In Cities Rejected by Amazon, Some See Upsides to ‘HQ2’ Process

Employees walk through a lobby at Amazon's headquarters Tuesday, Nov. 13, 2018, in Seattle.

Employees walk through a lobby at Amazon's headquarters Tuesday, Nov. 13, 2018, in Seattle. AP Photo/Elaine Thompson

 

Connecting state and local government leaders

“It wasn't just a sense of winners and losers in this,” says Mayor Karen Freeman-Wilson, of Gary, Indiana.

Like dozens of other cities around the U.S., Gary, Indiana submitted a bid last year to host Amazon’s proposed multibillion dollar second headquarters, dubbed HQ2, which the company announced this week would be split between sites in New York City and Arlington, Virginia.

For the once-booming industrial hub east of Chicago, which has struggled in recent years, the effort to attract the online retail behemoth was by any measure a long shot. The city was knocked out of the running early on when the Seattle-based company winnowed the 238 initial applicants to a shortlist of 20.

But Mayor Karen Freeman-Wilson doesn’t describe the bid, which cost the city about $60,000 to put together, as a waste. “Even though we didn't even make the first cut, there's a hiring fair tomorrow for a distribution center, an Amazon distribution center, that will be in Gary,” she said during a phone interview on Wednesday.

“While that’s light years away from HQ2, it is very significant to our community that Amazon understands and sees some of the assets that we touted and the opportunities that are associated with having a location in Gary,” Freeman-Wilson added.

Gary’s Amazon headquarters bid featured options that could have provided the company over $2 billion in state and local incentives, according to news reports. But the distribution center, Freeman-Wilson said, will not require these sorts of perks from the city.

The competition for Amazon HQ2, with its promise of $5 billion of investment and about 50,000 jobs, drew substantial national attention, along with scrutiny over the billions of dollars in subsidies that states and local governments dangled before the company.

It also put a spotlight on trends and fault lines that exist across the U.S., as various regions and cities attempt to carve out a place for themselves in the high-tech economy.

Since Amazon announced the two winners—both located in thriving metro areas—some critics have questioned whether the process was in earnest, or if the company was able to gather intelligence on cities’ plans while settling on obvious choices in the end.

Moody’s Investors Service noted in a report on Tuesday that each of the 20 HQ2 finalists had competitive advantages like highly skilled labor pools, robust higher education institutions and medical centers, transportation options and high quality of life offerings.

“It is clear, to me at least, that Amazon's decision did come down, in this case, to getting the requisite technical talent at scale,” Joseph Parilla, a fellow at the Metropolitan Policy Program at the Brookings Institution said by phone Wednesday.

“Their future, in terms of innovation, is built on getting the best people,” he added.

Citing 2016 U.S. Census Bureau data, the Moody’s report notes that around 35 percent of the population in New York City, and over 70 percent of Arlington area residents have at least bachelor’s degrees. That’s compared to a rate of 33 percent for the entire U.S.

The populations in both places, along with the 18 other HQ2 finalists, also tend to be younger than the nation as a whole.

Drew Klacik, a senior policy analyst at the Indiana University Public Policy Institute, assisted with the HQ2 proposal focused on Indianapolis, which was one of the finalist cities. He noted that colleges and universities in the region surrounding the city churn out thousands of engineering and computer science graduates each year.

"There's an incredible amount of talent being produced around us,” Klacik said. But he explained that Indianapolis doesn’t do as well as some other cities when it comes to convincing those young, educated people to stick around after they finish school.

“The question is: how can we step up our game and capture more of those folks?” he said. Doing so, he added, would likely make the region more appealing for companies like Amazon, or create a foundation of entrepreneurs who may build similar companies locally in the future.

Klacik said his take on the HQ2 selection process was that Amazon was likely considering the “global coastal” cities on the list and Indianapolis had little chance of landing the deal.

Or, alternatively, that the company was eyeing about a half-dozen locations like Indianapolis that Klacik describes as “semi-cool, convenient and affordable,” such as the Raleigh area in North Carolina; Pittsburgh; Columbus, Ohio; Austin, Texas; and Nashville.

Amazon ended up announcing on Tuesday that Nashville would be the site of a future operations facility that would employ about 5,000 people. But Indianapolis and the other cities Klacik mentioned were passed over. “They apparently wanted global and coastal,” he said.

