First, Amazon asked every American city to respond to what seemed like a sincere attempt to spread tech-driven prosperity across middle America. Then, the company decided to disappoint those cities by dividing its second headquarters between two of America's wealthiest coastal cities. Then, after experiencing pushback, they abandoned plans for the New York half of their expansion--presumably locating all of HQ2 in Washington D.C.

In other words, rather than expanding their national footprint with a second headquarters in Denver, Austin, Minneapolis, Albuquerque, or anywhere else, Jeff Bezos selected a city that is a global symbol of wealth, power, and insider connections.  

St. Louis--the metropolitan area I call home--participated in the scramble for HQ2 by offering an incentives package worth more than $7 billion.

What would $7B buy in a city like St. Louis?

It would pay the tuition for a four-year degree at the University of Missouri-St. Louis for more than 150,000 students. It would cover the cost of 140,000 Arch Grants, St. Louis' prestigious program that gives $50,000 in equity-free cash to startups willing to relocate to the city.

Of course, a $7B incentives package isn't the same thing as a bag with seven billion one-dollar bills stuffed aside. The bulk of any incentives package comes from tax breaks and abatements. That said, even putting together a bid for an RFP like Amazon's is expensive. For example, the estimated total cost of the St. Louis-area proposal was in the hundreds of thousands of dollars.

So, why participate in the HQ2 bid?

Did local governments in forty-two states really believe their communities had a shot--despite early rumors that Jeff Bezos' quest for world domination almost necessitated a headquarters in Washington, D.C.?

Maybe--and shame on Amazon for giving so many cities false hope.

But maybe some of the local governments knew they had no shot, yet felt compelled to submit a bid anyway.

Why?

Because it would take courage to give the HQ2 RFP a hard pass, and courage is not something local governments are typically known for.

An unfortunate shortage in vertebrae isn't the only reason cities and economic developers participate in futile attempts to hand over taxpayer cash to humongous corporations (and in the case of Amazon, the world's richest man). Elected and appointed officials throw money at companies like Amazon and Foxconn in part because it gives the appearance of doing something that is actually very difficult for local and state governments to do: create jobs.

Can local government play a role in job creation? Yes, it can, primarily in subtle ways. For example, a mayor or director of economic development who knows their community in an intimate way can help forge relationships between constituent entrepreneurs that, in the long run, potentially help local businesses grow and eventually create more jobs.

The problem with that approach to economic development in the eyes of most local elected officials?

You can't cut a ribbon in front of a strategic introduction between two local, homegrown success stories.

However, you can sell the public on the idea that you have a job-creation strategy by hiring an ad team to produce a slick pitch deck showing just how you intend to use taxpayer money to further pad Amazon's $11.2B in tax-free profits.

If nothing else comes from the sad spectacle of HQ2, hopefully it has helped at least a few voters understand what multiple studies have already shown: Trying to give companies huge incentives packages is not a strategy for job creation.

It's simply a giveaway by local governments that want to avoid the hard and unsung work involved in true economic development. 

Published on: Feb 22, 2019
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