Why Don’t the 20 Cities on Amazon's HQ2 Shortlist Collectively Bargain?

I completely disagree with the “race to the bottom” framing of the idea that cities shouldn’t compete to provide the best services for the commercial enterprises which reside there.<p>At the 50-75 year timeframe we are talking about at least hundreds of billions of dollars of economic value, if not trillions. The clustering effect of becoming Silicon Valley 2 cannot be overstated.<p>My personal opinion is cities should be talking about the Billions they will be committing to supporting infrastructure improvements rather than the billions in tax cuts. HQ2 needs a fuck ton of support systems, akin to building an Olympic City which never shuts down.<p>Of <i>course</i> city governments should be working hard to bring this kind of value creation and massive economic engine to their constituents. Of <i>course</i> Amazon should be asking tough questions of cities akin to “and what are you going to do to support me” before spending $5 billion building a new campus.<p>Personally I think the cities that only have tax incentives to offer will not come out the winner. Amazon cares a lot more about the surrounding infrastructure and ecosystem than a short term $1 Billion.<p>It’s completely irrational anti-capitalistic knee jerking to whine that cities shouldn’t be working hard to support HQ2 in their backyard. We are watching capitalism at its <i>finest</i> here folks - and market efficiency driving negotiation and competition is creating significantly better outcomes than the “fuck Amazon they don’t need handouts” crowd would arrive at.<p>If someone came to your town and said, I want to build a $20m community arts center with a theater, coworking space, parks, gardens, and playground — would you want your town to say “good luck with that” or would you want them to say “that’s amazing what do you need from us to make that happen?!” Just because Amazon happens to be for-profit, their presence in your city is an extraordinary asset and it makes perfect sense to entice them to come.<p>In fact, you can’t even consider building at anywhere near HQ2 scale without an intimate partnership with the host city which is, in one form or another, going to require somewhere on the order of dollar-for-dollar public investment to match the private investment. We’ve proven that this public&#x2F;private partnership is basically <i>the most effective</i> growth engine we’ve got. I certainly hope my city would do everything possible to roll out the red carpet. It’s the most effective dollars they could possibly spend, because it’s effectively corporate matching of public funds.

Because the cities are rivals in a competition for Amazon&#x27;s HQ, not colleagues who all stand to benefit from a collective bargain. In this case, there will be <i>one</i> winner so the incentive to cooperate is greatly diminished.

<i>(suggested) competing cities form a non-aggression pact</i><p>That&#x27;s been suggested before at the state level. But it runs into a Constitutional limitation. Interstate compacts have to be approved by Congress. Article I, Section 10: &quot;No State shall, without the Consent of Congress ... enter into any Agreement or Compact with another State.&quot; US cities are legally parts of states, not standalone entities.<p>Trying to get an anti-business deal like that through the current Congress would not work.

I commend the position of Toronto&#x27;s mayor John Tory who said (I am paraphrasing here): &quot;no tax breaks, if you come - come based on our merits as a city alone&quot;.<p>Toronto is not likely to get Amazon for various reason (political climate being probably more important than tax breaks)

Collective bargaining is probably the wrong metaphor. This is the principle-agent problem.<p>The citizens would be better off if the elected officials worked to make their city the best possible place to do business for all companies on an even playing field. The city would then attract plenty of good companies simply on its merits.<p>The elected officials instead benefit from granting favors, being able to brag about how they brought in a big name like Amazon, and getting Jeff Bezos on their personal speed dial.<p>This is also why collective bargaining will not happen here. The interests of the elected officials are not at all aligned. They&#x27;re competing for a scarce resource, and they themselves largely do not bear the costs of trying to acquire it.

Because it is a race to the bottom. Who can sacrifice the most tax dollars NOW for a hope at more down the line?<p>This reminds me of how NFL operates at extracting huge concessions and expenses from cities for the privilege of having their team stay in town.

Here&#x27;s an idea: don&#x27;t let states make targeted tax breaks to race to the bottom. That seems to work in the EU. Apple paid 1% in Ireland and simply had to pay up the difference to the normal tax rate.

Because the non-collusive city will come out ahead in this prisoner dilemma.

Seems like a pretty dumb idea. Amazon is limiting its self to those 20 cities. It can always back out and choose another if it wants.

