Amazon, City Killer?

Reader Craig H has given his reading of which city will drink the poisoned chalice of “winning” the Amazon beauty contest:

Disclaimer: this involves reading Bezos’ mind.

I don’t believe he really wants to fool with the governments of Maryland, or New York, or Chicago. I think there are only two real candidates. First Dallas. Plan B is Atlanta. Austin would be perfect except for the minor detail that it is not quite a large enough python to easily digest this pig. Dallas and Atlanta are big enough to do it and the business-government relations in those two municipalities are the only ones that he will feel comfortable dealing with in Win-Win fashion.

Dallas has the edge because Bezos is one of the largest landholders in the state of Texas. Texas loves Big Businesses, always has, always will. And Bezos loves Texas.

What I really cannot explain is the solicitation of a hundred bids and the announcement of twenty finalists. Maybe it was all part of a high tech high stakes drama to make the deal with Dallas more orgasmic at its final conclusion?

Another reason not to like Austin, and this may be part of what Craig H was alluding to: by some measures, it has the worst traffic in the US.

By Gabrielle Gurley,The American Prospect’s deputy editor. Originally published at The American Prospect; cross posted from Alternet

Trying to figure out where Amazon will set down roots or, depending on your perspective, spread its tentacles, is the newest capitalistic cage match. Nineteen American cities and one Canadian metro area, down from the original 238, now go into overdrive to secure what promises to one of the most transformative economic decisions in the world: a single $5 billion investment in a second headquarters that brings 50,000 high-tech workers and their families, plus thousands more jobs in associated sectors.

This competition spurred the type of collaboration between private sector and political leaders that only develops when a trophy like an Amazon comes into view, according to Susan Wachter, a University of Pennsylvania Wharton School professor of real estate and finance and co-director of Penn Institute for Urban Research, which assembled a group of urban experts to weigh in on the Amazon competition.

In a conversation with The American Prospect, Wachter uses the word “transformative” often to illustrate what the next Amazon outpost can expect—for better and worse.  Certainly, becoming Amazon’s HQ2 would come with a long list of bragging rights, beginning with a straight shot to world-class status (except for finalists New York, Los Angeles, and perhaps Washington, that already hold that distinction) for the winner. Amazon may even offer or stimulate major investments in education, infrastructure, and arts and culture.

But one critical question gets glossed over in headquarters horse race: why would state and local political and civic leaders participate in an economic development free-for-all that is guaranteed to lead to the Seattlefication of their metropolitan area?

Amazon has turned Seattle, its current headquarters, into a 21st-century exemplar of income inequality. Living in the Pacific Northwest’s largest city is a beautiful thing for a worker with the skill set to slip effortlessly into a high-tech job. For everyone else, Seattle now features all the disturbing traits of any place that rewards knowledge workers at the top of the food chain and flushes away just about everyone else: from astronomical housing costs that have long since displaced middle- and lower- income people to punishing commutes for everyone who has to move in and out of the city.

Amazon’s arrival is bound to accelerate the displacement of people of more modest means and send the cost of living in the “lucky” victor soaring. The New York and Washington metro areas, already two of most expensive places to live in the United States, would become even more unaffordable for the average worker. (There are actually 15 “cities,” not 20, competing. New York and Newark constitute one mega-city; while Washington, D.C., Montgomery County, Maryland, and Northern Virginia are effectively another single metropolitan area—whether local leaders like it or not.)

Wachter notes that the inclusion of Washington on the short list is especially puzzling, since the city “is on the cusp of being totally unaffordable and congested.” She added that Amazon could have another longer-term goal when it comes to the District. “In most of the rest of the world the major city of the country is the capital; this [move] would do that [for Washington],” she says. Though New York, with its preeminent financial, media, and arts and culture communities, isn’t likely to slip into second place any time soon. (Self-interest could also be at work: Amazon CEO Jeff Bezos, a married father of four, who also owns The Washington Post, is already renovating a mansion—a former museum—in Washington’s exclusive Kalorama neighborhood.)

