Amazon Second HQ Bid Ignites ‘Sadistic’ Frenzy Across North America
Don Cunningham was in a meeting in his Bethlehem, Pennsylvania, office when a colleague texted: "Amazon is looking for a new location. Let's get it." This wasn’t just any new location, but a second headquarters. As CEO of the Lehigh Valley Economic Development Corp., a state-funded agency that lures businesses to the region, Cunningham huddled with his staff to read Amazon's criteria.
They recognized they had shortcomings. Their region is smaller than Amazon wants, it doesn’t have a major airport, and while it does have colleges, they aren't major research institutions. But Cunningham felt the Lehigh Valley could sell its affordable cost of living and proximity to major cities like New York and Philadelphia, both about an hour away. "We're a little shy on some of these things, but we've got some things going for us so let's give it a shot," Cunningham said.
When Amazon announced it was inviting proposals for a second HQ--a corporate investment of $5 billion and 50,000 jobs--it set off a frenzy among governors, mayors, and bureaucrats around the country. As with Powerball, the large stakes lead to less rational behavior -- all that matters is the jackpot. High paying tech jobs can permanently transform a region and raise the political prospects of the leader who helped seal the deal.
Amazon’s come-one-come-all approach plays into the boosterish politics of economic development, where officials must balance their public enthusiasm with a more private reality: There’s a limit to how much time, money and hope they should spend on long-shot bid. They have to play Amazon’s game, but worry they’re getting played.
“It is a little bit sadistic,” said Alex Pearlstein, a vice president at Market Street Services, which helps regions develop strategies to be competitive in bids like these. But he understands political pressure on officials to apply. “You never want to say never,” he said. “Maybe a city that isn’t on their radar will just blow them away.”
Pearlstein points to his hometown, Birmingham, Ala., which created a hashtag, #BringAtoB, and erected a massive Amazon shipping box in front a new hip food hall to announce the city’s bid. “They are spending some serious resources on this,” Pearlstein said. “If Birmingham gets it, I mean, I think that would be the shock of the century.”
Ford Wiles, Chief Creative Officer at Big Communications, came up with the #BringAtoB campaign and said, “When I think about Amazon and how disruptive they have been, it seems like -- Why wouldn’t they pick the choice that not everybody is expecting?”
It’s not possible to tally how much officials nationwide are spending on PR stunts, strategy advice, and glossy proposal packages because many economic development groups are non-profit organizations not subject to public record laws, but the total will climb well into the millions.
Initial bids are due Oct. 19, and many places have hired big names. To get help with its effort, Virginia is paying consultant McKinsey & Co. $1 million, according to the Virginian-Pilot. Pittsburgh hired Boston Consulting Group to help. Their fee maxes out at $248,000. And the Kansas City Area Development Council, a non-profit economic development group is working with suburban demographer Joel Kotkin and urbanist Richard Florida, even though Florida didn’t list Kansas City in his earlier tweets of his “top three” picks (Toronto, Chicago, D.C.), his “second tier” (Dallas, Atlanta, Twin Cities, Denver, Boston, Philadelphia), his “sleepers” (Detroit, Pittsburgh, Austin, Nashville), or places that “deserve more attention” (New York City, Los Angeles) for the headquarters.
Tim Cowden, CEO of KCADC, said they hired Kotkin and Florida for their research, “not for their tweets.” He said in the proposal process, the two experts are learning a lot about the region’s collaborative ways, which “will benefit us long past any Amazon decision.”
Amazon doesn’t appear to be discouraging longshot bids. Virginia Gov. Terry McAuliffe told a local radio station that while cities in D.C. suburbs “clearly” fit Amazon’s criteria, the mayors of Virginia Beach and Richmond, which are smaller and don’t have the mass transit Amazon says it prefers, asked him about applying too. McAuliffe said he personally told Amazon, “‘They have other assets.’ And [Amazon] said, ‘Please have them bid.’”
And officials from Vallejo, a formerly-bankrupt city of 120,000 that’s an hour ferry ride north of San Francisco, told the local paper that Amazon called the city back within hours of their initial email about the search and said its “interested in exploring the opportunity in Vallejo.” Will Morat, who works in Vallejo’s economic development office, said the city’s signed a non-disclosure agreement with Amazon. He doesn't see Vallejo as a longshot, and even if Amazon doesn’t pick it for the HQ, Morat said the process has helped the city promote sites that are available for other projects. “There is no lose here for Vallejo,” he said. “We are going to find something that will fit.”
Amazon, through a spokesman, declined to comment.
"Amazon has been brilliant in making this a public response,” said Liz Cahill, chief marketing officer for Colorado Office of Economic Development & International Trade. “They are kind of setting it up for anybody." She said as a marketer, she understands why long-shots apply. "It’s a great way to draft off this public interest and get your place noticed," she said.
Dennis Cuneo, a former executive at Toyota who set up plants around the country, said people responsible for recruiting employers don’t want to look asleep at the switch, “and I am sure there are some economic development officials who know they don’t have a shot but are being pressured to respond by elected officials.”
And underdogs do occasionally win projects, Cuneo said, adding “Tupelo, Mississippi, surprised a lot of folks when Toyota picked it” for an assembly plant in 2007. But an assembly plant is no headquarters. Cuneo, who now consults for companies looking for sites though his firm DC Strategic Advisors LLC, said he’s talked with some smaller cities who are applying to Amazon and know it's likely hopeless. “They want to get on Amazon’s radar screen,” Cuneo said. “So the next time they are looking for a new warehouse, or IT center, it’s on their list.
National press is also a factor, and unique stunts --like Georgia’s Stonecrest City Council voting to let the company form its own City of Amazon on the site it’s proposing--has already gone viral. "This is an insanely popular company,” said Greg LeRoy, executive director of Good Jobs First, a non-profit that cautions governments against using tax subsidies. “They knew they were going to get a media frenzy, and they're going to go for multiple rounds of earned media frenzies as the list winnows."
Not everyone is going all out, though. Cunningham, the Lehigh Valley official, said despite his region’s enthusiasm, his office decided against hiring an expensive consultant. "We have a couple of freelance designers we'll use to help us put together a nice proposal so it's not a Word document," Cunningham said. "While we want to be in play, we don't want to blow the budget on this." After all, frugality is part of their pitch.