November 14, 2018
There’s really no way to sugarcoat it.
Amazon gave out three big prizes in its site selection derby Tuesday, and Pennsylvania’s two major league business destinations - Philadelphia and Pittsburgh - came up empty.
That’s a defeat that, for those in the Wolf Administration, took a bit of the shine off a big re-election win, and demonstrates Pennsylvania still has room for improvement when it comes to touting itself as what former Gov. Tom Ridge liked to call “a leader among states; and a competitor among nations.”
But however disappointing the news that northern Virginia, Queens and Nashville ate our business recruitment lunch this week, Wolf and other state officials are publicly taking the approach that Pennsylvania can gain from the experience.
First off, Wolf noted after an unrelated appearance Wednesday, "Amazon chose Pennsylvania as one of two states that had two finalists in their list of 20, so I think there are a lot of reasons we should look on this and think very well of ourselves...
“That really announces to the world that Pennsylvania is open for business.”
The Seattle-based company said it plans to invest a total of $5 billion to develop at least four million square feet of offices each at sites in Arlington County, Va., near Washington D.C., and Long Island City, N.Y., in the borough of Queens, creating more than 50,000 jobs across the two locations.
Additionally, it said it would make a $230 million investment in a new operations center in Nashville, designed to oversee the on-line retailer’s package delivery and supply chain operations, a niche that many in Pennsylvania felt this state was especially well-prepared to compete for.
Amazon has not spoken specifically about where the Pennsylvania bids came up short, and the company had not responded to questions about that from PennLive as of Wednesday evening.
But state Department of Community and Economic Development spokesman Michael Gerber told PennLive early indications are that it had more to do with available workforce concerns.
“Ultimately, Amazon noted to us that the decision primarily was made based on workforce,” Gerber said in a email response to questions about the decision. “The difficulty in finding a suitable workforce likely played into their decision to split HQ2 among two cities.”
State officials believe they are not being caught flat-footed in that area, given the state’s modest growth in aid to public schools in recent years and a new $30 million initiative to help school districts introduce or enhance computer science and other STEM (science, technology, engineering and math) programs.
State officials also released Tuesday the framework of an economic development incentive they had prepared for Amazon.
While details were sketchy, DCED shared letters to Amazon detailing an offer of up to $4.5 billion over 25 years that would have been indexed to income taxes collected from the company’s employees, along with $100 million to support transportation improvements.
The state program - which would have required legislative approval - would have made the company eligible for an annual grant for up to 25 years, based on the amount of personal income tax collected annually from Amazon employees.
It was paired, in Philadelphia, with local tax breaks estimated at at least $1.1 billion to the company over 20 years.
Some critics have slammed the Amazon process as an effort by a major corporation to wring as much as it can out of desperate municipal suitors, and argued that governments would be better served by concentrating on the fundamentals that can improve their own business climates.
“I think we have to do both,” Wolf said, reserving the right to go all in on the next big site selection derby if the prize is worthy.
“Don’t forget, our offers were performance-based,” the governor stressed Wednesday. “We were not going to give away any money to anybody if they didn’t create good jobs...
“I will continue to look for ways to bring good companies into Pennsylvania and grow companies that are already here. But it also reinforces the notion that we’ve got to invest in things like education, like infrastructure, like health care, to make sure Pennsylvania is the kind of place people want to live and work in.”
One top state business leader argued Wednesday that the Amazon turndown should also be a moment for introspection by all Pennsylvania policy-makers about the state’s current business climate.
Maybe Pennsylvania was never going to compete with the D.C. metro area and its proximity to the nation’s political power center, Pennsylvania Chamber of Business and Industry President and CEO Eugene Barr said in an interview with Pennlive.
But, he added, “why New York and not, say, Philadelphia? Are there signals that we are sending off as a state - or from the City of Philadelphia in particular - that are a negative for them? I think we have to ask ourselves those questions.”
At the state level, Barr pointed to the state’s high 9.9 percent corporate net income tax. At the city level, he pointed to the soda tax, which the chamber has decried as a tax on a single product for general social goods, and more recent proposals to dive into worker scheduling issues.
“If we simply say: ‘Oh well. too bad we didn’t get Amazon,’ and forget about it, I believe we’re making a big mistake,” Barr said.
Pennsylvania has ranked in the bottom half of all states in new job creation in recent years.
The state did claim one major site selection victory in 2016, when Royal Dutch Shell opted to build a $6 billion plant in Beaver County that will make feedstocks for plastics and other products. That project, which is touted as a potential catalyst for additional manufacturing growth, is currently under construction.
Philadelphia officials were especially hopeful about their Amazon bids because they felt the city had all the ingredients that Amazon was looking for, in a host city that’s large enough to absorb such a major project without causing local housing prices to skyrocket or creating other major growing pains.
Amazon, several city boosters told PennLive earlier this year, wouldn’t dominate Philadelphia’s economy; but it could super-charge it.
Wolf, sounding very much like a guy who has just spent a year touting his administration’s top accomplishments, pointed to the 200,000 new jobs created in his first term and said he is confident the state will have more economic wins in the future without major changes in trajectory.
“I think I know Pennsylvania’s business climate as well as anybody, and I think it’s a great place to do business,” Wolf said.
With regard to Amazon, he told Pittsburgh’s KDKA on Tuesday morning, “I think they made a mistake.”