The dark side of winning the Amazon headquarters

FAN Editor

Head coaches have set aside rivalries and one city offered to change its name. Others are taking the more traditional approaches of promising huge tax windfalls and new state-of-the-art transit systems. But history shows luring Amazon‘s second headquarters may not be a slam dunk for the victorious city.

The deadline for cities to submit bids to become Amazon’s second headquarters is 11:59 p.m. Pacific Time on Thursday for what many cities see as a once-in-a-lifetime chance to grab an economic golden ticket.

On the line: more than $5 billion in construction spending to build its second headquarters and high-paying tech jobs that will, in turn, generate tens of thousands of additional jobs and “tens of billions of dollars” in investment in the surrounding communities.

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But it’s not all skittles and beer, or jobs and growth. Seattle offers a cautionary tale of both the good and the bad that can befall the home of one of America’s fastest-growing companies.

The good news is jobs, jobs and more jobs. Amazon’s Sept. 7 announcementpromised more than 50,000 of them. But it’s more than that. It’s also the opportunity to attract a workforce that will stoke the local economy buying electric cars, artisanal bread and everything else they’ll need to build a life. And don’t forget all the other companies that will follow Amazon to wherever it lands.

“Amazon is magnetic to talent,” said Jeffrey Shulman, a professor of urban planning at the University of Washington who studies growth in Seattle.

But there’s a mixed blessing: Unless your town is extraordinarily full of tech workers already, many of those jobs will go to people moving in from elsewhere.

“You have to think about how many of your residents are set up to fill some of those. What’s your education infrastructure? Do you have a strong STEM program in your city?” Shulman said.

If not, you could get the worst of both worlds — local residents who don’t have any hope of participating in the new economy but who see their housing costs balloon as hordes of tech workers flood in.

Housing and traffic congestion are the two biggest pain points. Unless a city has an enormous reserve of unused housing, there’s no way Amazon-created demand won’t push up costs and push out current residents.

The only way around it is to build lots more housing that’s accessible to public transit. That’s not always possible, said C.J. Gabbe, a professor of urban planning at Santa Clara University in Santa Clara, Calif.

Cities making a bid for Amazon’s HQ2 shouldn’t be bewitched by the idea of all those high-paying jobs, Shulman said.

“Your city’s going to experience a lot of changes. In Seattle, some people feel positively about them, some feel like their community is vanishing,” he said.

On the plus side, unlike some of its tech industry peers including Apple, Google and Microsoft, who built self-contained corporate campuses in the suburbs, Amazon put its buildings in Seattle’s urban center. Employees in suburban campuses arrive by car or corporate buses in the morning where they find everything they need — free food, dry cleaning, barbers, sometimes even doctors. They never need to leave until they go home at night, resulting in little economic vibrancy in the surrounding area.

Amazon, on the other hand, purposfully doesn’t build enough cafeteria or even coffee bar space for staff, so workers are forced to walk to area restaurants and shops.

“That strategy is going to be a net positive,” Gabbe said. “The economic impacts of smarter, more compact grown are well known compared with more decentralized growth.”

While not all cities are showing their cards, dozens have indicated they plan to enter the fray. Amazon says it expects most to come via FedEx — but there are at least eight flights that land at Sea-Tac airport in time to make a mad dash drive downtown by the deadline. Amazon doesn’t expect to make a decision until sometime next year.

Cities that will be shipping over one online and five paper copies of their proposals include Austin; Baltimore; Boston; Buffalo; Camden, N.J.; Chicago; Cincinnati; Columbus, Ohio; Dallas-Fort Worth; Denver; Detroit; Indianapolis; Kansas City, Mo.; Las Vegas; Los Angeles; Louisville; Minneapolis/St. Paul; Memphis; Milwaukee; Nashville; Newark; New York; Pittsburgh; Philadelphia; Portland, Ore.; Pensacola, Fla.; Phoenix; Salt Lake City; San Diego; St. Louis; Sacramento; Tacoma, Wash.; Tampa; Tucson; and Washington D.C.

In Canada, Ontario, Toronto and Vancouver are in the mix. One of their selling points is an immigration policy that makes it easier for tech talent to enter the country. Detroit is piggybacking on that, noting that if Amazon were to locate there, Windsor in Canada is just a 2-mile drive away.

The requirements are sparse. Whatever area is chosen must be in North America, be a metro area of more than 1 million people, have local and regional talent, especially in software development and related fields, and be “a stable and business-friendly” environment. Proximity to a well-connected airport and walkability are also plusses as are being somewhere that can attract and retain workers — i.e. it’s got to be someplace hip Millennials want to live.

For such a tempting prize, cities are giving it their all.

Tucson sent a 21-foot saguaro cactus to Amazon, which the company promptly sent back as a donation to the Arizona-Sonora Desert Museum, saying in a tweet that it can’t accept gifts, “even really cool ones.”

The growing town of Frisco, Texas, just 30 minutes away from Dallas, hopes that Amazon will catch the “Frisco flu,” with Mayor Jeff Cheney saying it will “build to suit” and posting a video saying the town was “primed” for Amazon, a cheeky reference to the company’s Prime membership offering.

Birmingham, Ala., constructed giant Amazon boxes and placed them around town, then asked residents to tweet out photos of themselves talking about how wonderful a place it is.

In a clever move, Kansas City Mayor Sly James bought 1,000 products on Amazon and used the review of each to tout his city’s benefits.

Moody’s Analytics put Austin at the top of its list for the win, followed by Atlanta, Philadelphia and Rochester, N.Y.

Forbes put Philadelphia at the top, The New York Times chose Denver and Geekwireplumped for Toronto.

Martin Pupil, president of U.S. Brokerage at the global commercial real estate agency Colliers International, thinks anything in the same time zone as Seattle is out. While Denver’s got a good package, he thinks it’s still too close to Seattle. Miami seemed like a good bet early on, but the recent hurricanes may have made many reconsider, he thinks.

While Chicago’s got much of what Amazon wants, its state economy is a mess, making it too dangerous a play.

Detroit is a contender because it has great universities, a strong airport hub, lots of cheap housing and comes with its own “mission statement in terms of helping rebuild one of America’s great cities,” Pupil said.

In the end, whether Amazon is a net positive may or may not matter.

“Cities may be viewing this as a loss leader. Even if it’s a break-even proposition in the shorter term, they see it as an opportunity for more medium- and long-term economic development,” Gabbe said.

“I don’t think any city is going to turn down the opportunity to host Amazon.”

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