Why Amazon didn’t pick Detroit

Detroit — Regional leaders received a call early Thursday morning from Amazon informing them the city was out of the running for online retail giant’s second North American headquarters.

They were told two reasons hurt Detroit’s bid to become one of 20 cities selected to remain under consideration: a lack of mass transit and questionable ability to attract talent.

It was a call that Khalil Rahal, who heads Wayne County’s Economic Development Corp., told The Detroit News he received from Holly Sullivan, an Amazon economic development manager, before the formal announcement was made.

“As a courtesy, she called today before it hit the wire, and we had a good conversation as to what she thought and some of the reasons why we didn’t make the list,” he said. “Out of the 238 responses, she thought we had a phenomenal response to the RFP. She said not just the presentation but the data blew them away.”

Rahal then shared reasons Detroit wasn’t the best candidate for Amazon’s second headquarters.

“One thing they are looking for is what places are likely to attract talent,” he said. “What are some of the factors that exist to attract talent from 25- to 30-year-olds.”

They also, he said, had a specific conversation about mass transit.

“Some on the list either have a robust transit system or, if they don’t, have plans for some,” he said. “That was not the only factor, by any means, but it was a factor.”

The Seattle-based company said in a statement that it reviewed 238 proposals from across the U.S., Canada and Mexico to host its so-called HQ2 and picked 20 areas to move to the next phase of the selection process.

“Thank you to all 238 communities that submitted proposals. Getting from 238 to 20 was very tough – all the proposals showed tremendous enthusiasm and creativity,” Sullivan said in a statement. “Through this process, we learned about many new communities across North America that we will consider as locations for future infrastructure investment and job creation.”

The metro areas still in the hunt are:

• Atlanta, GA
• Austin, TX
• Boston, MA
• Chicago, IL
• Columbus, OH
• Dallas, TX
• Denver, CO
• Indianapolis, IN
• Los Angeles, CA
• Miami, FL
• Montgomery County, MD
• Nashville, TN
• Newark, NJ
• New York City, NY
• Northern Virginia, VA
• Philadelphia, PA
• Pittsburgh, PA
• Raleigh, NC
• Toronto, ON
• Washington D.C.

Following that initial early morning call with those involved in Detroit’s bid, Amazon executives held a conference call with Detroit’s key project team members, said Sandy Baruah, president and CEO of the Detroit Regional Chamber of Commerce.

There were representatives on the call from the cities of Detroit and Windsor, Wayne County, Dan Gilbert’s office and the Detroit Economic Growth Corp.

“It was nothing too detailed,” Baruah said of the call. “They were very impressed with the proposal, creativity and impressed with the regional approach. The document itself and the accompanying video. They were impressed with our ability to integrate Windsor into the proposal. What they had questions about was talent. Do we have enough talent here over the long-term?”

In its proposal, the team said that Amazon could tap the region’s rich university talent pipeline, which includes 25 colleges and universities. It noted companies are moving downtown to capture the millennial workforce and that the total number of workers downtown age 29 or younger has grown by 38 percent from 2010 to 2015, while half of downtown’s residential population is age 18-39.

“We’ve made incredible progress,” Baruah said. “If this opportunity were to happen a few years down the road where Detroit’s renaissance and the regional renaissance were a little more established, the outcome might have been different.”

Mass transit was thought to be a weakness for Detroit as it headed into the bid proposal process. The proposal countered that Detroit roadways have ample capacity to absorb additional traffic.

Uncompetitive mass transit was one of the reasons East Lansing-based Anderson Economic Group ranked Detroit 32nd in its index of 35 metro areas.

“Amazon followed what they said in their RFP pretty much,” said Patrick Anderson, CEO of Anderson Economic Group. “Their top 20 is very clearly based on the factors of business tax burden, labor force availability and transit options that we calculated in our index and they stated in their RFP. As further evidence of that, none of the bottom 10 (from the index) were in their top 20. Detroit wasn’t singled out. Others that had similar rankings also didn’t make the cut.”

The Detroit News last week reported Metro Detroit leaders are working to put a regional transportation millage on November’s ballot just over two years after voters narrowly rejected a tax hike to expand mass transit in southeastern Michigan.

Regional leaders have been meeting to come up with a new plan, and Wayne County officials say Executive Warren Evans is leading the group. An announcement could be forthcoming as early as this month.

Detroit’s Amazon bid committee was led by Gilbert, Detroit’s business mogul. 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.

Gilbert expressed his disappointment Thursday.

Still, he said "we are not deterred in any way, shape or form," he said in a statement. "Detroit is the most exciting city in the country right now, and the momentum continues to build every single day.

"All you have to do is spend an hour walking around town, and you will have a very clear and deep understanding of the opportunities, optimism and future of the Motor City.”

Among things highlighted in the team’s pitch:

• 3.2 million square feet in existing buildings, 1.3 million square feet of development projects that are underway and 71 acres of development sites in the U.S., and 20 acres across the Detroit River in Windsor, Ontario, Canada.
• Enough vacant land and surface parking lots in Detroit’s Central Business Districts and four surrounding neighborhoods to accommodate another 191 million square feet of development.
• Monthly rents in greater downtown average $1.28 per square foot, according to figures in the response to Amazon.

Gov. Rick Snyder added Thursday the news is disappointing, but the state appreciates the company's continued investment and expansion in Michigan.

“Detroit’s proposal to Amazon was incredible and garnered positive attention for the city from all across the world," he said in a statement. "As a state, we will continue to pursue these types of valuable opportunities for our talented workforce."

Duggan said the city is proud of its proposal, despite not moving on to the next phase in Amazon's selection process. He thanked Gilbert, the governor, the area's county executives, Windsor Mayor Drew Dilkens and the committee.

"It showed a clear vision for the future of our city and brought out the very best of our city and our region," he said. "We're going to keep building on the progress we’ve made and keep pursuing major developments.

"I expect that the lessons we learned in the Amazon process will help make us more successful on a number of other major potential investments that we are currently pursuing," he said. "We're going right back to work today to work on those other projects."

Rahal said Sullivan told him that there were some good factors working in Detroit’s favor including the fact that recently Amazon has expanded its footprint in the region.

“She thought from that standpoint, they really loved working with folks in the area,” he said. “What I say to folks is ‘this is a disappointment, but there were a lot of goals that were met.’ I think we did all we could.”

Among them, Rahal said, is the regional collaboration that came together to develop the plan.

“It’s a big deal for this area, and it hasn’t always been like that,” he said, adding they learned a lot about strengths and “what our shortcomings are.”

Wayne County’s Rahal said Detroit ranked “pretty high up there,” but Amazon was not willing to reveal the entire list.

“She made it very clear that she thought Detroit was an excellent place,” he said.

Rahal thinks the bid will serve as a guide for future pitches to land new businesses, noting Apple is looking for an area for significant investment as are others.

Rahal said five years ago, the city wouldn’t have had a shot like this and five years from now he expects more amenities to attract all types of people.

“This was not a total loss by any stretch of the imagination,” he said. “There were several goals as a region that we hit and we learned from. We are all committed as a region to get to that next phase where we start being recognized as people on this list.”

cwilliams@detroitnews.com