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How Amazon could affect Pittsburgh

After months of speculation, Pittsburgh has been announced as one of Amazon’s top 20 finalists for its second headquarters.

“Amazon settling in Pittsburgh would signal to other companies that this is a good area to do business in,” said Andrew Herr, associate professor of economics.

“It then becomes more likely for other corporations to settle in Pittsburgh.”

Amazon announced in Sept. 2017 that they would be building a second headquarters, and opened up applications for cities to be considered as the development site.

238 cities in North America applied. Each needed to submit detailed information, including its metropolitan area population and its perceived ability to attract and keep employees, according to The New York Times.

Amazon has stated that they will bring in 50,000 high-paying jobs and

$5 billion in investments to the winning city.

Herr explained that the city of Pittsburgh has seen growth of over 20,000 jobs in the last year. He believes that Amazon’s prediction of 50,000 jobs for the winning city would greatly benefit Pittsburgh from an economical standpoint.

Herr also believes that an Amazon headquarters in Pittsburgh would benefit Saint Vincent students.

“This would offer job opportunities for Saint Vincent students looking for career-type jobs with an international company,” Herr said. “The types of options would be huge for the college.”

Opponents of Amazon opening a second headquarters in the area argue that Pittsburgh does not have the housing capabilities to support a company of that size. Herr explained the possible effects on Pittsburgh’s housing market.

“Amazon would likely recruit urban dwellers, and those people need to live somewhere,” Herr said. “Pittsburgh would have to look at their housing options, and think about where we would put all these people.”

Herr also shared concerns about Pittsburgh’s current infrastructures, and whether the city is able to handle such an influx of traffic on its roads.

Herr’s greatest concern is that it is difficult to make any sort of economic

impact predictions, as Pittsburgh’s bid for Amazon has not been made public.

“From a negotiation standpoint, I understand why the city needs to remain silent. But with all these cities bidding, Amazon will choose the best deal. Even with all these benefits, it’s still possible to pay too much,” Herr said.

Herr referred to the economic concept of the “winner’s curse.”

“When lots of people bid on one thing, the highest bidder will usually over bid, and offer more than it is actually worth,” Herr said.

Herr said it is possible that the city would regret giving so much to Amazon in the form of tax-incentives and infrastructure spending.

Amazon’s initial application for cities asked for each city’s government it negotiates with to consent to a non-disclosure agreement. This document means that taxpayers in each city will not know what tax-incentives have been offered to Amazon, nor how much their elected officials have bid on the site.

Newark, New Jersey is the only city whose tax information has been leaked to the public. The city is offering Amazon $7 billion in tax incentives.

Pittsburgh’s bid has not been made public, though a state judge ordered on Jan. 24 that the city must release the bid and all emails pertaining to it within 30 days.

It is projected that this would drastically decrease Pittsburgh’s chances of landing the second headquarters.

Even without knowing of the private amount of tax-incentives offered, Herr believes that the city would be better off from a tax perspective.

“At the end of the day, property and corporate taxes would give Pittsburgh a boost in tax revenues that would only grow as those tax-incentives expire,” Herr said.

Herr said he was not surprised to see Pittsburgh on Amazon’s top 20 list, but would also not be surprised if the city did not make the cut.

“Overall, it’s good for the city to think about why we would be a good fit, to help us evaluate how we could attract other companies to our area,” Herr said.

Speaking to the possible cultural impacts on the city, Mark Abramovic, instructor in business administration, detailed the cultural revitalization of Pittsburgh that he has witnessed first-hand.

Abramovic explained the city’s shift from a coal and steel industry, to the energy hub it is becoming today. In the early 1980’s, Abramovic was a witness to meetings and presentations from leaders in Pittsburgh who wanted to resurrect the city following the collapse of the steel industry.

“This group ensured that the future of the city would include financial services, biomedical research, entrepreneurial developments, and artificial intelligence that would transition the it from blue collar to high-tech,” Abramovic said.

He explained that this project helped to create the ‘new’ Pittsburgh that exists today.

Now, Abramovic said that Pittsburgh is currently undergoing huge developments in the energy industry. The industry is currently building energy hubs, called cracker plants, along the Gulf Coast, and has begun building in the Western Pennsylvania area.

“If these companies are already coming in, it makes sense for Amazon to want to be around the action,” Abramovic said.

Abramovic speculates that an increase in new companies would create competition for existing Pittsburgh corporations, and affect the workforce in the city.

“This would increase competitions for many jobs, especially all business-type jobs. As demand goes up, starting salaries would also go up in the area. However, so would the demand for everything else,” Abramovic said.

Abramovic predicts an increase in the cost of living in Pittsburgh, which has been historically low when compared to other cities of the same size.

He feels that housing prices would also increase.

Culturally, Abramovic foresees an increased interest in the entertainment options that Pittsburgh has to offer.

“An increased amount of disposable income for residents would elevate the quality of our entertainment, restaurants, and other recreational activities,” Abramovic said.

Abramovic mentioned Amazon’s employees would also be interested in the quality of Pittsburgh school systems, healthcare options and transportation.

He feels that an increased feeling of crowdedness would be a big issue for Pittsburgh residents, and a con for the city.

“It would take years for current residents to assimilate to the influx of crowds. I believe people would become frustrated with the change in traffic patterns and transportation options,” he said.

Abramovic said that Pittsburgh has an issue with mass transportation that may be a problem for Amazon employees.

“Transportation could be a downfall at first, but I don’t believe it would be as important to the company employees as the other aspects,” Abramovic said.

While there are still questions regarding Pittsburgh’s bid, Abramovic believes that if the city does release the documents, they will be out of the running for the headquarters.

“I think if other cities are willing to comply and keep the bids private, Amazon will move on to one of those and drop Pittsburgh from the race,” Abramovic said.

Cities such as Boston, San Jose and Raleigh, N.C are also being considered. Final selections are believed to be being made in person, with Amazon employees visiting each city in the coming months.

Photos: Darrell Sapp/ Pittsburgh Post Gazette

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