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 Amazon Bid Made Without Council Okay

Claim city’s contract with Chamber permits
bid on City’s behalf is questionable

Investigative Report by Ken Martin
© The Austin Bulldog 2018
Posted Tuesday February 27, 2018 7:27pm

Amazon founder Jeff BezosAmazon founder Jeff BezosAll that’s known publicly is that Austin’s proposal was good enough to keep it in the running to be home to a second headquarters of the company founded by Jeff Bezos, now reportedly the Richest Man in the World.

Its hardly news that Austin is one of the finalists among 20 U.S. and Canadian cities whose proposals have earned a shot at attracting what Amazon calls its HQ2—and with it up to 50,000 high-paying jobs and $5 billion in construction expenditures.

The Request for Proposals the company issued last September nevertheless indicates the Richest Man in the World is looking for a long list of incentives before deciding where to invest that fortune.

Now it has come to light that the proposal designed to harpoon this Moby Dick of an economic development opportunity was put together—apparently with the City’s tacit approval—by the Greater Austin Economic Development Corporation. That’s an entity within the Greater Austin Chamber of Commerce that works on the Opportunity Austin program. The City of Austin has been the major funder of Opportunity Austin since 2005.

The Austin Bulldog’s investigation indicates that while the mayor and some City Council members were aware the Chamber was heading up this effort, the City Council never discussed authorizing that action, not in a public meeting and not in executive session.

Did the City delegate authority for Amazon bid?

Bill AleshireBill AleshireThe fact that the Chamber produced the proposal came to light after attorney Bill Aleshire on February 2, 2018, filed a public information request on behalf of his client IndyAustin PAC for a copy of the nondisclosure agreement that Amazon required from competitors.

In response, the City of Austin in a February 14 letter asked the Texas Attorney General’s permission to withhold the nondisclosure agreement, citing the need to protect information that would give a competitor or bidder an advantage if released.

Neal FalgoustNeal Falgoust“The City has joined with other governmental entities in the Central Texas region to submit a proposal to Amazon through the Austin Chamber of Commerce,” states a February 14, 2018, letter to the Attorney General signed by Assistant City Attorney Neal Falgoust. “The City has a contractual agreement with the Chamber to provide such services related to economic development.” (Emphasis added.)

Then in a late-breaking development on February 26 the City reversed course, withdrew its request for an AG ruling, and released copies of two nondisclosure agreements signed by City of Austin managers in late September. (Copies linked at the bottom of this story.)

But that begs the question: did the City contract with the Chamber to make a bid for Amazon HQ2?

What the document says

Falgoust’s letter refers to a “contract.” The document is actually an “Agreement by and between the Greater Austin Economic Development Corporation and the City of Austin for Participating in the Opportunity Austin Campaign.” (See Agreement linked below.)

After seeing Falgoust’s letter that referred to a “contract” with the Chamber, Aleshire filed a public information request for it and was provided a copy of the Agreement.

Mike MartinezMike MartinezThe City Council’s authorization for the Agreement passed December 11, 2014, on a consent motion vote of 6-1, with then-Council Member Mike Martinez voting nay. (See Item 25 in Minutes linked below.)

The vote authorized negotiation and execution of a one-year agreement in an amount not to exceed $350,000, with four additional 12-month extensions at $350,000 each for a total not to exceed $1,750,000. The initial term of the contract ran from January 15, 2015 to January 14, 2016. Three amendments have been executed, the latest of which will expire January 14, 2019.

The scope of work set forth in the Agreement (Linked below, see pages 1 and 2) requires only three things:

(1) execute a media campaign to a national business audience in an effort to create a greater awareness of Austin and Central Texas as a great location to operate a business and create jobs,

(2) execute a strategy designed to assist in closing the performance achievement gap at the high-school level among the most at-risk students, and

(3) attract or recruit clean energy technology businesses and related support businesses to Austin.

Nowhere in the Agreement does it state that the City of Austin delegates to the Chamber of Commerce authority to submit a proposal on the City’s behalf to Amazon or any other company.

Council member awareness varies

Kathie TovoKathie TovoMayor Pro Tem Kathie Tovo said in a phone interview that a representative from the Chamber of Commerce had reached out to her office, and possibly others, “to get initial feedback about Amazon and make clear they were responding for the region—not just Austin…

“I did know they were submitting a bid,” she said.

Tovo, who was elected to the Council in 2011, said, “It’s not atypical for conversations to happen outside Council.” These efforts “always transpire that way.”

She said the Chamber was trying to get a sense of whether council members had strong feelings in one direction or the other.

“They didn’t share details in the proposal,” she said.

While the Opportunity Austin agreement does not provide authority to commit the City to anything, she said, “They are the arm of the Chamber that seeks to recruit companies to the City of Austin.”

Leslie PoolLeslie PoolCouncil Member Leslie Pool told The Austin Bulldog that, “Absent contract language giving the Chamber this authority, and absent a public vote on the Council, the Chamber does not have standing to make promises or offer incentives or subsidies.”

She reviewed the Opportunity Austin Agreement and noted it authorizes only recruitment of “clean energy technology business” while the Falgoust letter describes Amazon as “an international e-commerce and cloud computing company.”

“I cannot find any contractual or legal basis for the Chamber to be acting as an agent of the City of Austin and certainly not the City Council in this matter,” Pool wrote.

