Amazon is in the market for prime real estate.
The company recently announced it is looking for a home for its second headquarters, launching a bidding war between mayors, county executives and governors across North America.
“Amazon HQ2 will bring billions of dollars in up-front and ongoing investments and tens of thousands of high-paying jobs,” Amazon founder and CEO Jeff Bezos said in a news statement announcing the site search. “We’re excited to find a second home.”
The project is “expected to have over $5 billion in capital expenditures” and an economic growth potential of $38 billion, according to Amazon.
The company would “hire as many as 50,000 new full-time employees with an average annual total compensation exceeding $100,000 over the next 10 to 15 years” following the commencement of operations at HQ2.
Milwaukee Mayor Tom Barrett sent Bezos a letter indicating the city’s interest the day the Request for Proposals was announced.
Madison Mayor Paul Soglin announced the next day that his city would also submit a bid by the Oct. 19 deadline.
Amazon has said it will announce a site selection for HQ2 in 2018.
Amazon’s desires and drivers
The internet retailer and tech company opened the bidding process Sept. 7 and gave respondents six weeks to prepare and submit “confidential” offers to corporate headquarters in Seattle, where about 40,000 people work.
Amazon says it’s served as a catalyst for downtown development in Seattle and can do the same for the community that hosts its second headquarters. “Amazon estimates its investments in Seattle from 2010 through 2016 resulted in an additional $38 billion to the city’s economy — every dollar invested by Amazon in Seattle generated an additional $1.40 for the city’s economy overall,” stated the invitation to bid.
The seven-page RFP detailed Amazons’ requirements, preferences and priorities.
Incentives — tax credits, relocation grants, workforce grants, permitting and fee reductions — offered in bids “will be significant factors in the decision-making process.”
Amazon will “prioritize certified or shovel-ready greenfield sites and infill opportunities with appropriate infrastructure” — and where construction can meet its timeline.
Such a site must be:
• In a metropolitan area in North America with more than a million people.
• In a stable and business-friendly environment.
• In an urban or suburban location with the potential to attract and retain strong technical talent.
• Within 45 minutes of an international airport and within 2 miles of major highways and arterial roads. “The highway corridors must provide direct access to significant population centers with eligible employment pools. Travel time to an international airport with daily direct flights to Seattle, New York, San Francisco … and Washington, D.C., is also an important consideration.”
• Located in an area with direct access to mass transit, including bus lines, rail or light rail — as well as enjoying optimal cellphone service and optimal fiber connectivity.
Amazon urged bidding communities to “think big and creatively” when considering locations.
And “big” is right. The company seeks at least 500,000 square feet for phase one, with the potential to grow to 8 million square feet beyond 2027. By comparison, Amazon’s Seattle campus is about 8 million square feet, with 33 buildings and 24 cafes.
Amazon says it would begin “sourcing for talent” at HQ2 upon selecting a site.
The 50,000 or so jobs would be for executive and management posts; engineering, with a preference for software development engineers; legal, accounting and administrative. Assembling such a large pool of talent demands the new site “be sufficiently close to a significant population center, such that it can fill the 50,000 estimated jobs…. A highly educated labor pool is critical and a strong university system is required.”
As for wages, an HQ2 fact sheet said the average annual compensation for new full-time jobs would exceed $100,000. However, “please note that the actual average wage rate may vary from the projected wage rate depending upon prevailing rates at the final location.”
Do Milwaukee or Madison have a shot?
Dozens of cities are expected to submit proposals for what has been referred to as the Olympics of the corporate world.
In addition to Milwaukee and Madison, proposals are expected from Atlanta, Baltimore/Washington, D.C., Boston, Chicago, Dallas, Denver, Indianapolis, New York City, Phoenix and San Diego. In Canada, Ottawa and Toronto have shown interest.
Even Seattle will be bidding. Acting Seattle Mayor Bruce Harrell said the city will submit a proposal encourage Amazon to expand its existing headquarters.
Barrett, in his letter to Bezos, wrote, “I’m proud to say Milwaukee meets all your requirements and even prouder to say our incredible renaissance would compliment your vision.”
He added, “You will learn more about all the great assets we possess as a city and region when we submit our proposal next month. But I couldn’t wait to let you know how excited we would be to have you on America’s ‘Fresh Coast.’”
Soglin, at his news conference to discuss Madison’s coming response to the RFP, said perhaps the former Oscar Mayer site would meet Amazon’s needs, but he added there are other possible locations.
The population of the Madison metro area isn’t a million, but Soglin said the proposal would include Dane, Sauk, Columbia, Jefferson, Iowa, Rock and Green counties.
Madison also doesn’t boast an international airport, but Soglin noted there are direct flights from Dane County Regional Airport to Chicago.
