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Toronto only Canadian city on short list for Amazon HQ2

The CN Tower can be seen in the Toronto skyline in Toronto, Ontario on Tuesday, April 25, 2017.

COLE BURSTON/THE CANADIAN PRESS

Toronto is the only Canadian entry to make the short list of 20 cities in the final round of bidding to host Amazon.com Inc.'s second headquarters, but it may be a tough sell in an era of deep protectionism in the United States.

The city's leaders hope to turn that potential problem into a virtue by touting Toronto's openness to immigration and its diverse talent pool to a company that is desperate to add tens of thousands of new engineers, developers and other staff.

The e-commerce giant announced on Thursday it has whittled down its options from 238 applications from the United States, Canada and Mexico. Twelve Canadian communities submitted initial bids, including Vancouver, Calgary, Edmonton, Winnipeg, Ottawa-Gatineau, Montreal and Halifax.

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The final decision will come later this year, after Amazon assesses the 20 finalists in more detail. The winning city is expected to gain 50,000 new technology jobs and direct investment of more than $5-billion (U.S.).

Amazon, which has wedged its sprawling headquarters into 33 buildings throughout Seattle's downtown core, has promised a second headquarters will be a "full equal" with the one in Seattle.

Mayor John Tory, among the first to announce his city wanted to be in the running when Amazon opened the bidding last year, underlined the fact that Toronto made the list even though it rejected a demand for lucrative tax breaks from governments.

"I sort of look at this today … as the day on which we made the playoffs," Mr. Tory told a news conference. "Making the playoffs is a great accomplishment, but now we are still a long way from the prize and there's a lot of hard work ahead."

Most analysts have not put the Toronto region's bid at the top of their odds lists, instead pointing to U.S. cities such as Boston and Denver. But Toronto is touting its depth of technology talent from a cluster of universities, as well as built-in cost advantages from government medical coverage and lower corporate tax rates. But the tax advantage highlighted in the original bid was mostly erased when the United States slashed its corporate tax rate in December to 21 per cent from 35 per cent.

The Toronto proponents say Canada's openness to immigration could help Amazon attract global talent more easily.

Former Toronto chief planner Jennifer Keesmaat, who helped shape Toronto's bid before stepping down at the end of September, said locating in Toronto could trigger a backlash in the increasingly protectionist United States.

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"It strikes me that it would be a pretty bold move for Amazon to decide to come to a Canadian city."

However, she said that could also be pitched as an advantage. She said U.S. technology companies are struggling to hire international talent, while in Canada, "that's just a no-brainer. We're very open to talent and we're very open to immigration."

While Toronto did not offer tax concessions, other contenders did. New Jersey Governor Chris Christie offered $7-billion in tax incentives and saw Newark earn a place on the short list. Amazon has given no indication of how much weight it will put on incentives.

Mr. Tory said on Thursday he did not expect Toronto, or the provincial or federal governments, to add financial incentives in the next round, especially given the cash being promised south of the border.

"I'd be very surprised if we were suddenly going to switch course now and say that we've found some pot of money," Mr. Tory said.

Amazon has put particular emphasis on the importance of finding an appropriate piece of land with 100 acres to build up to eight million square feet of office space.

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The regional Toronto bid offered several sites downtown and nine in suburban areas, including one in downtown Mississauga adjacent to the Square One Shopping Centre. One proposal would offer Amazon a 100-acre "east harbour" region just east of downtown Toronto and near the new Google Sidewalk Lab mixed-used neighbourhood being planned for the area.

It is one of the last large remaining pieces of land in the centre of the city, but needs significant services and infrastructure, including transit links. Amazon has said it will favour locations that are ready for development and serviced by infrastructure.

Toronto also would be expensive for Amazon's employees, with some of the most costly housing in North America and low rental vacancy rates.

Aaron Terrazas, senior economist at real estate property search site Zillow, said it will be hard for the real estate market in any city on the bidding list to accommodate the growth Amazon would bring. He said Seattle's home values have almost doubled as Amazon has grown in recent years, and Toronto is already struggling with affordability.

"But it has proven that it has a unique capacity to expand supply to meet the housing needs of newcomers," he said.

Several executives in Toronto's technology sector said on Thursday they are worried Amazon's headquarters would suck up all available talent in the region and drive salary levels far higher.

David Ossip, chief executive officer of Toronto-based Ceridian, a human-resources technology firm, predicts his company would look to invest in other cities or consider moving.

"If Amazon were to come in here, there would be some impact or churn at the lower levels of the organization or on entry-level positions," Mr. Ossip said. "But I would be more concerned about them really recruiting all of the leaders of most of the technology organizations in Canada, most of the startup community, the scale-up community."

Adam Froman, CEO of Toronto-based data collection firm Delvinia, said big companies such as Amazon create jobs, but the revenue and profits flow to the U.S. parent. He says governments would be better off helping Canadian companies grow.

"I think it's a great PR stunt – what better way to draw attention to Amazon and what they're doing," Mr. Froman said. "But I really don't think the likelihood of them coming to Toronto is very high. And if they did, you'll see a lot of Canadian companies in an uproar if it comes out there were subsidies to attract them."

But Ontario Economic Development Minister Steven Del Duca said his government's pledge to boost spending for science and technology education will help all technology companies in the province. "A lot of the investments we have made to set the table and compete for Amazon are not unique or exclusive to the Amazon bid," he said.

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