Some Amazon HQ2 Finalists Look to Transportation to Try to Seal the Deal
Following a nationwide search for a place in which to locate its second headquarters, Amazon is expected to announce a winner perhaps soon from among a group of 20 finalists announced in January. As I noted in a post last Fall, the heated competition for HQ2 has not only demonstrated the growing importance of ecommerce and logistics to the nation’s economy but also allowed communities to tout existing infrastructure assets or proposed infrastructure improvements as part of their bids to attract the project. As the finalists have tried to shore up their bids in recent weeks and those that failed to make the list have begun to examine what went wrong, transportation and infrastructure issues have come into play in a variety of ways.
HQ2 Finalists & Infrastructure Issues
Here’s a look at what some of the HQ2 finalists have been up to:
- California: When Amazon narrowed down the list of contenders for HQ2 in January, the only city West of the Rockies on the list was Los Angeles. City Lab reported recently on the lessons the city may be able to glean from Ontario, California’s successful pursuit of a QVC distribution center in 2015 (as detailed in a UCLA case study). Among the assets Ontario officials touted were a major airport, warehouse availability, proximity to Los Angeles and the presence of other distribution giants like UPS and FedEx. But the UCLA brief examines how Ontario could have struck a better deal and how other cities can do so in the future. “The answer, they say, would have been a tougher negotiation process, guided by community benefit agreements (CBAs) or project labor agreements (PLAs)—contracts drafted pre-development, designed with input from the community, and backed by strong enforcement mechanisms,” writes City Lab’s Sarah Holder. One example of the community benefit agreement is being piloted in Los Angeles following the 2016 passage of ballot Measure JJJ, the Transit-Oriented Communities Housing Incentive Program, Holder notes.
- District of Columbia/Montgomery County, Maryland/Northern Virginia: Lawmakers in Maryland last week approved $6.5 billion in tax incentives to try to lure Amazon to the White Flint Mall area of Montgomery County, The Baltimore Sun reported. Combined with an additional $2 billion in promised infrastructure and transportation improvements, that makes Maryland’s $8.5 billion package the largest offered by any of the HQ2 finalists. Maryland Secretary of Transportation Pete Rahn received some criticism in February for saying he has promised Amazon a “blank check” for any needed transportation improvements but the $2 billion is not currently budgeted and it’s uncertain how the state would come up with the money. A spokesman for Gov. Larry Hogan said Rahn “misspoke.” “The transportation portion of the Amazon incentive package will include targeted investments in both transit and roads that will be financed over at least 10 years,” communications director Doug Mayer told The Washington Post. Elsewhere The Post reported on a long-delayed road project that some say would be needed to allow future Amazon employees to get to work at the North Bethesda site and ease congestion in the area. Others say the proposed $142 million Montrose Parkway East project is outdated and unnecessary. … Of course, Virginia and the District of Columbia itself are also both still in the running for HQ2. Tyler Cowen, a columnist for Bloomberg, wrote recently about why the three destinations in the National Capital Region are not created equal. His bet is on Montgomery County. But the other contenders aren’t willing to concede just yet. DC Mayor Muriel Bowser was in San Francisco in February to meet with other big tech firms in an effort to keep the District’s recent momentum going, The Washington Post reported. … Amazon officials reportedly toured a number of the nine or so proposed HQ2 sites in the DC area in late February/early March starting with four sites in Northern Virginia before moving on to four in DC and the Montgomery County site. Amazon’s interest in the region is reportedly among the factors helping to goose support for funding repairs to the Metro system. “The excitement and the possibility [of Amazon coming] is making good things happen for this region in regard to Metro,” Montgomery County Economic Development Corporation Chairman Bob Buchanan told The Washington Post. “I think the fact that Maryland and Virginia are moving bills ahead to the extent that they are is an example of that.”
- Georgia: A transportation-related issue of another kind could derail Atlanta’s HQ2 bid, Fortune magazine reported last month, and it has nothing to do with the city’s notorious traffic. The Georgia legislature passed a bill stripping a $50 million sales tax exemption from Delta Airlines in retaliation for Delta’s decision to cancel a discount program with the National Rifle Association. “The spat would give any corporate giant pause when considering a base of operations,” the magazine said. “Experts speaking to CNN before the tax repeal passed said the fight showed Georgia’s government was more concerned with social policy than business, and that Georgia’s political climate could harm Amazon’s recruitment efforts.”