“If you look at the intent of what Amazon is doing, we think we can qualify,” the mayor said.
And, he stressed, Madison would not offer the unreasonable giveaways that were in Gov. Scott Walker’s deal to lure Taiwan-based Foxconn to the state. The GOP-engineered arrangement is the largest taxpayer-funded giveaway to a foreign corporation in U.S. history.
“I’m not opposed to having appropriate and reasonable financial incentives, whether it’s for Foxconn in southeastern Wisconsin, Foxconn in Madison or Amazon in Madison or Milwaukee,” Soglin said. “But I hope we understand two points. One, it has to be reasonable. And two, these businesses are looking for other things.”
Of course, Amazon says it’s seeking a city with “elected officials eager and willing to work with the company.”
So does Wisconsin have a chance?
One of the most expansive attempts to game out the competing cities was conducted by CBS News, which looked at North American metro areas with populations of more than a million people. There are 55 such areas.
CBS next considered the size and quality of the potential workforce Amazon needs — 50,000 people with the education and background to earn mid- to upper-income salaries.
Among the cities with a million population, the network identified 26 areas where more than 33 percent of the population has a college degree or higher.
The Milwaukee-Waukesha-West Allis area made the cut — Madison did not.
Many unanswered questions
While Amazon’s RFP has turned the heads of some of the nation’s leading Republican and Democratic mayors, some watchdog groups and policy organizations are emphasizing restraint and sharing cautions and questions:
• Where will the 50,000 employees come from to staff the headquarters?
Some Democratic lawmakers raised this question with their opposition to the Foxconn deal, including state Rep. Gordon Hintz, D-Oshkosh, who has observed that Wisconsin — with the 15th oldest population in the nation — had 105,000 fewer people of “prime working age” in 2015 than in 2010.
Some of the sharpest decreases have occurred in Jefferson, Kenosha, Ozaukee, Racine, Walworth, Washington and Waukesha counties.
Moreover, Hintz, when weighing in on the Foxconn deal, said the governor’s education and economic policies don’t prioritize growing the “prime working age” population.
• How would hosting HQ2 impact housing costs?
In Seattle, Amazon has been blamed for causing a decrease in affordable housing. The Seattle Times recently reported the median price for a house in August in Seattle was $730,000 — that’s up almost 17 percent from August 2016.
• What special incentives legislation will Amazon demand?
To win Foxconn’s flat-screen display factory, Wisconsin lawmakers approved a package that allows the Wisconsin Supreme Court to take certain cases directly from the circuit court and exempts Foxconn from a host of state environmental regulations.
• Will government investment prove more expensive than the returns?
Wisconsin’s deal with Foxconn is for $3 billion in state tax credits, which critics have called a “winner’s curse” — or “Walker’s curse.”
“Taxpayers should watch their wallets as the trophy deal of the decade attracts politicians to a hyper-sophisticated tax-break auction,” said Greg LeRoy, executive director of Good Jobs First, a national policy resource center that tracks subsidies and promotes accountability in economic development.
“We fear that many states and localities will offer to grossly overspend to attract Amazon, even though the business basics — especially a metro area’s executive talent pool — will surely control the company’s decision,” LeRoy said.
Good Jobs First has been tracking Amazon’s ability to secure economic incentives for years. “We assumed Amazon would apply this expertise for more fulfillment and sortation centers,” LeRoy said. “It now appears the company will also deploy it for a new headquarters deal. In its press release … we already see the markings of an aggressive messaging strategy to justify massive subsidies.”
A November 2016 report from the Institute for Local Self-Reliance — a national research and educational group — found between 2005 and 2014, half of Amazon’s fulfillment centers received public incentives totaling $613 million. During this period, Amazon also received $147 million in subsidies connected to its data centers.
“For taxpayers, workers and local governments, Amazon’s strategy has been costly,” said Stacy Mitchell, co-director of ILSR in Minneapolis.
Still, WiG didn’t interview any activists or elected officials in Wisconsin adamantly opposed to bids for the Amazon headquarters.
Restraint was one buzzword in the wake of the Foxconn votes.
“We are all for communities in Wisconsin aggressively courting new employers and new jobs, especially because of Scott Walker’s failure to create the 250,000 jobs he promised in his 2009 campaign,” said Scot Ross of the statewide progressive group One Wisconsin Now.
He also said, “We saw from the Foxconn debacle Scott Walker is a terrible negotiator. So if taxpayers are going to get the best deal, it better be left in the hands of local elected officials in Milwaukee and Madison. The best deal for taxpayers is always investing in people.”
On the web
Read the details of Amazon’s request for proposals at amazon.com/amazonHQ2.