http://ottawacitizen.com/opinion/columnists/reevely-dont-let-amazon-fever-cost-us-billions
Reevely: Don't let Amazon fever cost us billions
Ottawa has begun plotting its pitch to Amazon to put a giant new headquarters here, a task Mayor Jim Watson concedes might be beyond us.
“I’m realistic. This is an uphill battle for us. I’m not thinking it’s anywhere near a slam dunk. But my understanding is they said ‘North America’ and they meant ‘North America’,” Watson said, anticipating the first conference call Wednesday of the city’s “Amazon task force.”
A week ago, Amazon.com Inc. announced its intention to open a major office, the equal of its Seattle home base, in another North American city, and invited governments to submit bids. That a company could treat governments as supplicants like that is a sign of just how gigantic a force Amazon is. It’s best known as an online retailer. It’s also the world’s biggest cloud-computing vendor, supplying servers in its monster data centres. It popularized e-books. It sells its own line of consumer electronics. It produces and streams TV shows. It just bought Whole Foods.
Its stock is worth $475 billion. It’s turning profits for the first time after years of not doing so only because every time it was about to, chief executive Jeff Bezos barged the company into some new industry. Amazon is so big it’s effectively filled up Seattle and needs to colonize somewhere else.
The key question is how much money governments are willing to throw at Amazon to attract it. Ontario cities aren’t allowed to subsidize businesses directly. Ottawa or Toronto could make a deal for land, build infrastructure and do other things around the edges, but straight-up payments are the province’s and federal government’s business.
In short, how many of the benefits of having Amazon here are we willing to give right back to Amazon?
“The province hasn’t decided what they’re going to offer,” Watson said, but it’ll be something. “They’ve offered the auto industry — and other industries — support, in terms of loans and grants, in the past.”
Premier Kathleen Wynne named Ed Clark, the former TD Group chief executive to whom she turns for high-profile business advice, to quarterback Ontario’s response.
“I had a very good conversation today with Ed Clark,” Watson said. “I let him know that my desire is to ensure that the province remains site-agnostic, so that they’re not picking one community over another, and he agreed with that.” So no assuming Toronto is the only possible Ontario destination.
An associate deputy minister in the finance ministry is in on the pitching, too, Watson said.
Because, of course, that’s where they keep the money. The obvious comparisons are to a $220-million subsidy Ontario gave networking-hardware maker Cisco to hire 1,700 people, and $264 million it gave videogame studio Ubisoft to hire 700 people. The payments, and the hires, are spread out over years. We love the “jobs of the future” here, though the auditor general has said the actual return in economic growth on those subsidies is all but impossible to determine.
Those payments average out to about $200,000 a job. Proportionate subsidies to Amazon would amount to $10 billion. It might not take quite that much — Wisconsin is luring a $10-billion, 13,000-job Foxconn screen factory with the promise of $3 billion in tax breaks — but that’s the league we’d be playing in. The provincial government’s “jobs and prosperity fund,” its main subsidy tool, only has $270 million a year of taxpayer cash to dole out. That used to seem like a lot.
But in the offing is this irresistible prize of a $5-billion construction project, a workforce of 50,000 well-paid employees and an entry on a list of high-tech centres alongside Seattle, Redmond, Cupertino, Menlo Park, Mountain View.
“It’s such an overwhelming prospect,” Watson said. Landing Amazon would be a big deal for any city; for one like Ottawa, it would be defining. However long the shot, everybody who can take one will. One plausible theory is Amazon already knows where it’s going — Chicago, Atlanta, Detroit, maybe — and is having a bidding war to get the best deal. Dozens of urban centres can meet Amazon’s stated requirements of a million-strong population, on-site mass transit, an international airport and ready access to a major highway, and they’re all dancing for Amazon’s board.
Ottawa gets onto the floor, barely. We hit the population count if we include Gatineau. We have an international airport, though a lot of international destinations require a hop to Toronto or Montreal first.
Watson argues the strength of Canada’s tech sector should make north-of-the-border bids appealing anyway. Ottawa’s growing expertise in self-driving vehicles might be a selling point. But our current tech workforce is about 77,000 people, so most of Amazon’s hypothetical new hires would have to move here.
Unless we somehow coughed up LeBreton Flats or CFB Rockcliffe (improbable, given all the planning that’s gone into both places), suitable land here would be in the suburbs. Assuming busways don’t turn Amazon’s crank, we’d have to built light rail to Kanata or Barrhaven much sooner than we’ve planned, or extend it deeper into Orléans than we intend.
Ottawa would have to redesign itself to make room and Ontario would have to remake its budget to pay for it. Amazon would be a heck of a prize but let’s keep our wits about us.
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