The scale of the Amazon competition and the lengths that some cities and towns were willing to go to influence the company turned into an economic development decision into reality-show spectacle, featuring a plethora of tax incentives. New Jersey lawmakers plan to offer as much as $5 billion in tax breaks. That’s a dubious use for public funds. The tax revenues that a $600 billion company like Amazon could generate would accomplish more if invested in public services: local schools, housing, and New Jersey Transit, the much-castigated state wide public transportation system. (Only Toronto offered zero tax dollars.) Besides, Amazon needs taxpayer dollars for a new headquarters as much as an owner of a professional sport team needs tax incentives to build a new stadium.

Timothy J. Bartik, a Penn IUR fellow and a W.E. Upjohn Institute senior economist offered this sobering take on tax-incentive arms race: “If the winning city provided large long-term tax incentives, this may be interpreted by many local policymakers as a rationale for escalating incentive offers to other businesses.” He added, “This may divert resources away from educational investments that may be more cost-effective in promoting local economic development. … But such incentives are often not the most cost-effective way of creating local jobs.”

Tax breaks can also come back to haunt a city. Boston and the state of Massachusetts offered millions in tax incentives and other benefits (including “concierge services” like customized employee training) in its successful bid to secure General Electric’s corporate headquarters, only to discover this week that the company may be on the verge of breaking up into smaller entities. GE is already cutting back its Boston-based workforce, although the company claims that it still intends to bring nearly 1,000 jobs to the city.

There is an additional challenge for contenders like Chicago, Newark, and Philadelphia, with their high concentrations of poverty. Those cities must address what Wachter calls the “challenge of inclusivity.” “If Amazon chooses one of these cities, [that decision] should be accompanied by] a transformation initiative so that the move is not just a move to bring in high priced talent, but a move to grow the talent in that city,” she says.

In this new Gilded Age, cities can aspire to improve the lives of its citizens, courtesy of multibillion-dollar companies like Amazon. Perhaps the winning city and Amazon will join forces to fund education programs and repair and build schools, buy new buses or rail cars, incentivize workforce housing development, or back rent control initiatives. Maybe Amazon will take its corporate responsibilities seriously, realize that public funds should go to public purposes, not into company coffers, and decline tax incentives.

Or maybe Toronto gets the nod.

The finalists are:

·      Atlanta
·      Austin
·      Boston
·      Chicago
·      Columbus, Ohio
·      Dallas
·      Denver
·      Indianapolis
·      Los Angeles
·      Miami
·      Montgomery County, Maryland
·      Nashville
·      Newark, New Jersey
·      New York City
·      Northern Virginia
·      Philadelphia
·      Pittsburgh
·      Raleigh
·      Toronto
·      Washington, D.C.

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  1. The Rev Kev

    Footage has just been released on people’s reaction to Amazon setting up in their city as well as an environmental impact simulation of the effects on three candidate cities-

    Maybe, just maybe, there never was a race to the bottom for these cities and it was all predetermined. For other corporations, it would be like a discovery opportunity in that there is now a list of which cities are dumb enough to put up their hands for a mob like this and exactly how desperate they are to land business – whatever the terms! I also wonder how much Amazon could sell all the information and private offers that they received from all those cities – the private stuff – to other interested corporations.

    1. allan

      “all the information and private offers that they received from all those cities”

      Many cities which were discarded in the first round are now refusing FOIA requests
      for the terms of their offers to Amazon.
      Here’s a story concerning the secrecy around the joint proposal from (no laughing please)
      Buffalo and Rochester, and here’s one about Cleveland.
      The only citizens in the New Republic are corporations and billionaires.
      The rest of us just get to watch the proceedings on TV.

