Amazon swallowed Seattle. Detroit could be next 

In its first home, Amazon is a polarizing presence blamed for exacerbating income inequality and housing prices

click to enlarge Turn that smile upside down: In its first home, Amazon is a polarizing presence often blamed for income inequality, soaring housing costs, and gridlocked roads. - COURTESY PHOTO
  • Courtesy photo
  • Turn that smile upside down: In its first home, Amazon is a polarizing presence often blamed for income inequality, soaring housing costs, and gridlocked roads.

Aerial shots of the Detroit River and the Ambassador Bridge. Shiny new cars on display at the auto show. A freshly assembled-in-Detroit Shinola watch. A trolley crawling up Woodward, where it will ultimately turn around within three miles.

The images laid over a revved-up beat in a video released by Dan Gilbert aim to showcase what the Motor City has to offer Amazon as the e-commerce giant mulls where to land its second headquarters — a $5 billion investment that will employ up to 50,000 people. From the looks of it, a "Super Bowl"-like bid committee made up of Gilbert, and Detroit and regional officials is touting an international border crossing, and — we guess — innovation and public transit. At the end of the 30-second spot, there appears a movie trailer-esque tease: "The story begins 10.19.17."

At long last, the start of this "story" has arrived. Dozens of cities across the U.S. and Canada are expected to have submitted their pitches for "Amazon HQ2" on or by this fateful day — a milestone in what has thus far been a wild six weeks of speculation since the company kicked off a competition of historic significance.

As of this printing, the specifics surrounding Detroit's bid were unclear — though officials have said they envision a series of Amazon buildings woven into Detroit's downtown, along with possible regional sites to offer the up to 8 million square feet of space the company says it will need. The bid was expected to include Windsor, though officials hadn't indicated that a satellite site would exist there.

Although visuals of vacant land are absent from the video, Gilbert and Detroit Mayor Mike Duggan have described the city's ample space as setting it apart in the race for Amazon HQ2. Detroit is also the only city in the running with an international border crossing.

No city will be able to "check off all of Amazon's boxes" journalists and experts have said, which means the competition will boil down to which characteristics the corporate giant decides to prioritize. Metro Detroiters have been abuzz for weeks trying to answer this: Will the company overlook Detroit's abysmal public transit system and schools for bountiful land near an urban core? Will the city's unique position near Canada be enough to set it apart from the 19 other places deemed serious contenders? What of the state's efforts to expand STEM education, and Detroit's close proximity to the University of Michigan and the engineering and computer science talent it produces?

Strangely absent amid this flurry of desperate hope and speculation has been any real criticism of Amazon's effect on its first home. That's a head-scratcher for many Seattleites, who know Amazon to be a polarizing company often blamed for rampant inequality, skyrocketing housing costs, gridlocked roads, and tough working conditions. There, news of the coming HQ2 has, according to at least one media outlet, prompted residents to examine one central question: has the company been a net positive for Seattle, or has its presence caused more harm than good?

So before we collectively cream our jeans over the possibility that this mammoth corporation could put down stakes here, let's take a look at some of the possible repercussions of putting an Amazon within Detroit's borders.

Gentrification

In 2010, Amazon moved its headquarters into Seattle's South Lake Union neighborhood, setting into motion a housing shortage that has led to skyrocketing costs.

According to Seattle's Office of Planning and Community Development, by 2015, the number of jobs in the city had increased almost twice as fast as the number of homes, pushing the average rent for a one bedroom up 35 percent. Today, average rents in the city are nearly 50 percent higher than when Amazon first arrived near the city center, according to data from Zillow.

With the pay of jobs apparently unable to keep up with cost-of-living increases, Seattleites have grown increasingly rent-burdened. One report found that, as of last year, nearly half of Seattle renters were spending more than 30 percent of their income on housing.

"There has been huge displacement to the suburbs and exurbs as a result of the soaring housing costs," says Spencer Cox, who has been researching Amazon's impact on Seattle's communities as a PhD student at the University of Minnesota. "That becomes an issue because [vulnerable populations are] being pushed outside the progressive hub into areas that don't have the same social services, transportation, and kind of baseline support that a city like Seattle does."

While displacement to the suburbs is less of a threat in a city the size of Detroit, vulnerable populations have already been pushed away from the city services and amenities available in the greater downtown amid the more modest redevelopment spurred by Quicken Loans and Dan Gilbert's family of companies. In Detroit, the effects of such displacement are compounded by the city's poor public transportation and high car insurance rates. And they would be further amplified if major steps aren't taken to address what housing advocates have described as a looming affordability crisis.

A study commissioned by the city last year already found a shortage of housing options for the city's lower-income renters. Partly to blame is a decade-long foreclosure crisis that has turned the tide of home ownership and left a greater need for rentals. Housing advocates say affordable housing options are also expiring faster than they're replenished or preserved.

But at least one urban development expert says the nature of Detroit's Amazon bid — which could include sites in various locations, coupled with the city's glut of vacant land — could help Detroit avoid the displacement Seattleites have suffered in the wake of Amazon's move to that city's center.

"There's no real downside to Amazon coming here if it's handled properly," says Wayne State University professor of development John Mogk. "You can't have redevelopment of a city without gentrification, it just doesn't happen. But it's the government's job to ... protect the vulnerable classes of people who may be adversely impacted if a city's going to be redeveloped."

