How Amazon Picked HQ2 and Jilted 236 Cities

A Carolina Panthers fan tries to woo Amazon shortly after the company announced its intention to find a second headquarters. Charlotte didn’t make the final list.
A Carolina Panthers fan tries to woo Amazon shortly after the company announced its intention to find a second headquarters. Charlotte didn’t make the final list. Photo: Bob Leverone/Associated Press

In late summer, officials in Northern Virginia were surprised by a rumor that Amazon.com Inc. AMZN -0.35% was going to divide its giant second headquarters—known as HQ2—between two cities.

They had grown confident of landing one of the biggest corporate development projects in memory, with the prospect of 50,000 jobs and billions of dollars in investments within tantalizing reach of the Crystal City neighborhood in Arlington, Va.

Weeks earlier, they had impressed Amazon’s site-selection team during meetings that ended with appetizers at the Stomping Ground restaurant. Together, they drank beer, ate mini chicken biscuits, with a Gay Pride flag hanging out front.

A promotional effort in Philadelphia for their Amazon bid allowed residents to write why they love their city on a chalkboard.
A promotional effort in Philadelphia for their Amazon bid allowed residents to write why they love their city on a chalkboard. Photo: City of Philadelphia

Then came the curveball. Amazon confirmed the two-city rumor in a phone call. What neither Northern Virginia nor the other 20 finalists realized was that Amazon executives had already determined months earlier that no one city had enough technical talent to accommodate the company’s projected growth, according to people familiar with the company’s thinking.

On Tuesday, Amazon announced it would split HQ2 evenly between Northern Virginia and New York’s Long Island City, while giving Nashville, Tenn., the consolation prize of an operations facility and the promise of 5,000 jobs.

What felt like a jilt to the losers showed just how much of a hold Amazon exerted on a swath of American cities. Some of the more than 200 applicants had invested hundreds of thousands of dollars to woo the company on the promise that HQ2 would reshape their local economies.

Where the Cities Stand

Amazon selected Arlington County’s Crystal City and New York’s Long Island City as locations for its second headquarters operations.

N. Virginia

Range from min. to max. of values for the 19 U.S. sites shortlisted

Transportation and housing

Industry and workforce

Transit ridership, as a percentage of workers

Business state tax climate, ranked

Fortune 500 company headquarters, by city

One-way commute time, average

Monthly housing cost, average

Tech labor force

Coffee and tea shops, per capita

College-educated population

Number of farmer markets, by city

Tech degrees from 2011-16

N. Virginia

Range from min. to max. of values for the 19 U.S. sites shortlisted

Industry and workforce

Transportation and housing

Transit ridership, as a percentage of workers

Business state tax climate, ranked

Fortune 500 company headquarters, by city

One-way commute time, average

Monthly housing cost, average

Tech labor force

Coffee and tea shops, per capita

College-educated population

Number of farmer markets, by city

Tech degrees from 2011-16

N. Virginia

Range from min. to max. of values for the 19 U.S. sites shortlisted

Industry and workforce

Transportation and housing

Transit ridership, as a percentage of workers

Business state tax climate, ranked

Fortune 500 company headquarters, by city

One-way commute time, average

Tech labor force

Monthly housing cost, average

Coffee and tea shops, per capita

College-educated population

Number of farmer markets, by city

Tech degrees from 2011-16

N. Virgnia

Range from min. to max. of values for the 19 U.S. sites shortlisted

Industry and workforce

Business state tax climate, ranked

Fortune 500 company headquarters, by city

Tech labor force

College-educated population

Tech degrees from 2011-16

Transportation and housing

Transit ridership, as a percentage of workers

One-way commute time, average

Monthly housing cost, average

Coffee and tea shops, per capita

Number of farmer markets, by city

Amazon kicked off its beauty contest in September 2017 to showcase the company’s economic benefits. In the end, the contest revealed more about its immense power.

“Would it have been better to get 50,000 jobs? Of course,“ said Alicia Glen, New York City’s deputy for housing and economic development.

