20 cities in the running for Amazon HQ

By Neil Amato

Amazon announced Thursday that it has named 20 North American cities as candidates for the site of the company’s second headquarters. The city that wins is banking on long-term economic growth through direct and indirect employment and investment.

Amazon reviewed proposals from 238 metropolitan areas in the United States, Canada, and Mexico, and it said that 19 U.S. cities and Toronto have advanced to the next phase.

The company said the second headquarters would accommodate as many as 50,000 jobs, according to a news release. In addition to a planned direct investment of $5 billion, the company said, “construction and ongoing operation of Amazon HQ2 is expected to create tens of thousands of additional jobs and tens of billions of dollars in additional investment in the surrounding community.”

The list of metropolitan areas in alphabetical order: Atlanta; Austin, Texas; Boston; Chicago; Columbus, Ohio; Dallas; Denver; Indianapolis; Los Angeles; Miami; Montgomery County, Maryland; Nashville, Tenn.; Newark, N.J.; New York City; Northern Virginia; Philadelphia; Pittsburgh; Raleigh, N.C.; Toronto; and Washington.

Whatever city wins is likely to offer millions, and possibly billions, in the form of tax incentives. For example, Reuters reported in October that the state of New Jersey was offering $7 billion in potential credits against state and city taxes if Amazon were to pick the city of Newark.

Taxpayers in a region might be happy that a large company’s arrival makes the value of their house rise, but they also may see new taxes or higher ones as a result, because the tax breaks given to the company must be made up for elsewhere. Ultimately, someone also must pay for the infrastructure to support both a new facility and the increased population as people move to the area to fill new job openings.

Raleigh, for example, would experience pluses and minuses that individuals would evaluate differently, according to Michael Walden, a professor of agricultural and resource economics at North Carolina State University.

“It would elevate [Raleigh’s] already prominent tech sector in the region to new levels,” Walden said in an email. “Expanded commercial, entertainment, and transportation infrastructure would likely result. Of course, congestion would increase, as would density and land and housing prices. Those who like Raleigh’s size just fine as it is would be disappointed.”

Of course, the region that lands thousands of new jobs gets more than a boost in population and cachet. The residual effects of having a company such as Amazon are numerous, according to economic developers.

“From home purchases to retail spending to car sales to a cup of coffee at the local café, those 50,000 positions would support a tremendous amount of additional spending at other businesses in the local, regional, and even state economies,” Christopher Chung, CEO of the Economic Development Partnership of North Carolina, said in an emailed statement. “That in turn would drive additional indirect and induced job creation. All of that would be on top of spending made by the company within the local economy, including vendors, contractors, service providers, and even corporate philanthropy and civic engagement.”

In 1994, the German car manufacturer BMW opened a plant in South Carolina, which had offered millions in tax incentives. The company has added thousands of jobs directly and created demand for other companies, such as automotive suppliers. According to a 2014 study by the University of South Carolina, for every direct job created at the BMW plant, three additional jobs were created elsewhere in the state.

Not every new company can offer that multiplier effect, but it’s that type of long-range growth potential that has 20 finalists hopeful that Amazon will pick them.

Amazon said it planned to delve deeper into the proposals of the 20 locations and announce a second headquarters location later this year. The company, which employs 540,000 people worldwide, is based in Seattle. Amazon estimated that its investments there from 2010 to 2016 added $38 billion to Seattle’s economy.

Amazon’s announcement comes one day after Apple said it would open a new campus in the United States that will house technical support for customers, according to a news release. The location of that facility will be announced later this year. Also, Apple announced that it expected to create more than 20,000 jobs in the United States over the next five years at several of its locations.

Neil Amato (Neil.Amato@aicpa-cima.com) is a JofA senior editor.

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