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Amazon’s Utopian Criteria

eye on the news

Amazon’s Utopian Criteria

Looking to open a second headquarters somewhere, the online retailer sets cities and states scrambling to fulfill its contradictory set of demands. October 23, 2017
Cities
Economy, finance, and budgets

Last month, Amazon announced that it was looking to open a second headquarters in North America, igniting a bidding war among metropolitan areas to lure the giant online retailer, which would be looking to house some 50,000 well-paid employees. More than 200 cities submitted proposals by last Thursday’s deadline. Amazon won’t decide until next year, but that hasn’t stopped speculation about which cities hold the edge.

Though the company published a highly specific set of criteria for its new home, analysts’ prospective front-runners differ from one another dramatically. That’s not surprising, because Amazon is seeking qualities so expansive and alluring that they seem utopian.  No city has all of them, but each can boast some—which might make it easier for the firm to squeeze tax incentives out of local officials worried about their cities’ weak spots. Amazon’s criteria include a metro area with a population of at least 1 million, extensive access to mass transit, a strong collection of nearby universities, a “stable and business-friendly climate,” an available site that can support up to 8 million square feet of office space, a great labor force, diverse population, international airport, and “an overall high quality of life.” The company has also asked for data on crime rates, traffic congestion, cost of living, and recreation.

Looking at this imposing list, the New York Times’ Upshot began applying the criteria to America’s 100 largest cities and systemically eliminated unqualified localities. In fact, the Upshot’s survivors’ list included only one city: Denver, which didn’t appear anywhere on Moody’s list of top 10 Amazon candidates (Moody’s had Austin leading the pack and dark horse Rochester, New York ranking fourth.) Denver did make Bloomberg’s list, but so did Detroit—a “stable and business-friendly climate” only if you ignore the city’s recent bankruptcy and the dozens of abandoned buildings that haunt its downtown.

Detroit and Rochester point up one of the contradictions in Amazon’s criteria. Different experts selected these cities for their low housing and business costs. But Detroit’s low costs are a result of 50 years of decline, and Rochester’s reflect a city that lived for generations off the bounty of Kodak, which it can no longer do after digitalization disrupted the sale of photographic film. The lesson here is that if a city offers low costs and little congestion, it probably lacks many of the other appealing qualities that Amazon seeks. Some of the standards that Amazon specifies are “inversely correlated,” as one website put it.

Amazon’s original headquarters, Seattle, is a lesson in how the economics of supply and demand work. “For years, much of downtown Seattle has been a maze of broken streets and caution-taped sidewalks. Dozens of enormous cranes tower overhead as double-length dump trucks hauling excavated dirt rumble past pedestrians and bicyclists,” the Associated Press noted recently. “Housing prices have soared faster than anywhere else in America, driving some low- and even middle-income residents beyond city limits. Traffic is frequently unbearable.”

Seattle’s rapid evolution raises the question of how some of the other prospective top contenders, like New York, might fare if Amazon came to town. New York has seen its economy grow more or less steadily since the mid-1990s, except for a brief downturn after September 11, 2001. The result, however, is that the New York metro area’s housing costs are astronomical, and the city’s progressive mayor and city council would likely need to hand out huge incentives to the famously tax-averse Amazon to ameliorate the city’s skyrocketing business-occupancy costs. Optimists say that New York is big enough to absorb Amazon, in part because the city has a great mass transit infrastructure, but that system is already strained to the breaking point. Commuters into Manhattan—where Amazon would presumably locate—already face devilish trips by subway from the city’s other boroughs or by train from the suburbs, and that’s before Amazon would add 50,000 workers to the mix.

A few analysts even put Chicago on their list of top prospects. By contrast, the Times’ Upshot eliminated the city in its first cut because of its deep fiscal instability, which includes a junk bond rating and so much debt that tax increases are inevitable. Unless Chicago and the state of Illinois fixed their debt-problems soon, Mayor Rahm Emanuel said a few years ago, “you won’t recruit a business, you won’t recruit a family to live here.” Reform has been minimal since then, and Chicago homeowners have been hit with more than a half-billion dollars in property tax increases to pay for rising pension costs. Amazon might escape that bill—projected to double in five years—but granting tax breaks to a company led by one of the world’s richest men, while ordinary Chicagoans see their taxes soar, will be politically unfeasible.

Amazon’s request for proposals makes no mention of what will prove a major factor in any outcome: local politics. Though not as intensely political as some technology giants, Amazon is reliably liberal in its outlook, especially on cultural issues. Amazon joined other businesses in fighting against Washington State’s initiative to make public restrooms available to individuals based on their biological sex, for example, and the company has opposed some of President Trump’s immigration policies. By contrast, a number of cities that seem to fit Amazon’s specifications are in red states that have taken the opposite positions on these and other issues. Is Amazon ready to set up shop in a city and state that might face a boycott someday, or where other liberal-minded companies declare that they won’t hold conventions or send workers to meetings? Are legislators in these states ready to trade 50,000 good jobs for what might be a politically transformative company in their state?

As several commentators have noted, where Amazon decides to go will depend on how it prioritizes the many things that it says it wants. Few of the lists I’ve seen include a plausible compromise candidate: Toronto.

Photo by David Ryder/Getty Images

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