      1. James T. Cricket

        And people say that government or its regulators are not controlled by big business–usually with a sneer at those of us trying to find where the democracy is. All people are equal, but some have more resources to be equal with than others…

  2. cnchal

    Only Toronto offered zero tax dollars

    Whew, Toronto dodged a bullet. And so did any potential Amazon office drone. With a $100,000 annual salary they would be competing for housing with police officers, fire fighters and garbage collectors. Never mind the Chinese elite with their loot.

    Critical to remember that the Toronto Amazon HQ2 bid did not offer subsidies as a way to get at the table. Our proposal touted our quality of life, openness to immigration and current/forthcoming transit investments as the key reasons to come. #WeDidItRight

    Damn right. Touted is the right word for the occasion. Toronto is a city with a peasant’s highway (the 401) and a rich man’s highway (the 407 toll road). Bezos could afford the rich man’s highway for the rare visit, the Amazon office drones would add to the chaos on the 401.

    1. John Wright

      Maybe Toronto learned from Montreal’s winning bid to host the 1976 Summer Olympics.

      Sometimes “winning” to host the Olympics is transformed into a long-term public financial mill-stone.

      At least cities are wising up to the usually negative value of hosting the Olympics.

      Perhaps cities are now more aware that they CAN give away too much to attract a new employer.

      In my view, Toronto handled this well.

  3. lakecabs

    This is why we need strong unions to target cash cows like this.

    Jeff Bezos pulls a billion dollars out of this ponzi scheme and pays his workers nothing is criminal.

    Leaving it to the middle class to pay for the shortfall in wages.

    1. ejf

      No unions? Then it’s Dallas.
      Don’t need no unions there. And with Fort Worth next door, you got labor.

  4. a different chris

    >Tax breaks can also come back to haunt a city.

    Glad somebody mentioned this.

    1) Amazon ain’t never gonna hire 50k top-line engineers. 20k max. If Uber is tech-delusion level 10, Amazon is at least a 5. They never make any money. They don’t have any compelling products (and I use and like my Amazon Fire HD. I’m probably the only guy you know who even has one).
    2) I doubt they will hire 50k people, period. But if they do the majority -see #1- will be (family blog) jobs.

    So they’re K-mart without the physical stores and somehow without the need to show a profit. What are these 50k people going to do?

  5. L

    The “tax breaks” are hardly the worst of the problem Danny Westneat at the Seattle Times chronicled one of the worst excesses This City Hall, brought to you by Amazon.

    Chicago’s offer was not actually a cut on Amazon’s taxes but a promise that all the taxes their workers paid would be funneled to the company thus making it a literal company town.

    But the real winner is Fresno California who offered Amazon special authority to control how “their” tax dollars are spent. 85 percent of tax money would be channeled to a fund controlled by Amazon and city officers to be spent around Amazon’s HQ. To quote the article:

    When asked about it, Fresno’s economic-development director threw the public interest under the bus.

    “Rather than the money disappearing into a civic black hole, Amazon would have a say on where it will go,” he told the Los Angeles Times. “Not for the fire department on the fringe of town, but to enhance their own investment in Fresno.”

    Sounds like someone wants a new gig at Amazon.

    And remember these are only the offers that are known. Most cities have kept the details of their offers secret. In my own area we have private developers, multiple city governments, county, and probably the state who all were involved in the groveling bid. Who knows what combination of promises were made or just how much of our democracy the eager future candidates put on the chopping block.

  6. j84ustin

    “What I really cannot explain is the solicitation of a hundred bids and the announcement of twenty finalists. Maybe it was all part of a high tech high stakes drama to make the deal with Dallas more orgasmic at its final conclusion?”

    It was to squeeze every last possible tax break and concession from the city they have likely already internally chosen.

    1. Left in Wisconsin

      Just posted this on last night’s Water Cooler but fits better here:

      What I really cannot explain is the solicitation of a hundred bids and the announcement of twenty finalists.

      My guess is it was simple another data collection scheme. Amazon now has a virtually complete inventory of every large parcel of available land in every large metro area in the country. Not to mention a very good sense of how willing various localities are to sling the subsidies. All seems like valuable information. Voluntarily donated to the new vampire squid free of charge.

