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Cities dream of wooing Amazon, but is it worth it?

The pitches have been quirky, some might even say desperate. City officials across North America are trying to get Amazon's attention in hopes that the fourth-largest company in the U.S. will build its next big tech hub in their community. Economics correspondent Paul Solman reports on what they stand to gain -- and pay -- for the chance.

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  • Judy Woodruff:

    But first, Amazon is searching for a place to build a second headquarters.

    The scale of the project is massive. It comes with a proposed eight-million-square-foot campus that would cost $5 billion and promise up to 50,000 new jobs.

    As economics correspondent Paul Solman reports, that's created an unprecedented bidding war between cities and states.

    It's part of his weekly series, Making Sense, which airs every Thursday.

  • Man:

    Hey, Alexa, where should Amazon locate HQ2?

  • Woman:

    Hmm. In Frisco, Texas.

  • Paul Solman:

    City officials across North America have come up with quirky, some might say desperate, ways of getting the attention of Amazon, the country's fourth largest company.

    Birmingham, Alabama, boosters built giant delivery boxes around the city. Southern Arizona promoters sent the company a cactus, while other places touted traits they're not usually known for.

  • Woman:

    Las Vegas is well-positioned to be a catalyst for the most advanced smart city technology in America.

  • Paul Solman:

    Dallas' pitch, livability.

  • Man:

    Flavor.

  • Woman:

    Vibe.

  • Man:

    Margaritas.

  • Man:

    Culture.

  • Woman:

    Because it's great for kids. It's great for your homes.

  • Paul Solman:

    Detroit's case, make a difference.

  • Man:

    Move here, move the world.

  • Paul Solman:

    Two hundred and thirty-eight cities and regions are bidding for what's being called Amazon HQ2, the company looking for assets like the tech talent that drew it to Seattle, thanks to Microsoft.

    So, no surprise that's part of Wil Reynolds' pitch.

  • Wil Reynolds:

    Great university system, great group of millennials, which is a growing population here. Great arts and culture. Affordable.

  • Paul Solman:

    Reynolds founded an Internet marketing firm in 2002. Not much tech where he was back then.

  • Wil Reynolds:

    Today, people have tons of options if they want to work in the tech industry, and that's just been in the last 10 years.

  • Paul Solman:

    The hot-tech hub Reynolds is pushing? Philadelphia, which has even branded North Third Street, where Reynolds founded his company, Nerd Street.

  • Wil Reynolds:

    I think the biggest thing that Philly has over most other cities is our diversity. It's really big right now for Silicon Valley and tech start-ups to be focusing more on what they're doing in the community and how their teams are becoming more diverse.

  • Paul Solman:

    But Philadelphia already is. And that's a huge plus, says Reynolds.

  • Wil Reynolds:

    You got blacks, whites, rich and poor. Amazon sells stuff to all kinds of people.

  • Paul Solman:

    A diverse customer base is best served, according to Reynolds, by a diverse work force.

    But wait. Amazon has also made it clear it wants downtown real estate, easy access to public transportation. Your prayers are answered, says the city's professional booster.

  • Matt Cabrey:

    We are on Market Street, Market West, 30th Street Station right here. It's the third busiest rail station in the Amtrak system. It's adjacent to bus terminal, trolley stop. And just behind us is University City.

  • Paul Solman:

    As head of Select Greater Philadelphia, it's Matt Cabrey's job to hawk the City of Brotherly Love, which is why he's pushing the 14-acre Schuylkill Yards, supposedly primed for Amazon.

  • Matt Cabrey:

    Everything from the size of population, to the transportation infrastructure, and the mass transit, this particular site fits perfectly.

  • Paul Solman:

    So, perfect for Amazon, he claims — and, of course, not too bad for Philadelphia.

    Is this the biggest such project ever?

  • Jay Biggins:

    We have not been able to find another project that comes near it.

  • Paul Solman:

    Site selection consultant Jay Biggins, whose own company is based in New Jersey, says the economic benefits Amazon would bring to Philadelphia are ginormous.

  • Jay Biggins:

    You have $5 billion in payroll that is dropping into your market now that wasn't there before. You're creating contractor opportunities, the coffee shop and the hair salon, and millions of others that are all generating more activity to themselves. They're all spending more because they're making more.

  • Paul Solman:

    The benefits are why 238 bidders are in the game. But in any transaction, there are also the costs.

    Forever bidding against each other for new business, cities and states dangle not just prime real estate, but money, mainly tax breaks. Case in point, Outgoing New Jersey Governor Chris Christie's Newark bid.

