Amazon HQ2 to receive more than $2.8 billion in incentives from Virginia, New York, Tennessee
Amazon received government incentives totaling more than $2.8 billion from Virginia, New York and Tennessee to build its two new headquarters and an operations center in those locations, according to the company’s announcement Tuesday.
The total appeared to be considerably less than the package of up to $8.5 billion offered by Maryland and $7 billion by New Jersey, which suggested that factors such as access to talent and airports were more important for the company.
New York was the most generous among the winners, promising more than $1.85 billion for Amazon to build one of its two new headquarters in Long Island City in the borough of Queens, according to the Amazon announcement. (Amazon.com founder Jeff Bezos owns The Washington Post.)
Virginia appeared to have made a better deal, as it offered incentives of $819 million to place the other new headquarters in Arlington in Northern Virginia, according to the announcement.
Both of the new headquarters are expected to eventually create 25,000 jobs with an average pay of more than $150,000 a year, and most of the incentives are conditional on Amazon delivering that many new positions.
Nashville, a surprise last-minute addition to Amazon’s plan, promised $102 million in incentives for a new operations center with 5,000 jobs.
In the frenzied bidding for the second headquarters – which was originally supposed to be a single investment of $5 billion creating 50,000 jobs – most states and cities kept their incentive offers private. Of the ones that were disclosed, Maryland’s was the most generous, with New Jersey’s second.
In describing its rationale for picking Northern Virginia and New York to share the top prize, Amazon stressed that access to tech talent was paramount.
“We were looking for a location with strong local and regional talent – particularly in software development and related fields,” the company statement said.
Talent would not necessarily explain the choice of Northern Virginia over Maryland’s Montgomery County, however, as the two are across the Potomac River from each other and in the same metropolitan area.
However, Northern Virginia is widely seen as more business-friendly than Montgomery County, partly because Virginia is a right-to-work state. Also, Amazon said it wanted good access to airports, and the Arlington site will be only a half-mile from Reagan National Airport, whereas the Montgomery County site would have been more than a 30-minute drive from that airport.
In Virginia, the bulk of the incentives will come in the form of performance-based direct incentives of $573 million, including a workforce cash grant from the state of up to $550 million based on $22,000 for each job created over the next 12 years.
The state will also invest $195 million in infrastructure in the neighborhood, including improvements to the Crystal City and Potomac Yards Metro stations, a pedestrian bridge connecting the Amazon site to Reagan National Airport, and other improvements.
From Arlington, Amazon will receive a cash grant of $23 million over 15 years linked to incremental growth of the tax on hotel rooms. The county also will dedicate about $28 million of future property tax revenue for on-site infrastructure and open space at the site.
Although it is not a direct subsidy, Virginia’s package also included a plan for Virginia Tech to build a $1 billion graduate campus focused on innovation in Alexandria.
Virginia Gov. Ralph Northam, a Democrat, described the package as “a new model of economic development for the 21st century.”
One provision in Virginia’s package is not financial at all. Virginia agreed to give Amazon at least two days notice if the media or the public filed a Freedom of Information Act request about the agreement. This would “allow the Company to seek a protective order or other appropriate remedy.”
New York’s package included direct state incentives of $1.5 billion, most of which is to be provided via a refundable tax credit equivalent to $48,000 per job over the next 10 years. That means Amazon would get the benefit only if it creates the jobs.
New York also offered a cash grant of $325 million based on the square footage of buildings occupied in the next 10 years.
In addition, Amazon will benefit from other New York incentives for which a dollar value was not provided, according to the company statement. These include “as-of-right” incentives from two New York City programs, and a third program based on Amazon’s property taxes.
Amazon said it has agreed to donate space on its campus for a tech start-up incubator, and for use by artists and industrial businesses, and Amazon will donate a site for a new school.
Tennessee’s package included a state cash grant of $65 million based on the company creating 5,000 jobs over the next seven years. Nashville will also provide a cash grant of up to $15 million, and a job tax credit of almost $22 million.