Follow the tech talent pool and logistics network
The results are in. Amazon has narrowed the search for its second headquarters down to 20 locations, which it intends to work with to make a final pick by the end of 2018. The finalists are: Atlanta, Georgia; Austin, Texas; Boston, Massachusetts; Chicago, Illinois; Columbus, Ohio; Dallas, Texas; Denver, Colorado; Indianapolis, Indiana; Los Angeles, California; Miami, Florida; Montgomery County, Maryland; Nashville, Tennessee; Newark, New Jersey; New York City, New York; Northern Virginia, Virginia; Philadelphia, Pennsylvania; Pittsburgh, Pennsylvania; Raleigh, North Carolina; Toronto, Ontario, and Washington, DC.
For those just tuning in, it was this past September that Amazon announced it would be locating a second headquarters, and received bids from 238 cities and regions from across 54 states, provinces, districts and territories across North America. The company said it would make a decision in 2018. Called HQ2, the new facility will cost at least $5 billion to construct and operate, and will create as many as 50,000 high-paying jobs.
Reality Style
Cities made reality-TV-style attempts to attract the company’s attention. Tuscon sent a giant cactus to CEO Jeff Bezos and Stonecrest, Georgia offered to de-annex some of its land and rename it the city of Amazon. Meanwhile, Kansas City Mayor, Sly James, gave five-star reviews to 1,000 random items on Amazon’s website, which tied in the city’s strengths into each post.
Gov. Andrew Cuomo said all of the proposals from New York, including NYC, will be supported by a full complement of state incentives, including Excelsior tax credits tied to potential job creation and other assistance with the development of office space, workforce development, educational programming and research collaborations.
“New York is submitting proposals from every corner of our great state, but we are one New York — and we will work with you to create the greatest possible benefit to Amazon and to all New Yorkers,” Cuomo wrote in a letter to Bezos.
“Getting from 238 to 20 was very tough –- all the proposals showed tremendous enthusiasm and creativity,” Holly Sullivan of Amazon Public Policy said in a statement. “Through this process we learned about many new communities across North America that we will consider as locations for future infrastructure investment and job creation.”
Amazon says it evaluated each of the bids based on the criteria it previously outlined, such as proximity to a major airport (which makes Nashville, Raleigh and Columbus curious choices), and ability to attract tech talent. Now that it’s down to a final list, Amazon says it plans to “dive deeper” and evaluate the locations.
Analyst Guesses
Baird analyst, Colin Sebastian, says he is surprised that Houston, Detroit and Minneapolis are not on the list, but adds that “their proposals may have simply fallen short.”
In October, data science coding bootcamp, Thinkful, predicted Washington, D.C. would be deemed the best choice. The runner-ups included Boston, New York, Philadelphia, and Austin, in order from most likely to least likely. Thinkful praised D.C. for its quality of life, transit, diversity, and high population of people with a bachelor’s degree or higher. Austin? Sounds cool, but unlikely. Maybe for HQ4.
To analyze each city, Thinkful used a data science method called “recommendation systems,” the same technique Netflix uses when suggesting shows to watch, and the same technique Amazon uses when recommending products to buy. “First, we standardized our data,” they said. “This is a common technique in data science to shape different data onto the same scale. Standardization resulted in the creation of a new dataset where the mean of every feature is 0 and the standard deviation is 1. Utilizing the maximum values from each of the features, we first created a (fictional) best possible city.”
“Next we calculated a similarity score between every real city in our data set and this fictional city. The closer the real cities features were to those of the fictional city, the better suitor it was for the HQ competition. We derived the similarity scores by calculating the euclidean distance between the fictional city and every real city in our dataset.”
Is it all public to the public?
Still, everyone has an opinion, and most focus on the high cost of starting a business in the dense East Coast. Economists have also warned winning cities that tax breaks and other incentives could erode a city’s tax base, but over time could be more beneficial than other projects that often receive public financial aid, such as sports stadiums and manufacturing plants. While it may be true that cities are giving too much up to make as much of difference to anyone other than Amazon’s employees, it also could be argued that there is really no other choice for cities that want to make a “tech play.”
Public records laws around the country vary, but when courting businesses, governments generally aren’t required to disclose tax breaks and other incentives during the negotiating phase. Open-government advocates, though, argue that Amazon has turned the project into a public auction, the large amount of taxpayer money at stake, and the political clout the Seattle-based company could have in its new home. “They’re just acting like this is another secret deal,” said Greg LeRoy, head of Good Jobs First, a nonprofit group that tracks economic development spending. “This is a nutty situation.”
LeRoy says there are no grounds for hiding the information since no one is negotiating yet with Amazon. “It’s all paid for by taxpayer dollars,” he argues. “Therefore, it should all be public.”
According to the Associated Press, some state and local governments have trumpeted the financial incentives they are dangling. New Jersey’s pitch contains $7 billion in tax breaks, a draft of Houston’s plan calls for about $268 million in inducements, and Boston’s offer includes $75 million for affordable housing for Amazon employees and others.
But others — including Delaware, Georgia, Kansas, Nevada, Virginia and such cities as Detroit; Philadelphia; Orlando, Florida; Louisville, Kentucky; and Albuquerque, New Mexico — won’t say exactly what they offered.
Where should it be?
In the long run, though, it’s almost certain to be a very good thing for any city. Amazon’s HQ2 will likely entice other companies and industries to partner in such cutting-edge fields as virtual reality and A.I. It is projected that some Amazon employees would also likely leave the company to launch their own startups, thereby producing additional job growth.
Atlanta makes an intriguing destination. A southern-based logistics hub in the eastern time zone, it’s 2700 miles from HQ1 in Seattle. They would position themselves in “Freight Alley,” arguably the strongest logistics hub in the nation, and a region that automakers and freight continue to invest heavily in.
Atlanta boasts the world’s busiest airport. While Atlanta only has a modest tech scene for a city of 5.8 million, they’re also positioned only two-hours from startup tech scenes like Birmingham to the west and “Gig City” Chattanooga to the north. It’s also a mere hour-and-a-half from one of their major distribution warehouse centers in Knoxville. There is also outstanding engineering and tech talent from Georgia Tech, Georgia State, and the University of Georgia, among a wide variety of other smaller higher education schools.
Urban sprawl and traffic issues are pervasive problems for the city, but Atlanta is probably more affordable than dense population centers elsewhere in the east (like Boston, New York, Philadelphia, D.C.). Same with Chicago in the midwest, although if it was strictly on logistics talent, Chicago would probably win. But all these cities are rife with their own share of infrastructural challenges. Denver would be too distant from the East Coast, and too near Seattle, even if Bezos does have a $23 million home there.
It probably all depends on who gives Amazon the best relocation package, and that remains a “trade secret,” according to Amazon.
