Metro Detroit’s bid for Amazon is a group effort

Candice Williams, and Daniel Howes

The regional bid for Inc.’s second North American headquarters, due Thursday, culminates what some are calling a remarkable level of cooperation between Michigan business and political leaders determined to offer the giant online retailer its only truly “bi-national” proposal.

Officials do not plan to release details of the Metro Detroit bid, which sources close to the situation say comprises an executive summary of fewer than 10 pages and related data. But they have not been shy about touting their plan to highlight Detroit’s revival, its proximity to Windsor and the potential talent available in southern Ontario.

“Look at the narrative of Windsor and Detroit and the tale of two countries,” said Dan Mullen, president of Bedrock, an affiliate of Quicken Loans Inc. Chairman Dan Gilbert’s Rock Ventures LLC. “The creativity that we are able to pull together with the state of Michigan, Detroit and Windsor — and all the amazing opportunity Amazon can take advantage of — we very much highlighted in the response.”

The group, led by Gilbert, worked long hours the past five weeks to prepare the proposal. Detroit Mayor Mike Duggan tapped Gilbert for the role shortly after Amazon announced plans to invest $5 billion and create 50,000 high-paying jobs averaging $100,000 a year in a second headquarters that Amazon calls “HQ2.” Company officials say the new site would approximate its current campus in Seattle.

Detroit’s bid delivered to Amazon, Gilbert says

A 59-member bid committee from across the region was assembled to work on the proposal. It includes county executives, university presidents, state and federal politicians, and many of the region’s most prominent CEOs. Gilbert convened weekly conference calls of the committee, even as a smaller “deputies” group with representatives from the city, the business community, Gov. Rick Snyder’s office and Gilbert’s Rock Ventures communicated daily by text and email.

The Detroit Regional Chamber, a major collector of regional information, helped assemble demographic data, employment and income data, next-generation mobility assets and other relevant trends. And the state’s Big Three universities showcased their University Research Corridor and its growing record of next-generation innovation.

The bid is “putting forward the data in a very comprehensive and curated way,” said Matthew Cullen, CEO of Rock Ventures. “The numbers are part of that. The power of it is our entire region came together.”

Amazon is expected to winnow the list that’s expected to exceed 100 bids, and then select a site next year.

A winning bid for Amazon would bring a massive infusion of jobs, investment and tax revenue. But none of that would come without costs, likely measured in terms of tax incentives, infrastructure upgrades and increased investment in mass transit — especially in southeast Michigan.

There are benefits to landing a large-scale investment, said Timothy J. Bartik, a senior economist at the W. E. Upjohn Institute for Employment Research in Kalamazoo — so long as a city, or a state economic development agency, doesn’t overbid and diminish equally important public services.

“If extra people come into the area you need to hire more teachers for the schools, you need to hire more police and fire because you’re going to have more people,” he said. “If the roads become more congested you’re going to need to expand the roads or do something with mass transit. The extent that a project raises population quite a bit it has lower fiscal benefits.”

Bartik said regions should be wary of offering incentives they cannot afford. He cited Wisconsin’s offer of $3 billion in state tax credits to attract Taiwan-based Foxconn Technology Group, a potential winner’s curse in which critics say the costs likely will outweigh the benefits.

“I do suspect if Amazon came without any incentive, the benefits would exceed the costs of the project,” he said. “It would provide some labor market benefits, it would provide some property value benefits, it probably would provide some fiscal benefits. It would generate more revenue than public service costs. It would probably drive up employment population ratios some.

“If the incentives are excessive,” Bartik continued, “the cost of both the budgetary costs and the costs of the public service cuts and tax increases you have to do to pay for the incentives might mean the project doesn’t pass the benefit cost test. Even if the project is a good idea it doesn’t mean you want to make an infinitely high bid for it. At some price it isn’t worth it.”

Still, the collaborative effort across southeast Michigan is drawing widespread praise. “It’s one of the few times we’ve seen all hands on deck,” said U.S. Rep. Brenda Lawrence, D-Southfield, a member of the bid committee.

“It’s impressive how Detroit is growing, the education level of our workforce. What we have to offer. This win is going to bring jobs. It’s going to bring a diverse player to our economy. On a national level it’s going to raise the bar. Often we’re not on the radar. I’m so glad this was a competitive process.”

Oakland County Executive L. Brooks Patterson, a member of the committee, said his county’s portion of the proposal emphasized its strengths, including available land, an educated residential population and a burgeoning high-tech corridor. The county offered the Silverdome in Pontiac, Northland Mall in Southfield and Kmart Corp.’s abandoned headquarters in Troy in its pitch.

“It’s impressive,” Patterson said. “If it’s going to match other cities in the hunt? I don’t know. I think we have a lot to offer. Oakland County rounded up all the assets we have, vacant land, transportation, schools. We blended ours in with Gilbert’s so we have a regional presentation.”

On Tuesday, the Detroit City Council approved a resolution in support of the bid for Amazon. While some council members agreed to mentioning the potential for incentives in the resolution, Councilwoman Raquel Castaneda-Lopez expressed concern about the city “selling itself in an unhealthy way.”

“I like Amazon. However, as a council member I think we can be supportive and not overcommit ourselves,” she said. “We can highlight the positives, but not grovel.”

Does Detroit have a chance at landing Amazon? Patrick Anderson, CEO of East Lansing-based Anderson Economic Group, thinks so. Among the criteria Amazon sought were labor and business services, cost of doing business and ease of transportation.

“The cost of doing business in a stable tax environment — Michigan looks really good,” Anderson said. “It also looks very good on explicit criteria for talent and trained workers. Where it doesn’t look good on the explicit criteria is on mass transit. If you put all those together, there’s the opportunity to address what is a shortcoming and highlight what is a very strong basis for building a major facility like what Amazon proposes in Metro Detroit.”

Anderson Economic Group ranked Detroit 32nd out of 35 metro areas, mainly because of its uncompetitive mass transit. New York City ranked No. 1 overall, while Chicago came in second. Yet, Detroit’s comparative weakness in mass transit may not prevent the region from making Amazon’s short list.

“Once they start visiting cities they are going to see strength and weaknesses in every one,” he said. “Some cities that have availability of mass transit, such as New York City, will also have extremely high cost of doing business and a lot of congestion that makes it hard for people to get around and well as difficulty getting to an international airport.”

Anderson notes strengths such as Detroit’s accessibility to Detroit Metropolitan Airport, which offers solid connections to both U.S. coasts as well as business centers in Europe and Asia. Employees can generally get to work their workplace, they just do it by car.

“I think we can make a good pitch to Amazon that they should get us on their short list,” he said. “The cost of doing business is very reasonable, our workers are very productive and our talent pipeline is excellent. Then we can talk to them about getting people to and from work.”