Amazon chief Jeff Bezos and Oracle CEO Larry Ellison are setting up shop in Nashville. They are two of the world’s richest persons.

In the third article in the Tribune’s series on housing, we look at how Metro and state officials negotiated with Amazon and Oracle to get them to move to Nashville and what plans each of them have to mitigate the critical lack of affordable housing in Nashville.

NASHVILLE, TN – Mayor John Cooper doesn’t like development deals that pay companies millions to build their facilities and offices with Tax Increment Finance (TIF) loans. He also opposes paying a company every year for each new hire under contracts that can last 7 years or sometimes even longer.

For decades that has been Metro’s economic development strategy. If it was good for big business and created jobs, then public private partnerships were a good thing. But that was before the housing market left most workers behind and such deals were often political plums that did not promote equitable development, and worse, they often left Metro with the short end of the stick.

Like a poor cousin who cosigns a mortgage for a rich uncle, Metro officials have to fund schools, public safety, pay its own employees without much, if any, help from private partners. Lop-sided economic development policies don’t create a rising tide that lifts all boats if they are short-sighted and the public benefits are more rhetorical than real—or, as some studies have shown, development would have happened anyway without help from taxpayers.

The Amazon Deal

In 2018, then Mayor David Briley, former Governor Bill Haslam, and Amazon officials announced a deal to bring Amazon’s Operations Center for Excellence to downtown Nashville. Amazon is expected to invest $623 million over seven years and create 5,000 new jobs.

Those jobs will pay about $150,000/yr. To get them, Nashville and the State of Tennessee promised Amazon $101 million in grants. A $65 million capital grant from the State of Tennessee helped Amazon acquire land and offset construction costs.

Another $21.7 million from the state are job tax credits that cut state franchise and excise taxes in half. Finally, Metro will pony up an estimated $15 million over 7 years to pay Amazon $500 each for 3,000 new hires in the first year and 500 jobs per year after that until reaching a total of 5,000 jobs. All subsidies total about 16% of Amazon’s investment.

Amazon’s Transit Oriented Development Strategy

Last month Amazon announced it would provide $75 million in below-market loans to develop 800 new affordable housing units on private land along high-capacity WeGo transit corridors in Nashville. Metro buses carry about 30,000 riders every day.

Where it has regional headquarters, Amazon will provide loans, grants, and lines of credit towards Transit Oriented Development (TOD). The company said it would spend $2 billion to preserve and create 20,000 affordable housing units in Arlington, Virginia, the Puget Sound area of Washington, and Nashville.

Catherine Buell is Amazon’s Head of Community Development. She is a graduate of Spellman College in Atlanta and the Georgetown University law school.
She is a former President and CEO of the Atlanta Housing Authority.

Amazon is accepting applications to build apartments and single-family homes in Nashville. “We’ve already received a lot of interest,” said Catherine Buell, Amazon’s Head of Community Development.

Over the next five years, Amazon’s affordable housing investments will focus on properties within a half-mile of transit stops and prioritize opportunities to invest in minority-led organizations and racially and economically diverse communities. Urban Housing Solutions, Nashville’s biggest non-profit developer is applying.

Unfortunately, the projects Amazon funds will not stop the gentrification of Nashville neighborhoods where long-time residents are being displaced.

“We recognize that in a number of cities and districts where we are expanding our public presence the housing issue preceded our arrival in the community…Our role is really to help mitigate any further damage,” Buell said.

Amazon’s commitment is putting more money into affordable housing than Metro has managed to set aside for the Barnes Housing Trust Fund in recent years.

The Oracle Deal

Mayor John Cooper visited Oracle CEO Larry Ellison in January 2020 and Governor Lee has met with Ellison twice.

In May 2021 Metro Council unanimously approved a deal with Oracle to build a $1.2 billion 65-acre campus on the east side of the Cumberland River for 8,500 workers by 2031. Their average salary will be around $110,000. It is the largest jobs deal in Tennessee history. State officials have not announced their tax and cash incentives to Oracle yet but they are expected to be around $60 million in job grants and tax credits worth $21.7 million for a total of $86.7 million in state subsidies.

Cooper did not offer Ellison the usual TIF loan incentive but offered a tax break instead. He figured Ellison’s company, worth $222 billion with annual revenues of $39 billion, could afford $175 million to clean up part of the property that used to be a landfill, build roads, utilities, sewer pump station, greenway, and a pedestrian bridge across the Cumberland River.

Ellison agreed. In exchange Cooper offered a 50% tax break on the site that currently brings Metro about $800,000/yr. in property tax. Once it is finished the Oracle campus will generate $18 million in taxes. Oracle will pay half of its property tax for 25 years or until the $175 million is repaid. The city will own the public parts of the Oracle campus like the sidewalks, greenways, and pedestrian bridge.

At-Large Councilwoman Zulfat Suara suggested splitting Oracle’s taxes between the Barnes Housing Trust Fund for affordable housing and other things like schools. Basic construction costs in Nashville for a 1200 sq. ft. house are $238,800. Earmarking half of Oracle’s current taxes for housing would not even pay for two single-family homes.

Urban Housing Solutions, a large developer of affordable multifamily apartments, said their cost is about $150,000/unit for apartments they buy and renovate. Costs for new construction are about $225,00 or higher. It depends on the cost of the land. Oracle’s current taxes with 50% discount would pay for three rehab units or two new apartments.

To dedicate Oracle’s taxes towards affordable housing Metro Council would have to earmark them for the Barnes Fund and that is not a sure bet. Affordable housing advocates want a separate Nashville Housing Department not just the two staffers in the Planning Department who work on those issues.

In either case, Oracle hasn’t announced any plans to produce, fund, or partner with Metro or non-profit housing developers to build any of the estimated 50,000 affordable housing units needed by 2030. Oracle will house some of its employees on its campus.

In an earlier era, housing for workers was commonplace in company towns in the Rust Belt and Midwest.