Stephen Moret, chief executive of the Virginia Economic Development Partnership, said 25,000 high-paying jobs still stacked up as one of the largest economic development projects in U.S. history.

The mayor of Dallas, which believed it was still in the running until recently, was told by Amazon of its decision shortly before the public announcement.

“My heart is broken today,” said Mayor Mike Rawlings at a news conference that seemed more like a wake. Nashville’s mayor said he found out officially about the consolation prize when he saw Amazon’s tweet Tuesday.

Amazon kept many of the cities in the dark through much of the roughly 14-month selection process, frustrating some government officials. Seventeen finalists leave empty-handed, despite spending a collective fortune on proposals, data and site visits.

J.J. Ament, left, chief executive of the Metro Denver Economic Development Council, and Sam Bailey, the group’s vice president, pose with paper and Kindle versions of their proposal a year ago. Denver was a finalist.
J.J. Ament, left, chief executive of the Metro Denver Economic Development Council, and Sam Bailey, the group’s vice president, pose with paper and Kindle versions of their proposal a year ago. Denver was a finalist. Photo: Rick Wilking/Reuters

The public spectacle drew comparisons to an unequal and dysfunctional relationship.

“They literally set in motion a bidding war and these communities literally groveled at the table of the possibility of seeing HQ2 located in their community,” said Richard Florida, a University of Toronto professor who studies urban economic development.

This account of the HQ2 bidding spectacular is based on interviews with dozens of city and state officials, developers and people familiar with the company’s thinking.

At around 3 a.m. West Coast time on Sept. 7, 2017, Amazon made the unexpected announcement: It would begin a public search for a second corporate home, which Chief Executive Jeff Bezos said would be a “full equal” to its Seattle headquarters.

The message reached municipal leaders across North America as they awoke. Large corporate development projects can create a few thousand jobs. Amazon promised 50,000, more than the population of roughly 96% of U.S. towns. They would pay average full-time salaries of $100,000. Amazon said it would invest $5 billion in its second headquarters over two decades.

Seattle residents referred to Amazon as the “prosperity boom.” Since 2010, Amazon’s Seattle workforce has grown to 45,000 from roughly 5,000. The company has spent more than $4 billion on about 40 offices in Seattle, helping transform a dilapidated neighborhood of tire shops and small warehouses.

For Amazon, HQ2 was a publicity campaign for the ages. Mr. Bezos was inspired in part by Tesla Inc.’s 2014 search for its $5 billion advanced battery factory. Nevada won, handing over $1.3 billion in tax incentives.

A rendering for a HQ2 proposed location from Boston, which made the list of finalists.
A rendering for a HQ2 proposed location from Boston, which made the list of finalists. Photo: City of Boston

Its requirements were stringent. Amazon wanted a metropolitan area with more than 1 million people—eliminating all but roughly 70 North American prospects. It asked for a stable, business-friendly environment, and an urban or suburban location with the potential to recruit top technical talent. The company also wanted a place within 45 minutes of an international airport, one or 2 miles from a major highway and easy access to mass transit.

Cities large and small worked overtime on their applications. “Pretty much from when they made their first announcement, we had daily war-room meetings,” said Brian Kenner, deputy mayor for economic development in Washington, D.C. “Sometimes we had them twice a day.”

Dozens of cities that didn’t meet all the requirements prepared pitches nonetheless, hoping to grab Amazon’s attention maybe for a future project. Gary, Ind., population 80,000, bought a newspaper ad with a first-person letter to Mr. Bezos that listed its qualities and offered “all the land you need.” The Lower Merrimack Valley in Massachusetts sent a fake diamond ring with the proposal: “let’s get merri’d.”

For others, the costs seemed too high. “Blindly giving away the farm isn’t our style,” wrote San Antonio, officials in an open letter to Mr. Bezos. Little Rock, Ark, flew a banner over Seattle that said, “Hey Amazon, it’s not you, it’s us.”

Some government officials were upset about having to spend limited time and budgets on a long shot bid. Other cities spent hundreds of thousands of dollars on consultants. The chance was too alluring to resist.

