Friday, September 15, 2017

California has Potential to be a Strong Contender in Amazon's Search for New Headquarters

Last week, an exciting opportunity arose for cities throughout North America. Amazon Inc. announced its plans to expand further by building a second headquarters, dubbed HQ2. Since the announcement, mayors and governors across the United States have been submitting proposals and offering tax incentives to the giant company, trying to get Amazon to choose them. According to Andrew Khouri's L.A. Times article, California won't be offering quite as much as other states when it comes to tax incentives, but instead, will be relying on its inherent attractiveness as a metropolitan area with good weather, education opportunities, and skilled laborers.

In some states, like Wisconsin or Nevada, billions of dollars in subsidies and tax incentives are offered to manufacturing and tech companies looking to make a move. They hope that the tax incentives they provide initially will be paid off in the future by thousands of more jobs in the area and an improvement in the housing market. Wisconsin is in the process of working out a $3 billion package with television producer Foxconn. In 2014, Nevada's $1.3 billion package earned them Tesla's lithium-ion battery factory, a factory that Governor Jerry Brown has been vying for.

The amount of money being offered may not matter as much for landing the Amazon deal. Amazon is one of the wealthiest companies in the world, and they have made the parameters of their new headquarters well known. They are looking for a metropolitan area with skilled workers, desirable housing, good distribution routes, and a strong base of customers. With its shipping ports, high quality of life, and many prestigious public universities, California could be a strong choice for Amazon's second headquarters.

Analysts believe that Amazon's main purpose in being so public about their search is to try to get competing offers from different cities so that they can use them to leverage a better tax incentive package from whichever city they actually want for their headquarters. That's why they believe that California has a good chance. Research shows that around 90% of the time, companies would choose the city they chose whether they got the same incentive package or not. It really seems to be up to California itself to shine. Either Amazon wants to build HQ2 here or the company doesn't. The amount of money being offered is unlikely to make much of a difference.

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