Coal Country Courts Amazon, Fears Lack of Flat Land: Muni Diary

(Bloomberg) -- Could Amazon.com's HQ2 be located in coal country? One West Virginia county thinks it should be.

Monongalia County, where Morgantown is located, is using public money to encourage exactly the type of economic development that Amazon would usher in. The county commission sold $76.4 million in unrated bonds this week to finance infrastructure improvements that will “facilitate development of future retail and other businesses” in a site by a highway, according to bond offering documents.

The site could appeal to companies like Amazon, which is looking for a location for its second headquarters, said Edward Hawkins, president of the county commissioners. He “immediately” asked the local chamber of commerce to consider submitting a bid. “It's not something you should ignore,” he said.

Monongalia County, population 104,000, is one of the many municipalities that has sold high-yield municipal bonds to finance economic development gambits. The bonds priced at a top yield of 5.9 percent in 2043, more than 3 percentage points higher than the AAA benchmark, according to data compiled by Bloomberg.

Amazon has solicited proposals for its second headquarters, which will cost more than $5 billion and create as many as 50,000 jobs. The Seattle-based company says it prefers metropolitan areas with a population of more than one million people and a “business-friendly environment.”

The race to woo Amazon might seem like a long shot for any place in West Virginia, which is in the midst of a recession, according to Moody's Analytics. The Morgantown metro area is recovering from a recession, it says.

The county's major employers include the Morgantown-based West Virginia University and its hospitals and Mylan Pharmaceuticals, bond documents say. Morgantown's unemployment rate was 4.4 percent in August, lower than the state figure of 5 percent, according to the U.S. Bureau of Labor Statistics.

“It has a much broader base than what you see in most every other part of West Virginia,” said John Deskins, director of WVU's Bureau of Business and Economic Research. His office projects county employment will rise by an average annual rate of 0.9 percent between 2017 and 2022.

The development, which includes several mixed-use properties, is part of the county's effort to diversify its economy. The district is located in a larger “super-regional” shopping center, according to bond documents.

The bonds will be paid off with a 6 percent sales tax. Over 500,000 square feet of development in the taxing district has been completed and an additional 300,000 square feet is under construction.

Stores like Ulta Salon, AC Moore, Sportsman's Warehouse and a Triple S Harley-Davidson retailer have opened within the tax district, as well as restaurants like Chipotle and Firehouse Subs.

Even if Amazon doesn't choose to locate there, Hawkins says he sees the site as being a good fit for other major tech companies. “It's going to be business-oriented,” Hawkins said. “The thrust of this is job creation.”

Investing in the Monongalia deal, sold in minimum denominations of $100,000, involves “significant investor risks,” bond offering documents say. The documents state that the developer could fail to attract and keep tenants and that tax revenue could miss projections. “The retail sales industry is highly competitive,” documents say.

One of the biggest challenges for attracting businesses to the state is the lack of flat land, which is why it's important for localities like Monongalia to invest in infrastructure, Deskins said. “Big employers need a big, flat spot if they're going to locate a brick and mortar facility there,” he said.

The state also needs to improve its reputation as being conducive to businesses and work to ensure that it has an educated and drug-free workforce, he said. West Virginia had the highest rate of deaths due to drug overdose of any state in 2015, according to the Centers for Disease Control and Prevention.

“Guaranteeing a company that they'll be able to have the workers they need — it's not always an easy promise to make in other parts of the state,” he said.

Hawkins said Monongalia County is serving as a growth engine for the rest of the state as it moves away from coal. It fills Amazon's preferences for a new home, except it does not have a population of one million, he said.

“We were an export state,” Hawkins said. “I'm hoping our state can become a tech state.”

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To contact the reporter on this story: Amanda Albright in New York City at aalbright4@bloomberg.net.

To contact the editor responsible for this story: Joe Mysak at jmysakjr@bloomberg.net.