By Amazon’s Oct. 19 deadline, the 238 HQ2 proposals filled a large conference room at its Seattle headquarters. Amazon went quiet for three months. It drilled into such data as the local market’s rate of growth, the willingness of prospective employees to move to each city, as well as local high-school SAT scores.

On Jan. 18, 20 finalists were announced. They included a mix of predictable picks—New York City, Boston and Chicago—as well as few wallflowers, including Indianapolis and Columbus, Ohio, cities with smaller airports, weak public transportation and fewer tech workers.

Newark, N.J., has an airport, but not an Amazon office. New Jersey Sen. Cory Booker and then-Gov. Chris Christie at the city’s announcement it would enter the HQ2 contest.
Newark, N.J., has an airport, but not an Amazon office. New Jersey Sen. Cory Booker and then-Gov. Chris Christie at the city’s announcement it would enter the HQ2 contest. Photo: Seth Wenig/Associated Press

One surprise was the selection of three contenders in the Washington, D.C., metro area. The fix was in, some speculated, because Mr. Bezos owned both the local paper, the Washington Post, and a second home there. Holly Sullivan, the Amazon executive leading the effort, was the former economic director for Montgomery County, Md., one of the HQ2 finalists.

Among those not invited to the dance were Detroit and Orlando, Fla. Officials were told by Ms. Sullivan they didn’t have enough tech workers. “Talent is a very big issue nationwide,” Ms. Sullivan told Khalil Rahal, executive director of the group that ran Detroit’s bid.

Mr. Rahal said Ms. Sullivan told him most U.S. cities fell short. “There really isn’t a place in the country that’s got the ability to backfill their order of 50,000 people,” Mr. Rahal said.

From that point in the contest, Amazon enforced strict silence. Some officials heard that other cities were cast out early because of leaks. Indianapolis, one of the finalists, required about 400 people sign nondisclosure agreements.

At this stage, Amazon asked cities what they wanted in return. The requests included ideas to cap home prices, support for more STEM education at schools and mandatory volunteer work for Amazon employees.

Amazon then asked each city to plan a less-than-48-hour visit from company officials. Cities were given almost no instruction, other than to provide sessions on education and talent, as well as site visits.

In Los Angeles, Amazon executives notified officials on a Tuesday they would be visiting the following Monday. Local officials had to juggle a major clean-technology conference scheduled for that day because Amazon executives insisted they couldn’t change their plans.

The message was clear: Amazon had to take priority.

In June, Amazon sent a letter saying they were still evaluating finalists. Some cities, like Raleigh, N.C., never heard back, after hosting breakfast in March at the state governor’s mansion and dinner at the Death and Taxes restaurant.

But Amazon’s team of about eight people made repeated visits to New York City and the Washington, D.C., area.

The July meeting of 30 Northern Virginia officials, Crystal City developers and Amazon’s team at the Stomping Ground was top secret. Owner and chef Nicole Jones was told to set up the buffet, hand over the keys and leave.

The same month, New York City’s Economic Development Corporation brought representatives from 11 area colleges and universities to meet with Amazon executives to make the case they had the necessary talent.

By August, some city officials realized Amazon was shifting its ambitions. During a second visit in Los Angeles, a city official asked whether Amazon should break up HQ2 among several cities because there wasn’t enough tech talent in one location. Ms. Sullivan and her staff gave each other knowing glances.

Inside Amazon, the team had determined after the first site visits early in the year that no single city would likely fulfill its requirements.

Amazon made another trip to New York in September, when Amazon executives met with city officials to tour Long Island City. The rode Citi Bikes and took a sunset cruise on a New York City ferry.

Steven Fulop, the mayor of Jersey City, N.J., across the Hudson River from Manhattan, had his own opinions about the contest. His city entered but wasn’t a finalist.

Amazon “used their brand not to have any social impact,” he said. “They used it to pit one community against the other and everybody fell for it. Us included.”

Source: https://www.wsj.com/articles/how-amazon-picked-hq2-and-jilted-238-cities-1542153869

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