海角大神

In early September Ron Nirenberg was one of the hundred-plus city mayors who felt their ears prick up when online retail giant Amazon announced its desire to set up a second headquarters outside of its Seattle home.

He is now one of just three who declined to throw their hat in the ring before today鈥檚 deadline to submit proposals to the company.

Attracting large companies to an area has long been viewed as a golden ticket to economic prosperity 鈥� such deals have ticked up in frequency and cost since the Great Recession 鈥� and Amazon鈥檚 鈥淗Q2鈥� project is the latest and shiniest of those. The company is promising to invest $5 billion in the facility and to create as many as 50,000 high-paying jobs.

Yet what bidders are being implicitly forced to provide in return 鈥� most notably, a more generous tax incentives package than their rivals 鈥� has seen some cities and economists questioning the wisdom and fairness of this bidding-war approach to economic development. Instead of letting megacompanies avoid their fair share of taxes, they wonder, why not focus on city improvements so that businesses show up even without special subsidies?

Amazon鈥檚 highly publicized HQ2 process has already become a platform for that conversation, alongside a wider scramble by cities that has been frenzied, and at times comical.

Officials in Tucson, Ariz., tried to deliver a 21-foot-tall saguaro cactus to Amazon鈥檚 headquarters. The city council in Stonecrest, Ga., part of the city 鈥渢he city of Amazon鈥� if the company moves in there. Mayors from Washington to Danbury, Conn., have posted videos of themselves asking Alexa 鈥� Amazon鈥檚 intelligent personal assistant device 鈥� where the HQ2 should be located. The answer every time: that mayor鈥檚 city.

But the bids to recruit Amazon have involved much more than stunts. In particular, some observers believe the HQ2 incentives package could end up as one of the largest in American history. New Jersey, for example, Amazon tax breaks worth over $7 billion over the next decade, an incentives package worth more than double what Wisconsin offered to Taiwanese electronics company Foxconn to build a factory there last month.

It was that race to the bottom that turned off Mr. Nirenberg, the mayor of San Antonio, Texas. Last week, he and Bexar County Judge Nelson Wolff (who鈥檚 jurisdiction includes San Antonio), 聽Amazon CEO Jeff Bezos to say they were pulling out of the HQ2 race.

Nirenberg says that trying to match the kinds of incentives being offered by other bidders would hamper the city鈥檚 goals of attracting companies like Amazon in the future.

鈥淚t鈥檚 a difficult proposition to contend with when a company [is] intending to get cities across the country to compete in an incentives arms race,鈥� he adds. 鈥淲e鈥檙e willing and open to negotiate with a big toolkit of economic development opportunities with Amazon, but we鈥檙e not willing to mortgage our future to do it.鈥�

Nirenberg says his team had already been crafting their letter to Mr. Bezos when he read about Mayor Sam Liccardo of San Jose, Calif., making a similar declaration .

鈥淚t was heartening to see another city focus on the future [and be] not willing to play games with the future of its city,鈥� Nirenberg says. 鈥淗opefully that will begin to turn the tide of the expectations for economic development.鈥�

A tipping point?

Siting deals like HQ2 have become increasingly common in recent years. The number of $50 million-plus deals between a company and a city or state has more than doubled since 2008, by Good Jobs First, a research group on development policy.

A long-term decline in entrepreneurship is the main reason these megadeals have become more attractive to local officials, says Greg LeRoy, the group鈥檚 executive director.

鈥淭hat means there are fewer ribbons to cut, fewer deals for politicians to compete for, [but] a lot of pressure [to create jobs] because the economy is still soft,鈥� he adds.

What people like Mr. LeRoy fear is that Amazon could bring a surge in population and income to a community without investing a commensurate amount in improving the city鈥檚 infrastructure and services. Then either taxes will go up or the quality of public services will go down.

Writing in Fast Company on Tuesday, LeRoy . 鈥淲ill Amazon鈥檚 hubris be met with public demands for community benefits instead?鈥�

鈥榃e can鈥檛 compromise that future鈥�

Officials like mayors in San Antonio, San Jose, and Toronto (which decided not to expand existing incentives to win the HQ2 prize) are already making those kinds of demands of Amazon, and they represent a potential shift in how cities view economic development.

鈥淓conomic development in the old days used to be mostly about [creating] jobs, but now it鈥檚 [also] about communities developing high quality infrastructure, a skilled workforce, environmental stewardship and quality of life,鈥� says Thomas Tunstall, senior research director at the University of Texas at San Antonio鈥檚 Institute for Economic Development.

Cities are starting to realize that 鈥渋f you focus on high quality of life, develop your local workforce, those are the things companies are looking at anyway,鈥� he adds.

Mr. Liccardo said that his how San Jose has been able to bring companies like Adobe, Google and Apple to the city recently 鈥渨ithout a single cent of taxpayer money being used for subsidies.鈥� Nirenberg is trying to get San Antonio to that point.

鈥淭hat鈥檚 why the investments we鈥檙e making in infrastructure and education and housing are so important to us,鈥� he says. 鈥淥ur people come first. The jobs will be filled by those people. We can鈥檛 compromise that future.鈥�

Professor Tunstall sees an obstacle to popularizing that approach. It鈥檚 easier for an economic development corporation to show that a specific recruiting deal brought jobs than to show how an improving quality of life is bringing families and companies to a place, he says.

And 鈥渜uality of life鈥� can be hard to define.聽When Tunstall asked city managers across Texas what it meant 鈥� as part of a study last year 鈥� 鈥淭here was often significant discrepancy in the definitions,鈥� he says. 鈥淥ne fellow who had moved to Texas from Louisiana said back there, it was defined more by crawfish boils and being close to mama.鈥�

The role of the 鈥榠ntangible鈥�

Tax incentives are unlikely to disappear, experts say. That is especially the case now, with entrepreneurship at such a low ebb, says Bernard Weinstein, an economist in the Cox School of Business at Southern Methodist University in Dallas.

But what may be changing is that incentives become a less decisive factor than they have been in the past, and more intangible factors like quality of life and a community鈥檚 social culture become more important.

That is a shift that could cost any Texas city the HQ2, experts say. Debates in the state legislature this year on controversial bills 鈥� including one related to transgender rights () and one related to local cooperation with federal immigration officers () 鈥� have been cited as factors that could lead Amazon to look elsewhere.

This is perhaps why Joe Straus, Republican speaker of the state House of Representatives, announced last week the formation of a new committee to look at the state鈥檚 economic competitiveness.

鈥淭he formula isn鈥檛 as simple as it used to be 鈥� being pro-business isn鈥檛 just about tax breaks and cash incentives,鈥� Rep. Straus . 鈥淚t鈥檚 also about education, tolerance, empathy, quality of life.鈥�

That was music to the ears of Nirenberg.

鈥淔or a city that鈥檚 interested in partnering with a corporation, it would be ludicrous to compromise its ability to build the kind of city worth investing in,鈥� he says, by agreeing to an unbalanced partnership.

Smart, big businesses like Amazon, he adds, 鈥渁re looking for much more than a net gain on incentives. They鈥檙e looking for communities to invest and have a solid, durable, and equitable future, and that鈥檚 what we鈥檙e interested in.鈥�

Amazon has said it will announce the winning site next year.