Amazon’s announcement of its intention to build a second headquarters complex somewhere in the United States, generating $5 billion in investment and up to 50,000 jobs, sparked some lively punditry around Virginia. Reactions varied widely.
Central Virginia would be an ideal location, opined the Richmond Times-Dispatch. The region meets the threshold population of one million, it has a stable, business-friendly environment, it has a strong university system and access to a major airport and mass transit, and it offers a strong logistical system.
The big drawback, suggested the editorial, is Virginia’s aversion to subsidies and tax breaks. Amazon has made clear its interest in incentives. “Fabulously rich companies shouldn’t get handouts from the taxpayers,” says the libertarian-leaning editorial page. But with a prize as big as Amazon, it conceded, “It’s highly unlikely that the state’s political leaders will let any laissez-faire principles stand in the way of a project that could transform an entire region.”
The Virginian-Pilot editorial writer didn’t have much use for Amazon. Noting that Virginia Beach Mayor Will Sessoms hopes to pitch the technology-intensive retailing giant, the Pilot figured that Hampton Roads faces an uphill climb. Sure, the region does have the requisite one million population, and it soon will have access to huge trans-Atlantic broadband links, but the Amazon announcement may be no more than a marketing ploy — “a plan to wring tax breaks out of cities and states stepping on each other for the chance to capture some of that Amazon magic.”
“While communities in Virginia — including Virginia Beach — should certainly try to lure the retail giant here, officials should be wary as well,” the Pilot concluded. “Bending over backward for this or any company carries risk that needs to be worth the reward.”
Then there is the starry-eyed Roanoke Times which, despite a regional population less than a third of the one-million minimum, proceeded to make the case that Amazon should think transformationally: “If you go to some conventional big city, that’s simply a case of the rich getting richer. There’s no glory in that. If you come to Roanoke, a promising city that sits on the edge of Appalachia, you are single-handedly changing the rules of the game.”
The editorial writer touted the region’s high quality of life, its creativity in making deals work, and its proximity to Virginia Tech and Liberty University. “Our region has more undergraduates per capita than Boston, San Francisco-Oakland, Raleigh-Durham, or Austin, Texas. ”
Sad to say, I don’t think Amazon is looking for glory in its new headquarters complex. It’s not looking to transform the world with its corporate real estate strategy. I have to agree with the Pilot on this: Amazon is looking to convert its name into hundreds of millions of dollars in subsidies and tax breaks. And who can blame the company, as long as there are local governments around the country willing to sell their souls?
Landing a mega Amazon corporate center would be an economic game changer, it is true. The Times-Dispatch is right to relax its libertarian scruples enough to at least contemplate the idea of incentives.
But I have yet to see anyone conduct a rigorous cost-benefit analysis of a major economic development project. Studies invariably are framed in such a way as to bias the outcome in favor of the desired outcome. Thus, a study on the “economic impact” of an Amazon headquarters undoubtedly would show billions of dollars of positive impact — but would exclude the liabilities associated with providing government services not only to the Amazon corporate campus but to fund the growth in infrastructure and government services associated with 50,000 direct jobs and perhaps another 100,000 or more in “multiplier” jobs. Rarely will any consultant’s study reveal the net benefit — the benefit after costs have been deducted.
A region like Roanoke would be totally overwhelmed by the impact. Even Roanoke or Hampton Roads would be hard-pressed to accommodate such a surge in investment and jobs. Frankly, only Northern Virginia has the size, assets and wherewithal to play Amazon’s game. The rest of us need to dream more modest dreams and husband our resources for projects that (a) we realistically might win, and (b) we won’t regret it if we do.
Update: The New York Times crunches the numbers for Amazon, and narrows down the final four list to Portland, Denver, Washington and Boston. The optimum pick: Denver.