How might Texas win Amazon’s second headquarters? Not because of flashy financial incentives.

Georgia has reportedly offered $1 billion worth of incentives. In Philadelphia, it’s more than $2 billion; in Maryland, $5 billion; and, from high-rolling New Jersey, a whopping $7 billion.

But in Texas, Republican Gov. Greg Abbott said this week, “We will not give away the farm.”

After an elimination round reality TV-like in its mystery, only 20 contenders remain in the competition to win Amazon’s coveted second headquarters. The company says it will invest $5 billion toward the location’s construction and estimates it will bring as many as 50,000 jobs into the community that wins it.

The cut, which whittled the list down from 238, leaves two major Texas cities — Austin and Dallas — still battling for the prize. And it pits Texas against 15 other states, as well as Washington, D.C., and Canada.

When it comes to attracting businesses, Texas “can do battle with anybody on that list,” as Dallas Mayor Mike Rawlings put it. Attracting Amazon would be an enormous win for a state that’s fiercely proud of its business-friendly reputation. But in Texas, lawmakers and experts said, the wooing process is unlikely to rely on gimmicky offers or staggering amounts of cash.

“It’s important for a company to feel like they are wanted,” said Jeff Moseley, CEO of the Texas Association of Business. But “sometimes these incentives are almost more symbolic than they are important to the transaction.”

Financial boons

In its initial call for proposals, Amazon identified incentive programs as one “key preference and decision driver,” among others like labor force, transportation opportunities and quality of life. Incentives offered at the state and local level “will be significant factors in the decision-making process,” the company said.

Critics have hypothesized that Amazon has launched an unusually public bidding war in an effort to maximize perks by pitting cities against each other. But experts and lawmakers said it’s unlikely that the company will base its decision solely — or even primarily — on those financial considerations.

Indeed, Texas “will be stepping up and providing some incentives,” Abbott told the Fox Business network this week. The state has a handful of incentive programs, including the sometimes controversial Texas Enterprise Fund, a $230 million pot of “deal-closing” money the state can dole out to companies deciding between Texas and other sites.

Abbott’s largest grant from that fund, according to the most recent data, was $9.75 million to the pharmaceutical company McKesson. Former Gov. Rick Perry, also a Republican, gave two grants of five times that sum. But even those allocations are mere drops in the bucket compared to multibillion-dollar tax deals other states have publicly offered Amazon.

At the local level, cities have the option of waiving permitting and building fees, though those sums are likely to be negligible for a project of this scale. Meanwhile, Local Government Code Chapter 380/381 allows municipalities to offer companies local financial incentives that can add up to millions or more, like the decades-long tax rebates San Marcos and Hays County gave Best Buy when it agreed to place a new sales operation in the Central Texas city.

And school districts can forgive a large chunk of companies’ local property tax bills under Chapter 313 of the tax code. That program — the largest corporate tax break program in the state — is intended as a “deal-closer” for companies considering multiple locations. Moseley called 313 “a tremendous tool.”

But, Texas Taxpayers and Research Association President Dale Craymer cautioned, Amazon’s second headquarters might not fall under the specific provisions of that regulation, which he said mainly targets manufacturing facilities. And he extended that caution to a handful of other potential offerings.

“Most of the other [incentive] programs aren’t really tailored to go after headquarters,” Craymer said.

The Toyota example

Luckily for Texas, then, history suggests that it won’t be those incentives that close the deal for the state.

When Toyota relocated its North American headquarters to Plano in 2014 — a billion-dollar facility expected to bring 4,000 jobs to the North Texas city — it won some financial boons from Texas: a $40 million grant from the Texas Enterprise Fund and $6.75 million from the city of Plano. But the Japanese car manufacturer gave up significantly bigger incentive packages from other states, like the $100 million North Carolina offered up. A spokesman told the Dallas Morning News at the time that incentives “were just one of many considerations” Toyota weighed.

Toyota’s decision, Plano Mayor Harry LaRosiliere said, was based much more on quality-of-life factors in the city and surrounding area — public and higher education, safety, recreational activities.

“Toyota makes 10 million cars a year. We gave them $7 million. That’s nothing. … That’s a rounding error for them,” LaRosiliere said. “You’re showing that you have skin in the game. But it’s not going to be the difference maker.”

Even this year, when Toyota chose Huntsville, Alabama, over Texas contenders for a new factory, North America CEO Jim Lentz insisted the choice was based on the site itself, not the city’s pledged $700 million in incentives.

