How the losing Amazon HQ2 cities can still win


Is Amazon a monopoly?

Only one city will win Amazon’s second headquarters. But other cities can still benefit from the process.

Some cities such as Denver, Philadelphia and Toronto said they’ve seen a spike in interest from businesses looking to expand or relocate, after being named to the short list for Amazon’s new facility, dubbed HQ2.

“The attention that has come our way since being shortlisted is enormous,” said Julia Sakas, a spokesperson for Toronto Global, the group that organized the city’s bid for HQ2. “It has literally put us on the radar of companies that might never have considered the Toronto Region.”

Last year, Amazon received 238 proposals from cities large and small to host its next headquarters. It announced the top 20 candidates in January. The campus will cost about $5 billion to build and will create as many as 50,000 jobs.

Some cities offered Amazon big tax breaks and perks for HQ2. For example, Newark, New Jersey, announced $7 billion in incentives to lure the company, while Maryland offered an $8.5 billion package (Montgomery County is one of the finalists).

Related: Texas city reveals why it lost Amazon HQ2 bid

“Many cities put in an incredible amount of work for Amazon HQ2, and this [could] have distracted them from other economic development opportunities,” said Nathan Jensen, a professor at the University of Texas at Austin. “But using their information and marketing materials from the HQ2 bid could be an effective way to reuse some of the outputs from this hard work.”

Cities like Toronto are also reusing the information they compiled for their Amazon proposals to help attract other firms. Since publishing the bid online in October, Sakas said it’s been downloaded by businesses and the public more than 15,000 times.

Some local organizations have already used the data from the proposal for research purposes.

Philadelphia has experienced more interest from businesses, too, according to a spokesperson for the city’s Commerce Department.

“The videos [we created for HQ2] were able to capture some of the city’s best qualities and highlight them in a way that was easily understood by people who may not be as familiar with Philadelphia compared to places like New York or Washington DC,” the spokesperson said.

Several companies have referenced Philadelphia’s Amazon pitch as a catalyst for their new interest in the city. One company, Elm Partners, an investment firm previously based in London, is now relocating to the city.

Denver also said it received “significant” interest following public release of the short list, according to a spokesperson for Metro Denver Economic Development Corp., the private organization spearheading its HQ2 efforts. Denver did not reveal the incentives it offered.

Related: For Amazon HQ2 hopefuls, Seattle serves as a cautionary tale

Even cities such as Arlington, Texas, that are no longer in the running hope the publicity around HQ2 will generate interest in its proposal site. Arlington offered up to 1.7 million square feet at Globe Life Park — home to the Texas Rangers baseball team, which is moving to another stadium — to host its new offices. The city submitted a proposal as part of Dallas-Forth Worth’s bid for the facility. (Dallas-Forth Worth remains a candidate).

“We are open for business and look forward to other great companies that want to take a look at Arlington,” said Mayor Jeff Williams.

However, some experts warn the enormous incentives offered to Amazon could set a troubling precedent for future projects.

“For many of us studying economic development, we were shocked by the responses of cities to Amazon HQ2 — both in the lack of transparency and the willingness to give massive incentive packages,” said Jensen. “I worry that the economic development incentives being offered to Amazon HQ2 could be the new norm for some of these communities.”

He added that a city or state should be careful not to give so many tax benefits away that it hurts the community in other ways. To pay for local tax cuts, cities may have to raise taxes elsewhere or slash spending on public services like education and infrastructure.

“This strategy of [cities] chasing the mega-deals is flashy and can allow politicians to take credit for economic development, but it shouldn’t be the primary goal of economic development,” Jensen said.

CNNMoney (New York) First published May 17, 2018: 3:15 PM ET



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