- Indiana: Lawmakers last month failed to repeal a ban on light rail in Central Indiana that was aimed at boosting Indianapolis’ bid for Amazon HQ2, The Indianapolis Star reported. The ban, approved in 2014, prohibited public spending on light rail projects in the greater Indianapolis metropolitan area. The repeal, which passed the House 90 to 5 in January and was torpedoed by Senate Republicans, nearly got a last-minute reprieve when legislators tried to attach it to another transportation measure. But it didn’t make it through a final legislative day that some described as “chaotic” and that also claimed another casualty in the form of a plan to encourage and regulate driverless vehicles. Despite the failure of the repeal and regardless of what happens with Amazon, some believe Indianapolis is still on track to build on recent successes with new bus rapid transit lines, a popular Cultural Trail and a plan to revive key Indy neighborhoods, Curbed reported recently. The article notes that the RebuildIndy plan invested half a billion dollars in infrastructure, including new sidewalks, complete streets, and bike lanes. The New York Times found much to like in a January article titled “Is Indianapolis Cool Enough for Amazon? It Just Might Be.” The Times points to a number of transportation assets in the city’s favor including the “light-filled new international airport (that) has been voted the best in North America for five years running” and which offers multiple direct flights to key cities like Seattle, the home of Amazon HQ1. Also noted: Indy’s central location and network of interstates that have earned the city the nickname of “the Crossroads of America.”
- Massachusetts: Boston’s bid for HQ2 appears to have transit officials taking a second look at a long-shelved project that would connect the T’s Red and Blue lines, the Boston Business Journal reported last week. The Massachusetts Bay Transportation Authority is launching a study to examine the costs and benefits of the project. Boston’s bid for the Amazon headquarters included a Red-Blue connector as one of several proposed transit improvements. The city’s proposed HQ2 site, Suffolk Downs in East Boston, sits on the Blue Line and a more direct connection would better link the site to the Red Line-situated tech workforce pipelines of Harvard University and the Massachusetts Institute of Technology as well as the startups and tech firms of Cambridge, The Journal noted. By the way, Wells Fargo Securities’ artificial intelligence system, Aiera, last month predicted Boston would win the HQ2 sweepstakes, Barron’s reported.
- New Jersey: Some analysts are reading the tea leaves and concluding that despite state efforts to offer $7 billion in tax breaks, the city of Newark may not be able to land HQ2, NJ.com reported last month. Their bets are on the Washington, D.C. area where Amazon CEO Jeff Bezos owns a home (and The Washington Post). The DC area also has a more reliable, updated transit system. “I wouldn’t be totally surprised if Amazon looked at our transit system and said ‘wait a minute, you guys aren’t investing enough in this,’” said Peter Kasabach of the research and policy non-profit New Jersey Future. The tax incentive package offered by the state of Maryland, which as noted above is now the largest offered in the nation, also could outshine Newark’s hefty package when combined with these factors, some believe. But Gordon MacInnes of the think tank New Jersey Policy Perspective says instead of trying to entice massive companies like Amazon with big incentive packages, Newark and the state of New Jersey would be better served by reinvesting in key areas like educational facilities and infrastructure to try to spur economic growth organically. “We’ve been neglecting the things that have made New Jersey an economic powerhouse in the past,” MacInnes told NJ.com. “If you don’t pay a steady attention to investing in your assets you are going to be in the condition the state is in now.”
- New York: Some are concerned that if Amazon were to pick New York City for HQ2, an influx of tech workers could exacerbate many of the problems the city already faces, Business Insider reported recently. One of those is the inefficiency of the New York subway system. A 2017 New York Times investigation found that explosive population growth over the last century has been a big contributor to that inefficiency. “The aging subway faces funding challenges, as well as an impending temporary shutdown of the L Train — a main (and majorly congested) line that travels from Manhattan to Brooklyn — to make repairs for damages incurred by Hurricane Sandy in 2012,” Business Insider noted. “It's uncertain whether the city's subway system and roads could cope with thousands of new Amazon commuters or drivers.”
Cities That Didn’t Make the Cut
While there were 20 finalists for the HQ2 project, 237 other proposals didn’t make the cut. In some cases, transportation issues may have played a part. But some might be able to increase their chances of landing the next Amazon by developing transportation assets.
- WXYZ in Detroit reports that “If it wasn’t clear before Detroit’s failed bid to draw Amazon’s new headquarters to Michigan, it is now: metro Detroit is behind other major American cities when it comes to mass transit.” (February 20, 2018). More here.
- Next City examines “What Should HQ2’s 237 Losers Do Next?” (January 31, 2018). Among the recommendations: Missouri should continue with a plan to connect Columbia, St. Louis and Kansas by Hyperloop “as a mechanism for expanding and strengthening Missouri’s economy.”
