Amazon announces New York and Virginia as HQ2 picks

The two locations will eventually house at least 25,000 employees each
Long Island City in Queens has new apartment towers, low-rise manufacturing and the country’s largest public housing complex.
Long Island City in Queens has new apartment towers, low-rise manufacturing and the country’s largest public housing complex.

SEATTLE — Amazon laid out its plans for two of the biggest economic development projects in the country on Tuesday, announcing that it will put major corporate outposts in New York City and Arlington, Va.

The two locations, in Long Island City in Queens and the area around Crystal City in Arlington, just outside of Washington, will eventually house at least 25,000 employees each, the company said in agreements with the local and state governments. Amazon also said the new sites, which it is calling headquarters, would require $5 billion in construction and other investments.

The company also said it will develop a smaller site with 5,000 jobs in Nashville that will focus on operations and logistics.

Amazon, which is based in Seattle, could receive more than $2 billion in tax incentives in New York and Virginia, the company said in its announcement. Up to $1.2 billion of that will come from New York state’s Excelsior program, a discretionary tax credit. In Virginia, the company could receive up to $550 million in cash incentives from the state. Both programs are tied to the number of jobs the company creates — if Amazon’s hiring falls short of projections, the incentive payments will be smaller.

“These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come,” Jeff Bezos, Amazon’s chief executive, said in a statement.

Gov. Andrew M. Cuomo of New York said in a statement that “with Amazon committing to expand its headquarters in Long Island City, New York can proudly say that we have attracted one of the largest, most competitive economic development investments in U.S. history.”

The project is a “transformational opportunity to diversify the economy” of Northern Virginia, which is heavily dependent on government contracting, said Stephen Moret, president and chief executive of the Virginia Economic Development Partnership. “The majority of our entire package is a historic investment in doubling the tech talent pipeline in Virginia.”

The announcement capped a frenzied, 14-month competition among cities across the country looking to lure the tech giant for what executives had initially billed as a second headquarters, or HQ2. Many politicians saw it as an opportunity to remake their city or a neighborhood for the tech era. Critics warned against using public money to help one of the most valuable companies in the world, and of the potential for higher housing costs and traffic problems.

Instead of choosing one site, Amazon decided on two. The decision will let the company tap into the labor markets of New York and Washington and retain bargaining power with two localities for decades. In tandem, the new major sites will make Amazon one of the largest private tech employers on the East Coast and may, ever so slightly, help shift tech talent eastward, away from Silicon Valley and Seattle.

The company said it would start hiring in New York, Virginia and Tennessee in 2019.

Jay Carney, a senior vice president at Amazon, said the company looked at more than 100 aspects of each location, but “during the process it became clear to us that the overriding criteria was going to be the ability to find and attract talent.”

At a long meeting in August, the team running the search at Amazon realized they would have an easier time hiring the number of workers they wanted if they split the headquarters. “We also think that 25,000 as a floor is easier for the communities to absorb,” he said.

Carney said Bezos did not tour any of the sites, nor did any member of his senior leadership team.

Amazon announced its search in September 2017 for what Bezos said would be a “full equal to our Seattle headquarters.” Almost 240 locations submitted bids. They used marketing gimmicks — Tucson tried to send a giant saguaro cactus — and formal proposals like training programs and billions in tax incentives.

In January, the online retailer narrowed the list to 20 locations, with places in nine of the 10 largest regions in the country. In the end, Amazon chose to build in two affluent areas with deep benches of high-skilled talent — and where Amazon already had more corporate employees than anywhere else outside the Bay Area and its hometown, Seattle. Bezos also owns homes in both new areas.

The two sites Amazon chose have parallels. Both sit just across a river from the heart of an iconic metropolis. Both are also seen as having a lot of unfilled potential: Crystal City is a neighborhood filled with office buildings developed in the 1970s for defense contractors but has had high vacancies after the Pentagon reorganized in the years after the Sept. 11 attacks. And Long Island City is a neighborhood with a mix of new apartment towers, low-rise manufacturing and the country’s largest public housing complex.

As the search dragged on, in some places the anticipation turned to antipathy and anxiety, with residents concerned about how their regions could manage a potential housing shortage and congestion that could come with an influx of well-paid workers. Many regions also debated whether one of the largest companies in the world, run by the richest man in the world, needed taxpayer funds.

While Amazon’s criteria made clear that attracting a large, educated work force was paramount in its search, its public competition, and the promise of $5 billion in investments, proved irresistible to the boosterism of elected and development officials around the country. Only a few places, including San Jose, Calif., and San Antonio, publicly declined to throw millions at the giant. Privately, even among the 20 cities on the shortlist, some officials admitted that they were unlikely to land the headquarters.

Amazon was always going to choose the best labor market, but the “genius of the HQ2 process” was the competition that let it squeeze out more incentives, said Margaret O’Mara, a historian at the University of Washington.

“This has been a hallmark of Amazon and other tech companies since the very beginning,” she said. “They have been unwilling to pay any tax unless they absolutely have to, and they have leveraged their market power and the psychic place they hold to get away with it.”

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