The competition for HQ2 has given Amazon CEO Jeff Bezos plenty of reason to smile.
The competition for HQ2 has given Amazon CEO Jeff Bezos plenty of reason to smile. Ted S. Warren/AP

Amazon set up its HQ2 bidding war for maximum manipulation of North America’s cities—and the company doesn’t seem to be following its own selection criteria closely.

More ink has been spilled about Amazon’s HQ2 process than any other economic development process in history, and the saga is ongoing. This past October, 238 cities across the United States, Canada, and Mexico submitted bids, many featuring wasteful taxpayer-funded incentives. In January, the company announced its 20 finalist cities. And this month, Amazon representatives started making phone calls to the rejected cities to discuss why they weren’t selected.

Many of the rejected cities are taking this feedback so seriously that they are working to remedy the deficiencies Amazon has identified, as recently reported in the Wall Street Journal. Detroit, for example, is pushing for a new regional transportation plan after Amazon officials said they were concerned about how their 50,000 workers would be able to commute to downtown from the suburbs.

While Detroit would be wise to improve its mass transit system—just as every other American city would be—it shouldn’t take all of Amazon’s guidance as gospel. That’s because the company has not been consistent or transparent with its own stated selection criteria.

A detailed analysis undertaken by Patrick Adler, my colleague at the University of Toronto’s Martin Prosperity Institute, and Adam Singer, a graduate student at the university’s Rotman and Munk schools, took a look at how all 238 HQ2 applicant cities and the 20 finalists lined up on Amazon’s RFP criteria. While it can be difficult to measure whether a given city adheres to each criterion, their analysis shows that many of the finalist cities do not even fit the most obvious ones. What’s more, several of the rejected cities seem to fit Amazon’s criteria for its HQ2 city better than some of the finalists.  

The company clearly stated four “core preferences” in its original RFP, released on September 7, 2017:

(Amazon)

The 20 finalists represent 18 metropolitan areas, with two separate jurisdictions in greater New York (New York City and Newark) and three in greater Washington, D.C. (the District itself, Northern Virginia, and Montgomery County in Maryland). All of the finalist cities make the grade on population, as all are part of large metropolitan areas, having more than 1 million people. And all of them have major highways and roads, though some are quite a bit more congested than others.

But a number of finalists seem to fall short on the two remaining criteria—access to mass transit and having an international airport.

While Detroit was told it failed to make the grade due to lack of a mass-transit network, the same thing can be said of nearly half of the finalists (eight of 18 metros). In Raleigh, Nashville, and Indianapolis, roughly 1 percent of commuters use mass transit; in Dallas and Columbus, less than 2 percent do; and in Atlanta, Miami, and Denver, less than 5 percent do. Of these cities, only Dallas, Atlanta, Miami, and Denver have any sort of urban-rail mass transit, and these systems are not extensive.

HQ2 finalist metro

Percent of commuters taking transit

New York 30.6%
Toronto 23.7%
Washington, D.C. 14.0%
Boston 11.9%
Chicago 11.3%
Philadelphia 9.5%
Los Angeles 6.2%
Pittsburgh 5.8%
Denver 4.6%
Miami 3.6%
Atlanta 3.4%
Austin 2.7%
Columbus 1.6%
Dallas 1.5%
Indianapolis 1.1%
Nashville 1.1%
Raleigh 1.0%

An additional five out of 18 finalists functionally miss the cut on international airports. While they may have international airports in name, Pittsburgh, Columbus, Nashville, Raleigh, and Indianapolis have few direct flights to global cities. Pittsburgh, for instance, has no year-round service to continental Europe. Nashville and Indianapolis both got their first European destinations this spring, and Columbus has no destinations outside of North America.* None of these cities has non-stop flights to Asia, where much of Amazon’s retail inventory is produced.

But the inconsistency does not just end with the HQ2 shortlist cities. Our analysis suggests that nearly 10 percent of the rejected cities (20 of the 218) actually met all four of Amazon’s criteria. These include Houston, Baltimore, Minneapolis, and Montreal. And many more cities that fall short on some things seem to meet more of the RFP criteria than a number of HQ2 finalists. Detroit, for example, has a bigger, more global airport and higher levels of mass-transit use than Nashville, Indianapolis, or Raleigh.  

