If you’re tiring of the noise about Amazon’s new headquarters relocation, you’re not alone. The buzz across the country, as recently reported in the BBJ, shows varying degrees of reality warp as regions come to grips with the paucity of their odds. One region actually said “no thanks.” In a recent Op Ed in the Wall Street Journal, the Mayor of San Jose explained why he wasn’t joining the chase (spoiler alert: it’s not because their crappy 1960’s ranch houses are already out of reach at $1.5M). He’s not playing for a very different reason.
Contrary to the obsession of most East Coast cities with emulating his region, Mayor Liccardo acknowledges that “some 95% of Silicon Valley’s job growth comes from the new small-business formation and when these homegrown companies develop into larger firms.” You might conclude that these are all venture capital funded startups, they’re not. He has harsh advice for second tier cities like Baltimore: subsidies are a relic and don’t change a decision that’s already made. “Cities should focus on building the workforce first – investing in human capital.” “Create safe and attractive cities for talented people to live in, and clear bureaucratic red tape.” As a reality check on the adverse impact of incentives, the Mayor reminds us that the GE deal to relocate to Boston costs taxpayers over $180,000 per job created. That’s shifting a lot of future resources to one company and away from a lot of other needs.
San Jose’s Mayor is challenging us to make a difficult connection – the more a region dumps into incentives for a few high-profile companies, the less funds there are to focus on the rest of the region’s home-grown economic development needs. To the south,San Diego is actually realizing that as more companies relocate, the competition increases for workforce. They’ve recently reimagined their economic development efforts to be about ensuring every willing resident is ready for the jobs in demand. Whether we accept it or not, the economic development playbook is increasingly about competing for talent and less about competing for relocations. In the “knowledge economy” companies will go and grow where the workforce is. Don’t kid yourself: access to talent will drive Amazon’s decision first and foremost.
We risk digging a hole with incentives that creates greater distance with our economically challenged neighbors, and leaves us with less capital to help them. As I suggested in my last column, this doesn’t require giving up on incentives; it does require thinking profoundly differently about how to deploy them. There are ways to use the resources we have to attract promising companies to our region but to do so in a manner that ensures equity and prosperity for the rest of us. It requires ensuring that those companies we attract are partners in driving the changes we need and the incentives are designed to deliver the workers they want.
With more than 30 years’ experience in law and business, Newt Fowler, a partner in Womble Carlyle’s business practice, advises many investors, entrepreneurs and technology companies, guiding them through all aspects of business planning, financing transactions, technology commercialization and M&A. He’s the pastboard chair of TEDCO and serves on the Board of the Economic Alliance of Greater Baltimore. Newt can be reached at email@example.com.