50 cities are in a bidding war for Amazon's newest headquarters — but there could be a downside for whoever wins

Noah Berger/Reuters

More than 50 cities across North America are vying to become the home of Amazon's new headquarters.

On the surface, the proposition sounds great for the city that gets it. When the e-commerce giant said in early September that its HQ2 would bring 50,000 jobs, mayors from Toronto to New York City to Los Angeles immediately expressed interest.

But Amazon's HQ2 could have a downside. It would bring loads of jobs, but cities would likely pay for some of them in the form of subsidies.

When Amazon has come to other cities across the United States, it has often accepted economic incentives.

From 2005 to 2014, the company received at least $613 million in local government subsidies to build warehouses, according to a 2016 report by the Institute for Local Self-Reliance. The group, which pushes for local resources to be dedicated to for community development, also found Amazon received an additional $147 million in subsidies for its data centers.

As Motherboard points out, Amazon will likely choose a city that offers subsidies or tax breaks. Amazon's proposal guidelines say that the company may require "special incentive legislation" in order "for the state/province to achieve a competitive incentive proposal."

It's not unusual for large companies to receive government subsidies. In return, local governments are promised an increase in jobs and economic prosperity. 

After Twitter thought about leaving San Francisco in 2011, for example, the mayor created a temporary tax break for companies that moved to the Mid-Market and Tenderloin areas — the location of Twitter's headquarters. Since then, the provision has cost the city nearly $40 million in tax revenue, according to The Wall Street Journal. Critics of the local tax breaks say they haven't created enough concrete benefits for the community.

In Seattle, the hometown of Amazon's first HQ, the city has seen rising housing prices and gentrification. And in the case of Amazon's new headquarters, it's not clear whether the 50,000 new jobs will be filled by local residents — or what kinds of larger effects it will have on the city it chooses for HQ2.

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