With the prospect of an estimated $5 billion in capital investment and 50,000 jobs paying an average of $100,000, suitor cities are lining up to woo Amazon’s HQ2.
Pittsburgh is among those scrambling to assemble its bid to be the home of this unprecedented corporate expansion of more than 8 million square feet of office space, which would be more than double the size of any other urban corporate headquarters in the United States (not including Amazon’s 33-building campus in Seattle).
Following the company’s Sept. 7 request for proposals (RFP), Mayor Bill Peduto has said he anticipates city government and private entities will invest at least $248,000, and possibly much more, to shape Pittsburgh’s proposal for the headquarters’ location, amenities and incentives. The RFP assumes applicants will include a generous allocation of incentives to sweeten the deal, and Amazon indicates those additional incentives will be among the “significant factors in the decision-making process.”
This comes at a time when discussions about inequality and Peduto’s own campaign to build a “city for all” has been complicating Pittsburgh’s many accolades as a “best place to live.” From 2010 to 2015, median wages increased by 8 percent among whites in Pittsburgh; among blacks, they dropped by nearly 20 percent. One child out of every six in Pittsburgh lives in poverty.
So such a concerted and costly effort to attract a tech giant to the city raises questions about what kind of development project would in fact be suitable for all Pittsburghers. What are Pittsburgh officials factoring into their decision-making? And how much of a bride price is Pittsburgh willing to pay? If Amazon comes to one of Pittsburgh’s leading site candidates, the 178-acre Almono site or the 28 acres that once held the Civic Arena, how can Pittsburgh’s proposal ensure a marriage that encourages greater equity in those neighborhoods of Hazelwood or the Hill District, not less?
Any major corporate expansion or relocation in Pittsburgh, whether it’s HQ2 or a development project half its size, would impact the future of our city’s workforce development, housing market and infrastructure. The city’s HQ2 proposal could determine the character of that impact.
Presley Gillespie is president of Neighborhood Allies, a self-described “unique community development partner” that provides development funding and consultation. He weighed in on the city’s bid for the headquarters.
“We believe the Amazon HQ2 RFP response provides Pittsburgh with a great opportunity to systematically address racial inequities and build a stronger and more inclusive region,” he said in a prepared statement. “The evidence is clear that the benefits of new growth and development will not automatically trickle down to poor and working-class residents; in fact it could harm them.”
Amazon gave cities six weeks to put together their proposals; they’re due on Oct. 19.
Amazon’s HQ2 could enable Pittsburgh to capitalize on a burgeoning scientific and technological ecosystem that, according to a recent Brookings Institution study, has “not yet translated into broadbased economic opportunity or growth.” In Oakland in particular – home to Carnegie Mellon University, the University of Pittsburgh and UPMC, among other institutions – the study says the city could do a much better job linking advanced research to industry in the region. HQ2’s 50,000 positions could help do this, drawing executives, software engineers, accountants and lawyers from around the world to buoy area industry, while competing with local start-ups and other companies to win Pittsburgh’s highly skilled workers.
In order for households at all income levels to benefit from Amazon’s arrival, Brookings fellow Scott Andes advocates for identifying occupations within these sectors and institutions that don’t require a four-year degree and then aggressively recruiting within low-income neighborhoods to fill those positions. By way of example, he cited the field of health care where a majority of positions in Pittsburgh don’t require a four-year degree. In the case of HQ2, that “linking” of workers with jobs could mean preparing and supporting not only Ph.D. holders and software developers, but also the many administrative and service sector positions necessary to support this work.
Andes sees HQ2 as an opportunity for the city to articulate a strategy for overall workforce development, “so on day one Amazon can come and there will be a pipeline from many of the neighborhoods that haven’t traditionally been involved. That’s going to be good for Amazon ... And it’s good for Pittsburgh because it brings community members who’ve been left behind into the new economy.”
Of course, those HQ2 employees – most of whom would still likely be new to Pittsburgh – would need a place to live.
“If the region succeeds economically, housing prices are going to go up,” said Randy Walsh, associate professor in economics at the University of Pittsburgh. If Pittsburgh did secure HQ2, he said, “Yeah, I guess there’ll be some upward pressure on the housing market, right? And I guess that that will lead to some increase in gentrification, but anything we do [to improve the job market] is going to do that.” In booming Seattle, home prices and rental rates are now rising faster than anywhere else in the country. In 2016, online real estate database Zillow found that rental rates had jumped nearly 10 percent in 12 months.
Walsh emphasizes that Pittsburgh’s house and rent prices remain low compared to other cities. Meanwhile, Pittsburgh’s population has remained stagnant, lessening demand.
“Our whole mantra really is, ‘Development without displacement,’” said Sonya Tilghman, executive director for The Hazelwood Initiative. “Something like Amazon that kind of lands on your neighborhood could, without some deeper discussion with Amazon itself, make our jobs much more difficult.” The Hazelwood Initiative renovates older homes and sells them to low- and moderate-income buyers — former renters in particular — while working with current homeowners to maintain properties. Looking ahead, she’s concerned with helping households with Section 8 vouchers stay in the neighborhood as property values rise and fewer landlords accept vouchers.
