Pimping for Amazon
The mad dash of cities across the nation to please a rich corporate suitor is as educational as it is obscene. The latter because public agencies from the state level all the way down to city departments are shamelessly offering tax dollars to one of the top value corporations owned by the richest man on earth and the company unashamedly asking for them.
Educational because the spectacle shows how completely the powers have reversed. It used to be that economic development agencies wrote the specs for sites they wanted to offer for private development. Now it is the private corporation that writes the specs. It used to be that cities looked to private developers to pay part of the cost of new development through impact fees and adequate public facility ordinances. Now a powerful corporation not only expects top notch infrastructure transit but tax credits and benefits on top. It is educational to witness how ready our representatives are to give away the shop and how eager their minions are to comply.
As in the preparations for Roman gladiator shows, all decency and rules are shed in the thirst for blood. Cities and metro areas take their gloves off and are willing to use just about any weapon suitable to kill the competition even though they all know that what they are doing is self defeating.
Now a few weeks later, even the media have forgotten all pretense and have joined the full throttle local boosterism, assembling ridiculous checklists showcasing their hometowns are definitely best suited for Amazon beyond any relation to fact and proportion.
Occasionally, and almost as an unintended consequence these efforts yield honest insights when even the biggest booster can't deny a glaring weakness of his burg. Lack of a functioning transportation system often percolates to the top of such self doubt. Would Amazon be possibly troubled by the terrible traffic mess of sprawling Atlanta? Would the District's overburdened and regularly faltering subway system be a problem? Even the suburbs smell the coffee. But would it matter that Howard County's Columbia, MD, also touted as HQ2 location, has no rail connections at all? There are other serious flies in the ointment for the eager contenders which burn the midnight oil pimping their town. Would Amazon mind Baltimore's sky high murder rate, second in the nation only after St. Louis? The chances of cities winning the big ticket aren't much better than their citizens playing the lottery.
The accidental introspection could prove to be useful by making metro regions aware of what they are missing to be truly competitive in an arena covering an entire continent (Canada is apparently included in teh search area). Initial reactions, though, leave little hope that regional and local government mired in their usual local provincialism would actually lift their sight high enough above the immediate horizon to get a true sense of their competiveness.
There can be truth to that. Certainly Greenville and Spartanburg don't look back and sweat that they gave the keys to their cities in 1994 to land the American branch of the luxury auto giant BMW. But Amazon is not BMW, even though Amazon proposes more than five times as many employees than the automaker has employed to date. Why, because BMW is part of the old economy with huge tangible assets actually sitting in Spartanburg for all to see. Making automobiles in that region spurred an entire eco-system of suppliers multiplying BMW's employment to a point that the total automotive employment benefit is estimated today to be above 45,000 statewide. By contrast, Amazon is part of the new economy. It is a logistics company with almost no tangible product since everything it sells is made by others. The indirect economic effects of Amazon are difficult to quantify even if one can look at Seattle to see a precedent. While BMW USA has become the US largest US automobile exporter, Amazon's success typically means an even more negative trade balance, the opposite of BMW's exports. Amazon's impact on the overall domestic economy is far from being straight forward and subject of much concern: Many accuse the giant of cannibalizing domestic production and pushing traditional businesses out of the market.
The worst: The entire circus may be nor nil. Amazon may well know already where their second headquarter should go and no amount of incentives will change their mind. All it will change is their cost.
How far the public sector is willing to tip the balance in a public bidding war over private companies has recently been demonstrated by the State of Wisconsin. The $3 billion write-downs offered to Foxconn, equal $15,000 to $19,000 annual public subsidy for each job the company offers according to the New York Times. Foxconn will produce flat-panel display screens for televisions and other consumer electronics.
Nationwide about its is estimated that about 50-100 billion tax dollars are given away annually as "corporate welfare". Compared to the $ 2.6 trillion offshore dollars that the US economy can't seem to get its hands on, a trivial amount. But for cash strapped local and state governments who can barely buy books for their pupils or mow the grass in their parks, these amounts are staggering, even if one concedes, that the give-aways are not really cash drained from budgets, but cash drained from fictional budgets that would never exist without those companies allocating in the jurisdiction in the first place. But what is often forgotten in the casino mentality that comes from playing this game are the costs that the companies bring as well. All the people and all the structures will require significant investments in all kinds of fragile infrastructure.
