Amazon Office Decision Attracts Skeptics, Protests

Theresa Agovino By Theresa Agovino November 15, 2018
Amazon Office Decision Attracts Skeptics, Protests

​Amazon's headquarters skyscraper and biosphere in Seattle.

​It has only been two days since Amazon announced it is splitting its new East Coast command post between New York City and Arlington, Va., yet the welcome mats are already fraying.

On Nov. 13, the Seattle-based behemoth run by Jeff Bezos, the world's richest man, said it would invest at least $2.5 billion and create 25,000 jobs with an average salary of $150,000 in each location.  Amazon reported that New York City and the state would receive a total of $10 billion in incremental tax revenue over 20 years from the new office in Long Island City, while $3.2 billion would flow to Arlington and Virginia.

"These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come," Bezos said in a statement.

But some politicians and activists in each community are angry that the cities and states dangled more than $2 billion in incentives—such as tax breaks—to hook Amazon. The outrage was particularly acute in New York City, which is already a tech firm magnet. In fact, Google is negotiating to buy another building there, so that it can more than double its workforce to around 14,000, according to published reports. Google already owns two buildings in Manhattan, including one of the city's largest office towers.

Google set up shop in New York City sans the 14-month competition Amazon launched to pick its second headquarters—a beauty contest that at one point had 238 locations vying for the crown.

"Offering massive corporate welfare from scarce public resources to one of the wealthiest corporations in the world at a time of great need in our state is just wrong," said New York City Councilman James Van Bramer and New York state Sen. Michael Gianaris, both Democrats, in a statement.  They said that the 25,000 jobs Amazon pledged to create represented less than 3 percent of the total created in the state in the last decade.

The two, along with some activists, protested Nov. 14 in Long Island City, a former industrial area that has become a hotbed for condo development thanks to its proximity to midtown Manhattan. Published reports said apartments in the area had been selling sight unseen via text since the Amazon announcement.

Amazon will also set down roots in the Crystal City neighborhood of Arlington, which is only a few miles from central Washington, D.C. The location, which has been re-christened "National Landing," has numerous vacant and under-used office towers that Amazon can develop. The Washington, D.C., area had long been considered a favorite in the race to host Amazon's second headquarters. Not only does it offer proximity to regulators, but Bezos owns The Washington Post as well as a $23 million mansion in D.C.'s exclusive Kalorama neighborhood.

Activists in each city worried that the influx of high-salaried employees will drive up rents, displacing low- and middle-income residents, and make it harder for other local employers to compete with Amazon salaries.

Philip Tegeler, executive director of the Poverty & Race Research Action Council, told The Washington Post that Amazon is going to make northern Virginia much less economically and racially diverse. "We can't just keep pushing lower-wage workers farther and farther out into northern Virginia, with longer commute times, and develop these monoculture bedroom suburbs," he said.

Not everyone agrees. "I think what [some politicians] are doing is posturing for constituents. It shows a complete lack of understanding of the terms of the deal," said Tom Stringer, a site selection consultant with BDO USA, an advisory and consulting firm in New York. He added that there was "zero chance" that their protests would change the deal.  Stringer said that the $1.8 billion in incentives offered to Amazon is based on the company reaching certain milestones and won't be dispersed unless those milestones are met.

New York state agreed to grant Amazon about $1.8 billion in incentives provided it meets job-creation targets. The company said it also intends to apply for various city programs, including tax abatements that could help the company save money.

Meanwhile, Amazon will receive a grant from the state of Virginia of up to $550 million if it meets performance targets such as job creation. It will receive a cash grant from Arlington of $23 million over 15 years.

However, The Wall Street Journal reported that Amazon could receive $5.5 billion in incentives—that's more than the $5 billion the company is investing—based on documents that Journal reporters viewed.

Amazon didn't accept the highest offer, however. New Jersey, for example, offered $7 billion in tax credits.

"In my experience, you never take the highest bidder," Stringer said. He explained that the cities that offer the most incentives tend to be compensating for their locations' disadvantages.

Many viewed Amazon's contest as disingenuous, as the company knew there were only a handful of cities that could accommodate its specific needs, yet it opened the competition to all. Only six or seven cities, including the two winners, met Amazon's requirements of an urban environment with public transportation, tech talent, excellent universities and proximity to airports, experts said.

"It was a feeding frenzy even though Amazon was never going to these remote places" that put in bids, said Giacomo Santangelo, a senior lecturer of economics at Fordham University in New York City.

"Why do a big competition? So you can sow the seeds of doubt and get a bit more," he said.

Virginia's governor Ralph Northam said in a statement that the headquarters is a big win.

"I'm proud Amazon recognizes the tremendous assets the Commonwealth has to offer and plans to deepen its roots here," Northam said. "Virginia put together a proposal for Amazon that we believe represents a new model of economic development for the 21st century, and I'm excited to say that our innovative approach was successful."

Andrew Cuomo, New York's governor, was equally upbeat. He said that Amazon's choice proves that the city's fiscal policy and business climate are attractive to the industries of tomorrow.

"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," Cuomo said.

Now the question is whether those investments will deliver the expected dividends for all involved.



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