Did we win the Amazon booby prize?

Boxes move along a conveyor belt at the Amazon.com fulfillment center in Kenosha, Wisconsin
Boxes move along a conveyor belt at the Amazon.com fulfillment center in Kenosha, Wisconsin

Would Alabama football fans be excited if Nick Saban led Alabama to a last place finish in the SEC?

Would there be a parade?

Would there be cheering?

Would Bama fans be slapping each other on the back and celebrating?

Well, that’s sort of what happened with Amazon’s announcement to build a $325 million fulfillment center in Bessemer.

Birmingham is the nation’s largest metro without an Amazon distribution center

According to the Birmingham Business Journal (BBJ), “Birmingham is the nation’s largest metro without an Amazon distribution center.”

Georgia has 4 fulfillment centers; Tennessee 6; Florida 5; Kentucky 12; Alabama up until now 0.

Birmingham’s the largest metro in the state. Did anyone think Amazon was just going to skip us?

How do Alabama’s incentives for Amazon compare?

State incentives from Alabama, Jefferson County, and Bessemer will total more than $51 million with most of the money coming from the state. (And we should be thankful for the state support)

According to the BBJ, “Amazon built more than a dozen fulfillment centers that are exactly 855,000 square feet – the same square footage as the Bessemer project that will employ at least 1,500 and possibly up to 3,000. Employment estimates were generally within that range for other 855,000-square-foot facilities.”

Estimated incentives for like fulfillment centers according to BBJ

  • Fresno, California $30 million
  • North Haven, Connecticut $25 million
  • Romulus, Michigan $18.5 million
  • Etna, Ohio $19 million
  • Sacramento, California $1.7 million
  • Houston, Texas $7 million
  • Opa-locka, Florida $6.5 million
  • Salt Lake City, Utah $5.6 million
  • San Marcos, Texas $11 million
  • Bessemer, Alabama $51 million

BBJ: “Based on those numbers for other metros, the incentive deal for Amazon’s Bessemer facility is clearly at the higher end of the spectrum. But it’s also important to point out incentive disclosure regulations vary by state, so totals for some facilities may not include all incentives offered.”

Will we get our money’s worth?

Will we get our money’s worth? Here’s the introductory paragraph from an article that recently appeared in Gizmodo…

“When a Fulfillment Center opens, the expectation is that anywhere from 1,000 to 2,200 positions will become available overnight, each providing 40 hours of work per week at a minimum. In reality, the labor hours Amazon needs to power its brutally efficient supply chain appear to be far fewer. To reduce overhead but continue to sop up performance-based incentives from the local governments it operates in, Amazon has become increasingly reliant on a work scheduling scheme that often coerces workers into leaving their shifts early or turns them away at the door without notice.”

Should we be so dependent on incentives?

Recently Stephen Dubner, the host of  Freakonomics Radio, interviewed Dan Doctoroff, the man who helped modernize New York City and is now C.E.O. of a Google-funded startup that is building, from scratch, the city of the future.

Doctoroff said he and New York Mayor Bloomberg decided to stop throwing money at firms using financial incentives. He said companies game the system to “basically skim a bunch of tax-payers money for their own purposes.”

“When Mayor Bloomberg came into office, the economy was just on its back and New York was facing enormous budget deficits. It was an easy temptation to bribe companies to stay or bribe companies to come.”

“They met with CEO’s of companies all over the country and all over the world in addition to in New York. We analyzed their cost structures in great detail and eventually what we concluded was companies are going to do what’s in their economic interests over the long run and that provided these sorts of incentives was like giving ‘em crack. But the crack was ultimately going to affect the dealer more than the user. And so it just didn’t make a lot of sense. So we just stopped. Instead, the way we compete was based on our natural strengths.”

Let’s invest in ourselves

Metro Birmingham has had two huge economic development wins recently from out of state companies–the $325 million Amazon fulfillment center and an Atlanta based DC Blox $785 million data center.

The CEO of Atlanta based DC BLOX, Jeff Uphues, told the Birmingham Business Journal that Birmingham …“was the largest market in the U.S. we were able to find that did not have a tier-3, multitenant purpose-built data center,”

It’s absolutely great we won these two big projects, but we were lagging behind in both cases.

I have a friend who is president of a company active in real estate development throughout the Southeast. He says when his company builds in Florida; his company is required to pay for the infrastructure. That is the opposite of Alabama where our government has to pay companies to build.

The difference is Florida can be choosy about economic development—we can’t.

I didn’t write this piece to beat up our politicians or our economic development folks. Quite frankly, we badly needed these projects–and I know a great deal of work and effort went into them.

We are the product–let’s improve it

Alabama and Birmingham have spent hundreds of millions of dollars on incentives, but rather than invest in ourselves, we send our money to big corporations.

Imagine what we could do for our region if could take those hundreds of millions of dollars and invest in our infrastructure, education and public transportation.

Let’s quit waiting for companies to ask for handouts and actively work together as a region to invest in ourselves and in our future.

We will improve the quality of life for all our citizens and companies might pay us to move here.

Let’s turn Birmingham around.  Click here to sign up for our newsletter. There’s power in numbers. (Opt out at any time)

David Sher is Co-Founder of AmSher Compassionate Collections.  He’s past Chairman of the Birmingham Regional Chamber of Commerce (BBA), Operation New Birmingham (REV Birmingham), and the City Action Partnership (CAP).

Invite David to speak to your group about a more prosperous Birmingham. dsher@amsher.com

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2 thoughts on “Did we win the Amazon booby prize?”

  1. We have to ask ourselves this question. Why does Alabama have to offer businesses such generous financial packages to come here?

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