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Amazon's HQ2 Hunger Games Are Over, and Jeff Bezos Won

November 13,2018 21:11

Amazon's search for a second headquarters garnered criticism from research groups, some lawmakers, and concerned citizens who worried that enormous sums of taxpayer money would be handed to one of the wealthiest corporations in the country without ...and more »


After a 14-month search, Amazon announced Tuesday that it will open a pair of regional offices in two major metropolitan areas where it already has a presence: the Long Island City neighborhood of Queens, a borough of New York, and Arlington, Virginia, just outside Washington DC.
The decision comes after more than 230 cities submitted bids to be home of the Seattle-based company’s highly anticipated second headquarters, which originally promised to employ 50,000 white-collar workers. Now Amazon’s “HQ2” will be split in two, with 25,000 employees expected at each location over the next 10 years. In addition, Amazon says it will open a new “Operations of Excellence” office in Nashville, Tennessee, which will employ an additional 5,000 people. Hiring in all three locations will begin in 2019, with salaries averaging $150,000, according to the company.
Amazon’s search for a second headquarters garnered criticism from research groups, some lawmakers, and concerned citizens who worried that enormous sums of taxpayer money would be handed to one of the wealthiest corporations in the country without much public oversight. In the end, Amazon will receive over $2 billion in incentives from its three new locations. The state of New York will hand out over $1.5 billion in government incentives over the next decade, as Amazon creates jobs and reaches building occupancy targets. In Arlington and Nashville, the company says it will receive incentives of up to $573 million and $102 million, respectively.
The retail giant ultimately chose cities that offered less in public incentives than some nearby competitors, including Montgomery County, Maryland, which offered $8.5 billion; and Newark, New Jersey, which offered $7 billion. In its announcement Tuesday, Amazon said economic incentives played a role in its decision, but “attracting top talent was the leading driver.”
Prime Locations
The metro areas of New York and Washington are major destinations where Amazon staff already travel and work. Amazon Web Services, Amazon’s cloud computing arm, is favored to win a multibillion-dollar federal defense contract with the Department of Defense, headquartered in Fairfax, Virginia. Nearby in Loudoun County, Amazon is opening an enormous new data center, one of several it has planned in the area. The retail giant also has increased its lobbying spending by 400 percent in the last five years—including of federal agencies like the Department of Justice— in the wake of increased scrutiny from lawmakers.
What's more, Amazon CEO Jeff Bezos has a personal relationship in Washington. In 2016, he purchased a $23 million former museum in the city to convert it into the largest private residence in the area. He also bought the Washington Post Co., publisher of The Washington Post, in 2013.
New York City is not far from Newark, where Amazon’s audiobook subsidiary Audible is based. Last year in Manhattan—just across the East River from Queens—Amazon leased 360,000 square feet of new office space. (Amazon is not alone in wanting to enlarge its NYC footprint; Google is also planning a large expansion in the city, according to The Wall Street Journal.)
Trust the Process?
Just because Amazon decided on the most obvious locales doesn’t mean its extensive headquarters search was all for naught—it had lots to gain from pitting cities against one another. As Bloomberg points out, Amazon now has data from hundreds of metropolitan areas across North America. It can use that information—about transit systems, talent pools, and real estate availability, among other things—to inform future expansions and strategic decisions, like for its growing brick and mortar retail business. Google took a similar approach in 2010, when hundreds of cities answered its request for information for its Fiber internet service project.
Cities also handed over plenty of data about what they were willing to give. Each year, American cities spend an estimated $45 billion to $90 billion on tax breaks and grants to entice corporations, according to a report from the Brookings Metropolitan Policy Program in March. While some experts believe luring corporations with economic incentives isn’t beneficial to communities, the practice can be an effective political strategy for politicians looking to market themselves as job creators. Government officials, especially those who made it onto Amazon’s short list, were handed an excuse to tout their hometowns as hubs of technology and innovation, even if they knew they were unlikely to be picked by Amazon anyway.
Not every politician in the chosen locations is excited that Amazon is coming to town. In New York, Mayor Bill de Blasio and Governor Andrew Cuomo both enthusiastically courted the retail giant; Cuomo even said last week he would rename a creek in Long Island City the Amazon River. “This is a giant step on our path to building an economy in New York City that leaves no one behind. We are thrilled that Amazon has selected New York City for its new headquarters,” de Blasio said in a statement.
Other local lawmakers were not as enthusiastic. Michael Gianaris, a state senator from Queens, and Jimmy Van Bramer, a local councilman, said in a statement that they have “serious reservations” about Amazon coming to Long Island City. “We were not elected to serve as Amazon drones,” they wrote.
“Amazon is a billion-dollar company. The idea that it will receive hundreds of millions in tax breaks at a time when our subway is crumbling and communities need MORE investment, not less, is extremely concerning to residents here,” Alexandria Ocasio-Cortez, the newly elected House representative from Queens, said in a tweet.
In Seattle, where around 45,000 people work at Amazon’s headquarters, housing costs are rising faster than in any other large city. Earlier this year, Seattle’s city council passed and then quickly overturned a tax on large corporations designed to pay for affordable housing initiatives. It would have required Amazon to contribute around $10 million annually, or a fraction of how much Bezos earns in a single day. Lawmakers reversed course on the so-called “Amazon tax” after the company helped fund an aggressive opposition campaign, which included threatening to move jobs out of the city.
Washington and New York both already suffer from housing and affordability crises, and the Big Apple's crumbling public transportation system is in need of extensive repairs. New York has the most segregated school system in the country, while Washington has a higher level of income inequality than any other state, according to U.S. Census Bureau data. Local activists in both New York and Washington have expressed concerns that Amazon’s presence could help to exacerbate the problems already challenging their cities. For its part, Amazon says it will donate a site for a new school in Queens, among other pledges.
The question now is whether all of Amazon’s promises—to bring high-paying jobs and generate economic development—will be enough to make up for the concessions.
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