The Atlantic's CityLab estimates that most of these public dollars are not even properly hedged against the possibility that the corporations wouldn't or couldn't come through with their promises. In spite of their designations as economic experts, few economic development departments seem to be aware of the risks to which today's corporations are exposed and how quickly their fortunes can turn. This is especially true for companies whose value is mostly stock value and not good old bricks and mortar and machines leading to the famous distortion where Musk's Tesla is valued higher than Ford.
The most positive aspect of Amazon's specs are the qualities they expect form the suitors: an attractive urban setting, good transit, and a decent bicycle infrastructure. This is a good lesson for city fathers and mothers who still don't understand quality of life, place-making, active transportation, place-making, healthy lifestyle, complete streets and whatever all the catchwords of good urban design are today. For those who stille peddle 20th century solutions to 21st urban problems and have been unable to pivot their cities towards the future the Amazon gamble is a good lesson.
Klaus Philipsen, FAIA
Nothing Is Too Strange for Cities Wooing Amazon to Build There
Brookings: Which is cities are well positioned for Amazon's HQ2?
Few Cities Could Accommodate Amazon's New Headquarters
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| Almost any major US city imagines itself as ideal for HQ2 |
Educational because the spectacle shows how completely the powers have reversed. It used to be that economic development agencies wrote the specs for sites they wanted to offer for private development. Now it is the private corporation that writes the specs. It used to be that cities looked to private developers to pay part of the cost of new development through impact fees and adequate public facility ordinances. Now a powerful corporation not only expects top notch infrastructure transit but tax credits and benefits on top. It is educational to witness how ready our representatives are to give away the shop and how eager their minions are to comply.
As in the preparations for Roman gladiator shows, all decency and rules are shed in the thirst for blood. Cities and metro areas take their gloves off and are willing to use just about any weapon suitable to kill the competition even though they all know that what they are doing is self defeating.
Now finesse is set aside, and we have pure unadulterated murder. The combatants have no protective covering; their entire bodies are exposed to the blows. No blow falls in vain. This is what lots of people prefer to the regular contests, and even to those which are put on by popular request. And it is obvious why. There is no helmet, no shield to repel the blade. Why have armour? Why bother with skill? (The Roman philosopher and Senator Seneca after witnessing a gladiator fight)It took only hours after Amazon announced their desire to find a location for their second flagship dubbed HQ2 that the first mayors, governors and development agency heads chimed up. "Please look here, look at me" they shouted via tweets, Facebook and even official phone calls to HQ1 in Seattle. The peacocks spreading their prettiest feathers.
Now a few weeks later, even the media have forgotten all pretense and have joined the full throttle local boosterism, assembling ridiculous checklists showcasing their hometowns are definitely best suited for Amazon beyond any relation to fact and proportion.
 |
| HQ1 in Seattle: valuable lessons? |
Occasionally, and almost as an unintended consequence these efforts yield honest insights when even the biggest booster can't deny a glaring weakness of his burg. Lack of a functioning transportation system often percolates to the top of such self doubt. Would Amazon be possibly troubled by the terrible traffic mess of sprawling Atlanta? Would the District's overburdened and regularly faltering subway system be a problem? Even the suburbs smell the coffee. But would it matter that Howard County's Columbia, MD, also touted as HQ2 location, has no rail connections at all? There are other serious flies in the ointment for the eager contenders which burn the midnight oil pimping their town. Would Amazon mind Baltimore's sky high murder rate, second in the nation only after St. Louis? The chances of cities winning the big ticket aren't much better than their citizens playing the lottery.
The accidental introspection could prove to be useful by making metro regions aware of what they are missing to be truly competitive in an arena covering an entire continent (Canada is apparently included in teh search area). Initial reactions, though, leave little hope that regional and local government mired in their usual local provincialism would actually lift their sight high enough above the immediate horizon to get a true sense of their competiveness.
Seattle ranks 9th of the 55 metro areas on this composite “talent pool” index. Near the top of the list are the nation’s largest and most educated cities: New York, Washington, San Jose, Boston, San Francisco, Los Angeles, and Chicago. But the top half also includes medium-sized cities like Austin, Detroit, Hartford, Minneapolis-Saint Paul, and Raleigh. (Brookings)Reviewing the endless queue of cities lining up in front of the Amazon lottery counter it is also educational to see how little cities, counties and states care about a true cost-benefit analysis or how poorly they are equipped to conduct one. Blinded by the $5 billion figure put out as the eventual construction expense and the up to 50,000 employees promised, huge monetary benefits seem so certain that even poor jurisdictions think they can forgo some of the imagined proceeds that they can artificially reduce the flow of taxes by offering tax credits, tax increment financing and the like. On first blush a few hundred million tax credits seem small potatoes in light of the "game changing advent of HQ2.
