Philly Almost Getting HQ2 is the Next Best Thing

A new book, “Amazon Unbound”, by the author Brad Stone revealed this week that Philadelphia was closer to the top of Amazon’s list of finalists for HQ2 than the conventional wisdom may have predicted, making it into the final 3 finishers with Chicago and Raleigh.

Of course, as we now know, they initially ended up going with CEO Jeff Bezos’s gut and selecting Arlington, VA and New York City, then trimmed their sails down to just the Greater DC headquarters after political pressure made the New York office untenable.

The whole competition and due diligence process was ultimately for naught. Even more annoyingly, there’s a suggestion in the book that Philadelphia may have been nixed based on some Amazon executive being a Giants fan and having a silly sports grudge against the Eagles. It’d be easy to conclude from these developments that the HQ2 process was a huge waste of a lot of city leaders’ time and money, and it’s sure to leave people who already felt cynical about the whole thing feeling even more so.

The glass-half-full read on the situation, though, is that the process still could have some concrete benefits for Philadelphia in that the news helpfully revealed to the world that the more serious people at Amazon actually did think Philadelphia was a top-tier choice on the merits. With any luck, that could lead some other growing companies to take a second look at Philly as a possible headquarters, ideally without an HQ2-style wild goose chase. 

Also, by all accounts, the HQ2 bid exercise within city government had some helpful internal benefits for bringing together a good team across departments and breaking down silos, which some city employees say has had some lasting positive effects. And the exercise also resulted in a lot of helpful research and marketing materials for the city that can be reused for non-Amazon economic development work.

The tax subsidies issue and the rat-race aspect of pitting cities against one another in a race to the bottom were, to be clear, bad. There was always a real worry that cities would go so overboard on the tax subsidies that there would be few economic benefits left for the eventual host city.

But some critics want to take the argument quite a bit further to say that it would have been bad in general to have a large company come to the city and create a lot of high-paying jobs, because it could have the side-effect of worsening other cost-of-living problems, like housing costs and traffic congestion. 

That a big jobs boom might be seen as a net negative development for the city is perverse, and reflects poorly on city leaders’ management of issues like housing supply policy, where the assumption is that the status quo policies would fail under even a little more pressure. The underlying assumption is that we’d just fail to build enough housing or add enough transit capacity to address these issues in a high-job-growth scenario. But this would be a policy choice, and it really says a lot about the misguided framework that some segments of the progressive political universe are operating under when it comes to issues of economic growth and change that a positive-sum outcome is seen as an impossibility.

(Image: Center City District)

For decades, Philadelphia has suffered from comparatively slow job growth when stacked up against our peer cities, and the broader southeast region, and the results have been predictably terrible! As many elected officials are quick to point out, Philly is the poorest big city in the country. One thing that would help improve the situation is if there were more higher-wage jobs, particularly in and around Center City and University City where Center City District’s research has shown high-rise office buildings can support many different kinds of jobs for people of all education backgrounds and skill levels

The southeastern Pennsylvania region suffers from a lot of job sprawl of office jobs in particular, with a higher share of office jobs in the southeast suburbs, often inefficiently located beyond the reach of good transit. This situation is bad for Philadelphia residents, many of whom must reverse-commute long distances for work, it’s bad for the city’s budget and regional share of the tax revenue, and it’s bad for ridership of the public transit system. 

Reversing the job sprawl trend would improve the economic situation for everybody, boost funding for beleaguered city services, and make it easier to solve any resulting problems. 

Office buildings of the same scale as HQ2 would grow the pie of city tax revenue, allowing city government to afford to provide more expansive public services and hire more unionized public employees. Following national trends, Philadelphia’s local government is still smaller than it was prior to the Great Recession. Having a lot of tax revenue from fast job growth would help rebuild our local public services like the chronically-underfunded Dept. of Parks and Rec, and fund a better local safety net. Additionally, having more big office buildings that can support a whole building staff creates more job opportunities for non-college workers, and more opportunities for service employee unions to grow their membership.

A jobs boom in the city could also set off a housing construction boom, creating even more jobs for people all up and down the income ladder. 

On the other hand, where would everybody park? It may sound like a joke, but this is the level where many of the more conservative members of City Council are getting hung up on housing. And with every problem becoming an excuse to level down housing production, and introduce more discretion by District Council members, it’s no coincidence Philly has had comparatively one of the lowest per-capita housing permitting rates of any big city in the period since the Great Recession ended. 

The HQ2 saga may be over, but the growth and jobs issues are here to stay, especially with some signs that Philadelphia’s economy may benefit from certain post-pandemic trends.

For example, many people who live in Philly but commute to suburban office jobs would much prefer to work in the city. Remote work makes that much more painless. Remote work also has meant there’s been more of a national job market for many large companies, tech and otherwise, so people don’t have to move to New York or the Bay Area to work at some of the high-paying companies there. And if you can live anywhere, Philadelphia is a fun, relatively affordable big city to live in. One thing that’s become clear from New York City Mayoral primary is that our friends to the north will likely continue to fail to build sufficient housing. So we can probably count on a continued influx of priced-out New York residents fleeing the high cost of living, and increasingly able to work from anywhere. 

The question of whether or not this would be a good thing for the city is a good political Rorschach test that gets to a fundamental divide about growth optimism vs. pessimism that increasingly seems to polarize city politics.

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  • Jon Geeting
    published this page in Blog 2021-05-21 16:31:44 -0400