T Nation

Amazon HQ2, Good Or Bad For The City They Pick?


#1

@ActivitiesGuy requested it. Would you want Amazon HQ2 in your city? Why, or why not?

https://www.forbes.com/sites/marciaturner/2017/10/19/amazon-is-most-likely-to-build-its-second-headquarters-in-1-of-these-5-cities/


#2

Thanks dude. I think this has some potential for a good thread.

I honestly do not feel that I have a sufficient grasp of micro- and macro-economics to comment intelligently, but I hope that some people do. If no discussion starts, I’ll throw a few balloons into the air solely to generate some discussion.

Here’s my brief (layman’s) take:

The PRO of getting HQ2 is all those fancy new high-paying jobs! Bringing people with high-paying jobs into the economy does more than just bring those people in - it also means more people in town buying houses, cars, groceries, yoga classes, CrossFit memberships, etc. Bring it on!

The CON is that the areas in Pittsburgh which are still struggling are, IMO, unlikely to see much benefit from HQ2. How will this help places like Braddock and/or Wilkinsburg? Are the new tech workers that move in with HQ2 going to spend any dollars there? Probably not. They’ll buy houses in “trendy” areas or in the burbs, and they’ll buy everything they want from Amazon or Whole Foods anyway.

Of course, there are some interesting sidebar factors that can make this better or worse. From what I’ve read, Amazon purposely does not provide a cafeteria or coffee shop in their corporate offices, with the idea being that their workers are forced to engage with their surroundings to get their lattes and lunches, giving at least some vibrancy to the local economy (in contrast, some other tech giants reportedly build an entire luxury campus that provides everything the workers need onsite…which is cool for them, but means they also don’t really stimulate much activity in the surrounding area). Touches like that could make a difference in how I’d perceive this.

Anyway, that’s just enough to start some discussion. There are a million angles to take this. Let’s get some smarter people in the room, please.


#3

It’d be great for Baltimore, which has lost so many businesses over the last decade it’s not even funny.


#4

OK, brings up a good point that the answer depends on what your city is like currently, so I’ll throw in another offshoot question: does HQ2 have more value in a struggling city than it does in a prosperous city?


#5

I think it depends on the labor market in the city. If you have excess unemployed HQ2 should drive economic activity/growth as more dollars enter the local market. If labor just shift between businesses (ie If Amazon steals fork-truck drivers from, idk, Wal-Mart) then it could result in growth if the other business is able to bring employees in from elsewhere, but it could also result in economic activity remaining flat.

That said, it might not create growth in Baltimore City because so many people already commute to Bmore for work, but leave post haste when the whistle blows because it’s such a shit city. However, the inner harbor is getting better (particularly because of Kevin Plank and Under Armour) and thePort Covington project looks promising, but there are concerns too.


#6

I think one of the more interesting questions is if its a good thing the way these cities bid for companies like Amazon to locate to there. They give them huge tax breaks and incentives where the city’s tax payers take on the risk if things don’t work out well.

John Oliver did a segment on it the last week, and while he is always over the top (its a comedy show) I think it raises an interesting point. I’m not sure how it’s solved though, its similar to a price war among competitors of products that are easily substituted.


#7

Boston

Fuck god no. Please lord no…

Traffic is already so shitty here, please just no.


#8

Ya, that’s a great point.


#9

As a Pittsburgh resident, here’s my (possibly naive) concern: HQ2 is supposedly going to bring 50,000 high-paying jobs to wherever it lands. Some of those will actually go to local residents; some will go to transplants. Even the transplants will supposedly bring tangential benefits to the city - like I said, more people buying houses, groceries, cars, artisanal juices and all that. But, as you pointed out…that’s likely going to be most concentrated in areas that are already doing well, right? If you have some shitty places with high unemployment and totally burned-out storefronts, will HQ2 move the needle at all? Will some adventurous business owners balk at the increasing cost of retail space in the trendy places and make the leap to open their new craft microbrewery in a burned-out neighborhood? If so, is that a net positive?

Ding-ding-ding-ding! Glad someone brought this up, and one of the reasons why I have some trepidation whenever I see Pittsburgh on the list. I don’t want Amazon in my city if the only way to bring them here is offering them billions in corporate tax breaks. But this is where I’d like someone smarter than me to chime in…is that actually all as bad as I think it is, or am I just a brainwashed liberal conditioned to think that most billionaires should pay for their own football stadiums, and that most billion-dollar corporations shouldn’t be granted special treatment by a city for the privilege of hosting their corporate headquarters?


#10

From the tax standpoint. If it REALLY brings in 50,000 jobs, that’d be huge for shrinking/dying Pittsburgh. That’s 50k people paying city payroll taxes that weren’t before and buying houses in Agony county to pay the property taxes (till they smarten up and buy houses in cranberry, beaver, Weirton… basically every where but Pittsburgh). Remember the transplants are good too. They’d bring spouses and children with them.

As far as crummy areas being revitalized… Pittsburgh has low vacancy rates and not a great deal of multifamily property in A-B neighborhoods. Some places would gentrify.