Sabina Deitrick, co-director of the University Center for Social and Urban Research at the University of Pittsburgh, pointed out that Pittsburgh needs affordable housing policies. The city has “been building and built thousands and thousands of subsidized-market housing [units], and it has to develop an affordable housing program.” She cited inclusionary zoning policies (also referred to as inclusionary housing) that some cities use to require developers to build a portion of below market-rate units with any new project. This approach, she said, has successfully strengthened the affordable housing market in places such as Montgomery County, Maryland, where inclusionary zoning has generated more than 13,000 affordable housing units since the mid-1970s. Inclusionary zoning policies could ensure that HQ2 or any other corporate development add to the city’s affordable housing stock.
In May 2016, the city’s Affordable Housing Task Force recommended that larger developments receiving public benefits be required to include affordable housing units, commensurate with the amount of public subsidy they receive. They also recommended applying inclusionary housing laws that would require affordable units be included in every new development in strong market neighborhoods. Pittsburgh has not adopted an inclusionary housing ordinance. The task force reported the city has a shortage of roughly 17,000 affordable housing units.
All of the new HQ2 households, if Pittsburgh’s bid were to succeed, would need good infrastructure and amenities: efficient public transit and roads, an airport flying directly to Seattle and other major cities, digital connectivity, and plenty of retail and cultural offerings, not to mention lead-free water. The Allegheny County Airport Authority has announced a $1.1 billion airport renovation using no local tax dollars. But the Pittsburgh Water and Sewer Authority is struggling to ensure water safety and to replace outdated sewer lines. Further, bus routes maintained by the Allegheny County Port Authority are in constant danger of being slashed.
In Seattle, traffic has become infamously bad, and commute times have grown drastically. Infrastructure hasn’t kept pace with its development. So how might Pittsburgh fashion its HQ2 proposal, or a framework for any other future corporate development, to prompt systemwide investment in the city’s infrastructure — and not just in those neighborhoods with new headquarters or tech nodes?
Equitable Development: The Path to an All-In Pittsburgh — a 2016 report sponsored by PolicyLink, Neighborhood Allies and Urban Innovation 21 — calls for a more holistic approach that coordinates housing and transportation investments so that affordable housing is concentrated near dependable transit, enabling low-income residents and people with disabilities to “live in walkable, bikeable, transit-accessible communities.”
The City of Pittsburgh referenced this and two other reports on sustainable and equitable development in its own “request for expressions of interest” sent out on Sept. 21; the city is soliciting local companies and institutions to offer development partners and sites to be included in Pittsburgh’s HQ2 proposal, requiring that they show a “commitment to equity and inclusion, including connection with underserved communities and promotion of job growth.”
Measuring that “commitment” can be challenging. One of the other reports referenced in the city’s appeal is the October 2016 p4 Performance Measures Report, a framework for developing Pittsburgh equitably and sustainably through the four themes of People, Planet, Place and Performance. The p4 measurement tool scores development projects on a 12-point checklist and could help the city prioritize public financing.
“I can say that p4 standards of equity and inclusion will be part of the proposal,” said Tim McNulty, spokesman for the mayor’s office.
Closing the deal
These days, many corporate expansions or relocations involve incentives in the form of tax abatements, tax-increment financing, construction grants, land, fee reductions or other breaks. For example, the state of Pennsylvania is giving Shell $1.6 billion in tax incentives to build a $6 billion ethane cracker plant in Beaver County.
Subsidy-tracker Good Jobs First says Amazon has already garnered more than $1.1 billion worth of incentives throughout the country, including $22.2 million from the state of Pennsylvania.
Meanwhile, according to the think tank Commonwealth Foundation, Pennsylvania has, over the last 10 years, spent more than any other state on such “corporate welfare” – nearly $6 billion – while some question whether such subsidies have a significant return on investment, or instead deplete already tight government budgets.
From the community’s vantage point, “community benefits agreements” (CBAs) are increasingly being utilized to close on development deals. They’re negotiated to ensure private projects supported by public subsidies benefit the public through new amenities, living wages, housing and business opportunities. In 2008, the One Hill CBA Coalition secured a CBA that leveraged redevelopment of the Civic Arena site into a new grocery store and local jobs with higher wages.
Still, “negotiation project-by-project agreements is a time-consuming endeavor,” says the PolicyLink report. “Citywide policies can have a broader impact by providing developers with clear expectations and predictable costs while not requiring individual negotiations.”
A Pittsburgh 2.0 that benefits all
As Pittsburgh courts HQ2, any prenup-proposal that marries the city to the fate of such a corporate colossus will influence whether or not economic prosperity reaches everyone.
But Brookings’ Andes said he believes greater equity isn’t possible in the first place in a sluggish economy. “You have to have a growth platform,” he said.
“You really need an engine for growth before you can get the inclusion argument right — by right, I mean in a sustainable way that provides future [jobs] not just for unemployed workers today, but for their kids.”
Pittsburgh’s resurgent economy has been moving from steel to health care, technology and advanced manufacturing. Now, Andes said, is the time to ensure we move to greater equity, not less.
“Version 1.0 was creating the strength over a 30- and 40-year period that put [Pittsburgh] on the map for where the economy is going,” Andes said. “Version 2.0 will be connecting that to all communities.”
This story was fact-checked by Lindsay Patross.
The story’s author, Mark Kramer, is a freelance writer and creative writing teacher based in Pittsburgh. He can be reached at email@example.com.