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Amazon HQ2 Could Finally Bring D.C. Region Together, But Divides Run Deep

The Washington area has a good chance of landing Amazon's $5B second headquarters, at least according to local officials and speculating analysts. But unlike many cities it will be competing with, the D.C. Metro area does not always speak with a unified voice. In the week since Amazon announced the solicitation, D.C., Arlington, Alexandria, Loudoun, Montgomery County and Prince George's County have all begun working on individual bids. 

Maryland Gov. Larry Hogan, Virginia Gov. Terry McAuliffe and D.C. Mayor Muriel Bowser at an Aug. 28 regional meeting

Local officials frequently pay lip service to the importance of regional cooperation, but the Beltway jurisdictions have a history of fierce competition when trying to lure large companies. Some local economic development officials believe this once-in-a-lifetime opportunity offers a unique chance for the region to stand together, while others are more skeptical about the prospects for cross-border collaboration. 

The board of directors for the Metropolitan Washington Council of Governments, a regional body made up of elected officials from each jurisdiction, voted unanimously Wednesday to explore the feasibility of submitting one joint bid for the region that would include sites from each locality. 

Montgomery County Council President and COG board member Roger Berliner, who put forward the resolution Wednesday, pointed to the language in Amazon's request for proposals that says metropolitan areas should work together. 

"Amazon is performing a competitive site selection process and is considering metro regions in North America for its second corporate headquarters," the RFP reads. "We encourage states, provinces and metro areas to coordinate with relevant jurisdictions to submit one (1) RFP for your MSA. The RFP may contain multiple real estate sites in more than one jurisdiction."

With Amazon's Oct. 19 deadline fast approaching, local economic development officials are working around the clock to put together their own proposals, so a decision to combine proposals would have to be made swiftly.

It also raises the sensitive question of financial incentives. While each locality is happy to engage in joint marketing efforts, are they willing to pitch in to create a combined pot of money to give the region the best chance to compete with other cities? 

The competition between jurisdictions has led to a growing incentives sweepstakes in recent years. The District in 2015 gave The Advisory Board, which had been mulling sites in Virginia and elsewhere, a $60M incentive package to stay in D.C. and create 1,000 new jobs. Earlier this year, Virginia and Arlington County combined to give $16M in incentives to Nestlé to move its U.S. HQ to Arlington and create at least 750 jobs.

Using the incentives-to-jobs ratio for each of these deals to calculate an estimated package for Amazon's 50,000 jobs shows that a Nestlé-equivalent deal would be worth roughly $1.06B and an Advisory Board-equivalent deal would come to $3B. To put that in perspective, the D.C. government's entire FY 2018 budget totals $13.8B. 

Officials recognize that those 50,000 new employees, who Amazon said would have an average salary over $100K, would not live entirely in the jurisdiction of the new campus. Additionally, Amazon setting up a major hub in the D.C. area would attract other companies looking to do business with the e-commerce giant and would likely create a widespread economic boon for the region.

To compete with cities like Boston, Austin, Denver and Atlanta, where the metropolitan areas are contained within a single state, some officials say a joint incentive package could be helpful. 

D.C. Deputy Mayor for Planning and Economic Development Brian Kenner

D.C. Deputy Mayor for Planning and Economic Development Brian Kenner told Bisnow he could support a regional incentive package as long as it includes built-in assurances that it would benefit D.C. residents. 

"We would be interested in doing something like that, and I'm hoping the region would see the value in it," Kenner said. "I'm willing to structure something to make sure they get that." 

The day after Amazon released the RFP, Kenner said he contacted his economic development counterparts in Maryland, Virginia and in the neighboring counties. He declined to say whether they discussed incentive packages, but he said the conversations were productive.

"We know this is going to be a regional answer no matter how you cut it," Kenner said. "We want to make sure we're sharing information and thinking about ways we can approach this to make sure we put our best foot forward." 

Alexandria Economic Development Partnership CEO Stephanie Landrum and Fairfax County Economic Development Authority CEO Victor Hoskins

Arlington Economic Development Director Victor Hoskins noted the entire region would benefit greatly from Amazon selecting any of the jurisdictions, and he said a joint incentive package could give Greater Washington a leg up. 

"If the region could do that, I don't think there's a region in the country that could beat us," Hoskins said. 

He did acknowledge that political forces may make such an arrangement difficult. Elected officials in one jurisdiction may be uncomfortable explaining the use of local tax revenue to fund an economic development initiative outside of their borders, but Hoskins said they would need to look at the bigger picture.

"We have to think about how could this entire region serve Amazon best and craft it to fit that," Hoskins said. "At the end it may look like some got less and some got more, but that's where everybody puts on their big boy pants and says, 'This is how we have to do it this time.'"

Alexandria Economic Development Partnership CEO Stephanie Landrum said the city is working on a bid and is considering the Potomac Yard and Eisenhower Avenue areas as potential sites. Landrum said she sees opportunities to coordinate messaging with neighboring jurisdictions, but thinks the deadline is too soon to engage in deeper collaboration involving incentives. 

Amazon has not indicated exactly how it plans to come to a final selection, but Landrum said if it narrows it down to a handful of finalists, that could create more opportunities for collaboration.

"If there are finalists and there is one site in the region, that could maybe pave the way for discussions about benefits to the region," Landrum said.

Prince George's County Economic Development head David Iannucci at a 2015 Bisnow event

Prince George's County economic development head David Iannucci is more skeptical of the potential for regional cooperation. He said he believes each jurisdiction should submit their own proposals, and MWCOG can play a role in marketing the region and helping ensure counties do not overtly attack their neighbors. 

"There will be some opportunities for joint marketing, but frankly I’m one of those people who does not believe regionalism can be that successful in economic development," Iannucci said. "I know it's been the aspiration of many economic development officials for cooperation and regionalism. I believe how that can best be applied is everyone can feel enabled to passionately defend their own sites and not denigrate the competition."

Iannucci also dismissed the idea of any type of joint financial agreement.

"At the end of the day, Virginia taxpayers are not going to put incentives in for Maryland and vice versa," Iannucci said. 

But Ken Ulman, who is helping prepare a bid specifically for College Park, sees more of a benefit in regional cooperation. 

“The jurisdictions in the Washington region need to work together to secure this,” Ulman said. "We ought to figure out what the best sites are and put all our muscle behind those sites.”  

Ulman said that Amazon selecting College Park would benefit all of Maryland, D.C. and Northern Virginia. While the former Howard County executive does not recall any past instances where cross-border incentive packages were offered, he is open to the idea. 

“If there is a time to do [joint incentives] this is it, because of the size of this opportunity,” Ulman said.