Over the next several weeks, The Ringer will be documenting the various desperate strategies cities are using in the competition to land Amazon’s massive second headquarters. The Thirst Tracker will catalog the stunts local officials are using to woo Amazon, explore some of the ways thirst manifests itself in economic development deals, and dig into how Amazon is changing city infrastructure and community planning.
Tulsa, Oklahoma, suffered a 94-degree scorcher last week, about 15 degrees above the late September average. Perhaps it was in the midst of this throat-drying heat wave that Mayor G.T. Bynum admitted to The New York Times that he’s not concerned about negotiating a bad deal with Amazon to land the retailer’s highly coveted new headquarters, HQ2. “Whatever it takes,” Bynum told the newspaper, likely in a raspy, thoroughly parched voice. “These are 50,000 jobs with the most innovative company in the world.”
As covered earlier, corporate thirst is all fun and Saguaro cacti until the ledgers come out and cities have to decide exactly how much money they’re willing to spend (or forgo, in the form of tax revenue) in order to woo a new business to town. Incentive packages brokered between governments and companies usually involve waivers of certain taxes, municipal infrastructure upgrades, job training programs, and even cash sweeteners. Some local leaders are taking the alarming stance that for Amazon, no price tag is too high.
In recent years, companies have gotten more adept at wringing every penny possible out of state and local governments desperate for jobs and political victories. Just last month, Apple announced a new data center in Iowa that will employ 50 people and is being subsidized with $208 million in tax breaks. In July, the Taiwanese electronics manufacturer Foxconn, after being promised $3 billion in tax incentives, chose Wisconsin as the site of a new plant that will create between 3,000 and 13,000 new jobs. When Boeing was considering building its 777X planes outside of Washington in 2013, state officials threw together an $8.7 billion incentive package in just three days, an all-time high for a business development deal.
Amazon is marketing HQ2 as a bigger prize than any of those deals. The online retailer says it will hire as many as 50,000 employees and pay them more than $100,000 per year. That scale of investment may be unprecedented and would fundamentally change the economic makeup of any major American city (save perhaps New York, Chicago, or Los Angeles). Boston, rumored to be a front-runner in the competition, had fewer than 50,000 residents total making six figures in 2014. There and elsewhere, economic development officials are fantasizing about tons of rich Amazon employees shopping in their revitalized downtowns, buying expensive homes, and launching new startups to build a thriving tech scene.
Given the massive potential upside of HQ2, the size of the Amazon incentive package will almost certainly be measured in the billions. Good Jobs First, a Washington, D.C.–based organization that tracks government subsidies, recommends that states and localities cap subsidies at $50,000 per job, a figure well below the size of typical deals. But even with that lowball number, Amazon would be netting $2.5 billion in incentives. At a more realistic $300,000 per job, the company would get $15 billion. At $2 million per job—the average incentive governments offer tech companies for data centers—the figure balloons to $100 billion. “I think it’s entirely possible that this could exceed [Boeing’s] $8 billion,” says Chris Tilly, a professor of urban planning at UCLA.
Yet there’s no guarantee that winning Amazon’s favor—likely at a very high cost—will be a long-term victory. In its request for headquarters proposals, Amazon is careful to point out that its job estimates are subject to change. The company currently employs more than 40,000 people in Seattle. Even if its business continues to grow unabated, and increasing antitrust sentiment doesn’t scuttle its plans for dominance, the company would still have to more than double its number of headquarters employees to reach its stated goal of 50,000 employees at HQ2. “If you look at other big companies, including other big diverse companies like Berkshire Hathaway or General Electric or United Technologies … they don’t employ anywhere near 40,000, much less 90,000 headquarters employees,” says Greg Leroy, executive director of Good Jobs First.
History indicates that a generous incentive package can eventually result in buyer’s remorse. After landing the massive tax breaks in Washington, Boeing proceeded to cut more than 12,000 jobs in the state, compelling legislators to try to pass new laws to recoup some of the tax revenue they gave away. Any responsible deal with Amazon will have to include clawback clauses, which would ensure that the company only gets all its incentives if it meets certain capital investment or job creation benchmarks.
But with so many cities competing, Amazon is likely to receive some eye-popping deals that benefit the company much more than they benefit local residents. The retailer has crafted a scenario that intensifies media spectacle, public pressure, and political one-upmanship. “Amazon is going to encourage the bidding war,” says Tilly. “Just knowing what we know now about Amazon, it seems to me that there’s a few different places that could work for them. Between those places, the tax package will matter.”
Now for your thirstiness update:
Charlotte, North Carolina
Metro-Area Population: 2.5 million
Top School: University of North Carolina at Charlotte (as ranked by U.S. News and World Report)
Top Cultural Attraction: The Billy Graham Library (as ranked by TripAdvisor)
Thirstiest Quote: #CLTisPrime
Amazon probably doesn’t want to move to a town filled with pesky protesters who would challenge the company’s ruthless quest for labor efficiency. So Charlotte officials started the feel-good Twitter hashtag #CLTisPrime to encourage locals to voice their love of the city. This municipally sanctioned affection can be conveyed with words, photos, videos, and even songs. So far the hashtag seems to be mostly filled with messages from the Charlotte Chamber of Commerce, which is not the best outcome for a brand-sponsored hashtag, but also definitely not the worst outcome.
Gary, Indiana
Population: 76,000
Top School: University of Chicago (24 miles away)
Top Cultural Attraction: Michael Jackson Family Home
Thirstiest Quote: “And land? Jeff, I have all the land you need.”
The town implicitly referenced in the Jackson 5 song “Goin’ Back to Indiana” believes it can be Amazon’s new home, even though nearby Chicago is a more obvious choice. Gary officials took out a small ad in The New York Times arguing for their community’s resilience, leadership, and abundant cheap acreage. I like the moxie to try to get on the national stage, but it seems like the Seattle Times or the Bezos-owned Washington Post would have been better outlets for their publicity stunt.
Ottawa, Canada
Metro Area Population: 1.3 million
Top School: University of Ottawa
Top Cultural Attraction: Canadian War Museum
Thirstiest Quote: “He’s showing up at Amazon’s door uninvited without any sort of plan on how they’re going to proceed.”
Amazon’s headquarters search includes not just the United States but all of North America, so it’s no surprise that our northern neighbors are also throwing themselves at the company. Earlier this month, Ottawa Mayor Jim Watson made a one-day trip to Seattle to scope out Amazon’s campus and its geography within the broader community. One small hiccup—it’s not clear he was granted an audience with Bezos or any other top Amazon executive. According to The New York Times, he simply walked as close to Amazon’s premises as is “publicly accessible.” A political operative back in Ottawa called the trip “grandstanding.” I call it next-level thirst.