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Canadian cities jump at chance to play host to massive Amazon HQ

Amazon boxes are seen stacked for delivery in Manhattan, New York, U.S. on Jan. 29, 2016

Mike Segar/REUTERS

The mayors of several Canadian cities say they want to compete for an irresistible economic prize: The right to become the home of Amazon.com Inc.'s so-called second headquarters, a massive complex the company says comes with up to 50,000 jobs and more than $5-billion (U.S.) in investment over the next 15 years.

The Seattle-based online retailing giant announced on Thursday that it was soliciting bids from cities across North America to house what it calls its "HQ2." However, the odds of a Canadian city winning are low, some say, hampered by a shortage of skilled workers and less attractive government subsidies. Companies here also complain that money spent luring a foreign multinational could be better spent supporting smaller Canadian firms and startups.

Nonetheless, within hours of the Amazon announcement, the mayors of Toronto, Vancouver, Montreal and Calgary all declared that their cities would be great hosts for the tech giant. Ontario officials also said Thursday that high-tech centres Ottawa and Kitchener-Waterloo have been in touch with Queen's Park about throwing their hats in the ring.

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Canada's hopefuls will face extremely steep competition south of the border. Dallas, Denver, Pittsburgh, Baltimore, Boston, New York, Nashville, Cincinnati and even hurricane-battered Houston are all said to be already contemplating bids. And many U.S. jurisdictions have also historically been more prepared to dole out millions in subsidies and tax breaks than their Canadian counterparts.

Amazon's request for proposals for the project states that the winning city should have a population of more than one million, a "stable and business-friendly environment and tax structure," the ability to attract and retain technical workers and a site with public transit and close to highways and airports. But it also makes clear the company expects big government handouts, asking bidders to spell out all of their incentive programs: "The initial cost and ongoing cost of doing business are critical decision drivers."

Davin Raiha, an assistant professor at the University of Western Ontario's Ivey School of Business, warns that Canadian governments may not have the stomach to match richer offers from U.S. cities and states. But he adds that many studies suggest governments end up overpaying when they bid this way for investment.

Plus, Amazon is already quite practised at winning handouts in the United States, he said, garnering hundreds of millions in tax breaks in exchange for building distribution centres in Texas, for example.

"Amazon has a history of being able to extract a lot in subsidies in almost wherever they go," he said. " … I wouldn't bet on Amazon coming here. I doubt that the offers they will receive from Canada will be especially competitive compared to the ones they will get in the U.S."

Still, Ontario, for its part, has handed over cash to tech giants in recent years. In 2013, Premier Kathleen Wynne announced a deal that saw $220-million provided to Cisco Canada in exchange for a pledge of up to 1,700 new jobs.

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Brad Duguid, Ontario's Minister of Economic Development and Growth, says his government had given out $3-billion in various subsidies to businesses since 2004, resulting in $27-billion in private investment and 170,000 jobs.

He said his government was willing to put up significant subsidies if it meant Amazon would put its massive complex somewhere in the province: "You're either in the game of attracting these kinds of jobs, or you're not. … We're no stranger to this kind of competition."

The federal government was also expected to be involved. In a statement, Innovation Minister Navdeep Bains was noncommittal about providing subsidies for any Amazon bid, but appeared open to the idea.

"While other parts of the world are focused on building walls, Canada is focused on building bridges and opening doors. We are building the economy of the future and we welcome the opportunity to engage with our provincial and municipal counterparts to attract further investments and resilient jobs," Mr. Bains said.

Toby Lennox, CEO of regional economic development agency Toronto Global, likens the process to an "Olympic bid." He said Toronto should stress its innate strengths – such as its educated work force and vibrant city life – rather than focus on outbidding competitors with cash: "You can go and give them a gazillion dollars but it's not going to give them the talent that they need."

Some in Canada's tech sector warn that throwing money at a foreign giant would have a negative effect on smaller Canadian companies already here, who do not enjoy similar handouts. Plus, Amazon's arrival would only worsen the shortage of qualified tech workers the sector faces, sucking Canadians away from domestic firms and startups.

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"It makes me angry," said Carl Rodrigues, founder and CEO of tech firm SOTI, based in Mississauga. "We're sitting right here in front of their nose. We're trying to scale. Invest in Canada."

Whatever the pitfalls, Amazon's prize is something no big-city mayor can afford to ignore. In an interview, Toronto Mayor John Tory said his city, with its burgeoning tech sector, universities and cultural attractions, would be an "outstanding fit" for Amazon and pledged to champion the effort.

"We have to be seen among the appropriate leading contenders from the beginning," Mr. Tory said, noting Amazon's boast that it had contributed $38-billion (U.S.) to the city of Seattle's economy since 2010 and calling the proposed second headquarters "a megaproject of the highest order."

Calgary Mayor Naheed Nenshi, whose city was hit with an oil-price slump that produced unemployment and vacant office space, says he, too, is interested.

Mr. Nenshi said his city is affordable, has plenty of office space, is a key Western transportation hub and has a highly educated work force: "I cannot imagine a better place than Calgary for this kind of investment, and I will be making that case strongly."

Vancouver Mayor Gregor Robertson, who is travelling in China, said in an e-mailed statement that his city and its "world-class tech ecosystem" was an obvious contender, partly because it is so close to Amazon's home base in Seattle: "As mayor, I – in partnership with the Vancouver Economic Commission – will put forward an outstanding bid for Amazon's next North American HQ that will put Vancouver over and above other cities."

With reports from Kelly Cryderman and Shane Dingman

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About the Authors
Toronto City Hall Reporter

Jeff Gray is The Globe and Mail’s Toronto City Hall reporter. He has worked at The Globe since 1998. From 2010 to 2016, he was the law reporter in Report on Business, covering Bay Street law firms and white-collar crime. He won an honourable mention at the National Magazine Awards for investigative journalism in 2010. More

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More

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