BUSINESS

Johnston council OKs tax deal on Amazon shipping facility

Mark Reynolds
The Providence Journal

JOHNSTON — With Gov. Dan McKee urging them on, Johnston Town Council members voted Wednesday night to give Amazon a tax deal on the massive shipping facility it intends to build off Hartford Avenue near Route 295. 

The council also authorized Mayor Joseph M. Polisena to sign off on a separate "community partnership agreement" that routes streams of money from the e-commerce giant to Johnston town entities for years to come.

The rationale for offering a tax break to a developer is to make the project location more attractive than competing locations. 

Polisena and Amazon's representatives pitched the tax deal as an arrangement that will bring the town an average of almost $7.3 million per year, compared with the $60,000 in tax revenue that the town now collects on the mostly undeveloped land.

Background:Amazon seeking tax deal from Johnston for mega-warehouse

The Amazon fulfillment center in Shakopee, Minn. On Aug. 9, Amazon mandated indoor mask-wearing by its 900,000 U.S. warehouse workers regardless of their vaccination status.

No one offered a calculation on the total revenue Johnston would stand to collect if the town simply taxed Amazon without any breaks. 

But without any tax deal, Amazon would simply take the project elsewhere, Polisena said. In addition to new tax revenue, Amazon is expected to bring Johnston 1,500 construction jobs and 1,500 permanent jobs — an annual payroll of $57 million, according to one Amazon official. 

"This project proves that Johnston and Rhode Island is a place to invest in," Polisena told the council, speaking at the outset of a hearing in the high school auditorium.

State officials, including Commerce Secretary Stefan Pryor, backed up Polisena's assertions that the deal with Amazon is great for Johnston and for the state. Pryor called it "exemplary."

"Once again, Johnston leads the charge," said McKee.

Brad Griggs, Amazon's senior manager of economic development, said that the new jobs include 1,350 positions that will pay an average of $18 per hour and 150 managerial level jobs paying an average of $60,000 per year.

Previously:Developer with ties to Amazon moving through plan review in Johnston

The text of the tax stabilization agreement says that offering the arrangement to Amazon benefits the town because of Amazon's willingness to develop the property.

The tax revenue over the 20-year term of the agreement amounts to $145.6 million, according to the builder, Don Chase, a partner in Bluewater Development Group.

Chase also presented a comparison that showed Project Schooner — the early alias for the Amazon venture — paying more annual taxes than any other business in town, from National Grid to FM Global.

Prior to the meeting, Polisena said that under the agreement, Amazon would not pay taxes on tangibles.

But Amazon's text of the proposed community partnership with Johnston does entitle the town to additional benefits.

Under the pact, for example, Amazon pays 10 annual "installments" of $538,000, totaling almost $5.4 million, to cover the cost of public-safety operations.

Other required payments include $250,000 to support the Johnston Municipal Land Trust, $100,000 to support Johnston Memorial Park and $100,000 to support the Johnston Senior Center. The company must contribute $50,000 to support Johnston youth sports.

Amazon also pays a total $2.75 million to the state, contributing $550,000 per year to the Rhode Island Business Assistance Program.

The pact obliges Amazon to pay for up to $90,000 in RIPTA bus passes on an annual basis for 10 years.

The proposed distribution facility would handle large volumes of merchandise, receiving, sorting and sending to "last mile" facilities near customers' homes. The developers hope to begin construction next month and complete the project in April 2023.

Pryor emphasized that Amazon has lots of options when it comes to choosing where to build such fulfillment centers.

"We are building a national asset in Rhode Island, right here in Johnston," he said.

The leaders of various Rhode Island labor unions spoke at length, often passionately, about the importance of the project.

Several residents raised questions about traffic on Hartford Avenue and Route 295. Both Polisena and the director of the state Department of Transportation, Peter Alviti Jr., said  construction on Hartford Avenue will greatly improve safety. 

Extensive traffic studies show that the area can accommodate the proposed Amazon operation, Alviti said.

Brian Wambolt wasn't convinced.

"You're really focusing on Hartford Avenue," he said. "What about 295?"

"This should not be here at all," he said.

Dr. Alex Lubin, of Warwick, echoed passages in a 2018 report by the Economic Policy Institute, which found that fulfillment centers "do not generate broad-based economic growth."

Jobs created in warehousing and storage by Amazon "are likely offset by job losses in other industries," the report says.