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In Focus: The Pitfalls of Being in the Running for Amazon HQ2

Only one city can win the project, leaving the losers to explain why they were so heavily invested in trying to land the HQ2, which may ultimately come with its own set of challenges.

Q3 2018
As we near the one-year mark since Amazon initiated its HQ2 search, the excitement and hoopla that greeted this economic development Super Bowl has given way to the criticism that’s inevitably foisted upon this sort of undertaking: The jobs, capital investment, and various other benefits are undeniable, but is the cost too high?

The elongation of the search process has enabled critics to answer this question with an expanded list of complaints. Here are just a few of the recurring criticisms:

Transportation infrastructure — For already congested areas such as Boston and D.C., the perils of another 50,000 workers commuting to and from work is apparent. But even for those medium- to small-sized cities, is it possible to accommodate the daily flow of such an exponential increase in people — even if the hiring comes in phases?

Tim Cook, CEO of KSM Location Advisors, works closely with companies across the country during the site selection process, assisting with identifying available sites, providing comparative analysis of qualified locations, and assisting in negotiating and securing economic development programs. He is also partner-in-charge of Katz, Sapper & Miller’s State and Local Tax Group.
Housing — While existing homeowners might welcome the increase in overall property values that will accompany so many new high-paying jobs, others fear that such an invasion will exponentially inflate the costs for homebuyers and decimate housing inventories. This pain could be especially acute in the current economy where home prices are soaring, and inventories are low nationwide.

In a case of bad timing, this issue has been front and center at the home of Amazon’s first headquarters as Seattle has struggled with the political fallout from its recently passed — and quickly repealed — “head tax,” which was aimed at providing funding for homeless services and affordable housing.

Incentives — Similar to the venom leveled at cities for the hundreds of millions of dollars that are spent to save sports franchises, whatever hefty price tag comes with HQ2 is certain to receive massive criticism from watchdog groups, incentive-hating commentators, and potentially voters.

Katie Culp is president of KSM Location Advisors, part of the Katz, Sapper & Miller Network. Previously Culp led Cassidy Turley’s (now Cushman & Wakefield) national Location Advisory and Incentives practice, working with corporate clients to make fully informed location decisions and maximize state and local incentives packages.
The process — Amazon came under fire early on for pitting states, cities, and regions against one another in a bidding war sometimes described as a race to the bottom. As a result, cities such as San Antonio chose to not even submit a bid. The secretive nature of the submission process has resulted in public attacks against elected officials for not divulging the details of their bids, especially given that some of those officials have likely offered hundreds of millions (if not billions) of dollars in an effort to stand out.

Distraction — Considering that the starting number of 238 competing cities has been reduced to the current number of 20 and will ultimately result in only one winner, some argue that the resources invested by the losing 237 locations could have been better invested, especially for a project that was, for the losing suitors, a longshot at best.

As site consultants, we’ve voiced from day one that the benefits of a project of this size greatly overwhelm whatever negative impacts — perceived or real — come with it. Any city with a viable chance to compete is justified in doing so. But in a day and age where every political action is endlessly autopsied, the 19 cities and regions that are left empty-handed at the end of the day may have much explaining to do. The same may hold true for the eventual winner.

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