There can be truth to that. Certainly Greenville and Spartanburg don't look back and sweat that they gave the keys to their cities in 1994 to land the American branch of the luxury auto giant BMW. But Amazon is not BMW, even though Amazon proposes more than five times as many employees than the automaker has employed to date. Why, because BMW is part of the old economy with huge tangible assets actually sitting in Spartanburg for all to see. Making automobiles in that region spurred an entire eco-system of suppliers multiplying BMW's employment to a point that the total automotive employment benefit is estimated today to be above 45,000 statewide. By contrast, Amazon is part of the new economy. It is a logistics company with almost no tangible product since everything it sells is made by others. The indirect economic effects of Amazon are difficult to quantify even if one can look at Seattle to see a precedent. While BMW USA has become the US largest US automobile exporter, Amazon's success typically means an even more negative trade balance, the opposite of BMW's exports. Amazon's impact on the overall domestic economy is far from being straight forward and subject of much concern: Many accuse the giant of cannibalizing domestic production and pushing traditional businesses out of the market.
The worst: The entire circus may be nor nil. Amazon may well know already where their second headquarter should go and no amount of incentives will change their mind. All it will change is their cost.
How far the public sector is willing to tip the balance in a public bidding war over private companies has recently been demonstrated by the State of Wisconsin. The $3 billion write-downs offered to Foxconn, equal $15,000 to $19,000 annual public subsidy for each job the company offers according to the New York Times. Foxconn will produce flat-panel display screens for televisions and other consumer electronics.
Nationwide about its is estimated that about 50-100 billion tax dollars are given away annually as "corporate welfare". Compared to the $ 2.6 trillion offshore dollars that the US economy can't seem to get its hands on, a trivial amount. But for cash strapped local and state governments who can barely buy books for their pupils or mow the grass in their parks, these amounts are staggering, even if one concedes, that the give-aways are not really cash drained from budgets, but cash drained from fictional budgets that would never exist without those companies allocating in the jurisdiction in the first place. But what is often forgotten in the casino mentality that comes from playing this game are the costs that the companies bring as well. All the people and all the structures will require significant investments in all kinds of fragile infrastructure.
The Atlantic's CityLab estimates that most of these public dollars are not even properly hedged against the possibility that the corporations wouldn't or couldn't come through with their promises. In spite of their designations as economic experts, few economic development departments seem to be aware of the risks to which today's corporations are exposed and how quickly their fortunes can turn. This is especially true for companies whose value is mostly stock value and not good old bricks and mortar and machines leading to the famous distortion where Musk's Tesla is valued higher than Ford.
 |
| 2013 State ranking of corporate hand-outs |
The most positive aspect of Amazon's specs are the qualities they expect form the suitors: an attractive urban setting, good transit, and a decent bicycle infrastructure. This is a good lesson for city fathers and mothers who still don't understand quality of life, place-making, active transportation, place-making, healthy lifestyle, complete streets and whatever all the catchwords of good urban design are today. For those who stille peddle 20th century solutions to 21st urban problems and have been unable to pivot their cities towards the future the Amazon gamble is a good lesson.
This is the Olympics of corporate relocations. The winning city will be able to offer a large metro area, a deep and educated talent pool with a strong local university system, a robust international airport, sufficient highway and transit infrastructure, a reasonable cost of living, a welcoming culture, a business-friendly environment, likely eye-popping tax incentives, and a local business and political community able to work together to make a convincing pitch. (Bloomberg)What legacy city mayors should really learn, though, is that playing the lottery won't solve their problems. Mayors of disinvested and impoverished cities like Detroit, St Louis and Baltimore may dream about salvation via a white knight riding into town. Doing their day-job, however, they need to fix their cities for their existing residents so they become happy residents who become ambassadors of their cities. That is the only truly sustainable way to build those cities back. If old legacy city mayors insist on sending Bezos an application, it could be very short. This is what it should say: "Given the image problems your corporation has (along with Uber, Facebook and Google) and given that the future of these corporations depends on them embracing strong ethical values, you may need us more than we need you. You are welcome to open HQ2 in our city. But don't ask what we can do for you, but what you can do for us."
Klaus Philipsen, FAIA
Nothing Is Too Strange for Cities Wooing Amazon to Build There
Brookings: Which is cities are well positioned for Amazon's HQ2?
Few Cities Could Accommodate Amazon's New Headquarters
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