  • Governor Chris Christie:

    All of the economic incentives put together from the city and the state would realize $7 billion in potential credits against Amazon state and city taxes.

  • Paul Solman:

    So what's the cost-benefit bottom line?

  • Amy Liu:

    These tax incentives are not good for taxpayers.

  • Paul Solman:

    Brookings scholar Amy Liu studies regional economic development.

  • Amy Liu:

    The bulk of job creation in a state and city comes not from business attraction deals. They only make up 3 percent of all the jobs created in a community. Real job creation comes from entrepreneurship, start-ups, helping scale new firms and helping existing companies grow.

  • Paul Solman:

    Liu argues that investments in affordable housing, infrastructure, and education would do a local economy more good than tax lures.

  • Amy Liu:

    It creates a perverse incentive of doing the wrong thing.

  • Jay Biggins:

    There's really nothing at all perverse about that. We revere competition in all other aspects of American economic life. In fact, we insist on it as a matter of law. The only way to really think about incentives in this context is that it's a pricing tool.

  • Paul Solman:

    So how much are up to 50,000 jobs worth? Philly's tax bid, a reported $3 billion. Now, a city like Albuquerque can't offer much money, so outgoing Mayor Richard Berry makes a different argument.

  • Mayor Richard Berry:

    We're not going to buy your love, but we're going to earn your business. And we think that we have a lot of things to offer Jeff Bezos, who was actually born here.

  • Paul Solman:

    So, what's your pitch?

  • Mayor Richard Berry:

    You can succeed here, Jeff. You were born here. Come home.

  • Paul Solman:

    Actually, Philadelphia nurses similar dreams.

  • Matt Cabrey:

    One of the things that's often under recognized is, it's not just the city where it's located, or it's not just the town or the office park. It's where the CEO and where the C-suite want to live.

  • Paul Solman:

    Well, Jeff Bezos has a connection to Washington, D.C., owns The Washington Post, has a house down there, right?

  • Matt Cabrey:

    He does. And he's a Princeton grad and he has other family connections in the greater Philadelphia region. So those kinds of factors may actually be part of this decision-making.

  • Paul Solman:

    And then there's Little Rock, Arkansas.

  • Mark Stodola:

    Amazon, you have so much going for you, and you will find what you're looking for, but it's just not us.

  • Paul Solman:

    Mayor Mark Stodola published an open letter in The Washington Post saying Little Rock wasn't bidding because 50,000 Amazon workers — quote — "would be a bummer. That ease of getting around would be totally wrecked."

  • Mayor Mark Stodola:

    We're great, but I don't think we were meant to be together this time around, so we're going to kiss you goodbye before you can kiss us goodbye.

  • Paul Solman:

    And Wil Reynolds admits there will be drawbacks if his city wins.

  • Wil Reynolds:

    I'm going to have more competition.

  • Paul Solman:

    And they are going to compete for talent?

  • Wil Reynolds:

    Absolutely.

  • Paul Solman:

    And they're going to drive up prices of houses like yours.

  • Wil Reynolds:

    Absolutely. If you look at the Capitol Hill neighborhood of Seattle, where one of my really good friends lives, he can barely afford to live there now. So there's definitely some negative spillover, but I think the positives outweigh the negatives so much in terms of what it would do for this city and for the kids of our city.

    I'm willing to take the fact that my job might be a little bit harder for what's good for the whole city. And to me, it's the whole city.

  • Paul Solman:

    OK, but what are this whole city's chances?

    Back at Schuylkill Yards, I asked Matt Cabrey.

  • Matt Cabrey:

    The odds for greater Philadelphia of getting the Amazon HQ2 project is 80 percent, in my opinion.

  • Paul Solman:

    Eighty percent?

  • Matt Cabrey:

    Eighty percent.

  • Paul Solman:

    That would make you a prohibitive favorite.

  • Matt Cabrey:

    Absolutely, yes. We're a perfect fit for this project on several levels.

  • Paul Solman:

    Now, if it weren't both unseemly and illegal, I would have offered a bet on the spot. Ireland's gambling Web site Paddy Power has Philadelphia in ninth place at 16-1, a less than 6 percent chance.

    Even the betting public's favorite, Atlanta, is 3-1 against, a 25 percent chance. But even if the city is among the 237 losers, consoles skeptical scholar Amy Liu-

  • Amy Liu:

    I do think there's a silver lining in this bid for Amazon headquarter two, and that is that Amazon essentially gave a playbook to every single city about what matters in this digital economy.

  • Paul Solman:

    To survive and prosper with or without seducing the biggest prospective catch in corporate history.

    This is economics correspondent Paul Solman reporting from ever-loving Philadelphia.

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