By Victor Reklaitis, MarketWatch
The incentives for Amazon.com Inc.’s second headquarters attracted attention, and now the company has abandoned its plans for an “HQ2” in New York City.
Amazon on Thursday also said its HQ2 plans “ will proceed as planned ” in Virginia. Officials from that state have stressed that they had limits on what they were willing to offer.
Virginia’s team has promised about $800 million in direct incentives, including $550 million in cash grants if the e-commerce giant delivers on its promise of 25,000 new jobs over 12 years.
“Had Amazon come back and said, ‘Well, no. We need that to be $1 billion to us, not $550 million,’ the state was very adamant that was not going to happen,” said Ryan Touhill, an Alexandria Economic Development Partnership official who was part of the Virginia team that worked with Amazon. “And we felt that was OK, if that was going to be the case. We could walk away from that deal.”
His comments came during a panel discussion in November looking at government incentives in the wake of the competition among localities to attract Amazon’s /zigman2/quotes/210331248/composite AMZN -0.47% secondary headquarters. When asked to elaborate on a walk-away number, Touhill said that his point was that “if it got into the billions, like other states were offering, I don’t think we were going to go down that road.” Virginia’s Major Employment and Investment Commission, which approves such grants, had approved $550 million, and it would have had to sign off on any higher figure, said Touhill, who is chief of staff at the economic-development agency.
Other officials from Virginia have made similar points. That state commission’s chairman, Frank Ruff, told the Washington Business Journal that Virginia was “ not going to get into the bidding war .” The Virginia Economic Development Partnership’s director, Stephen Moret, has talked up being “a relatively low-incentive state” and wanting to win “ in a Virginia way ” that was “more about emphasizing our assets.”
But Touhill pushed back in November when asked about whether any incentives were needed at all to land Amazon’s HQ2, given Northern Virginia’s strengths. The region’s positives include unemployment rates of about 2% in Arlington County and the city of Alexandria. Some locations that were finalists were offering “enormous” incentive packages, and Virginia officials felt “a need to compete” and make “a very prudent offer,” he said at the panel discussion in Washington, D.C., which was sponsored by the Pew Charitable Trusts and George Washington University’s Center for Washington Area Studies.
Touhill also rejected suggestions that Amazon — whose CEO, Jeff Bezos, owns a mansion in Washington, D.C., as well as the Washington Post — had planned all along to pick the D.C. area. The Seattle-based company announced on Nov. 13 that it plans to locate its so-called HQ2 in both Crystal City, Va., and Long Island City, N.Y., with about 25,000 employees in each place, following a long selection process. Crystal City is in Arlington County, but neighboring Alexandria is due to become home to a new $1 billion Virginia Tech facility that was part of the state’s pitch to Amazon.
“I don’t agree with the assessment that they had already decided before they started this,” Touhill said. “We went through 14 months of work and review on this, and there were moments where we felt there was still very stiff competition, and that it was on us to try to win it.”
Economic-development deals in general have changed in recent years, and Virginia’s $550 million for Amazon is a performance-based grant, he said. “None of that money is going out the door until jobs are created. It’s not like the commonwealth wrote a check for $550 million at the signing ceremony.”
Virginia’s offer has been praised as relatively restrained, with one local columnist even describing it as “ stingy ,” given that New York promised more than $1.5 billion in direct subsidies , while Maryland and New Jersey pledged billions in their failed bids to attract Amazon. On the other hand, New York officials have said the Empire State’s higher costs contributed to its offer’s being more generous. And a CNN report argued that New Yorkers could have fared better because their minimum-wage laws will ensure decent pay for the thousands of new jobs that Amazon could indirectly create.
Check out: Activists protest Amazon’s HQ2 in New York
The biggest misconception about developments in Virginia related to Amazon’s HQ2 is that “it’s all going to come tomorrow,” Touhill told MarketWatch in November. “This is going to roll out over 12 to 15 years.”
In nixing its New York plans on Thursday, Amazon cited opposition from “ a number of state and local politicians .”
This is an updated version of a report first published on Nov. 30, 2018.