Mayor out front all the way

Steve AdlerSteve AdlerMayor Steve Adler’s two-page sales pitch to Amazon—addressed “To our friends and future collaborators”—is undated. In answering The Austin Bulldog’s query about when it was written, his communications director, Jason Stanford, said the mayor’s statement about the letter was made public October 25, 2017.

“I did want to be open and honest with Amazon with what I’ve been saying and written…so when the Chamber asked me to contribute a letter to Amazon I wrote them a letter a week ago”—meaning October 18, 2017, the day before Amazon’s deadline to receive proposals.

Ora HoustonOra HoustonThree council members contacted for this story said they were not consulted by the mayor and did not see his letter in advance. Council Member Ora Houston said, “I have not seen the letter.” Tovo said she did not know Adler was preparing it. Pool said she first learned about it by reading the newspaper.

Adler’s letter (copy linked below) was provided to Aleshire in response to his public information request that asked for records indicating the City had authorized the Chamber to make the Amazon offer on its behalf.

The letter calls for “a precedent setting partnership” that offers Amazon the “opportunity to expand from community member to community catalyst.” The letter brags at length about any number of local institutions and accomplishments.

The letter’s closing paragraph reads as much like a call for help as an offer to come on down:

“Austin is a special city and Amazon is a special company. I firmly believe that Austin and Amazon can help each other achieve solutions to our biggest challenges. Even as you assess our community’s great assets, I ask you to look at our community’s greatest challenges as an opportunity to help craft a story for Amazon and for Austin that will be told for a long time. You’ll find in Austin a hospitable, purposeful collaborator that knows its strengths as well as its needs, and is thoroughly committed to building for the future.”

Even the City Council is in the dark

In sum, whatever the Chamber prepared was shipped off to Seattle without a public City Council discussion or vote. What was offered on the City’s behalf is unknown.

That doesn’t sit well with Aleshire, a longtime advocate for transparency.

“Your Mayor and Council (at least a majority) has a system so that secret deals can be offered in the City’s’ name without any consideration by council in a public meeting to even authorize making the offer in the first place,” Aleshire wrote an a February 16 email.

“So does this also mean that the Council is going to say they are obligated to endorse the Amazon deal?” Aleshire wrote.

No economic incentives offered?

So, exactly what is Austin willing to offer to grab what some are calling the economic development opportunity of a lifetime?

The Amazon RFP goes on at length about the need for economic incentives to attract this behemoth. Yet Mayor Adler in a Q&A interview with the Austin American-Statesman published November 22, 2017, said the City was offering none.

In that interview, Adler was quoted as saying:

“The (city) council passed a resolution that says that when we sit down with companies to talk about coming here that…there’s a public engagement process. That’s something that’s being developed right now, and a conversation with Amazon would be consistent with that. The city will not approve incentives without a public process that would require a council vote. This system would be new, but ultimately, the question to offer incentives is something to be decided by the council….”

Will the council rubberstamp a deal?

Aleshire, a former Travis County tax assessor-collector and then Travis County judge, wrote in a February 23 email, “Once the terms of the Amazon deal are negotiated (including tax abatements) by the Chamber of Commerce, the ‘deal’ (fully cooked) is laid before the Council under enormous political pressure to approve it. Cowards and sell-outs on the Council get political cover to approve the bad deal.”

Council Member Pool has the same fears.

“The Council is not required to agree to whatever deal (the Chamber) may have offered to Amazon, but…it puts the City Council in an exceedingly awkward position of having to support an agreement that could already have impetus behind it. It’s for this reason that I am very concerned over how this affair is playing out procedurally.

“The Chamber’s actions don’t bind the Council but the Chamber’s actions increase the levels of difficulty inherent in turning back that deal, should the Council wish to do so. And even that is not known—we haven’t talked about Amazon, pro or con, publicly at all,” Pool said in an email.

Public process required on back end

The key safeguard to prevent or at least slow down the approval of any massive giveaway to Amazon lies in Ordinance 20091001-011 (linked below), a copy of which was provided by Pool.

The ordinance sets forth the process for reviewing economic incentive proposals. It requires the city manager to conduct a cost-benefit analysis to evaluate economic incentive proposals, assess the fiscal impact, and make the proposal and backup materials available to the public no later than the sixth day before the matter is posted on the agenda for a council meeting.

Meanwhile, staff is to supposed to collect public comments and provide them to the City Council. Then a public hearing would be conducted at the next City Council meeting, during which the council could take action.

“Secrecy almost always leads to decisions that do not benefit the taxpaying public,” Aleshire wrote. “We may be on the verge of seeing another example of that with growth that makes Austin even more unaffordable.”

Links:

Agreement by and between the Greater Austin Economic Development Corporation and the City of Austin for Participating in the Opportunity Austin Campaign, executed by the City of Austin July 30, 2015. (70 pages)

Amazon HQ2 Request for Proposals (undated, 8 pages)

City Council Questions and Answers for Thursday, December 11, 2014 (35 pages)

Mayor Steve Adler's letter to Amazon  (undated, 2 pages)

Nondisclosure Agreements signed by City of Austin managers (2 pages)

Ordinance No. 20091001-011 Adding an Enhanced Process for Review of Economic Incentive Proposals  (2 pages)

Recommendation for Council Action, Agenda Item 25, Meeting Date 12/11/14

Regular Council Minutes, Thursday, December 11, 2014  (see Item 25) (53 pages)

Levity: The Amazon headquarters search mystery has been solved! Or has it? The Washington Post, February 26, 2018

Trust indicators:

Ken Martin has been covering local government and politics in the Austin area since 1981. See more on Ken on the About page. Email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

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