- The New York Times looked at “How Amazon Benefits From Losing Cities’ HQ2 Bids.” (January 28, 2018).
- “Louisville’s economic development chief on rejected Amazon HQ bid: Our proposal was not a failure,” reports Louisville Business First (January 19, 2018). One factor that could have undermined the bid: a shortage of international flights and nonstop flights to the West Coast at Louisville International Airport. Officials say there’s currently an effort underway to attract West Coast flights. Another factor, The Courier Journal reported in January: a public transit system limited to buses. “Two years ago, (Louisville Mayor Greg) Fischer unveiled a $1.4 billion transportation plan called Move Louisville that emphasized mass transit and biking as alternative ways to get around. But little has happened with that plan since the first round of public meetings,” the newspaper reported.
- “The Ticking Time Bomb for Suburban Retail,” City Lab, March 8, 2018.
- “Why Are Your State Tax Dollars Subsidizing Corporations?” The New York Times (op-ed), March 6, 2018.
- “Many Localities Are Unprepared to Collect Taxes on Online Purchases,” Institute on Taxation and Economic Policy, March 2018.
- “HQ2 Cities: There’s a Better Way to Do Economic Development,” City Lab, February 28, 2018.
- “The Amazon headquarters search mystery has been solved! Or has it?” The Washington Post, February 26, 2018.
- “Promising Billions to Amazon: Is It a Good Deal for Cities?” Governing, February 22, 2018.
- “How cities can strike a win-win deal for Amazon HQ2,” Brookings, February 6, 2018.
- “What Data Tells Us About Amazon’s HQ2 Decision,” National League of Cities, February 1, 2018.
- “Petition asks cities to avert bidding war, refuse tax breaks for Amazon’s HQ2,” The Seattle Times, January 30, 2018.
- “HQ2 Hunger Games: Meet Your Tributes,” City Lab, January 30, 2018.
- “What City Has the Power to Woo Amazon?” Slate, January 26, 2018.
- “The Case for Putting Amazon’s HQ2 in the Suburbs,” City Lab, January 26, 2018.
- “Where Amazon HQ2 Could Worsen Affordability the Most,” City Lab, January 22, 2018.
- “Does transportation even matter to Amazon and HQ2?” Brookings, January 19, 2018.
- “Cities should respond to Amazon’s squeeze play by saying no to subsidies,” Los Angeles Times, January 19, 2018.
- “The $5 Billion Question: Will Cities Win or Lose in the Bid for Amazon’s Second Headquarters,” Penn Institute for Urban Research, January 18, 2018.
- “Here’s what happens when inclusion is factored into Amazon’s list of 20 HQ2 city finalists,” Brookings, January 18, 2018.
- “The Darker Side to Winning the Amazon HQ2 Sweepstakes,” Route Fifty, January 9, 2018.
Broadband on the Agenda for New York P3 Conference
Of course, the infrastructure requirements of big tech-oriented companies like Amazon extend far beyond just ensuring their employees can get to work. The RFP for Amazon HQ2 that all the states and cities responded to had this additional requirement: “Ensuring optimal fiber connectivity is paramount at our HQ2 location. Please demonstrate the fiber connectivity on all submitted sites.” Not every place in the country is well-equipped with the high-speed internet demanded by today’s big tech firms, which can put some at a competitive disadvantage in attracting economic development and jobs. But some states are making an effort now to try to turn their prospects around by deploying a tool that’s perhaps better known in this country for its association with toll roads than broadband—the public-private partnership or P3. As I mentioned last week, CSG is pleased to be a supporting organization and media partner for one of the biggest P3-focused conferences in the country, the US P3 Infrastructure Forum 2018 hosted by Inframation. This year’s event takes place June 13-14 at The Hilton Midtown in New York City. Among the panels scheduled is a session on “Extending Broadband’s Wavelength Across America.” State officials from Georgia, North Carolina and Pennsylvania will be among those discussing opportunities for broadband P3s and how to avoid some of the pitfalls some recent projects have experienced. The Infrastructure Forum brings together state and federal public officials and regional transportation authorities, along with infrastructure developers, investors and financiers to talk about what’s happening with public-private partnerships around the country and the issues that are shaping the industry’s future. You can find out more about how to register for the conference at the early bird rate and register your interest to receive the full agenda once its released on the event website. I’ll also have more details about the event here on the CSG Knowledge Center in the weeks ahead. For an idea of what to expect, you can read my coverage of the 2016 forum here. And for more on broadband P3s, look for my rural infrastructure article in the upcoming May/June issue of CSG’s Capitol Ideas magazine.