Amazon ?? Chicago: The Drawbacks and Benefits

Amazon abandoned its plans to bring 25,000 new, high-paying jobs to Queens, New York as part of its storied HQ2 project. This opens the door for another tech hub to host the project. In early February, Gov. Pritzker held a phone call with Amazon executives to confirm his support for hosting the project in our state.

Making the decision to add a Brown Line crushing amount of people to our city should not be taken lightly. Taking the time to consider well-constructed, socially conscious arguments will prepare our communities to prosper for years into the future; I'd like to pull back some layers of the arguments against the project because some groups are apprehensive about inviting the e-commerce juggernaut to the City.

In this article, I will explain what I believe to be the benefits of Amazon moving to Chicago and juxtapose against those other perspectives. By no means will this be a comprehensive review of all the economic and social issues at play, after all, I am just a 26-year-old sitting at Starbucks. However, having these tough discussion early on will allow our beloved communities to prosper.

Housing Crisis in Chicago

Arguments against Amazon coming to Chicago start off by saying that the City is in the midst of a housing crisis and an influx of high-income people could lead to the end of many of Chicago's great neighborhoods and cultural hubs. The opposition of the project cites the gentrification of neighborhoods like Logan Square and Pilsen as prime examples of how newcomers with higher housing budgets can push out the existing residents. This effect is illustrated by the graphic on the right ??. Often as a city grows, wealth and power consolidate as lower-income families are pushed to the outskirts or surrounding areas of a city. Chicago's marginalized communities can be seen in red.

The housing issue was a lightning rod for activists and New York City Council reamed Amazon Officials on the issue, ultimately, forcing Amazon to abandon their plans. Some are saying that Chicago should deny the opportunity to host Amazon for the same reason, however, Chicago's housing crisis isn't the same scale or scope as those in New York.

NYC vs. CHI: What's the Difference?

1. New York and Chicago have two very different infrastructures.

New York City is widely known to be overcrowded and the stories rancid smells and mounds of garbage follow the city like a bad rash. It's a fact that the Big Apple suffers from poor city planning which is a side effect from being American's first and greatest metropolis.

Chicagoans, on the other hand, had a chance to rethink and reorganize their city plan after the Great Chicago Fire of 1871. The silver lining in this tragedy was giving the City of Chicago the opportunity to add alleyways for easy trash removal, a new sewer system for the safe removal of contaminated water, and new laws that required new constructions to be made out of quality materials like brick, marble, and limestone. While these new regulations after the fire did famously lead to some people and small businesses to be crowded out of the city center, it did also forge the well-organized and easy-to-navigate downtown district we love today.

Simply put, Chicago's infrastructure is built to scale. Chicago has uniquely wide streets and safe sidewalks for a modern marvel of a city. When compared to other American cities of similar size, has more space, lower traffic times, and is adaptable in accepting new influxes of people.

2. Chicago's housing cost is increasing at a slower rate.

A recent analysis of rent costs across the country conducted by ApartmentList.com found that New York's YOY rent index grew by 2.4% from 2018 to 2019 while Chicago's grew by only .9%. This index can be used as an indicator of how rent prices will continue to move in the future and with New York growth rate being nearly 3x that of Chicago's, low-income families in New York are at a much higher risk of displacement than in Chicago.

3. Chicago's population is decreasing while New York's continues to rise.

For 3 straight years, Chicago has experienced a decline in population and 2018 numbers are expected to follow the same bleak trend. According to data released by the U.S. Census Bureau, an estimated 13,286 residents left the Chicago metropolitan area in 2017, with 11,177 residents leaving in 2016 and 3,371 in 2015. Meanwhile, New York's population continues to grow at a steady clip.

As other cities have no trouble recruiting new citizens, Chicago may, and their housing costs and overcrowding issues will continue to lag behind the problems in coastal cities like New York, Los Angeles, and San Francisco.

Tax Breaks and Incentives: What is Chicago offering Amazon?