“We don’t move a plant to the highest bidder,” Lentz told The Dallas Morning News last week.

Nathan Jensen, a University of Texas at Austin professor who studies economic development, said only one-third to one-quarter of companies are swung by incentives.

“Rarely do we think these incentives are pivotal,” Jensen said.

He said the pivotal things aren’t easy to change: quality of workforce, wage rates, a city that has the ability to attract skilled workers, workforce infrastructure, supply chain and more.

That’s because, experts and lawmakers said, site selection decisions most often come down to other factors about a potential new home — the advantages Abbott says Texas has “built in.”

“Built-in advantages”

One of those is the state’s tax structure. Texas is one of three states under Amazon’s consideration without an income tax — a “very big opportunity” to attract a headquarters, said Moseley, the leader of the Texas Association of Business. But the state’s property taxes are among the highest in the nation.

Property taxes, perhaps the biggest drawback to the state’s business economy, are levied locally in Texas, meaning the competing cities themselves have control over what to offer. Cities can waive costly property taxes, but only for limited stretches of time. Amazon does not expect to finish building its new campus until 2027.

Still, it’s not clear what rules lawmakers might be willing to bend in order to court the tech giant.

Texas already is, to use the nebulous phrase, “business friendly.” Corporations know they can count on state leaders to maintain a low-regulation environment, Moseley said.

But the state’s socially conservative political leanings — the chief example being the “bathroom bill” that drew opposition from major businesses, including Amazon, last summer — could be a disadvantage, said Angelos Angelou, an Austin-based economic consultant on site selection.

Both Texas cities have strong university systems — the University of Texas System flagship campus in Austin; the University of North Texas, UT-Dallas, Southern Methodist University and Texas Christian University in the Dallas region — and an educated workforce that Abbott has touted as Texas’ greatest asset.

Abbott told Fox Business that Amazon officials have “told me personally” that they continue to expand in Texas because of its strong workforce.

“Texas has a premier workforce in this state. We are cranking out great talent from our universities,” Abbott said.

The Dallas region, with its busy airports, seems to have the edge on air transportation — one factor Amazon has identified as a priority. But Austin looks likely to win out over its northern counterpart on general culture, recreational opportunities and quality of life. And both cities are relatively traffic-heavy, a likely detractor for the tech giant.

All that considered, experts said, it’s hard to know where Amazon might fall without knowing which factors are the highest priorities.

Dallas vs. Austin?

Asked on CNBC Friday morning to choose between his “two children,” Austin and Dallas, Abbott dodged the question.

“I’m going to favor Texas,” he said.

The state will almost certainly offer the same incentive package to each city, leaving it up to the metro areas themselves to duke it out. Both cities are strong contenders: Austin was Moody’s Analytics’ top pick, and Dallas ranks first according to a Wall Street Journal analysis. The cities offer distinct and attractive characteristics — but both have stayed quiet about the financial incentives they’ll offer.

Austin and Dallas have, generally speaking, the same authority to offer tax abatements or incentives, said Craymer, the tax association president. But Austin has historically been more cautious than Dallas in offering financial incentives to potential investors, said Jensen, the UT-Austin professor.

In 524 deals with companies that have moved to the Austin area from outside Texas since 2004, Chapter 380 incentive agreements were made in only 21 cases. (The Dallas Regional Chamber said it could not provide similar data.)

“Austin is notoriously very careful in their use of incentives,” Jensen said. “Dallas has been very aggressive in the use of incentives, so I could imagine a real variation at the local level — they’re kind of the polar ends, in some sense.”

Rawlings said “incentives are not going to be the deciding factor.” Nevertheless, the Dallas mayor said, “We’ll be as aggressive as Austin is.”

Meanwhile, Austin Mayor Steve Adler hasn’t said his city will offer any local incentives, and the capital area’s initial bid for the company didn’t include any, according to local reports.

“I do know that before Austin would do that, there would be a pretty transparent and open conversation in the community about it,” he said.

A lack of local incentives would be a disadvantage, Moseley said. But the tech giant could also choose to locate its new headquarters outside the city proper, in suburbs perhaps more likely to offer incentives. Amazon noted in its initial ask for proposals that the site “could be, but does not have to be” an urban or downtown campus.

Disclosure: The Texas Association of Business, the Texas Taxpayers and Research Association, Toyota Motor North America, the University of Texas at Austin, the University of North Texas, Southern Methodist University, Texas Christian University and Steve Adler, a former Texas Tribune board chairman, have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.