Norfolk mayor: No bidding war for Norfolk Southern

Learn more about the railway giant in the AJC's online "5 things to know" series.

The mayor of Norfolk, Va., said over the weekend that his city is not going to get into a bidding war to keep the headquarters of rail giant Norfolk Southern and concerns about that scenario shouldn’t be used to influence the Atlanta City Council’s deliberations over the controversial redevelopment proposal for downtown Atlanta’s Gulch.

Atlanta and state of Georgia leaders have used the possibility of Norfolk Southern relocating here, and the fear of that not happening if negotiations stall, as a pressure point to motivate City Council to approve legislation for up to $1.75 billion in public funding for the project. Norfolk Southern is scouting for a headquarters location in Midtown, but its land holdings in the Gulch are key to plans to build the proposed mini-city over the barren parking lots and rail lines between the Five Points MARTA station and Mercedes-Benz Stadium.

Norfolk Southern owns land that developer CIM Group needs for its up to $5 billion, 40-acre project. The railroad company plans to sell its land and use proceeds of the sale for the potential headquarters relocation, state officials have said.

The land sale and Gulch financing package are linked, and state and city officials have urged council to approve an unprecedented public financing package that would devote portions of future sales taxes, as well as new property taxes over three decades, to funding Gulch construction.

Gov. Nathan Deal and Atlanta Mayor Keisha Lance Bottoms have said the public investment could attract private capital that would transform downtown.

Norfolk Mayor Kenny Alexander said in a telephone interview that he’s seen reports and comments from Georgia and Atlanta officials that insinuate his city is competing to keep Norfolk Southern.

Alexander said he and Virginia officials have met with Norfolk Southern CEO James Squires. Alexander told Norfolk Southern executives the company could reduce costs by using property owned by the city and that Virginia could offer incentives for the creation of new jobs, The Virginian-Pilot newspaper reported.

But Alexander said the Fortune 500 company shouldn’t expect Norfolk officials to counter Atlanta’s offers. He also called the Gulch deal a “$1.75 billion giveaway.”

“I don’t want [Atlanta] council members to think they have to rush to a vote based on what allegedly the home city is doing,” Alexander said. “The home city isn’t aggressively doing anything of the sort.”

California-based CIM has proposed a development that would include office towers, apartments, hotels and retail space on par with a regional mall downtown. The purchase of Norfolk Southern’s land, and legislation creating tax incentives to build the project, could come before council at its next meeting Oct. 15.

Bottoms pulled a previous vote because of a lack of council support.

Some council members have balked at the potential taxpayer contribution, while others have raised concerns that include whether the proposal requires enough affordable housing.

Bottoms told council members last month that she was told by the governor's office that a company she declined to name "is considering relocating in our city (and) is now seeing very aggressive offers from their home state that could put this relocation in jeopardy." State officials later confirmed that company is Norfolk Southern.

Bottoms’ office directed inquiries to the state.

Bert Brantley, chief operating officer of the Georgia Department of Economic Development, said, “We consider it competitive only because there’s a chance they stay and there’s a chance they don’t.”

“From the beginning, the company has been crystal clear with us they were considering two scenarios,” he said. “One, is moving to Atlanta, and two is staying where they are.”

A Norfolk Southern train travels south close to the Mitchell Street bridge in the Gulch in May 2013. The railroad giant owns land critical to develop the Gulch downtown. The company wants to sell its holdings to developer CIM Group and use proceeds for a potential relocation to Midtown. JASON GETZ / JGETZ@AJC.COM

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A deal, Brantley said, is contingent on selling the Gulch land, and CIM’s offer is the only viable one Norfolk Southern has gotten in more than a decade.

Alexander said talk of Norfolk Southern moving its headquarters out of his city has happened intermittently for years, with Atlanta always being the No. 1 contender. Georgia has more Norfolk Southern workers than Virginia and has a large operations center it recently expanded in Midtown.

The company was recently the target of a potential takeover by rival railroad Canadian Pacific, and Norfolk Southern has worked to streamline operations to fend off suitors.

Asked if he was resigned to losing the company, Alexander demurred, adding that Norfolk Southern is contractually required to maintain “a significant presence” in his city through 2026.

Alexander, who formerly served in Richmond in Virginia’s House of Delegates and Senate, said he’s followed the Atlanta council’s debate over the Gulch deal.

The proposal relies on bonds backed by two sources of public funding: 5 cents of the city’s 8.9-cent sales tax generated from future sales on the Gulch site, and future expected increases in property taxes from the development, which lies in a zone known as a tax allocation district or TAD.

Gulch backers have emphasized that those dollars don’t exist today, and the taxes offered the developer are to attract the capital needed to make the site feasible. Four pennies of the sales tax, they say, are the state’s share.

Alexander, whose city might retain the company if a Gulch vote fails, said the Atlanta council should thoroughly vet the deal.

“The money going to the Gulch will not be realized by the city, it’ll go to the developer,” Alexander said, echoing some Atlanta critics of the proposal. “And other monies will be diverted to that location from other parts of the city, taking them away from the general fund. This project takes away from the general fund. It does not grow it.”

Our Reporting

The AJC first reported the city and CIM Group’s talks on a potential 10-figure public financing package for the Gulch project. AJC reporters have also looked at the potential costs and community benefits of the up-to-$5 billion project that could remake a 40-acre site into a mix of offices, retail, hotels and residences. The matter could return for City Council consideration on Oct. 15.