Amazon HQ2 likely to be split between Crystal City, VA, and Long Island City, NY

Amazon has yet to announce the HQ2 locations, but reports suggest the company is coming to both New York City and northern Virginia.

It seems Amazon has finally chosen the two locations for its new headquarters: Queens, New York, and Arlington, Virginia.

The company has yet to formally announce its decision, but news about the HQ2 sites began leaking last week. The Wall Street Journal reported on Monday that instead of one city, Amazon would split its HQ2 between two locations. A few hours later, the New York Times followed up with a report that the company was “nearing deals” in the Long Island City neighborhood of Queens and the Crystal City neighborhood of Arlington, a suburb of Washington, DC.

More than 200 local and state governments submitted proposals for Amazon’s consideration last year after the company announced it was looking for a North American city to house its $5 billion, 50,000-employee HQ2, a second headquarters outside its home base in Seattle. Some cities promised the company millions of dollars in tax breaks and other incentives.

New York City, for its part, claimed not to have offered Amazon any extra incentives. New York Gov. Andrew Cuomo, however, offered Amazon a still-undisclosed benefits package. Virginia, meanwhile, reportedly hired McKinsey & Co. to draft its proposal, which has yet to be publicly released.

The road to HQ2

Amazon first asked local and state governments to submit HQ2 proposals in September 2017, noting that municipalities with more than 1 million residents and a “stable, business-friendly environment” would have a leg up, as would those with robust public transit systems and large airports with direct flights to and from Seattle.

“We expect HQ2 to be a full equal to our Seattle headquarters,” CEO Jeff Bezos said in a statement at the time. “Amazon HQ2 will bring billions of dollars in up-front and ongoing investments, and tens of thousands of high-paying jobs.”

Hundreds of cities, from New York City to Gary, Indiana, jumped at the opportunity for its potential to boost the local economy and job market. A new Amazon headquarters would create 50,000 new jobs in the chosen city, meaning a larger tax base and opportunities for further economic development. And that’s just jobs at Amazon: Construction crews would be needed to build the company’s new campus or renovate an existing structure, and all those Amazon employees are going to need places to eat and shop.

A total of 238 cities and states ended up submitting proposals. Some, including Detroit, Las Vegas, and Pittsburgh, created videos explaining why they were the right choice. Orlando had more than one.

Amazon announced its 20 finalists in January. The shortlist included some obvious contenders, like New York and Chicago, as well as some less likely options like Indianapolis and Dallas.

Some of those cities tried to lure the company with huge financial incentives.

A letter obtained by the Chicago Tribune revealed that Illinois Gov. Bruce Rauner, Chicago Mayor Rahm Emanuel, and city leaders promised Amazon more than $2 billion in perks, including $1.32 billion in EDGE tax credits — grants for companies that promise to create jobs in the state — as well as $172.5 million in state sales tax and utility exemptions, and $61.4 million in property tax discounts. The largest of those incentives, the EDGE credits, would have been equivalent to 50 percent of employee income tax withholdings, the Tribune reported.

New Jersey offered Amazon $5 billion in incentives, plus an additional $2 billion from Newark — the second-largest publicly available offer the company received, according to CityLab. Maryland made an even larger offer: $8.5 billion in subsidies and infrastructure funding, as reported by the Baltimore Sun, in addition to an undisclosed incentive package from Montgomery County.

“I’m doing everything I can,” Cuomo told reporters when asked about his administration’s efforts to win over Amazon. “I’ll change my name to Amazon Cuomo if that’s what it takes. Because it would be a great economic boost.”

Was HQ2’s competitive selection process a highly publicized ruse?

Some experts reasoned that the massively hyped selection process was rigged from the start, and that Amazon knew where it wanted to locate its HQ2 all along. Scott Galloway, a professor at the NYU Stern School of Business, said as much at Recode’s Code Commerce conference last month when he predicted that Amazon would choose — and has always planned to choose — Washington, DC, as the home for its second location, but allowed cities to compete in order to extract more incentives from both the chosen city and its competitors.

“Amazon has gamified the HQ2 process and basically created a game which will result in a transfer of wealth from municipalities — fire districts, school districts, and police forces — to Amazon’s shareholders,” Galloway said. “I believe it is a [ruse]. I believe they have no intention of being in any of these [other] 18 cities. I believe this game was over before it started.”

CityLab co-founder and University of Toronto professor Richard Florida similarly said in May that Amazon always knew what the location for its second headquarters would be. “Like all corporate site selection, the HQ2 process is a rigged game, where the company knows the answer in advance and sets up a fictitious competition to wrest maximum incentives,” wrote Florida. “What’s going on is something that is bigger than just a search for a second headquarters; it’s about the company’s continued expansion across North America.”

The HQ2 process, he argued, was a way for Amazon to crowdsource information on sites across the country — not a genuine competition for a new headquarters — in order to have intel on where to place new distribution or logistics centers. He called it a “brilliantly cynical exercise in corporate locational strategy,” and he might be right.

In May, the Wall Street Journal reported that Amazon had begun calling up cities whose HQ2 proposals it had rejected to tell them why they hadn’t been chosen — and some of those cities are taking Amazon’s suggestions to heart. Cincinnati, for example, responded to Amazon’s critique that it didn’t have enough local tech talent by refocusing a high school apprenticeship program on information technology. Orlando, which reportedly received a similar critique, considering starting a community development fund to invest in local tech companies. Detroit is looking for ways to beef up its public transit in response to losing out on the Amazon bid.

So what does this mean for the winner?

It’s likely that despite the hoops cities and states jumped through in order to show Amazon they were worthy of being chosen as the home of HQ2, the company knew what it wanted to do all along. In the case of New York and Virginia, all of this could mean that any extra perks officials offered may come at the expense of longtime residents.

In May, Vox’s Matt Yglesias wrote that Amazon’s promise of 50,000 jobs may not be as much of a boon as it may seem. Instead of creating jobs needed by “people who are really in need of help,” i.e., under-paid, low-skilled workers, Amazon’s presence will likely lead to a surge in well-compensated white-collar professionals who will drive up property values even further.

It’s nearly impossible to overstate the effects Amazon’s presence has had on the housing market in Seattle, which is home to more than 45,000 of the company’s employees. Highly paid Amazon employees in the city have contributed to steadily rising real estate prices in the city and its outlying suburbs, causing housing costs to surge and leading to the displacement of low-income families. In 2015, King County declared a homelessness state of emergency; conditions have hardly improved since, and local lawmakers have repeatedly pointed to a lack of affordable housing in the city as a key culprit in its homelessness crisis. House prices in the city have risen 70 percent since 2011, according to a report by the Guardian, and rents have risen along with them. Traffic is also a concern; Seattle is contending with an excessive burden on the city’s public transit system.

What remains to be seen is what kind of effect HQ2 will have on New York and Arlington, and whether the cities will take steps to protect their residents from Amazon’s presence.

Author: Gaby Del Valle

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