Amazon’s HQ2 was announced with a flurry, and cities lined up to bid across the nation, from Austin to Boston, DC to Detroit. Huge tax incentives were offered to Amazon to lure the company and detonate what one wag called “a prosperity bomb.”
Last week, when Amazon hinted at the results, the scent was not of prosperity but of exploitation. Whispering the likely outcome during the busiest news cycle of the year (the 2018 mid-term elections) was one indication that the project had some shame associated with it. Another is the fact that the rumored choices — Crystal City, VA, and Long Island City, NY — would each end up being within 7 miles of one of the three houses Jeff Bezos owns (the third is in Seattle).
What CEO doesn’t want to walk to work?
The apparent ploy by Amazon is covered in this week’s episode of a great new podcast featuring Kara Swisher and Scott Galloway called “Pivot.”
Why the ruse? To extract tax breaks. As Galloway says in the podcast, the cities’ position resembles parents bidding at a school raffle for dinner with the headmaster. One well-off family bids $9,000, the next bids $10,000. The result? The school agrees to hold two dinners and pockets the $19,000:
I would bet . . . that when they pick two cities . . . they didn’t say, ‘Well, only half our headquarters is going there, so we’re going to let you cut the tax subsidies and incentives in half.’ This just has ill will written all over it. . . . It’s the Olympics on steroids. A lot of high fives and ribbon cutting, and then 10 years later, we realize it was a bad idea.
The Detroit Free Press sees things roughly the same way:
. . . it appears that Amazon's lottery-like competition for HQ2 was more about sussing out every city's best offer so Amazon could gain bargaining power with the eventual winner or winners.
The story is still not over with, and things may change. Amazon may have floated a trial balloon with their election-week whisper campaign, and can backtrack. But early indications are that Amazon has done what stadium owners have been doing for years — tempting cities into bidding wars, extracting huge concessions, and then doing whatever they were planning to do all along.