MEMPHIS CHECKS MANY BOXES BUT IS STILL A "LONG SHOT" IN THE AMAZON HQ2 BID
With Amazon’s highly-publicized search for a second headquarters, 50 cities across America – including Memphis – took their best shots at making their pitch to be the chosen one for the e-commerce giant’s new campus. FedEx, affordable living and an upshot in amenities over the past few years are positives in the Memphis column. Crime statistics, high poverty rates and the lack of a strong technical workforce are significant hurdles.
What are Memphis’ chances? According to University of Memphis’ Dr. John Gnuschke, “a long-shot, but longshots come in.”
As part of its proposal, Memphis offered a total $60 million in cash incentives if Amazon agrees to build a secondary headquarters in the city.
Amazon plans to begin constructing phase one of its second headquarters, dubbed HQ2, in 2019. Valued at $5 billion, the secondary headquarters will cover 8 million square feet. The new campus will employ tens of thousands of executives and supporting staff.
“The addition of Amazon would be a tremendous shot in the arm for Memphis. It would be the kind of stimulus that we absolutely need. And it would be the largest addition to our economy from any single business ever,” said Dr. John Gnuschke, director of the Bureau of Business and Economic Research at the University of Memphis.
For a little perspective, during the 1990s – admittedly, a better economic time for Memphis – there was an average of 10,000 jobs added per year. Since 2000, growth has been anemic, according to Gnuschke.
“We’ve had pretty much 17 years of limited job growth. So, if you are talking 50,000 jobs – that is five years’ worth of growth,” said Gnuschke.
There are currently around 650,000 jobs in Memphis. The addition of Amazon would give Memphis a 7.5 percent boost, labor-wise. It would also employ thousands of white-collar workers eager to fill well-paying positions. Cities submitted their final applications to Amazon through October 19.
On October 3, the Memphis City Council voted to offer a cash incentive of up to $50 million. The city will give Amazon $5,000 over a 15-year period for each job created.
In addition, the Economic Development Growth Engine for Memphis and Shelby County (EDGE) was authorized to offer Amazon a tax break to build its new headquarters. The authorization provides a 20-year pay-in-lieu-of-taxes or tax-increment financing incentive. The board can seek state approval to extend Amazon’s incentive for an additional 10 years.
The city will also commit a $10 million investment in public transportation, the airport and workforce readiness efforts.
Memphis isn’t such a far-fetched choice, either. Relatively cheap Downtown property, an intermodal hub, amenities, affordability; a lot of requirements on an Amazon checklist could be crossed off.
“I think the second headquarters is all about adding capacity for growth. They can’t do that in Seattle. They talk about developable space. That’s one thing Memphis has in abundance. Amazon wants to be in an urban space, an urban environment. And we have plenty of space Downtown to accommodate them,” said Gnuschke.
Additionally, with the high cost of living in Seattle, the site of Amazon’s current headquarters, it’s become increasingly difficult to draw young talent, which is possibly one reason why Amazon CEO Jeff Bezos is opting for a new location.
“From an employer perspective, one of the greatest things Memphis has to offer is the quality of life. Having lived in N.Y. and L.A., I can honestly say it’s some really nice and easy living here. The cost of living is obviously cheaper,” said Meg Crosby, principal consultant and co-founder for PeopleCap. Her practice provides worker-centered human resources consulting to businesses.
As a former employee of tech giant Google, she has insight into the plight of many seemingly well-compensated workers in tech-established locales.
“I spent some time in San Francisco recently; the poverty level in the Bay Area is a six-figure salary. It’s incredible how difficult it is for businesses to operate in that kind of environment. Starting salaries have to be at least that high, or people can’t afford to live there,” said Crosby.
That wouldn’t be the case in Memphis. Instead of bunking with three roommates in a downtown studio apartment, one could afford a luxury apartment on the Bluffs, or an expansive ranch-style home in a well-heeled East Memphis neighborhood.
There’s plenty to do, too. Memphis in May, the Grizzlies, University of Memphis Sports and Levitt Shell, for example, draw crowds.
“We have a ton of amenities now. The city’s core has improved dramatically over the last 10 to 15 years. We have seen the redevelopment of Overton Park, Overton Square, and Crosstown has come online. Tiger Lane, the Kroc Center – we just have a lot of stuff going on right now,” said Crosby.
And there’s still room for improvement. That’s part of why Crosby thinks Memphis could be appealing to the types of employees Amazon would look to recruit.
