Amazon's announcement that it's seeking a place to deposit a $5-billion, 50,000-employee complex as its second headquarters somewhere in North America has predictably set up a frenzy of civic preening. Mayors and regional pooh-bahs from coast to coast have announced their great interest in bringing the immense company to their burgs, as have real estate firms such as Irvine Co.
Amazon's idea is to supplement its existing Seattle HQ with a co-equal headquarters in some entirely fresh location, since Seattle, where the company already accounts for fully one-fifth of all office space, will have trouble absorbing much more expansion. The company is asking localities for presentations explaining why they're the right place for what it calls HQ2.
Amazon's plan is being hailed in some quarters as a breakthrough in urban planning. Washington Post columnist Steven Pearlstein lauded the company's insight that rather than continuing to overburden Seattle by moving the workers to the jobs, "the better strategy (is) to move the jobs to workers" by creating, essentially a new Seattle somewhere else.
Amazon is acting as if universities, high-skilled workers and local and state services — airports, mass transit authorities, zoning commissions, etc. — will hustle up, jostling one another to give it everything it seeks. It may well be right, judging from the initial frenzy. Its eight-page "request for proposals," or RFP, for the new headquarters is being examined to the last comma by civic leaders like steel company executives examining a bid sheet for rebar. It's a fair bet that political leaders will respond with lavish tax incentives and other public grants to win the prize.
Yet a closer look reveals that the company's approach is arrogant, naive and more than a teensy bit cynical. Nor is there anything especially novel about it. In its headquarters competition, it's employing the same technique it has employed in siting its dozens of distribution facilities and data centers — playing states and localities against each other for maximum public handouts. This technique has garnered more than $1.1 billion for Amazon, by the reckoning of subsidy-tracker Good Jobs First. Bidding for HQ2 could set a record.
That would be exactly the wrong outcome, from the standpoint of public welfare. Rather than be offered bribes to move its headquarters into a community, Amazon should be made to pay for the privilege.
Perhaps the most important reason for this is that Amazon's arrival — whether the HQ2 site is an underdeveloped urban downtown, a shovel-ready suburban greenfield or even an exurban new town — will render its host community unrecognizable compared with what existed before. Communities that boast of relatively modest costs of living and reasonable labor costs as come-ons should recognize that Amazon's arrival will push up land values, and therefore the cost of housing and office space, and produce upward pressure on wages. That's good for workers, not so much for existing employers.
With its plan to occupy as much as 8 million new square feet over the next decade, Amazon is proposing to replicate its existing Seattle campus, which at 8.1 million square feet already casts the largest urban corporate footprint in America, more than twice the size of the No. 2 contender, Citigroup's 3.7-million square feet in New York and, according to the Seattle Times, more than the next 40 largest Seattle employers combined.
Accommodating this behemoth won't come cheap. Amazon says it's looking to build on a vacant location served by good transportation and educational infrastructure. But those things don't normally preexist together in a pristine state. They either emerge organically and symbiotically, or they're forced into existence. The first process takes time, and the second takes money, and lots of it. Historically, a city or region gingerly extends a tendril of its mass transit system toward an undeveloped territory; as new properties get developed, the transit system grows to serve them — you don't normally see full-scale transit webs serving vacant land.
Yet Amazon doesn't want to wait, and it doesn't want to spend. Its RFP requires communities to submit their responses by Oct. 19, with construction to start in 2019. The company encourages states and localities to "think creatively" about real estate options, but cautions that these creative solutions can't "negatively affect … our preferred timeline."
Most important of all, the company is signaling the expectation of public handouts. In other words, while creating the need for vast public investment in infrastructure, the company wants to reduce the resources available to make the investment.
A few features of Amazon's RFP seem designed to conceal this fundamental reality. The term sheet focuses mostly on the company's requirements for physical and social infrastructure. These include a metro area of at least 1 million population; an international airport no more than 45 minutes away, offering daily flights to Seattle, New York, the Bay Area and Washington, D.C.; mass transit service on-site and major highways not more than two miles distant; a "highly educated labor pool" and "a strong university system"; good cellphone and fiber coverage; and a political and social culture that supports "a diverse population" and an "overall high quality of life."
Asking civic leaders to make presentations about these factors is very much a sham. Every item on Amazon's wish list is something the company obviously can find out for itself — and probably already has.
Presence of major universities? It's not as though these institutions are hidden gems, waiting for a big employer to come along and suck up all their otherwise unemployed computer science graduates. Major international airports? Amazon can find lists of them on Wikipedia. Highways and mass-transit networks? Google search can provide maps. Labor and wage rates in various categories? Amazon can find them from the same source local officials would, the U.S. Bureau of Labor Statistics. Acceptance of diversity? Amazon founder Jeff Bezos need only to check the archives of the Washington Post, which he owns, to see how the anti-LGBTQ political environment of potential bidders such as Indianapolis and North Carolina match up with this prerequisite.
Information on only one major factor rests completely in the hands of local and state officials: government handouts. Amazon gives the game away by going into painstaking detail about what it expects from these programs right there on page 6, paragraph 2, of the RFP:
Please provide a summary of total incentives offered for the Project by the state/province and local community. … Please provide a brief description of the incentive item, the timing of incentive payment/realization, and a calculation of the incentive amount. … If any of the programs or incentives described in the summary of total incentives are uncertain or not guaranteed, please explain the factors that contribute to such uncertainty. … Please also describe any applicable claw backs or recapture provisions required for each incentive item.
That's the one aspect of the siting selection process that Amazon can't determine in advance because it's going to develop as the competition heats up. "We acknowledge," Amazon says, "a Project of this magnitude may require special incentive legislation in order for the state/province to achieve a competitive incentive proposal." Bidders need to know that "tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions … are critical decision drivers," the company says.
That's not an "acknowledgment"; it's a warning.
Amazon must know that its demands for salubrious public infrastructure and amenities are fundamentally incompatible with its demands for subsidies. The latter are plainly what the company considers most important; they also happen to be the only qualities of the candidate sites that aren't in some sense interchangeable.
Lots of U.S. and Canadian communities offer big universities, youth-oriented amenities, highways, transit systems and sizable airports. Those that don't exist will spring up around any big corporate headquarters offering 50,000 jobs at more than $100,000 each, which is where the company pegs the annual pay.
Amazon's HQ2 will attract an educated workforce whether it's located in suburban Denver, Dallas or Baltimore, to mention three locations appearing on not a few lists of candidates appearing in the media. Graduates of first-class universities from thousands of miles away will beat a path to the door. If the critical mass of workers and disposable income is great enough (it should be), restaurateurs, chi-chi retailers and other carriers of the cool lifestyle gene will follow. Transit lines and highway interchanges will reach out to carry this population where it wishes to go.
None of this is a new phenomenon, any more than is demanding a payoff. The only thing different about Amazon's campaign for a new headquarters is that it's bound to be bigger than any that came before. That's not a compliment.