Mogk says the city has tools with which to address the displacement issues that may arise if Amazon selects Detroit as its second home. Just as vacant land can lure a large corporation seeking to create an urban campus, he says vacant land — if developed properly — can help soften the blow of gentrification.

Jobs

There's no doubt 50,000 jobs would be huge for Detroit, in terms of income taxes generated (if Amazon doesn't siphon them to develop new buildings) and property taxes generated by people who move to the city. To put it in perspective — those jobs would represent a more than 20 percent increase over the 240,000 jobs the city has now.

But, as it has in Seattle, Amazon is expected to recruit talent from far beyond the borders of the city where it puts down stakes. Meanwhile, with the salaries for those 50,000 employees expected to average more than $100,000 a year, most of the roles will likely go to college-educated workers. When considering the fact that only 13 percent of Detroiters have a bachelor's degree or higher, it becomes apparent that many of the better-paying positions will go to people around the region or country. Detroiters would mostly find themselves eligible to fill temporary construction jobs or support staff roles for the company (think security guards and janitors).

But if Amazon's operations in Seattle are any indication, Detroiters who wind up occupying those lower-level positions could still find themselves struggling to make ends meet, particularly if the company drives a citywide cost-of-living increase.

In April, the more than 800 security workers who guard Amazon's headquarters held a protest to get the company to adopt a contractor policy that would give them a path to form a union. At issue were stagnant wages that in some cases were so low employees had to work two jobs. Amazon has, in fact, fended off many advances by organized labor.

Criticism of how the company treats workers extends beyond the guards for which it contracts. Numerous articles have portrayed the work environment in Amazon's warehouses as inhumane. People at the company's upper echelons, meanwhile, have described a workplace in which employees are encouraged to cut one another down and spend hours working nights and weekends.

Inequality

The Detroit Future City planning non-profit has described growing the middle class as critical to any true economic recovery for the city. But Seattle has seen its middle class shrink since Amazon, its largest company, began its rapid expansion in 2010.

"Amazon offers really high-earning jobs and really low-paying jobs and there's not much in between," says Cox. "If you look at Seattle ... the middle class has basically disappeared, and that's quite indicative of the type of impact Amazon would have."

According to Census Bureau data pulled by the Seattle Times, between 2010 and 2015, the number of Seattle residents who earned more than $75,000 grew at a rate 11 times faster than those earning less.

That's a particularly worrisome trend for a city like Detroit — the poorest major city in the country, where 36 percent of people live below the federal poverty line of $12,000 for an individual. Even without a corporate giant like Amazon and its average $100,000-a-year salaries within its borders, Detroit has already seen a widening of the gap between the rich and poor as a modest resurgence leaves people behind.

Detroit Future City CEO Anika Goss-Foster says while Amazon's 50,000 jobs are obviously enticing, "the devil is in the details."

"Those jobs would actually have to make sure that they offer opportunity and growth because what the trend we're seeing is that Detroiters — African-Americans — are not growing in the jobs they have," she said. "We don't want another company that would come in and contribute to that."

Tax breaks

Last week, a U.S. city did the unthinkable and took a stand against Amazon. Not only did San Antonio take itself out of the running for HQ2, officials penned an open letter to Amazon CEO Jeff Bezos saying the city wasn't willing to fork over the exorbitant tax incentives it would likely require to lure the e-commerce giant. Officials also said they were only interested in attracting a company that could be a good "corporate citizen."

"Does it create good jobs? Does it offer good benefits for employees? Are there opportunities for small businesses?" read the letter from Bexar County Judge Nelson Wolff and Mayor Ron Nirenberg.

The pair suggested Amazon already knows where it wants to put its second headquarters and is orchestrating a race to the bottom through the highly-publicized competition that's playing out.

"This public process is, intentionally or not, creating a bidding war amongst states and cities," said Wolff and Nirenberg. "Sure, we have a competitive tool kit of incentives, but blindly giving away the farm isn't our style."

The pair speculated that the incentives needed to lure the company would exceed the $3 billion Wisconsin recently agreed to give Asian electronics manufacturer Foxconn.

Detroit's bid committee and state officials have not indicated how much money they would be willing to throw at Amazon to get it here. But city and state leaders have given citizens plenty of evidence that they're just the type to "give away the farm." A recent Upjohn and Pew Charitable Trusts study found that Michigan provides businesses with more corporate welfare than most states. In the city of Detroit, handouts to developers have been the subject of much contention. About a third of the Little Caesars Arena, for instance, will be paid for with public money.

Amazon is expected to be looking for a state and city that can offer plenty of handouts, just as it was looking for a low-tax environment when it set up its first headquarters in Seattle.

"Their tax base is one of the most regressive in the country because it's based in sales and property rather than income and corporate taxes," said Cox. "As a result Amazon produces this intense (economic) polarization, but then doesn't pay their fair share or adequately seek to address those major contradictions."

As we learn more about Detroit's bid, Goss-Foster is hopeful that regional leaders will carefully calibrate their approach to ensure it benefits the middle class.

"I do think that there is an intentionality that has to take place," she says. "It can't just be about the jobs alone, I hope somebody is looking at the trends."

But with Detroit likely the most job-needy major city in the running, it has been difficult for the public to keep the bigger picture in mind. And it may prove even more difficult for the city's political and corporate leadership.


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