  7. DJG

    The way that the bid and Amazon’s claim were reported in Chicago haven’t made much sense. And this article picks up that flaw of “bringing 50,000 knowledge workers”–to Chicago? There is no intention of local hiring? It is a all a gold rush?

    The Chicago bid also was odd in that some of the sites proposed didn’t seem to conform to the mega-square-footage that Amazon claims to require. I tend to doubt that Chicago can get away with tearing down four or six square blocks on the edge of the Loop to welcome Amazon, although the Rahm administration may think so.

    All in all, and after the absurdities of the Lucas Museum, and the slowly simmering controversy over the Obama Pyramid, Chicago is not a likely candidate.

    1. rps

      I tend to doubt that Chicago can get away with tearing down four or six square blocks on the edge of the Loop to welcome Amazon

      Eminent Domain

  8. Chauncey Gardiner

    “Seattlefication”… What an apt term!… and what will happen to Seattle in the wake of this decision with all its political, social and economic implications? Further, what does Amazon actually make or do that cannot be done by someone else; and what are the company’s competitive, legal, managerial and financial vulnerabilities? I cannot help but think that the very establishment of this “second headquarters”, together with the company’s growth and size, will also contribute down the road to bureaucratic inertia that will likely be addressed in a manner similar to that now being implemented by GE. Perhaps an apt metaphor is that of a large snake that lives on the river from which the company derived its name and attempts to swallow and digest prey that is too large… Whole Foods acquisition, Pentagon procurement contract, second HQ… all in the last 12 months.

    In a broader sense that transcends this particular company, there also seems to be rising public sentiment that something very fundamental is very wrong. Saw it reflected in the graffiti in another West Coast metro area I visited recently: “High Tech Low Life”, levels of homelessness there, and have read media reports of buses carrying employees of large tech companies in the Bay Area being hit by rocks. Just sayin’.


    Hey, remember back in the 90’s when they told us that the Internet was going to make real estate as we know it obsolete because we can remotely work and teleconference so businesses can be anywhere and you don’t need to live near your employer? Good times, good times.

    This makes me think of the story a few days ago, about how Amazon doesn’t generate profit, they just keep expanding to play the market cap/capital gains game. If they reach maximum expansion and need to contract, it’ll be HQ2 that gets hit, not the Seattle OG. And then why does the “winning” city get? Monorail… Monorail!

  10. Wukchumni

    He gets to pick distribution house
    He’s mighty, mighty, just lettin’ it all drag out
    He’s an online house
    Got his odds stacked and that’s a fact
    Ain’t holding nothing back
    He’s a slick house

    We order together everybody knows
    And this is how the story goes
    He knows he got everything
    A shopper needs to get demand, yeah, yeah
    How can he lose with those things we use?
    365/12/52/24/60/60, what a winning hand

    He’s a slick house
    He’s mighty, mighty, just lettin’ it all drag out
    He’s a slick house
    Likes his odds stacked and that’s a fact
    Ain’t holding nothing back
    He’s a slick house

    He’s the one, the only one built like Amazon
    The clothing wares, and texty ways
    Make an old man wish for younger days, yeah, yeah
    He knows what he wants built and cities how to please
    Sure ’nuff a strong man, can bring them to his knees

    He’s a slick house
    He’s mighty, mighty, just lettin’ it all drag out
    He’s a slick house
    Likes his odds stacked and that’s a fact
    Ain’t holding nothing back
    He’s a brick house

    Shake it down, shake it down now
    Shake it down, shake it down now
    Shake it down, shake it down now
    Shake it down, shake it down now
    Shake it down, shake it down now
    Shake it down, shake it down now
    Shake it down, shake it down now

  11. Arthur J

    I don’t know why Toronto even bothered to apply. Besides the problem of the Amazon workers all needing passports, Toronto is already gridlocked. Running company buses is no solution because they’ll just be stuck in the same traffic. Toronto real estate prices are through the roof, such that even well paid single engineers would have trouble finding a place they could afford.

