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Was Amazon's HQ2 Search a Waste of Time for Cities?

State and local officials devoted thousands of hours, and put other projects on hold, to lure the company.

After Amazon’s announcement that it would split its second headquarters and coveted 50,000 jobs between the Washington, D.C., area and the New York City borough of Queens, the losing cities put a positive spin on the news. Columbus, Ohio, officials, for instance, said they were just glad to get attention for being a finalist. 

But after the 14-month search and the thousands of hours devoted by state and local officials to their bids, many can't help wondering if it was all just a big waste of time. After all, the tech giant wound up choosing two of the most obvious economic centers on the East Coast.

Finance experts agree that development activity in the 20 finalist cities has been put on hold to some degree because of the HQ2 contest. In the hopes of winning the marquee tenant, according to John Boyd, head of a New Jersey-based corporate site selection company, it's likely a number of developers had signed nondisclosure agreements that prevented them from marketing assets until the HQ2 hunt was over.

“These are highly coveted assets that were essentially sitting idle for almost a year waiting for Amazon to make a decision,” he says. “Now that all of that is history, you’ll see a lot of [economic development] announcements in the coming months.”

Some see that 14-month delay as just one more loss for the cities. “That’s an opportunity cost forfeited because of this charade,” says Stacy Mitchell, co-director of the left-leaning think tank Institute for Local Self-Reliance and frequent critic of Amazon.

She says the real winner in all of this is Amazon. The company now knows how much state and local governments are willing to give up for the tech company’s business. “It’s not just that cities wasted their time," says Mitchell, "but that cities handed over a lot of valuable data.”

One of the 238 cities to bid for Amazon's second headquarters, for instance, learned a few months ago that it's getting one of the company's new distribution centers -- but at a cost. Amazon will receive $51 million in state, county and local tax incentives on top of an unspecified amount in local occupational tax incentives for opening a distribution center in the Birmingham, Ala., metro area. The tax breaks are far higher than compared with similar-sized facilities elsewhere.

Still, Boyd doesn't think it was a fruitless exercise. The bid packages cities put together could easily be recalibrated for other companies, he says. “These cities have sent the message to global companies that they’re open for business. [Competing for Amazon] raises the game and improves the economic development acumen of those that engaged in this process.”

What's more, he says, city officials have forged meaningful relationships with Amazon executives that they can build upon. He points to Amazon's announcement last week that it will invest $230 million in runner-up Nashville, Tenn., and add 5,000 jobs at a new operations site there. And just months ago, Amazon announced new distribution centers and jobs in Tulsa, Okla., another city that sought HQ2.

Liz Farmer is a former GOVERNING fiscal policy writer.
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