A consultant delivered a sobering message in late September to cities hoping to lure Amazon’s second headquarters and its 50,000 high-paying jobs.
The faster Amazon hires workers, the better the odds governments can recoup the incentives they have put on the table. But a faster pace of hiring risks driving up housing costs and disrupting local economies, according to an analysis from Regional Economic Models Inc. or REMI, a firm out of Amherst, Mass.
“The REMI team concludes that it is in the state and local community’s favor to work with Amazon to negotiate an incentive packaging that would encourage Amazon to hire as many employees as possible, within as short of a time frame as possible,” the company said in its analysis, which The Denver Post and Denver 7 obtained from the state’s economic development office in an open records request.
A fast hiring scenario, while good for government coffers, would push up home prices 6 percent a year and lift wages and other costs existing businesses must pay. Metro Denver, even without an Amazon, is already struggling with shortages of skilled workers and homes.
“There will be upward pressure on wages in management jobs and across the economy,” REMI said.
Amazon on Sept. 7 put out a request for proposals for a second headquarters employing up to 50,000 workers earning an average wage of around $100,000 a year. Colorado submitted its proposal, one of 238 Amazon received, on Oct. 18.
Although Amazon said hiring at HQ2 could occur over 15 years, REMI advised governments to structure incentives to accelerate that timeline as much as possible. REMI provided the report to officials from Colorado and other states who participated in a webinar on submitting bids for HQ2 in late September.
If Amazon hired all 50,000 workers in the first five years of a new campus, state and local government revenues could jump $12.9 billion over a 15-year period. But stretch that hiring over 10 years, and additional revenues drop to $8.7 billion, according to rough estimates from REMI.
And if Amazon took a slow approach, and only hired 2,500 workers in the first five years, then governments could expect to recoup $869 million.
Several economic development groups in the region paid $150,000 in 2013 to retain REMI and access its high-powered computer model, which they have used to analyze the economic costs of various ballot initiatives.
REMI’s webinar, called “Amazon HQ 2.0: At What Price?,” also passed on a warning from former Massachusetts governor Michael Dukakis to not get carried away.
“I am strongly against what is now going on in the frenzy to land these outfits, and I simply wouldn’t do it when I was governor. It’s a racket and a lousy way to try to build a state economy,” Dukakis wrote in an email that REMI shared with clients.
