Will Amazon HQ2 Process Change Economic Development Game?

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By Tripp Baltz

Economic development professionals are torn as to whether the campaign by cities and metro regions to win Amazon’s second headquarters will change the way the game is played.

“Some people thought it was the most inefficient RFP process they’ve ever seen, but I saw it as quite brilliant, and I think it’s going to be good for other businesses,” said Linda H. DiMario, executive vice president of economic development and tourism for the Greater Irvine Chamber of Commerce in Irvine, Calif.

“Having seen the press that was generated, most of it positive, for the communities that submitted and for Amazon, I think it will be taken as a model for some of the other companies that will come calling,” DiMario said during a Jan. 30 panel at the International Economic Development Council’s annual Leadership Summit in Las Vegas.

After Seattle-based Amazon.com Inc. recently eliminated more than 200 cities that had submitted bids, 20 cities and regions across the U.S. and Canada remain contestants in the largest corporate incentives sweepstakes in recent times—with a prize of about 50,000 high-paying Amazon jobs.

‘New Normal?’

Greg LeRoy, executive director of Good Jobs First, which has been critical of Amazon HQ2 public proposal process, said he didn’t think it would “become the new normal.” The method that Amazon has used is “suited best for companies that are good at earned media,” he said. “That describes Tesla as well.”

While most of the proposals remain secret, some of the finalists have promised huge performance-based tax breaks and other multi-billion-dollar incentives for Amazon HQ2. Panelists discussed whether that fuels a “race to the bottom.”

LeRoy said he didn’t think it would make the race to the bottom “any worse because it’s already terrible. We’ve had an 80-year history of race to the bottom.”

DiMario said at the beginning of the Amazon HQ2 bidding process things would be different, and the company would pledge to invest and contribute for the benefit of the winning community as well as its own bottom line.

“I thought perhaps Amazon is going to turn the page, but at the conclusion of the 20-city process, the eight-page RFP was written like a cut and paste, of every wish list they could possibly ask for,” she said.

“Incentives work here in the day,” she added. “That’s the prisoner’s dilemma, that’s the corner we’re backed into.”

Not Competitive

Kimm Coyner, vice president of business development and project management with REDI Cincinnati, said for her community there was no “race to the bottom” because the region knew it couldn’t compete on tax and cash incentives.

“It challenged us to think of how we can provide value,” she said. “Is there a way to partner on transportation initiatives? Is there a way to partner on parks and recreation? Is there a way to get things that work for the community and also benefit Amazon? We tried to quantify those things because we weren’t going to win on incentives.”

Knowing it couldn’t compete on real estate offers and incentives, San Antonio, Tex. made a conscious decision not to bid for Amazon HQ2, said Jenna Saucedo-Herrera, president and chief executive officer of the city’s Economic Development Foundation. After that “no-go” decision was made, the city turned to a public relations process of trying to “control the message” by sending a letter directly to Amazon CEO Jeff Bezos explaining its choice, she said.

Public Disclosure

Panelists disagreed on the level of transparency and public engagement that should be part of big projects.

“We think all bids should be disclosed,” LeRoy said. “Nobody has the excuse not to disclose because nobody was negotiating with the company. Many people are rightfully ticked off by a system in which a wealthy company is offered an enormous amount of taxpayer resources in a very short period of time in a process from which they are excluded. I think that’s a recipe for resentment.”

Irvine did disclose its bid, but DiMario said her concern about transparency is that it could “exacerbate an already existing misunderstanding about our work.” She said if the average person understood “what we did, and the strategies and formulas we use and how we evaluate these deals, then I would say, on with transparency.”

Confidentiality

Thomas A. Kucharski, president and chief executive officer of Invest Buffalo Niagara, told Bloomberg Tax an interview after the session that at some point, the public has to trust its public officials.

“One thing that Amazon and other companies have told us is, any breaching of the confidentiality, you’re off the list,” he said. “Ninety percent of the companies we deal with, down to very, very small companies, they want the same respect.”

“At what point does the public transparency and accountability collide with the ability to do business?” he added. “We’re not going to do anything to compromise the long-term health of our communities, and we have to operate at the speed of business. Clean-tech and the business of the future, they don’t have to be in the United States.”

LeRoy said a petition was released Jan. 30 urging elected officials in the 20 finalist cities to reject the use of “tax giveaways” to win Amazon HQ2.

“Such incentives do not alter business location decisions as much as is often claimed, and are less important than more fundamental location factors,” the petition said. “Worse, they divert funds that could be put to better use underwriting public services such as schools, housing programs, job training, and transportation, which are more effective ways to spur economic development.”

To contact the reporter on this story: Tripp Baltz in Denver at abaltz@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

For More Information

Information on the IEDC Leadership Summit is at https://www.iedcevents.org/LeadershipSummit/index.html.

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