February 26, 2018; Atlanta Business Chronicle
“No one I know in the economic business believes that Amazon started with a blank piece of paper,” writes Atlanta-based economic development consultant J. Mac Holladay in the Atlanta Business Chronicle. “I believe that they had the three final candidates [who] were completely researched and selected BEFORE [emphasis in original] the process started,” remarks Holladay.
Holladay adds, “There has never been a public competition like the one going on for what is called the Amazon HQ2.… Cities and regions across the country have submitted ‘proposals’ that run from bizarre to very creative. Included in many of them are massive incentives of all descriptions including large amounts of cash. As an economic development professional who has participated in many large projects as both a state economic development director and a local Chamber executive, let me offer perhaps a different view of what is happening.”
Holladay’s answer: “The Game has given Amazon in-depth and detailed information of literally hundreds of communities; make that exactly 238 who proposed. It has also revealed to the firm what folks would do in terms of incentives. No matter who gets this project, Amazon knows the data for and boundaries for any and all future projects they may have from coast to coast.”
Holladay notes that many of the 238 communities submitting proposals knew that their odds were slim, but the bidding process itself can be beneficial. As Holladay explains, “So now the list is supposedly down to 20 ‘finalists.’ Several of those chosen have gotten some excellent ‘earned media,’ like Indianapolis did in a recent New York Times article. There is no doubt that going through the process has brought different players together in many places, and that process can have a positive effect going forward in preparation for other projects. In fact, several of our clients, who knew they were not really competitive for the project, have made it clear that the proposal creation process has had a real positive effect for their region.”
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In a sense, the Amazon process shares the traits of many Obama administration programs, like Promise Neighborhoods, in which the prize money—ahem, federal grants—was vastly short of the demand, but where the proposal process brought together partners, spurring local projects even in the absence of federal support, as occurred in Cleveland’s Central Neighborhood.
Holladay notes that Amazon has gotten free press, but also risks a backlash if the company gets too greedy. Holladay asks, “How could a CEO with [Jeff Bezos’s net worth of $114 billion] and a firm with billions in the bank, justify asking local and or state government, some still recovering from The Great Recession, to give them mountains of taxpayer money?”
As NPQ noted in January, while cities often award corporations with tax abatements, these are not fundamental to most business location decisions. As the nonprofit research and advocacy group Good Jobs First puts it, “We have said since Amazon announced this rare public auction that incentives will be somewhere between marginal to irrelevant in Amazon’s decision. That’s because all state and local taxes combined equal just 1.8 percent of the average company’s cost structure. It’s the other 98.2 percent of costs for business basics such as labor, occupancy, and other business inputs that almost always determine where companies expand or relocate.”
Holladay echoes this view: “The belief about this headquarters project has been that the quality and availability of the workforce…and the quality of place, including local mobility and an open and welcoming community.…Those two along with national and global access via a great airport would seem vital to long term success. As far as company stability and success in the future, they will far outweigh a one-time incentive package.”
How much Amazon seeks to squeeze out in incentive payments from the “winning” city, adds Holladay, will reveal “a great deal about the culture and value system of Amazon itself.”—Steve Dubb