Philadelphia was another one of the jilted finalists on the HQ2 shortlist.

John Grady is president and CEO of PIDC, a longstanding joint venture between the city and the local Chamber of Commerce that concentrates on economic development.

“We’re disappointed,” he said.

Even so, Grady describes a number of upsides to the process and its outcome. For instance, he said it was a chance to “develop a bit of a new story” about Philly, and that marketing materials and data it assembled have been “de-Amazonified” for more general use.

He also believes that the sites the company did select reinforce for large employers that Philadelphia’s home in the Northeast is a desirable place to be.

“I think the challenge and the opportunity for us is to make sure we differentiate ourselves in the Northeast corridor,” Grady said. “We don’t want to just say we’re located halfway between New York and D.C.,” he added. “There’s no differentiation, or value proposition associated with that.”

Grady noted that the city has seen people relocating from New York in recent years, some in search of more affordable living. “One of the things we really promoted to Amazon,” he said, “is we are the most affordable big city on the east coast.”

“We have this capacity to support more growth,” Grady added.

Klacik highlighted similar selling points for Indianapolis. “If you look at our housing prices relative to the coast, you almost faint,” he said.

But Klacik says it’s more than housing prices that give Indianapolis its appeal.

“If you're a young hipster millennial, we're probably only semi-cool,” he said. “But most hipster millennials eventually morph into having partners and children. And when you're trying to balance your career and your family life, a city the size of Indy gives you opportunities.”

As he discussed the HQ2 process, Parilla, with Brookings, emphasized that getting selected as one of Amazon’s finalists is not the only metric by which to measure a city’s economic prowess.

"But I think it does signal that, by making that shortlist, they're viable players in the modern economy, at least judged by a big tech firm finding them attractive,” he said.

Parilla later added: “I think the ultimate takeaway is that what led Amazon to select a site was probably not, like, the quality of the marketing materials, or the size of the incentive package. It was about what are the assets in that place.”

Those assets, such as transit, broadband access, airports, real estate, and an educated workforce, he pointed out, can take significant amounts of time and money to develop.

Apart from HQ2, Freeman-Wilson noted a commitment this year by U.S. Steel to invest $750 million in its flagship plant there. “While they don't employ the number of people that they used to,” she said, “they're still our largest employer.” The company in the early 1900s was largely responsible for the city’s rise. But by the 1970s and 1980s layoffs and industrial declines had taken a heavy toll on Gary.

The city’s population had fallen to roughly 76,000 last year, from around 151,000 in 1980, and about 36 percent of residents are in poverty, according the most recent Census Bureau figures.

Freeman-Wilson says the city’s HQ2 pitch suggested that, just as Amazon has been a game-changer in the retail sector, and with its other business lines, it could take on a similar role helping drive a transformation in a city that is in the process of making a comeback and shedding its Rust Belt reputation. And it could do so just 30 miles away from Chicago.

The mayor sees regional efforts as a key ingredient for making economic progress in her city.

Parilla has a similar perspective. He says places like Gary, with eroded tax bases, simply don’t have the muscle to go it alone, and notes that Amazon sought out regional HQ2 applications.

Towns that aren’t nearby or connected to better-off cities, and that lack assets like colleges and sound infrastructure, are in a tough spot in this regard, and Parilla says that turnarounds in some of those places will likely require federal attention.

“We have to decide: is this a national interest issue?” he said.

Freeman-Wilson says that just going through the HQ2 process helped her city build stronger ties with state and regional economic development organizations, and serves as a reminder of the importance of investing in workforce training and education.

“It wasn't just a sense of winners and losers in this,” she said. “It was really a sense of how do you use this experience to strengthen your economic development efforts.”

Bill Lucia is a Senior Reporter for Government Executive's Route Fifty and is based in Washington, D.C.

FEATURED CASE STUDIES
Powered By The Atlas
Erie County, PA offers all local restaurants free digital tools to plan for safe COVID reopening
Erie County, PA, USA
Online permitting and approval process during COVID-19 exceeds in-person performance numbers
Markham, ON, Canada
Chula Vista creates a Digital Equity and Inclusion Plan
Chula Vista, CA, USA

NEXT STORY: An Easy Way to Make More Ambitious Decisions

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.