Cities Not Shortlisted, But Meet ‘Core Four’ RFP Criteria

Vancouver Ottawa
San Francisco Utah (including Salt Lake City)
Long Beach/Huntington Beach Calgary
Edmonton Seattle
Portland Baltimore
Minneapolis Tampa
San Diego Quincy
San Jose Somerville
St. Louis Houston
Phoenix Charlotte

Still, it’s worth asking why these 20 cities were selected as finalists, even if others would appear to be better candidates according to Amazon’s own criteria. Our analysis suggests the finalists may have other things in common that are not listed on the company’s RFP.

For one, the finalists are more likely to be farther away from the company’s original home base in physical distance, reflecting the predominance of East Coast cities on the list. Last year, an Amazon executive was quoted as saying that Amazon would like to build HQ2 outside of the Pacific Northwest, to attract a more diverse set of employees. Presumably, the same logic can be extended to the entire West Coast. (Seven of the qualified cities that were not selected were located on or near the West Coast.) An East Coast location, particularly in a large city along the Northeast Corridor, would provide a base to recruit more globally-oriented talent in key “headquarters” fields like management, finance, and marketing, as well as tech.

Finalist cities are also likely to have a larger share of tech workers. And they are more likely to have non-stop flights to the company’s current home base in Seattle.

But one factor is even more interesting. Our analysis found that shortlisted cities had more U.S. senators with considerable seniority. While this could simply be a coincidence, it is curious especially for a company that is frequently said to be a target of anti-trust inquiries and is currently the object of Trump’s ire.

At the end of the day, none of this should surprise us. Like all corporate site selection, the HQ2 process is a rigged game, where the company knows the answer in advance and sets up a fictitious competition to wrest maximum incentives.

Besides the political advantages, there are many signs that Amazon’s HQ2 is heading to the greater Washington, D.C. region—the fact that its CEO has a multi-million dollar mansion there (currently undergoing a $12 million renovation, with large public rooms for social events) and already owns the Washington Post; the fact that three area jurisdictions made the shortlist; and the fact that the person running Amazon’s search previously ran an economic development agency in the region. Perhaps four other metros on the list are serious contenders—New York, Boston, Chicago, and Toronto—with Philadelphia, Denver, Atlanta, and Dallas having an outside chance.

What’s going on is something that is actually bigger than just a search for a second headquarters; it’s about the company’s continued expansion across North America. Amazon is siting distribution facilities at a feverish pace, as my Atlantic colleague Alana Semuels reported back in February. Meanwhile, it is expanding its white-collar presence in cities like Vancouver and Boston.

The HQ2 process provides a way of crowd-sourcing information on sites, giving Amazon one of the largest and most comprehensive databases of urban-development data on the continent. If each of the submitting 238 cities handed over information on five to 10 sites, that gives Amazon a database of between 1,000 and 2,000 sites, as well as detailed information on specific types of talent, university and training programs, and of course, a bottom line of tax and financial incentives that the company can use as a bargaining chip for future projects.

The best way to read the HQ2 finalists is as a brilliantly cynical exercise in corporate locational strategy. While they’re likely not serious HQ2 contenders, centrally located cities like Nashville, Indianapolis, and Columbus make perfect sense as large-scale distribution and logistics hubs. Pittsburgh and Austin make sense as R&D and tech hubs. Miami would make a superb Latin American headquarters. If Toronto doesn’t get HQ2, it could still host offices for international workers stymied by U.S. immigration restrictions.

For a company as large and ambitious as Amazon, many of these expansions would have happened anyway. Not to mention that this entire process puts even more pressure on its original hometown of Seattle to kowtow to its demands.

Amazon is clearly the instigator here, but it has not pulled off this historic coup on its own. The mayors and civic leaders of America’s most liberal and economically dynamic cities have played right into the company’s hands, rushing to subsidize one of the world’s largest corporations and its richest man rather than building up their own local economic capacities and investing in pressing social needs. While Trump and his cronies in Congress seem to be in a competition to advance the most backward-looking policies, these liberal cities, with Amazon holding the reins, are engaging in their own race to the bottom. Seeing all the advantages Amazon has gleaned from this reality-TV-style locational rat race, other companies may very well follow suit.

It’s time for residents and leaders of America’s great cities to resist this kind of extortion, which ultimately undermines their own efforts at more inclusive and equitable development.

*CORRECTION: A previous version of this article stated that Raleigh’s airport had no direct flights to destinations outside of North America. It has two, to London and Paris. The article has been updated.

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