Seattle professor: Cities should think carefully about pursuing Amazon headquarters

(Published in the News and Tribune Oct. 7, 2017)

SOUTHERN INDIANA — As city and state leaders across the country, including those in the Louisville area, feverishly pronounce their willingness to do absolutely anything (even work themselves to death in Detroit’s case) to score Amazon’s second headquarters, Jacob Vigdor preaches a more measured approach.

Think carefully, he advises from his position as a professor of public policy and governance at the University of Washington in Seattle, the same city that houses Amazon’s (currently only) headquarters.

Vigdor says this because Amazon may promise to bring 50,000 jobs with average salaries of $100,000 a year (more than double Louisville’s median income), to whatever metropolitan area it settles in, but strings come along with the deal — even though Southern Indiana might not feel their effects as harshly as other areas wooing the mostly-online retailer.

The jobs

First, the good that follows Amazon’s second headquarters, specifically the 50,000 jobs.

Louisville is one of the many metropolitan areas submitting an application to Amazon by a deadline of Oct. 19. The city is partnering with other stakeholders in the region, including River Ridge Commerce Center, which is an industrial and business park in Charlestown and Jeffersonville (although the spot within the commerce center that Executive Director Jerry Acy has identified as a possible location for Amazon is on the Jeffersonville side).

Mayor Mike Moore is thrilled by that possibility.

“You bring that kind of wealth into a community, you’re going to strengthen your schools, you’re going to strengthen all of your quality of life, you’re going to improve all of your infrastructure,” he said.

Vigdor doesn’t necessarily disagree: Amazon would increase a city’s tax base and likely improve schools.

The company itself claims that it added $38 billion to Seattle’s economy from 2010 to 2016. That financial input has also boosted local support services.

Seattle has a booming restaurant scene, Vigdor said, partly because of hungry Amazon employees looking for someone else to make them a meal after a full day of hard work.

Wendy Dant Chesser, the president and CEO of One Southern Indiana, foresees even more types of businesses, from nail salons to mortgage bankers, benefiting from an influx in residents and discretionary income as a result of the second headquarters.

Other, less service oriented businesses could also follow Amazon. The number of Fortune 500 companies with engineering and research and development centers in Seattle grew from seven in 2010 to 31 in 2017, according to the company.

But if you really look at Seattle, where Amazon has lived since the 1990s, you’ll find that more than employment has changed.

An expensive gift

Knute Berger, a columnist specializing in heritage and politics at an online Seattle newspaper named Crosscut, has lived in the city almost all of his life.

In the 1960s, Seattle was defined by Boeing, the city’s most important employer, as well as its proximity to nature: towering mountains and water to the east and west.

“…The people who moved here in the 1980s and ’90s moved here largely to get away from traditional cities,” Berger said. “It was like, well, you know, Seattle is a place where you can go and be close to nature and you can live a more laid back lifestyle than you can in New York or Chicago.”

Microsoft was really the start of Seattle’s transition to the “urban stepping-stone” city it is now. The company moved to Washington in the ’70s and grew into the behemoth we know it is today, but its headquarters were still a lake away from Seattle, meaning it didn’t impact the city as much as it could have, Vigdor said.

By contrast, Amazon carved out its own neighborhood within the city, just north of downtown. As the company has grown, the city’s traffic problems have worsened, causing much grumbling in the metro, according to Vigdor. The cost of housing has also shot up in Seattle. The median price for a single-family home in the city is now $729,000. It’s $140,000 in Southern Indiana.

Vigdor warns that any metropolitan area that receives Amazon’s second headquarters will be confronted with the same things.Think about how congested your traffic is now, he prompts. It will get worse. Consider how affordable your housing is currently. It will become less so.

That’s why he believes you should carefully consider the consequences of housing Amazon: “The presence of 40 or 50,000 tech employees with their cars, needing housing and all that sort of thing, is that a direction that we’d like our community to go in,” he requests you ask.

The resounding answer in the Louisville area seems to be yes, however: Moore has already voiced support for giving Amazon incentives to locate to Jeffersonville, Dant Chesser is also “excited,” at the prospect of the headquarters (albeit skeptical of the likelihood) and the City of Louisville’s economic development arm jumped into the application process just 10 days after the opportunity was announced.

But Vigdor also says that Amazon’s more negative impacts could have less of an effect in a place like Louisville. Amazon is better for a community if housing is more affordable in an area, there’s more space to build homes and a potential site for the headquarters lies outside of a traffic-heavy downtown.

The Louisville area checks all those boxes: housing affordability is prime in the Midwest, the city’s real estate area isn’t constrained by oceans or mountains and River Ridge is decidedly distant from Louisville’s downtown with plenty of acreage for expansion.

In Moore’s words, “Jeffersonville has a lot to offer.”

Planning for Amazon

A willingness to host Amazon is one thing. Being prepared for the company is another.

Not even Southern Indiana’s biggest cheerleaders, such as Moore and Dant Chesser, believe that the area is complete ready, but what place is?

It’s like hosting the Olympics, Dant Chesser said. The cities selected for that honor often have to build themselves up, and the Louisville area would have to do the same for Amazon. The company needs access to an international airport, and while Louisville does contain one, the metropolitan area might need to work on adding more direct flights to far-flung parts of the world. Louisville also lacks a strong public transportation system, another request of Amazon’s, which Dant Chesser said the area would have to work hard to make up for.

Perhaps most important in Dant Chesser’s mind is Amazon’s need for a technologically skilled workforce. Clark and Floyd counties’ educational attainment is below the United State’s average, and One Southern Indiana is already engaged in a battle to educate residents as employers increasingly complain about a lack of skilled workers. Dant Chesser would like to see an effort to prepare Southern Indiana residents for the types of jobs Amazon would offer.

All that work requires a cohesive effort.

“I would say it’s going to require cooperation from all units of government, from the business community, from the school corporations to higher education,” Dant Chesser said. “And if we’re truly going to service all of their needs, we’re going to need the utility providers of all sorts.”

On whether she thinks the different sectors of the metropolitan area will be able to band together: “If not for this project, than what else would we be waiting for?”

Hopefully, the Louisville area would have time to prep. Amazon has said it will announce what metropolitan area it has selected for its second headquarters in 2018, but it isn’t clear just how long that area would have to prepare for the company.

Who benefits?

There’s one more thing that Vigdor asks for residents to consider as their cities gear up for Amazon. Would they be happy with their new neighbors?

An official at River Ridge has said that while the Louisville area might not have the skilled workers needed for Amazon, they would move to the area for the salary.

It’s not clear how many of the 40,000 plus workers at Amazon’s Seattle headquarters are transplants, but it’s an oft-heard complaint from locals that too many are.

Berger, the Seattle native, does know long-time residents who have made millions working at Amazon, but he knows others who worked for different companies and didn’t.

Many of those less wealthy friends are moving from the city to less expensive enclaves, although even those are becoming less affordable. Berger’s family members are amongst the movers.

“My kids and grandkids cannot afford to live here, and that’s new,” he said.

Berger himself works for a nonprofit and doesn’t make “Amazon money or Microsoft money.” He rents a place in the city, and the cost to do so has risen dramatically.

“…I wonder how much longer I’m going to be able to live here,” he said.

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