heated competition for 50,000 jobs.

“Because most of the incentives appear to be contingent on Amazon investing a large number of dollars and bringing a large number of jobs, it looks like a reasonable offer, provided the City and State included clawback provisions to make sure taxpayer dollars are returned if Amazon does not fulfill its commitment,” Msall wrote in an email to the Sun-Times.

“Additionally, the potential of returning the James R. Thompson Center or the Michael Reese site to local property tax rolls could have a significant benefit.”

During a meeting with the Chicago Sun-Times editorial board last Wednesday, the day before Amazon’s bid deadline, Emanuel said Chicago’s bid would be “competitive.”

But the mayor refused to disclose the size of the incentive package. He didn’t want to give rival cities an opportunity to up the ante.

The mayor argued then that the incentives that matter most are the ones that put Chicago head and shoulders above the rest: the city’s educated workforce and great universities, its transportation system, O’Hare and Midway airports, Chicago’s thriving restaurant and cultural scene, its comparatively reasonable cost of living and the city’s role as a burgeoning technology center.

“You have every right to talk about incentives. But you’re looking at one incentive and missing the No. 1 incentive. You’re narrowly defining `incentive.’ I’m asking you to expand your definition,” Emanuel said then.