#11

This is getting into “gentrification” territory.

Opinions on that vary.

Completely depends. As they say, the devil is in the details, and in this case, details beyond the government’s an cities control?

Generally speaking if the bulk of the wages go to people that live in the city, the deals can be a huge boon, and well and above cover what is given as a break to the corp. If the buik of the wages are to commuters, then there is a net loss (possibly significant) to local RE Tax revenues and any local tax revenues that won’t cover the deal.

So in one scenario you have a shit load more money tomorrow for schools and shit than you do today, even after offering the break, and the other you only have a little bit more money for schools than you had yesterday. But unless you’re throwing out the baby with the bathwater in tax deals, you should still have more, presuming the offices aren’t going into preexisting buildings at the top of the RE Tax ladder.

They should ALL pay for their own stadiums.

remember why they would be offering the deal tho. Revenues pretty much go up under every situation, and the potential is there to go up bigly. (wink) And other cities are offering this, so you have to in order to stay in the bid.

Should government do this? No. Do I get why they do it? Yes. It’s the market, and the market is both amoral, and unavoidable.


#12

Ya, I think it’s hard to say what the impact would be. Intuitively you’d think 50,000 jobs would be a good thing and in the macro sense it probably is a good thing and you’d expect it to create a positive impact locally because previously unemployed or underemployed individuals in depressed areas will have better opportunities (in theory anyway). The problem, though, is a) it might benefit the surrounding areas (like we’ve talked about already) or it might inflate costs to the point that the local community’s economic situation remains flat or even worsens.

Well, @countingbeans can probably explain this better, but don’t forget that Pittsburg isn’t receiving tax revenue from Amazon now. So. yes they’d be getting a “break” so to speak, but it’s not like Pittsburg is losing tax revenue. They’re really delaying an increase in business tax revenue.

I think the more pressing issue is whether or not the city will help pay for the campus as often happens with sports venues. In which case the city would actually be allocating limited resources to bring the company there. Then it becomes more or less an NPV calculation that can be wrong.


#13

Oh, shit, looks like @countingbeans already posted…


#14

Plus, the state would see an influx of sales tax revenue unless Pennsylvania is one of the state that has already adjusted their sales tax laws to account for online sales. Amazon’s physical presence would require them to collect sales tax in Pennsylvania for sure.


#15

Correct.

In almost every situation the city would have increased revenue. It’d be pretty hard (which I don’t put past politicos) to be stupid enough to structure a deal that was a net decrease (or an overall increase in deficits).

So, yes, Amazon would be getting a deal on their (likely only) Real Estate taxes, it should, in most cases, still increase over all revenues.

Annnnnnd… Now you’re into stupid land where this could end up a net loss for the city. (Increased deficit.)

This would not surprise me in the slightest lol.

Or if they moved them into existing office space that generates $XXX in revenue, but only $XX in revenue now that they moved in due o the deal.

This situation is hard to fuck up, but they will find a way to if they can.


#16

I love this conversation. I typically hear it from the transplants living in Portland. Saying gentrification is bad, yet they are the ones who moved to the city in search of a hipster life.

After watching Nike and Intel take over my hometown in the last 25 years, my thoughts are it’s rough on a micro level and great on a macro level.


#17

What’s rough exactly? I know that Google and the gang have bid up housing prices and rents in San Fran to absolutely stupid levels. What else does having your city flooded with tech jobs hurt? Pitt already has some uber here and those people tend to like urban living, night life, nice apartments. Different than your average yinzer that wants a house and lives for stiller games.


#18

Let’s be honest here.

How many poor kids from urban neighborhoods with shitty schools and limited voucher programs is Amazon moving in going to hire? Not that many. Most of the people they will hire will be already educated kids and adults from wealthier places that have already gotten a quality education.

This move will create some level of gentrification, almost assuredly.

If 15k of these jobs would be hiring otherwise economically depressed black kids from the “harsh side of town” at low to moderate wages with the opportunity to create a career there the social effects of them moving in will no doubt be worth it. But I’m not sure Amazon is a company like that.

A lot of the rural black migration to urban centers was because these people could get a job and work their way up. Creating a hell of a lot better life for themselves than sharecropping. (Plus it gave us Chicago Blues, so thank god it happened.) If Amazon can do that for folks, great. If they are just going to hire a bunch of crackers and relatively well off immigrants and other minorities not in the struggle, then the gentrification will undoubtedly hurt black families in the area more so than anyone. Which is pretty shitty for them.

I understand both sides of the gentrification argument.


#19

Poor people need a place to live too. Poor people in urban areas tend to be black more often than not.

Hipsters moving in and raising RE prices to a level poor people can’t afford anymore have to find somewhere to live.

It doesn’t have to be intentionally “anti-black” for it to be “anti-black”. It can happen very organically and even with the opposite desired outcome in mind.


#20

Isn’t cost of living like stupid expensive in San Fran? Not just housing, but basically everything?