BuzzFeed News

Reporting To You

tech

New York And Virginia Offered Amazon More Than $2 Billion In Incentives For HQ2

The search for Amazon’s next headquarters has finally come to an end — and it’s officially a tie.

Last updated on November 13, 2018, at 2:11 p.m. ET

Posted on November 13, 2018, at 9:56 a.m. ET

Amazon CEO Jeff Bezos.
Phillip Faraone / Getty Images

Amazon CEO Jeff Bezos.

After a 13-month-long search, Amazon has chosen to split the site of its second headquarters, dubbed HQ2, between two East Coast locations: New York City and Arlington, Virginia. It means that, along with Seattle, Amazon will have three so-called headquarters in North America. And as part of Tuesday's crowded announcement, Amazon also said a third city, Nashville, was selected for a new Center of Excellence for its Operations business, responsible for customer fulfillment, transportation, supply chain, and other similar activities.

Hundreds of cities across North America competed for the estimated $5 billion project by offering the tech giant steep tax subsidies and other incentives. New York's incentive agreement with Amazon exceeds Virginia's offer, which New York Governor Andrew Cuomo told reporters on Tuesday was necessary to win the bid.

Amazon will receive performance-based direct incentives of $1.525 billion based on the company creating 25,000 jobs in Long Island City in New York, according to the company. In Virginia, Amazon will receive performance-based direct incentives of $573 million based on the company creating 25,000 jobs with an average wage of over $150,000 in Arlington. For its new Nashville operation, Amazon will receive performance-based direct incentives of up to $102 million based on the company creating 5,000 jobs with an average wage of over $150,000 in the city.

"To get Amazon here did we have to win the competition? Yes, we had to win the competition," New York Governor Cuomo said Tuesday. "If you’re Amazon and you're looking at Texas or Virginia, they have half the income taxes we have. It’s not a level playing field to begin with."

New York City and Northern Virginia were some of the 20 locations that made Amazon’s short list out of 238 cities that applied. Specifically, HQ2 will be split between an area it calls National Landing in Arlington, Virginia, and New York’s Long Island City in Queens.

Each new office will have about 25,000 employees, and hiring at both locations will begin in 2019. Amazon CEO Jeff Bezos said in a statement: “These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come.”

Virginia Sen. Mark Warner — who also founded Columbia Capital — said in a statement on Tuesday: “As a former Governor, now Senator, but also as a former technology executive, I’m really excited about the potential Amazon offers not only to Northern Virginia but the whole capital region and the entire Commonwealth. We’ve seen that major investments like these can bring not only thousands of direct jobs but also lead to job growth in other industries. As we welcome Amazon’s new investment in Virginia, we must commit to implementing this announcement in a way that will benefit the whole region and all of the Commonwealth.”

In September 2017, when Amazon asked cities to send formal proposals for hosting its HQ2, the company framed it as a competition and said it expected an incentive package beyond a “business-friendly environment and tax structure.”

Local governments jumped at the chance to get the $5 billion in investments and 50,000 jobs Amazon promised would come with HQ2. Tucson, Arizona, sent the company cactuses. Gary, Indiana, paid for an ad in the New York Times that addressed Amazon and referenced the city’s “resilient, eager to work” people. Maryland approved $5 billion in tax incentives for Amazon if it were to choose the state as its next headquarters (a legislative analysis of the proposal estimated the final tally may have come to $8 billion). New Jersey offered an incentive package valued at $7 billion. And Chicago promised Amazon its employees would be allowed to keep $1.3 billion worth of income taxes if it were chosen as the location.

The 19 finalist cities that Amazon turned down will likely use the proposals they drafted for HQ2 — some of which are public — to woo other businesses. Cities rejected by Amazon in the first round told Curbed the process helped them improve their economic development plans. Philadelphia’s deputy commerce director told the Wall Street Journal that other firms have approached the city based on what they read in its proposal to Amazon.

But the process has also been riddled with secrecy. Places like Washington, DC, have kept many of the details of proposed tax incentives under wraps, even in response to public records requests. The Morning Call filed a complaint against Philadelphia after the city refused to disclose details of its proposed HQ2 tax incentives. The court eventually sided with the Morning Call in March, ruling the requested documents were public, but the city redacted 38 pages that included information about business and tax incentives it offered.

The arrival of Amazon HQ2 will have a major impact on Long Island City and the North Landing area. Seattle, where Amazon’s main headquarters is located, has been transformed by the company over the course of the last decade.

Amazon owns one-fifth of all the office space in Seattle — more than the next 40 largest Seattle employers combined, according to the Seattle Times. Many Seattleites blame Amazon for rising rents and gnarly traffic.

The anticipation of HQ2’s arrival in Northern Virginia and New York City will cause a flurry of real estate and investment deals, as business owners and developers scramble for a piece of the HQ2 profit. According to the Wall Street Journal, some HQ2 prospectors are using “proprietary software” that will allow them to select promising properties to attempt to purchase within just five minutes.

Some local residents have raised concerns and protested the lack of transparency surrounding their cities’ HQ2 bids and incentive packages. In October, a group of more than 70 local organizations sent a letter to the company demanding it employ “a substantial percentage” of people from disadvantaged communities, limit the use of temporary agencies to staff its warehouses, and make a “significant” annual contribution to support affordable housing.

“They’re a highly profitable company and shouldn’t need a handout, but they take advantage of cities’ willingness to do that,” Erin Johansson, research director with Jobs With Justice, a workers’ advocacy group in Washington, DC, that signed the letter, told BuzzFeed News.

Residents in Atlanta, Chicago, New York City, Philadelphia, Pittsburgh, and Washington, DC, protested Amazon’s potential arrival in April, claiming the company will drive up rents and squeeze its city budgets dry.


ADVERTISEMENT