Philly’s on Amazon’s HQ2 finalist list. Now what?

The city will need to play the “quality of life” card hard.

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Danya Henninger
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Philadelphia made it. We’re among the 20 finalists for Amazon’s second headquarters, aka HQ2.

The news that the city is still in contention is likely to excite the business and tech communities.

It’s also already inciting backlash from many residents, who wonder why local leaders are continuing to “grovel” to please a company whose plans will boost our rents and unleash a torrent of tech bros into the community.

Here’s a quick breakdown of what’s to come over the next several months — and a look at what Philly’s chances are against the other 19 cities.

The timeline

Amazon promises to be swift. The e-commerce giant announced the hunt for a city for its second headquarters last summer. By October, it collected RFPs. The decision for which city wins HQ2 is expected at some point this year.

Until then, Amazon said it would take a deeper look at each city’s proposal, possibly request more information and further evaluate how each city can “accommodate the company’s hiring plans as well as benefit its employees and the local community.”

Translated to plain English: Amazon will see how well Philly and the rest of the candidates can provide optimal talent and save the giant corporation money.

Philadelphia wants to continue playing the game. The Mayor’s Office released a short statement Thursday morning saying, “We are thrilled at today’s announcement and look forward to working with Amazon’s team on the next steps of this process to further highlight all that Philadelphia has to offer.”

The tax break

Philadelphia can offer the talent. Penn, Drexel and Temple are complemented by dozens more colleges in the region, and many other schools — like Carnegie Mellon and Penn State, plus institutions in New York and Washington DC — aren’t far.

The harder part will be matching the amount of savings Amazon could receive from other competitors.

If Philly is serious about the bid, it will need to offer tax credits in the billions. Steps have already been made to make that happen. Councilman David Oh introduced a bill last September that could lead to $2 billion in tax savings over 10 years by reducing the Business Net Income Tax rate to zero for a “megabusiness.” That bill is currently collecting dust in the Committee on Finance.

The state has pledged $1 billion in tax breaks should Amazon relocate anywhere in Pennsylvania.
Pittsburgh is also a finalist.

Savings of $3 billion would give Amazon a more generous offer than any corporation has ever received in Pennsylvania. Shell was awarded about $1.6 billion in tax credits over 25 years. Comcast received about $40 million in credits, plus the 10 year tax abatement for all new construction when it built its first tower.

That’s a lot of money. It’s more than either California or New York City has pledged — though New York state will likely offer up some credits.

But it’s not as much as, say, New Jersey. Newark is one of the finalists, and ex-governor Chris Christie and legislators discussed offering $7 billion in savings. Then there’s Texas, which practically invented the tax credit as incentive strategy. Dallas and Austin are on the list, and the Lone Star State routinely doles out $20 billion per year in tax incentives.

Do we really have a chance?

Philadelphia has been something of a media darling in this contest. We’ve landed in the top five on a several national roundups and been written about in the HQ2 context a lot.

But most industry experts have been favoring other locations.

Some have pointed to Atlanta and Nashville, the latter of which is similar to Seattle pre-Amazon. Others have zeroed in on New York and Los Angeles as the likely destinations. The wealth and population of those two cities overpower what almost anyone else can offer — perhaps even tax incentives. New York now also has Cornell Tech on Roosevelt Island, producing thousands of Ivy League engineers within city limits.

Philly will need to figure out how much financial incentive it can provide, and then hope Amazon is serious about its claim that it is placing a high value on quality of life, and not just business advantages.

The city’s original proposal highlighted our young and educated population, restaurant scene and historical atmosphere; the ability to build something entirely new at Schuylkill Yards or the Navy Yard; and the fact that although we’re not New York, you can reach it in two hours.

In general, if Philly wants to win Amazon’s heart, leaders will need to stress how a major company could grow here and thrive in a different way than it could in more traditionally tech-friendly cities.

That is, if Amazon even has a heart.

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