“We are kind of a ‘big small town,’ and what I mean by that is we’ve got a close network of folks who make it easy to find what you need if you want to get something done. If you want to get involved in something, it’s really easy to do that here. To have an impact on the city, things like that really appeal to a younger generation.”
In many wealthier towns, avenues to change can be harder to access. Sometimes, those routes are difficult to navigate and guarded by well-established interests.
“One of the things my Nashville friends talk about is that you have the feeling that Nashville is already done, but Memphis is a work-in-progress. So, there is still room to have an impact,” said Crosby.
In the world of the flow of goods, only a few spots in the U.S., like Long Beach, Calif., with its constant flow of Asian-made products through its port, see more action than the FedEx airstrip. That nugget alone could theoretically sway things in Memphis’ favor.
“The quality of air service that you can get out of Memphis, whether Amazon flies its own planes or uses FedEx, is certainly better here than almost any other place,” said Gnuschke.
Any fair assessment of Memphis’ chances needs to examine the city’s shortcomings as well, and poverty glares as Memphis’ most persistent burden.
If you were to take a class-based flyover of Memphis, a pattern of gentrification, renewal and shrinking pockets of need would emerge. This strip runs eastward from the Bluffs to the suburbs. It’s sandwiched by swaths of poverty and long-term lack of access to capital in North and South Memphis. Areas of endemic poverty generally act as Petri dishes for crime. These are no different.
“A big challenge is some of the quality of life issues. We have a substantial crime rate and a substantial poverty problem,” said Gnuschke.
Currently, the city’s overall poverty rate is 26.9 percent. The national rate stands at 14 percent. Even worse, Memphis’ child poverty rate is at a staggering 44.7 percent.
Things are better in terms of some crime statistics. Last year, 228 homicides were recorded, according to The Commercial Appeal’s homicide tracker. So far, 167 have occurred this year. It’s down 25 from this time last year.
Still, Memphis’ viability is being damaged. Business-friendly publication Forbes recently rated Memphis the fourth most dangerous city in the U.S., behind Detroit, St. Louis and Oakland, CA.
While it’s hard to argue with statistics, Crosby believes media plays a role in perpetuating Memphis’ bad reputation.
“We need to invest in our reputation. Because of crime statistics and how local networks lead with crime every night, we need accountability for what this does to the psyche of our city and to our reputation, for people looking at Memphis as a place to move.”
Other cities have faced similar problems. New York City used to have an out-sized reputation as a crime capital. Of course, Memphis doesn’t have the resources or capital of a NYC. Yet, if a large corporation were to locate a second headquarters in town…
“All of those could be helped if you attracted Amazon, but they are barriers to our success,” said Gnuschke.
Outreach has been made to put a best foot forward. Local boosters launched the #MemphisDelivers campaign across Oct 11 to 19 to grow support for the effort to woo Amazon. In addition to digital outreach, the Big River Crossing on the Harahan Bridge was lit up “Amazon” orange to highlight the effort.
“We saw an opportunity and had great faith in our city – in businesses, organizations and individuals that are interested in the growth and welfare of the city. Basically, we put out an invitation to show their support and catalyzed that effort with the Memphis Delivers hashtag,” said Doug Carpenter, founder and principal of DCA, a creative communications consulting firm that lead the campaign. “And we got great response.”
#MemphisDelivers was used across Instagram, Twitter, and Facebook. The potential Twitter reach (calculated by DCA by adding up all the followers of each account that used #MemphisDelivers) was 2,036,759 unique users.
With only a week’s time to galvanize support for Memphis’ bid to Amazon, DCA enlisted support from many local organizations including Choose901, I Love Memphis Blog/Memphis Convention & Visitors Bureau and the Downtown Memphis Commission, to name a few. It was a 100 percent social media, online outreach effort.
“As far as the information, we wanted to have it live in the world online so that it’s available for folks to find it under the #MemphisDelivers. Hopefully, Amazon is one of those folks,” Carpenter stated.
Regardless if poverty, crime, or some other stumbling block ultimately sink Memphis’ chances, Gnuschke believes Amazon did the city and other communities a favor.
“Amazon has given us a road map to the future, and whether we win or lose, we need to follow that map.”
The “road map” is a list of expectations Amazon has for a prospective home for the campus. It includes a quality labor force, ties with a strong university system, good transportation – not only air, but public - good quality of life and a host of other factors.
“If we follow the map, we can begin to build a technical labor force that is high-quality. At first, you begin to train people for other areas and subsequently you begin to attract them. Ultimately, you’ll begin to attract employers to Memphis.