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Randall Samborn, Esq

October 27, 2017

Amazon’s HQ2 Sweepstakes: A Long, Strange Trip It Will Be

Chicago, New York, Detroit and it’s all on the same street . . .

Most assuredly, Amazon’s HQ2 sweepstakes was not on the minds of Grateful Dead bandmates when they wrote the lyrics to their 1970 anthem, Truckin’, but just as certainly, their poetry provides an apropos context for perhaps the most exciting corporate beauty contest of 2017.

How else to measure the billion-dollar bidding that yielded 238 proposals from 54 cities, states, and provinces across North America, all driven by the e-commerce behemoth’s strict set of requirements for a metropolitan locale that sports a low cost of living; a highly educated, high-tech workforce; a population of at least one million people; and easy access to an international airport. And what benefit to the locale that lands the honor – Amazon’s $5 billion second headquarters, replete with a promised 50,000 high-salaried jobs.

The high stakes sweepstakes raise the question: What is the appropriate balance between necessary and justifiable taxpayer incentives versus an unfair and overly burdensome distribution of government funds and resources to benefit private enterprise? Is New Jersey’s reported $7 billion incentive package over the top? What about the clever, but rejected ‘gift’ of a 21-foot saguaro cactus offered by Tucson, Ariz., or the quaint proposal by Stonecrest, Ga., (pop. 53,000) to de-annex 345 acres and rename it Amazon, Ga.? Each proposal, it seems, is stuffed full of creative lights, bells, and whistles aimed at wooing the mega-suitor.

Let’s consider Chicago, for example, whose location, airports, workforce, and quality of life all seem to immediately meet Amazon’s criteria. Yet the city is situated in a state with the nation’s worst credit rating. City, county, and state elected officials, who are often at dysfunctional odds (Illinois recently went two years without a state budget), forged a public and private sector coalition supporting 10 proposed sites, backed by more than $2 billion in incentives and hinting they could do more after the first round of vetting. After recently losing out on a Toyota and Mazda manufacturing facility and a Foxconn LCD panel plant, (which was lured by Wisconsin’s $3 billion in incentives, some in refundable cash tax credits), the Chicago area is pining for Amazon HQ2’s estimated $341 billion in operational spending over 17 years, and an additional 37,500 regional jobs.

Yet, Chicago and Illinois are an enigma in the early handicapping of the contest. The city and state are plagued by contradictory perceptions of overwhelming public debts and senseless gun violence on one hand, while also being somewhat contradictorily blessed with a longstanding reputation as a cosmopolitan city with world-class amenities and Midwestern values. Moody’s Analytics ranked Chicago No. 24 among 65 cities measured against Amazon’s requirements, while Anderson Economic Group cast it in second place behind New York. It looks like even after all these years, we may still be the second city. Excluding Seattle, Moody’s top five were Austin, Texas, Atlanta, Philadelphia, Rochester, N.Y., and Pittsburgh.

Many would-be Amazon suitors are, as the Grateful Dead sang, “your typical city involved in a typical daydream.” Can perceptions, or the reputation, of a city like Chicago tip the scales for or against winning Amazon’s HQ2 bonanza? And how much does reputation even matter with billions of dollars in “incentives” being dangled at the end of the Amazon’s rainbow? In “Truckin’,” the Doodah Man says, “Gotta play your hand / Sometimes the cards ain’t worth a dime / If you don’t lay them down.”

Only time will tell whether it’s the saguaro or the tax breaks that will complete the royal flush and take home the pot. While every city waits, you can download the song for $1.29 on Amazon Music or stream it free on Amazon Prime.

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Posted by: Randall Samborn, Esq

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