Hosting Amazon Could Come With Major Strings Attached

Over the last year, cities across the United States have been vying to host Amazon’s second headquarters — known as HQ2 — and the company has finally decided on splitting the location across two metropolitan areas, with outposts in Queens, New York, and Arlington, Virginia.

The lengthy process of wooing Amazon and waiting for word feels kind of like battling to host the Olympics — and the resemblance might not be a coincidence: Housing HQ2 could become more of a curse than a blessing, with some advocates fearing it could have unintended consequences.

Amazon approached its desire to open a second headquarters in a somewhat unconventional way — classic for the “disruptive” tech industry. Rather than reaching out to a city to gauge interest and discuss feasibility, the company instead started a competition, inviting cities to submit “bids.”

Interested parties had to show they met requirements like proximity to major airports and room to grow, but unspoken went another assumption: the desire for favorable regulatory treatment.

The battle over taxes isn’t abstract. Amazon’s HQ2 locations will have a major impact on housing prices, traffic congestion, transit utilization, job opportunities, construction and more – and that impact won’t be all positive, no matter what the company says.

Demanding tax cuts as a condition for relocation would mean that the giant company would be taking money away from services employees would otherwise be using, from public buses to hospitals and parks. HQ2 will create tremendous infrastructure demands: Can cities pay for them after handing out tax cuts?

Meanwhile, property prices would likely rise, putting pressure on low-income residents. And while the technical salaries at companies like Amazon may be high, they’re also supported by a large pool of non-technical workers — from underpaid contract janitors to social media specialists. Some of those workers may not be able to afford the high cost of living, instead spilling out into neighboring communities and creating a ripple effect like that seen in the Bay Area.

In San Francisco, for example, the “Twitter tax break” has been used to promote the growth of the tech industry, with proponents saying it keeps companies in the city. But these kinds of benefits have been criticized, with some arguing corporations should pay their fair share because their presence has driven up the cost of living and harmed working class people.

Or, in the case of Amazon, cities have proposed that companies should pay to offset the negative elements of their presence. A “head tax” in Seattle targeting large companies to fund homeless services and other supports was almost immediately repealed after complaints from Amazon, and similar taxes hit ballots in California this year.

Strikingly, competitors have remained tight-lipped about the tax incentives they’re offering, perhaps because they fear backlash from residents and want to make HQ2 a done deal before revealing the truth — even though this runs contrary to the transparent ideals of government. A CityLab analysis found that even slashing taxes might not be enough, with the finalists in the competition not necessarily reflecting Amazon’s own request for proposals.

Several cities can offer object lessons in what happens when companies are given preferential treatment as an enticement to relocate or stay — and while some suggest an economic benefit, others decidedly do not. They highlight the need for transparency and public input in any plans aimed to attract a massive company that will put pressure on a community’s capacity to accommodate it.

Just as the Olympics can turn into a boondoggle for the communities that host, HQ2 could end up costing host cities a lot of money in addition to fundamentally reshaping the landscape — and the economic returns might not be as great as envisioned.

The “prosperity bomb” of a new HQ could come with issues, like Amazon’s documented hostility toward organized labor, that could resonate for decades. And unlike a startup, which may scale quickly but at least starts small, Amazon wants to effectively relocate a small city’s worth of people as quickly as possible — something few cities can cope with. Choosing two densely populated areas may work against Amazon, as it’s likely to create housing and construction pressures almost immediately.

The criticisms of this project are valid, but it’s also worth noting that expanding out of traditional hotbeds for tech has its benefits, too — even if Amazon’s location choices don’t reflect very much care for the communities the company wants to move into.

Moving to new cities and suburban areas elsewhere in the country can alleviate some of the financial burden created by gentrification, for example, and may attract workers to pursue tech careers who would have been unable to do so in cities like Seattle, New York or San Francisco because of high housing costs. Ethical companies can also drive sustainable economic growth in their communities.

Here’s hoping that the “lucky” cities chosen for HQ2 are thinking smart and planning ahead for a long-term relationship with Amazon.

Photo credit: Wonderland/Creative Commons

26 comments

Emma L
Emma L11 days ago

thanks for posting

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Lisa M
Lisa M11 days ago

Thanks.

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Lisa M
Lisa M11 days ago

Thanks.

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Danuta W
Danuta W11 days ago

thank you for posting

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Mary B
Mary B11 days ago

This is exactly the kind of thing Bernie means when he says "Corporations need to pay their fair share. "Why shouldn't they? Why should they be given tax breaks when they"re going to be siphoning money out of a community that needs it for there own infrastructure . Even in small towns like I live in, business likes to claim what's good for them is good for all of us. Well it's not. Tourists are not home owners. Tourists need more shops, restaurants, bigger groceries, more traffic lights, more road work , more cops, more emergency room visits. They don't know how to drive on the dirt back roads or even state roads with out leaving road kill littering the ditches, garbage in the camp sights and beaches. I can't even imagine how a huge company like Amazon would impact a small city. And I like shopping at Amazon so it not like I think they are demons. But where ever they go, they DO need to PAY THEIR FAIR SHARE.

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Alea C
Alea C11 days ago

I am very grateful Amazon isn't anywhere near my house.

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HEIKKI R
HEIKKI R12 days ago

thank you

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Leo C
Leo C12 days ago

Thank you for sharing!

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Chrissie R
Chrissie R12 days ago

Thank you for posting.

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Janis K
Janis K12 days ago

Thanks for sharing.

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