Amazon HQ2: Why some cities feel like winners, despite losing
02 Oct 2018
In January, when Amazon announced a shortlist of 20 cities still in contention for the company’s second headquarters, hundreds of mayors and economic development officials across the country felt the sting of rejection. Amazon even made calls to many of the cities dropped from what some have called the “urbanist Super Bowl,” explaining why they didn’t make the cut.
This wasn’t a “it’s not you, it’s me,” kind of conversation: in a few cases, Amazon reps even made specific suggestions on how cities can improve their standing, such as pointing out Detroit’s transit deficiencies.
It’s only natural for local leaders to feel like they lost out. More than 200 cities across North America have been denied the chance to become the second home of the trillion-dollar tech firm, a prize that came with a promise of 50,000 high-paid employees and $5 billion in investment.
But nine months after the shortlist was announced, as Amazon continues the process of finding a second home, it’s clear many cities don’t see the loss of HQ2 as a total loss. In many cases, the process has refined how cities pitch themselves and underlined investment in local tech talent, or led to unexpected opportunities after playing a part in one of the biggest corporate incentive contests in history.
Some have even taken the feedback to heart; Detroit, for instance, released a wide-ranging new transportation plan earlier this month, and Cincinnati approved funds for developing its local tech workforce.
In fact, many cities that didn’t make the final cut are thankful for the direction from the company because they still see hopes of landing Amazon jobs down the line.
“It’s not unfathomable that they may create just as many jobs again in 10 to 15 years,” says John Krueger, executive vice president of the Greater Sacramento Economic Council, which pitched a losing bid for HQ2. “Very few companies can make a credible claim to do that.”
Homework for economic development
Krueger and other economic development professionals believe the Amazon HQ2 process wasn’t about corporate welfare, as critics like urbanist Richard Florida have complained, but was “a reasonable way to utilize incentives.”
More importantly, the process wasn’t just an exercise in Amazon learning about cities—Amazon’s head of economic development, Holly Sullivan said in a statement that the company learned about cities that may become locations for future expansions—but for cities learning about themselves.
The HQ2 bid process asked cities to prepare a detailed report examining infrastructure, housing, transportation, and workforce issues. The process has been useful both for cities and developers. In Chicago, for instance, real estate developers have recycled HQ2 proposalsto help lure other large corporations thinking about new facilities or downtown relocations.
”Developers can now take the product of that pursuit and pursue other large scale corporate headquarters projects,” Kyle Kamin, executive vice president at brokerage CBRE, told Crain’s Chicago Business.
According to Krueger, Sacramento’s bid included a detailed proposal for a “virtual university,” a collaborative job-training program that would bring together educational institutions from around the region to train the influx of Amazon workers. It was a concept created specifically to show how Sacramento, despite having its own growing tech workforce, could quickly recruit and train the thousands of additional workers needed to meet Amazon’s requirements.
While the program won’t be used to train HQ2 workers, Krueger says it’s been incredibly useful for pitches to other large corporations. He can’t name them, due to confidentiality agreements, but says it’s helped convince larger firms, which may be able to bring 3,000 to 5,000 employees to town, to take a longer look at Sacramento.
“I’ve shown it to multiple tech companies, and asked leaders if they’d like to see my proposal to Amazon,” he says. “It’s great to be able to present a solution to a problem many companies have: where can they continue to grow?”
Kansas City has seen similar benefits from its pursuit of HQ2. The city’s publicity campaign—lead by boostery videos of Mayor Sly James leaving 5-star product reviews on Amazon—helped attract worldwide media attention. Drew Solomon, the executive vice president of the city economic development council, said they’ve fielded proposals from a number of companies interested in locating offices on sites once offered up to Amazon.
“The HQ2 process gave us an opportunity to showcase Kansas City through a different lens,” he says. “I think it opened people’s eyes to what Kansas City had to offer.”
All the economic development professionals interviewed for this story told Curbed that creating the bid for HQ2 was an involved process that helped them come up with creative ideas and create better collaborative relationships across the institutions, business, and leaders in their particular metro area.
According to Krueger, Sacramento’s bid process offered a different perspective, and focus, on regional development.
“The mentality now is, how do you spend the infrastructure dollars in ways that benefit the entire community?” he says. “It’s about having a concrete plan for infrastructure to solve workforce issues.”
Changing the economic development game
Regardless of what city Amazon picks, the HQ2 process, and the media circus around a Super Bowl for cities, has become a milestone in economic development.
Some see the public pursuit potentially enshrined in how companies seek new locations. According to Soloman, one of the lessons Kansas City took from this process was the power of different media channels, and tapping social media, to move things forward in ways that the typical site selection process cannot.
“I do feel like the HQ2 process set a mark for how major corporations do this in the future,” he says. “It does depend on the culture of the companies, and not all will do a public RFP. But I can see some going this route for other megaprojects.”
Take Denver, one of the 20 shortlisted finalists. According to Sam Bailey, the city’s vice president of economic development, the Denver area suffers from a perception challenge, that it’s all “sunshine and snowboards” despite having a growing homegrown tech economy specializing in information technology and financial services.
The Amazon bump has proven to be a powerful rejoinder. Denver has been the subject of 2,969 articles—including a New York Times story naming it the best pick—that provided 3.3 billion media impressions, according to Bailey. In addition, Denver has landed significant economic development wins: Slack is adding 550 tech jobs here, and VF Corporation, which owns North Face, is locating its new headquarters in Denver. Bailey says both benefitted from Amazon acting as a third-party validator.
“It’s created more marketing and awareness of Colorado’s advanced industries,” he says. “Other people are telling our story, not us.”
It’s easy for cities to sing the praises of Amazon after the fact, especially since the company will likely be circling economic development agencies again soon as it adds to its warehouse empire and other growing verticals. The company, which has collected $1.6 billion in economic incentives, embodies a corporation-dominated site-selection system, where “public officials are playing poker with a weak hand,” according to Greg LeRoy, executive director of Good Jobs First, a Washington, D.C., policy center that promotes accountability in economic development.
But as long as cities and local leader see the benefits of pitching and participating, it seems clear they’ll continue to play the game—even if Amazon rewrites the rules.
“Economic development is always going to be controversial,” says Solomon, “Is it an incentive, or an entitlement? We need to focus on workforce development and entrepreneurship. Simply redirecting capital back to corporations creating jobs, I think that can be a bit of a slippery slope.”