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The amazon effect on the municipal bond market

The growth of Amazon distribution centers in Colorado has had a uniquely positive impact on the Colorado municipal bond market. Amazon is a valuable and credible tenet in multiple special districts across our state. The flywheel of activity that an Amazon facility can create has lifted the areas property and sales tax collections, both keys to municipal finance.

Amazon’s rapid buildout since the first facility opened in Aurora in 2016 has spurred economic activity, created jobs in construction, distribution, home building, entertainment, food service and retail. This is most visible in Aurora and Thornton where the original 1mm+ square foot facilities were built.

In Thornton Colorado, the 2.5mm square foot facility at I-25 and 144th Ave helped propel activity around multiple housing districts, commercial districts and benefitted one of the state’s largest charter schools, Stargate, located across the street. Not long after Amazon opened, Top Golf opened to the north and St. Anthony’s Hospital to the east of 144th avenue. This also helped energize a newly created retail commercial district located to the south called Dry Creek with additional traffic. It’s difficult to measure but the needs of over 1,000+ new employees per facility who eat lunch, purchase gas, groceries, support daycare, have educational and entertainment has a positive local economic impact.

Now that the larger 3.5mm square foot facility in Colorado Springs has opened near the airport, we are seeing signs of accelerated activity in and around the newly formed district. New home construction is visible to the south and the fuel and convenience stores in the area are bustling with activity from hundreds of delivery vans entering and leaving each day.

While there are vocal critics of certain tax incentive deals that Amazon has negotiated with some cities I feel they fail to look at the broader and longer term impacts that we see clearly in the municipal bond market. In Colorado, there is often an increase in surrounding commercial and residential property values due to newly created housing districts and additional residents lifting sales taxes in the region.

According to Wendy Mitchell, of the Aurora Economic Development Council, there were zero incentives on the first Amazon project. In the second deal, Amazon received $1.1mm in equipment tax credits but that was far surpassed by the $5.4mm tax collections they received on total equipment purchases. The city of Thornton provided $3.7mm to Amazon to extend Grant Street that would serve the new property but that was already raised and earmarked through the Urban Renewal Authority.

In addition to the direct local effects, Colorado communities, far from distribution hubs, are also now collecting sales tax dollars on Amazon purchases. This has created a well-deserved additional revenue stream which was historically bypassed as locals often traveled outside their communities to make direct purchases. In my own community online sales taxes collections have grown materially over the past few years providing a buffer to our towns budget especially during the pandemic when travel was greatly curtailed.

When we combine the direct effects of construction jobs, warehouse employment, home building, property taxes, sales taxes collections and the extended multiplier effect of creating new economic momentum in underdeveloped areas outside a city core, the overall impact on the municipal bond market is decidedly positive.

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