Because city number 21 will race to the bottom and win the bid.

The reason is game theory. Every city has an incentive to leave the bargaining group and make its own proposal.<p>Taxes in general are a similar topic.<p>In a functioning democracy, the government&#x2F;legislator should set the taxes as they see fit, yet with increasing globalization, countries become price takers (<a href="https:&#x2F;&#x2F;www.investopedia.com&#x2F;terms&#x2F;p&#x2F;pricetaker.asp" rel="nofollow">https:&#x2F;&#x2F;www.investopedia.com&#x2F;terms&#x2F;p&#x2F;pricetaker.asp</a>), because many taxable goods become more mobile.<p>This is in line with this observation:<p>&gt; Rep. Keith Ellison, D-Minn., has also offered a dissent to the process.<p>&gt; “Something is deeply wrong with our economy &amp; democracy when local government offer up their<p>&gt; tax base to a corporation worth over $500 billion,” he wrote on Twitter.<p>Game theoretic constructs, where the social optimum solution is not reached can be seen in other topics as well. Take climate change for example, where a lot of governments know what the best outcome for the world(and thereby themselves) is, yet act in their own best interest and emit CO2. A collective &quot;bargaining&quot; solution would make sense, but has yet to happen.<p>Finding solutions for this is challenging and not as easy as the article puts it.

If the benefits would split 20 ways, collective bargaining might work. But it doesn&#x27;t seem that they would, especially given the geographical dispersion of the finalists.<p>Regions (such as US Northeast, or Nashville - Atlanta - Raleigh) might be able to assemble a useful coalition to share the bennies and any pains.<p>Not sure if BOS and NYC wouldn&#x27;t stab each other in the back.

I just hope they don&#x27;t come here to Pittsburgh. For the vast majority of citizens, the arrival of Amazon HQ2 will be a net negative.

The main reason is the devolved nature of government in the USA in the UK Amazon would have its arm twisted by the government in a you scratch my back ill scratch yours.<p>For example BT had development centres in all 4 countries that make up the UK mainly for political reasons - and why the BBC forcibly moved people to Manchester as part of the negations over the BBC charter.

Odds are in favor of Virginia (look up AWS and other data centers in that area). But it is still interesting to see how these cities are competing with each other and are throwing out tax payers money to lure in Amazon to moving in their backyard. I wonder if they would give similar incentives to small and upcoming businesses and startups.

I found this whole competition for Amazon absurd. Lets think about the prisoner dilemma:<p><pre><code> If A and B each betray the other, each of them serves 2 years in prison If A betrays B but B remains silent, A will be set free and B will serve 3 years in prison (and vice versa) If A and B both remain silent, both of them will only serve 1 year in prison (on the lesser charge) </code></pre> Now A, B are cities and the can compete(betray) or not compete(stay silent). If they both compete (1th case) is the worst outcome because Amazon does not need a tax break or incentives. It&#x27;s one of the richest companies in world already!<p>A competes, B does not (2th case). Good for city A because they can offer an small incentive an still get Amazon, bad for city B.<p>A and B do not compete. Good for both as the overall economy of the country would improve.

Because they’re all starry-eyed about the possibility and don’t care what it costs.<p>I live in the DC area. We’re on the list three times: DC itself, plus VA and MD suburbs. The prospect of cooperating on a bid was brought up, but they’re not willing to do it. They want to win and they want it all for themselves.

Large corporations often make deals with other large corporations, and they prosper. Workers used to do better when a larger percentage of them collectively bargained. But somehow, the possibility that citizens, who are represented by various local governments, would use those governments to cooperate with each other across the lines on the map sounds like science-fiction and is disparaged as far-fetched and unworkable in many of the comments here. What is it that Americans don&#x27;t understand?<p>Do they understand that Seattle, home of HQ1, has home-grown homelessness that is rising?<p>Do they understand that Amazon will automate away any job outside the executive suite that it can?<p>Do they understand the power that Amazon will have over the lucky city that makes the investment?<p>Do they understand that 50 years is now the standard term for the tax breaks that Amazon will be offered?

Because Amazon will make a point to go to the one or two defectors. Iterated Prisoners Dilema dynamics only work when you have iterated interactions. In large economies where you don’t have repeated interaction with other players there is incentive to cheat.

