Could Ama­zon put sec­ond HQ in metro Phoenix?

On­line re­tailer’s fa­cil­ity might cre­ate 50,000 jobs

The Arizona Republic - - FRONT PAGE - RUSS WILES

Ama­ is dan­gling a ma­jor eco­nomic-de­vel­op­ment car­rot with its plan to cre­ate a sec­ond cor­po­rate head­quar­ters, and large cities around the na­tion are drool­ing.

The giant on­line re­tailer this month an­nounced plans to open a sec­ond head­quar­ters, some­where in North Amer­ica, that would be home to up to 50,000 high-pay­ing jobs, along with $5 bil­lion in an­tic­i­pated con­struc­tion spend­ing.

That’s in ad­di­tion to pos­si­bly bil­lions of dol­lars of ad­di­tional eco­nomic ac­tiv­ity for the win­ning area — in sup­port ser­vices such as ac­count­ing and le­gal com­pa­nies, for home­builders and re­tail­ers, for lo­cal non-prof­its and so on.

The Phoenix metro area is con­sid-

ered by some ob­servers to have a vi­able chance of land­ing HQ2, as Ama­zon calls its pro­posed sec­ond head­quar­ters, but it’s too early to tell much. Cities have un­til Oct. 19 to sub­mit pro­pos­als, and Ama­zon isn’t likely to an­nounce fi­nal­ists or the ul­ti­mate win­ner un­til next year.

“We’ll be re­spond­ing on be­half of metro Phoenix, work­ing with Ari­zona State Univer­sity, other part­ners and the Gov­er­nor’s Of­fice,” said Chris Ca­ma­cho, pres­i­dent and CEO of the Greater Phoenix Eco­nomic Coun­cil.

Ama­zon has spec­i­fied a few key cri­te­ria that it would like to see. This wish list makes it eas­ier to nar­row the num­ber of vi­able can­di­dates.

Ama­zon said it’s seek­ing to lo­cate HQ2 in a North Amer­i­can metro area with more than 1 mil­lion peo­ple and a “sta­ble and busi­ness-friendly en­vi­ron­ment.” The cho­sen lo­ca­tion, whether ur­ban or sub­ur­ban, should have the po­ten­tial to “at­tract and re­tain strong tech­ni­cal tal­ent.” The com­pany wants to align with “com­mu­ni­ties that think big and cre­atively when con­sid­er­ing lo­ca­tions and real es­tate op­tions.”

Also, Ama­zon has ex­pressed a pref­er­ence for sites lo­cated within 30 miles of the near­est big pop­u­la­tion cen­ter and within 45 min­utes of an in­ter­na­tional air­port, with mass tran­sit con­nect­ing to its head­quar­ters and ma­jor roads and high­ways nearby.

The new lo­ca­tion doesn’t need to be pat­terned af­ter Ama­zon’s Seat­tle cam­pus — a 33-build­ing com­plex to­tal­ing 8.1 mil­lion square feet of space, with 24 restau­rants or cafes and eight other es­tab­lish­ments serv­ing the 40,000 peo­ple who work there.

HQ2 will be a sec­ond head­quar­ters, not a satel­lite of­fice, the com­pany said.

Phoenix has the ameni­ties Ama­zon wants, though the com­pe­ti­tion prom­ises to be in­tense. Metro Phoenix has am­ple avail­able land com­pared with many large cities, an in­ter­na­tional air­port that’s within easy reach of down­town, a net­work of free­ways, ad­e­quate mass tran­sit and cen­ters of higher learn­ing fo­cused around Ari­zona State Univer­sity. Roughly 6,000 of Ama­zon’s 380,000 em­ploy­ees cur­rently work in Ari­zona.

Also, Gov. Doug Ducey is re­garded as a progrowth gov­er­nor, and the Greater Phoenix Eco­nomic Coun­cil is viewed as one of the bet­ter de­vel­op­ment en­ti­ties in North Amer­ica, said John Boyd of the Boyd Co., a cor­po­rate site­s­e­lec­tion firm in Prince­ton, New Jersey.

Phoenix also might have an ad­van­tage in that Ama­zon needs bilin­gual work­ers and is ex­pand­ing into Latin Amer­ica, he added.

Tuc­son is also bid­ding — dra­mat­i­cally and per­son­ally — for Ama­zon. The Ari­zona Daily Star re­ported that Sun Cor­ri­dor, a Tuc­son eco­nomic-de­vel­op­ment agency, is send­ing a 21-foot saguaro to Ama­zon CEO Jeff Be­zos.