Many people opposing the plan say that Chicago will be giving all the potential tax revenue back to the company in the form of the incentives resulting in a "zero sum gain" so let's take a look at the incentives that were offered:

• Roughly $1.4 billion in state EDGE tax credits. The newly-revised program provides a 50 percent tax break for every job they create in Illinois.
• $450 million in site-specific infrastructure improvements that would come from the Illinois Department of Transportation, the Chicago Department of Transportation, the CTA and other agencies.
• $250 million worth of investments in education, workforce development and “Neighborhood Opportunity Funds” to make certain that all Chicagoans can qualify for the 50,000 high-end Amazon jobs and that businesses that spring up or move here to support Amazon locate in Chicago neighborhoods.
• $170 million in state sales tax breaks for building materials purchased by and new construction completed by “high-end businesses.”
• $100 million worth of free land which possible locations include the old Michael Reese Hospital, the old Post Office, or the Thompson Center.
• $60 million in property tax breaks through the city and county programs known as Class 7B and 7C.

No matter if Amazon comes or not, the incentives represent many investments that we should make in our people, city and communities. For instance, the $250 million planned for education, workforce development, and “Neighborhood Opportunity Funds" is already in progress and has helped to open healthy grocery stores on the South Side. This is an example of the additional opportunity and economic boom the City will experience in luring the headquarters to Chicago.

The City's offer carries some heft with a valuation of $2.25 Billion, however, no matter how lucrative our plan seems, it pales in comparison to other offers from places like Montgomery County, MD ($8.5 Billion) and Philadelphia, PA ($5.7 Billion), famously neared 10 figures to lure the project. Why would Amazon initially accept the smaller financial incentives from New York, NY ($1.5 Billion) and Crystal City, VA ($573 Million) instead? No one knows exactly why Amazon selected these locations but clearly, there is more at play than tax breaks and incentives.

The $1,600,000,000,000 Gorilla in the Room

The takeover of the American economy that Amazon has embarked on since its inception in 1994 is both alarming and unprecedented. Last year the company's valuation reach over one-trillion dollars. The capitalist in me would celebrate this as a clear inflection point in the US economy's supply and demand curve, however, there are a ton of implications that we should consider when allowing a behemoth like Amazon to effectively take over large sections of our logistics, retail, and entertainment industries. Many people intelligently mention the point that Amazon's online shopping business growth has led to the downsizing and closing of many brick-and-mortar retail businesses.

This is true more and more and it could have bad implication for business owners and entrepreneurs that aren't able to adjust. Also, what does this mean for all the real estate owners whose retail units lay vacant for months? How will they be expected to replace the income from the retailers that are electing to drop out of their leases? It may require a repurposing of some historical retail locations. However, I would suggest this may an opportunity for entrepreneurs instead of a downside. I won't go into the massive uptick of online entrepreneurs that sell goods on Amazon and the "foodtrepreneurs" that starting restaurants without rent or a food trucks but these individuals are destined to succeed in the new age economy. I know this is not an option for all the small business owners that have seen their businesses dwindle in the wake of e-commerce players Amazon but it could be an interesting and growing sector of our economy if we lean into these changes and meet them with the same tenacity we approach other social issues in Chicago. I believe would do better by asking ourselves: How can we create more technology jobs in Chicago? How can we prepare our city for the new economy?

A New Deal, A New City

No argument can be made against the fact that bringing 25,000 high-paying Amazon jobs would change the face of our city forever. We need to think hard about how we want our city to look and feel in 20 years. This project absolutely has the potential to displace families and whole communities; it's a side effect that we should seek to minimize through the strategic placement of the headquarters. City officials have pitched Amazon on currently uninhabited locations like the old Michael Reese Hospital, Post Office, Thompson Center, and other sites along a stretch of the Chicago River explicitly not historic neighborhoods like Logan Square, Lincoln Park, or even the South Loop. The locations that are being considered are historically reserved for industry and I believe having a tenant like Amazon move in would only add new life and economic energy to these otherwise desolate parts of our city.

The cities and economies that are doing the best around the world are investing heavily in their technology sectors. Because Chicago has some of the most world-class higher education institutions, we owe it to our skilled workforce to do everything we can to drive innovation within our city limits.

Bringing it Home

In a city with a dwindling population and nearly insurmountable financial debt, Amazon represents a bright light of opportunity and innovation. I believe most of the incentives laid out of Chicago city official represent benefits and opportunities to citizens of all wealth and education levels. The main point in this article is for us to continue to have intelligent conversations around the issues that may arise. Well-informed input should be added to the conversation early and often so we can find a way to encourage the growth of our great city experiencing possible plights like displacing communities, eliminating valuable jobs at small businesses, and adding additional strife to marginalized communities. That would be a very high price to pay for two-day shipping...

I'd like to thank Michael Walker for bringing many of these forward-thinking and socially conscious points to my attention. He's a great mind and an amazing ally for marginalized communities.