Tax breaks key to F.R. landing 1,000 Amazon jobs

Landing Amazon.com Inc. has been a long time coming for Fall River.
The city and online retail giant were in talks for more than two and a half years before the company late last month agreed to invest more than $200 million in a new distribution center in the South Coast Life Sciences and Technology Park.
If city officials and those in neighboring Freetown finalize a package of local tax breaks for the new facility, the Seattle-based company promises to create at least 1,000 new jobs over the next three years.
Warehouse picker may not be the most glamorous or well-paying job around, but for a city still struggling with unemployment over 10 percent, the new positions are being welcomed with open arms.
“It represents tremendous jobs opportunities and private investment, and shows other companies that the South Coast is a good place to do business,” said Kenneth Fiola Jr., executive vice president of the Fall River Office of Economic Development.
As it expands further into on-demand delivery and new markets, Amazon has been building new “fulfillment centers,” across the country where goods are stored and shipped to customers when their orders come in.
Right now, the closest fulfillment center to New England is in New Jersey, Fiola said, making the proposed Fall River center, and a smaller one planned for Stoughton, Mass., the first in the region.
Fiola said the scale of Amazon’s national building spree and number of other facilities in the construction queue was likely the reason it has taken so long to finalize the Fall River deal.
Amazon would be the first commercial tenant in the new 300-acre Life Sciences Park, which straddles the Freetown line and is home to a $35 million University of Massachusetts Biomanufacturing Accelerator.
Although Fiola declined to speculate about which other communities may have been competing to land Amazon, the protracted nature of the negotiations would have given other cities and states plenty of time to make offers.
But in the end, the sheer size of what Amazon is planning, more than 1 million square feet of new floor space with 2,000 parking spaces with direct access to water, sewer and highways, made the list of potential sites limited. “One million square feet is a massive undertaking,” said Mike Giuttari, president of MG Commercial Real Estate in Providence. “For the building alone you need around 23 acres of flat land that isn’t obstructed by trees, wetlands or any topography. And then there is the parking for a thousand workers.”
Giuttari said since he first heard Amazon was looking at a site in Fall River, there hadn’t been much chatter about any other locations trying to lure them.
Rhode Island has certainly been interested in attracting new employers, but R.I. Commerce Corporation Executive Director Marcel A. Valois said the state doesn’t have an industrial park with space for a 1 million-square-foot building, including the Quonset Business Park in North Kingstown.
He said the state’s policy is not to comment on whether it has or has not negotiated with any company, but if Amazon does in fact move to Fall River, that’s not a bad outcome given its proximity to the Rhode Island border.
“There is no question we live in a small region, so people move back and forth for jobs,” Valois said. “Of course we want those jobs on this side of the border, but having jobs plentiful in the region is a good thing.”
On the negative side of the ledger for both Rhode Island and most of New England is the fact that Amazon’s building plans would mean Massachusetts remains the only state in the region where it occupies a physical presence. (The retailer has an office in Cambridge.) That’s important because of the way online purchases are treated for sales tax purposes.
If an online merchant such as Amazon has a physical presence in a state, that state can make it pay sales tax on all transactions delivered there. If it does not have a brick-and-mortar presence, that retailer doesn’t have to pay sales tax, although customers are supposed to pay use tax on their online purchases.
In 2009, Rhode Island passed a law, which became known as the “Amazon tax,” defining local affiliates who sell through Amazon as a physical presence in the state for the whole company. Amazon quickly announced it had eliminated all Rhode Island affiliates and, as of last week, had not paid any Rhode Island sales tax, according to R.I. Division of Taxation administrator David M. Sullivan. Still, Fall River and Massachusetts are offering more than ample space and sales tax considerations.
On the local level, both the city and Freetown are expected to approve matching 15-year Tax Increment Financing deals that would save the company millions of dollars over their life.
In Massachusetts, TIFs operate more like tax treaties or stabilizations in other states, freezing the value of a property for a period of years and then gradually phasing in the higher assessments created by new construction. When added revenue from new construction does come in, it goes straight to the city and not to paying off bonds or any specific infrastructure project.
Amazon’s proposed TIF will abate all of the new real estate and tangible property taxes for the facility for four years starting in fiscal 2018 (July 2017) then begin phasing in the additional taxes.
The retailer would pay one-quarter of the new value of the building from 2022 and 2024, half the new value from 2025 to 2028, three-quarters of the new value from 2029 to 2032, and full value after that.
The city and Amazon are still negotiating the value of the building so an estimate of the total savings has not been provided yet, but Fiola said a floor for the combined value of the real estate and personal property has been set at $100 million.
The purchase price for the land is still being negotiated between Amazon and the municipalities, but is now assessed at about $5.3 million, Fiola said, with 60 acres in Fall River and 31 acres in Freetown.
That would mean during the four years of full abatement, Amazon would be paying the two communities roughly $125,000 per year on the current value of the land, with Amazon saving more than $2 million annually before the taxes on the building start kicking in.
The current plan calls for an unidentified developer to build the new facility and then lease it to Amazon.
On top of the local taxes, Massachusetts is weighing Economic Development Incentive Program tax credits.
If Freetown Town Meeting approves the TIF agreement Nov. 19 and the state endorses it in December, Amazon could begin construction in the first half of next year, Fiola said. •

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