Amazon’s coup? What Toronto, and other failed HQ2 candidates, gained and lost

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Amazon HQ2: Official explains why Virginia was chosen as one of two locations for offices
An Amazon official explained Tuesday why National Landing in Arlington, Virginia was chosen as one of its two HQ2 offices, saying aspects like transit and housing were a big appeal – Nov 13, 2018

For more than a year, cities across North America rolled out the red carpet to woo Amazon.

Nearly 240 cities submitted proposals to host the company’s second headquarters, according to Amazon, which whittled its list of contenders down to 20 during a 14-month-long search that saw many cities promise a number of concessions if picked.

In the end, the company decided it will split its second headquarters, dubbed HQ2, between New York City and Arlington, Virginia. Already, there has been an outcry. In New York, Amazon — currently valued at US$800 billion (C$1 trillion) — will receive, among other benefits, financial incentives based on the number of jobs they create.

Toronto is officially out.

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And while many agree the city — the only Canadian one to make the shortlist — has benefited from participating in the competition, not everyone is gung-ho about the implications of Amazon’s protracted and public competitive format.

“In America, when a monopoly closes down markets and takes the reins of government, it tends to get slapped down — or at least that used to happen,” said Stacy Mitchell, co-director of the community-scaled economy initiative at the Institute for Local Self-Reliance in a series of Tweets.

WATCH: Virginia governor proudly announces state chosen for Amazon HQ2 office

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Amazon HQ2: Virginia governor proudly announces state chosen for new office
“But with Amazon spreading its tentacles across D.C. and enlisting liberals like [New York Mayor Bill] De Blasio and [Virginia Gov. Ralph] Northam to fund its growth with billions of public dollars — I fear we’re no longer a democracy.”
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The process certainly does indicate another way for companies to do business, said Sherena Hussain, an assistant professor at York University’s Schulich School of Business in Toronto.

“It does set a precedent that large organizations like Amazon are able to gain preferential access to city officials … and make them bid and compete against one another in order to get their business,” she said.

“In some ways, it sets a bar for other companies that follow suit to have cities compete tooth and nail with one another.”

Mitchell, who did not return a request for comment Tuesday, wrote on Twitter that the big winner in the contest was Amazon. She called it a “stunt” that paid off for the company not just in “a bunch of city leaders singing its praises,” but ultimately in the data that cities hopefully forked over.

“Amazon will use this data to build out its empire,” she wrote, “To site stores, warehouses, etc. To get in early on the right real estate. To beat out competitors because it knows things they don’t.”

It’s not necessarily about raw data, Hussain said.

Every city that submitted a bid had a choice over how it made its pitch, she said, and they did so in full view of every other city. Toronto’s bid is online. Put another way, the city’s pitch wasn’t a secret.

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Where Amazon likely gained quite a bit, she said, is in the one-on-one negotiation meetings it had with each of the shortlisted cities.

What did they gain?

“Knowing the propensity of these cities to make concessions or accomodate organizations like Amazon and that’s quite invaluable.”

Julia Sakas, communications director for Toronto Global said in an email that the city did not use its one-on-one meetings with Amazon to offer it any incentives “that are not already available to any other company operating in the Toronto region.”

While Mitchell raised concerns about the information Amazon now has on plans for future infrastructure, related policy changes, and land use patterns, Gabor Forgacs said he’s doubtful that’s information they wouldn’t already have had or be capable of getting.

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“I don’t think they got anything out of the unsuccessful bids that would otherwise not have been available to them,” said Forgacs, an associate professor at Ryerson University in Toronto who specializes in tourism and business.

There are a lot of benefits that extend well beyond the financial for a city when it comes to enticing a company like Amazon to set up shop, he said. That cities like Toronto pulled out all the stops doesn’t strike him as harmful.

“Amazon has very smart leadership and they expected good bids, they knew the economic and the cultural value that any host city could get and they let them compete,” Forgacs said.

For Toronto, he said, “It was a very typical Canadian story: a huge effort, we can take pride in being considered, but at the end no cigar.”

It did, indeed, put Toronto on the map, said Dan Shaw, director of MBA programs at Dalhousie University. Toronto’s bid, which is posted online, has been downloaded roughly 17,000 times.

“You have to put it down as sharpening your bid for the next proposal,” he said.

Being on the shortlist introduced the Toronto area to the rest of the world as a serious tech ecosystem, he said. In a way, Shaw said, Toronto avoided “a lot of potential negatives” that would have come from actually winning the Amazon contest, while successfully elevating its profile. But what about the next time a company expresses interest?

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“The one thing you’d worry about a little bit is anybody who’s coming in to make major investments,” he said. “Do they feel that they’re not going to get the real red carpet?”

— With files from Reuters and the Canadian Press

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