This is so charmingly naive. I&#x27;ll tell you why they don&#x27;t collectively bargain. Because what will happen is, one or more of the cities will take advantage, cut a backroom deal, and win. That&#x27;s why.

&gt; <i>and instead collectively bargained with the company?</i><p>Because they are not a collective; only one of them gets Amazon HQ2.<p>Let&#x27;s project this to actual &quot;collective bargaining&quot; in labour. If you and 19 other people were negotiating in such a way that only one of you gets a raise and improved working conditions, and the remaining nineteen others get fired, would you still engage in &quot;collective bargaining&quot;?

Answer: Since there&#x27;s no way all the cities in the US and Canada would actually agree to such a pact, so Amazon will just pick one of the remaining cities.<p>I agree that cities should not be offering free land to a company. But it seems OK to offer tax breaks, considering how much taxes a company like Amazon will be paying in the long term. (Not to mention the even more significant taxes the employees will pay.)

Because Amazon could build their own city if they had to. The US has a lot of land, power and freeways leading to international airports.

&quot;I&#x27;ve sold monorails to Brockway, Ogdenville, and North Haverbrook, and, by gum, it put them on the map!&quot; -Jeff Bezos

For reasons already pointed out by others, this isn&#x27;t a pragmatic idea. i.e. Amazon could just restart their search, etc..<p>imo what&#x27;s more realistic is that cities on the top 20 list that are geographically close enough, should band together and offer combined benefits e.g. New York &amp; Newark; Montgomery County &amp; N Virginia &amp; DC

Because they don&#x27;t have any leverage in this situation. I read the article, I don&#x27;t see how this fundamental reality can be worked around. City Y has no disincentive to undercut City X until the NPV of HQ2 is equal to the cost of their incentive package. This is just a reverse auction process.

Nevermind collective bargaining; company-specific incentives should be illegal.

Each city could select a champion and hold a tournament for victory and glory!

This entire thought process assumes that tax incentives and such are the difference maker in this process. That it&#x27;s an auction that goes to the highest bidder. This is highly inconsistent with Amazon&#x27;s approach for long-term projects.<p>Do they want their HQ2 home to have some skin in the game? For sure. But what form does that take?<p>Suppose a city could offer Amazon $50MM in tax credits over some duration of time. Suppose another city offered to invest into local infrastructure investment -- roads, transit, broadband, etc. While $50MM is a lot of money (even to Amazon), the second alternative is much more appealing.<p>The HQ2 winner is going to be someone who is forward-thinking, not just whoever rounded up the best gift basket.

I can see it now: &quot;Amazon HQ2 Candidate Cities Decide to Collectively Bargain.&quot;<p>&quot;Boise, Idaho - previously not even in the running - is officially the home of the new Amazon HQ2!&quot;

If you don&#x27;t want cities and states to beg companies with tax exemptions then you should not have such tax exemption ability in the first place.

Or maybe think like a corporate raider: buy a substantial piece of a company and demand it move to your city?

Too much incentive for 1 of 20 to break ranks. The cities won’t have a good way to punish the scab

Because cooperation only happens in the repeated version of the prisoner&#x27;s dilemma.

I feel confident that Amazon will not pick a place with cold weather or hurricanes.

Because there are other cities not in these 20.

Might this violate antitrust law?

Just want to add the opinion to the comments section that I think it&#x27;s completely ridiculous that Amazon gets incentives from cities to go there, as if they need the money. This is monopolistic behavior to the detriment of cities, citizens, and smaller firms.

I don&#x27;t understand people who are conflating the search for HQ2 with Olympic bids and sports stadium bids. The Olympics are most likely a one time thing for a month, although in the future I could forsee it revolving around qualified sites, it takes a lot to convert facilities used for the Olympics into regular infrastucture (see Atlanta and LA).<p>Stadiums I think overall have a better impact, as they can create or revitalize an economic area, provide longer terms jobs, and sports teams provide back to their communities.<p>Amazon is on a completely different level. They will bring thousands of skilled workers, and generate trillions in economic activity. HQ2 will stand for a long time, it can completely change the trajectory of a city. There are many many issues with bringing Amazon to your city, home prices and infrastructure to name a few -- but isn&#x27;t this a problem you&#x27;d rather have than not?