Boyd doesn’t see metro Phoenix as a fron­trun­ner. Rather, he nar­rows that list to a hand­ful of Eastern metro ar­eas — At­lanta, Bos­ton, Philadel­phia, south Florida and cen­tral New Jersey. Other strong con­tenders, in his view, in­clude Chicago and Toronto.

Many of th­ese ar­eas have world-class uni­ver­si­ties, ex­ten­sive masstran­sit sys­tems, more in­ter­na­tional air con­nec­tions and more highly de­vel­oped tech­nol­ogy cen­ters.

Ama­zon said it’s es­pe­cially in­ter­ested in a lo­cal la­bor force that in­cludes pro­fes­sion­als in soft­ware de­vel­op­ment and re­lated fields.

An­other fac­tor is Ama­zon’s de­sire to re­ceive a good deal in terms of public-sec­tor in­cen­tives.

This could in­clude a com­bi­na­tion of state in­come-tax cred­its, prop­erty-tax abate­ments, work­force-train­ing dol­lars, in­fra­struc­ture-in­cen­tive grants and other good­ies, said Ron Starner, ex­ec­u­tive vice pres­i­dent of Con­way Inc., an At­lanta com­pany that pub­lishes Site Se­lec­tion mag­a­zine.

Typ­i­cally, when com­pa­nies re­lo­cate head­quar­ters or open large op­er­a­tions in a new area, they re­ceive in­cen­tives worth $10,000 to $15,000 per job cre­ated, Starner said. With Ama­zon en­vi­sion­ing up to 50,000 jobs at HQ2, the win­ning metro area might need to ante up $500 mil­lion or more.

It’s un­cer­tain which cities and states will of­fer such mas­sive in­cen­tives, though Starner ques­tions whether Cal­i­for­nia and its cities will step up to the plate. Debt-strapped Illi­nois and Chicago also might have prob­lems com­pet­ing. Illi­nois cur­rently has a credit rat­ing just one notch above junkbond sta­tus.

Ca­ma­cho said GPEC and its part­ners haven’t fi­nal­ized their public-sec­tor in­cen­tives yet, but he in­di­cated the pack­age will fo­cus on metro Phoenix’s arts and cul­tural scene, air con­nec­tions through Phoenix Sky Har­bor In­ter­na­tional Air­port, free­ways and other trans­porta­tion net­works, ed­u­ca­tion, recre­ational at­trac­tions and var­i­ous other fac­tors that give the Val­ley solid rat­ings as an at­trac­tive place to live.

“We will have a com­pre­hen­sive eval­u­a­tion of mar­ket value, as op­posed to a big in­cen­tive pack­age,” he said.

Starner in­cludes Phoenix among the 10 metro ar­eas he thinks could land HQ2, along with Denver, Dal­las-Fort Worth and Austin, Texas, in the West. His other front-run­ners are At­lanta; Bos­ton; Chicago; New York; Washington, D.C.; and Toronto.

The Phoenix metro area has had some suc­cess in re­cent years lur­ing larger public cor­po­ra­tions to set up shop here. For ex­am­ple, Mag­el­lan Health moved its head­quar­ters from Con­necti­cut to Scotts­dale, Rogers Corp. left Con­necti­cut for Chan­dler, and Carlisle Cos. switched its home from North Carolina to Scotts­dale. Ver­sum Ma­te­ri­als re­cently es­tab­lished its head­quar­ters in Tempe af­ter hav­ing been spun off from Air Prod- ucts.

Ama­zon ex­pects the 50,000 or so jobs in the new head­quar­ters city to even­tu­ally pay more than $100,000, on av­er­age,10 or 15 years down the road. Ama­zon en­vi­sions of­fer­ing its cur­rent staff in Seat­tle the choice of stay­ing there or re­lo­cat­ing to HQ2.

That op­tion could give metro Phoenix an edge, rep­re­sent­ing as it does a sunny, low-cost-of-liv­ing al­ter­na­tive to dreary, higher-priced Seat­tle, with more af­ford­able hous­ing.

But it also could work against Phoenix and other Sun Belt lo­ca­tions like At­lanta and Austin if Ama­zon per­ceives too many em­ploy­ees might want to move to a land of in­ex­pen­sive hous­ing.

“They prob­a­bly don’t want to pick a lo­ca­tion that’s too cheap, be­cause peo­ple might bank the money and run,” Starner said.

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