    Might be why they offered no tax incentives, since the chances of them winning are pretty much zero.

  12. Louis Fyne

    —a single $5 billion investment in a second headquarters that brings 50,000 high-tech workers and their families—

    If I recall correctly, in Amazon’s original press release the key qualifier is “up to” and “up to” and “up to.” Amazon is selling a ceiling, not a floor.

    But mouthpiece media spins it as a guarantee.

    Amazon’s PR firm deserves a bonus. or is it business media needs to be fired en masse?

  13. Louis Fyne

    shaking my head. straight from the horses mouth:

    “Amazon HQ2 will be Amazon’s second headquarters in North America. We >>>expect to<<<< invest over $5 billion in construction and grow this second headquarters to include >>>>>>as many as 50,000 high-paying jobs<<<<>>>is expected to<<<<< create tens of thousands of additional jobs and tens of billions of dollars in additional investment in the surrounding community."

  14. Croatoan

    I think Raleigh is more of a contender than people think. By the way, when they say Raleigh they really mean Research Triangle Park. Land land is still relatively cheap, and the state and local governments here LOVE giving taxpayer money away to corporations. Plus all the millennials here would be the biggest cheerleaders because they would be able to get their craft brew supplies from Amazon delivered same day.

    From a local paper:
    “RTRP has been mum on the question of financial incentives, which will probably be a huge factor in Amazon’s decision. When Raleigh first submitted its bid, we were told that the package didn’t talk about incentives, and that would come later on. Yesterday, Calabria told me there have been closed-session meetings with economic developers about incentives, though he couldn’t talk about them. Wake County does have some standard incentive packages that would apply, though there’s talk of going bigger; in addition, Durham and Durham County could chip in as much as $50 million

    Closed door meetings, ain’t that great.

    Bookmarking this so I can say “Told you so” when they decide.

  15. perpetualWAR

    The poor city that “wins” is in for a Seattle-like crapification.

    Good thing I had many years living in a pre-Amazombie Seattle.

    But now, I’m gone. Bye Bye. Off to a shorter commute.

  16. rps

    According the the Reader:

    “Rahm and Rauner have already offered Bezos about $1.32 billion in Economic Development for a Growing Economy (EDGE) tax credits. This is the program in which the state essentially lets a corporation keep the income tax dollars that its employees would normally pay to the state.

    …In addition, Rahm and Rauner have offered Amazon a property tax break of at least $60 million. Bezos hasn’t even selected a site and he’s already getting a break in Amazon’s taxes.

    Rahm and Rauner still haven’t told us who’ll pay to buy this land on which Amazon will settle. I’m pretty sure Bezos will demand that he not pay for it, and I don’t think the current owners will give it away….My guess is the acquisition costs will come out of TIF funds, as they generally do in such deals.”

    Ughhh, Bezos the Evil Emperor, Rahm the Terrible and Rauner the Rat. BRR…. Illinois taxpayers will be buried under an avalanche of tax hikes plus state and city services cuts under the guise of welcoming Bezos’ Trojan Horse as a gift. Bezos Evil Empire acquisition of another city, part deux. Please not chicago, please not chicago, please not chicago please not chicago please not chicago

  17. sglover

    Well here’s one DC-area resident who dreads the several signs that Bezos has his eye fixed on the Beltway. Since 3 locations in this region made the list, Bezos can set *them* against each other, after the next cull.

    Beyond armchair prediction…I swear to God, it’s almost like Bezos is conducting a demented public social experiment:. How much are local elites willing to give away? How deep is the rot?
    **Let’s get some numbers**

  18. Jasbo

    I wish governments would would put as least half as much energy into **getting out of small business’s way** as they put into bribing big business to move their way. The world would be a better place.

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