Opinion: Contestant cities miss the bigger point in the hunt for shiny HQ2

Friday, October 20th, 2017

The hottest selling item on Amazon.com is Amazon.

Seems that everyone wants Amazon and its so-called HQ2. Governors, mayors and probably anyone with a bad plaid jacket who works at their local economic development entity couldn’t be more stoked. Or amped.

The excitement is understandable. It’s a shiny political object. HQ2, the second Amazon headquarters, carries with it the broadly reported promise of as many as 50,000 jobs with compensation of about $100,000 per employee, and an investment of about $5 billion in capital in its new facility over the life of a 15- to 17-year project.

Amazon’s bar for consideration in its request for proposal was low – clearly designed to create competition. Any city, or collection of cities, within 45 minutes of an airport, two miles from an interstate and with 500,000 available square feet of space available met the criteria.

Amazon’s RFP  indicated that it prefers to place HQ2 in a metro area of one million or more people. Oh, and the company wants a “stable business environment” possessing “urban or suburban locations with the potential to attract and retain strong technical talent” and be in a place where “communities that think big and creatively when considering locations and real estate options.”

Amazon makes its choice in 2018. Where this project lands is anyone’s guess.

Outside of Atlanta, suburban Stonecrest, Ga., which only became a real place in January, said that it would change its name to City of Amazon if selected. No sentimentality there.

Not to be outdone, Kankakee County, Ill., which once was ranked as the 354th most livable city of 354 places ranked in the United States and Canada by the Places Rated Almanac, is in the mix. Kankakee has said it would effectively create Amazon City within its city.

Pittsburgh is in the game, and propeller heads there have been purporting the construction of a super tube that carries people at Jetsons-like speed back and forth to Chicago. I continue to read stories about Pittsburgh, which announced Thursday that it had spent “between $300,000 and $400,000” to create its proposal, and Nashville as front-runners because of their relative low costs of living and access to technically prepared workers, but stories about the Jetsons tube would be more interesting.

Further fueling the notion that “The Sopranos” actually was a documentary, New Jersey is said to be offering $7 billion in tax incentives if Amazon picks Newark. If Paulie Walnuts shows up at Amazon CEO Jeff Bezos’ door, well, that might help with the deal and create a new programming opportunity for Amazon Prime Video.

In Chicago, Democrat Mayor Rahm Emanuel and Republican Gov. Bruce Rauner are promising innovative innovations that are sure to ignite innovators through a $1.2 billion Chicago expansion of the University of Illinois Champaign-Urbana. That was announced Thursday. Wow, the timing. What an amazing coincidence.

By the way, the University of Illinois at Chicago is already a thing that exists, but that’s not sexy. Nor innovative. And never mind that there’s another school just a few miles down the road from the proposed innovation site, Chicago State University, which had 86 students enroll there for the start of the 2016 academic year and 145 this fall. There’s no plan to close that hotbed of higher learning.

Oh, and there’s still a $1.7 billion hole in the Illinois budget – the one that the state legislature worked on for roughly two years. But innovation is a dream built on tax dollars, so Illinois is adding another university entity to a state that can’t pay for its universities in the name of sealing this deal with Amazon.

Here’s why New Jersey and Illinois are really out, all apologies to Mr. Walnuts and the Illinois Department of Innovators of Innovative Innovations: These states are hot messes. Burdened by insane pension debt that’s fueling high property taxes, high corporate taxes and high personal income taxes, the environments aren’t ideal. Neither state has done what it’s needed to do ahead of Amazon’s desire to grow to be a contender.

Baltimore, Washington, D.C., and the University of Maryland have discussed a partnership that would offer access to a vacant steel plant, whatever Washington does and a dash of academia.

Tuscon, Ariz., so desperate for anyone to pay attention to it, sent a cactus to Amazon CEO Jeff Bezos in Seattle. It rains there – a lot, I’m told, so there’s no telling whether that was the best way to get on Bezos’ radar.

All across the U.S. and Canada (yes, this contest is open to Canadians, too), city after city, region after region, wonks and wannabes are tripping over themselves to create an environment for a political win and are willing to mortgage whatever they can to leverage the potential of landing Amazon.

It comes down to this: There’s no lack of bureaucrats with tax dollars to throw at Amazon who aren’t ready to throw them. The true competition may lie in determining which cities simply are willing to pay the most to cover their blemishes.

In town after town, virtually wherever Amazon has gone as it has scaled its massive distribution and fulfillment networks, the cities, counties and states whose workforces would benefit from the relationship have rolled over and offered tax incentives to accommodate the e-commerce monolith. This is more of that, but concentrated and packaged as white-collar work.

But what if municipalities were more willing to work with companies before they became massive and held the leverage to demand conditions for consideration? And what if cities simply created economic opportunity by not squeezing the company that could become the next Amazon by reducing taxes, cutting out regulation and unnecessary licensing, and thus allowed more business to blossom?

Over the next 15 or 17 years, a city or region that was thoughtful about the way it welcomed development and attracted 50 businesses that scaled to 1,000 people, 100 businesses that grew to 500 people, or incubated 1,000 businesses that employed 50 people would be far better off and positioned their futures more securely than the one city that lands one Amazon.

Ask yourself, which of those prospects is a better deal for your hometown?

Don’t think too hard.

Here’s a hint: A healthy and vibrant economy is not built by bribing one large company to set up shop in your state. It’s built by enacting policies that attracts hundreds, or thousands, to set up shop and grow year after year.

  • Chris Krug is President of Franklin Center for Government and Public Integrity. Write to him at [email protected]

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