Wed | Dec 19, 2018

Big benefits as Amazon picks New York, Virginia for HQ

Published:Wednesday | November 14, 2018 | 12:04 AM
Amazon founder and CEO Jeff Bezos.

Amazon Inc, which has grown too big for its Seattle hometown, has confirmed that it will split its much-anticipated second headquarters between New York City and Arlington, Virginia.

Its New York location will be in the Long Island City neighbourhood of Queens, while its Arlington offices will be located in an area called National Landing. Each site will get 25,000 jobs.

In addition, the online retailer said it will open an operations hub in Nashville, creating 5,000 jobs.

The decision ends an intense competition between North American cities to win Amazon and its promise of 50,000 new jobs. Some locations tried to stand out with stunts, but Amazon made clear that it really wanted incentives, like tax breaks and grants. The company received 238 proposals before narrowing the list to 20 in January.

With Long Island City and National Landing, the company is choosing two waterfront communities away from overcrowded business districts, giving Amazon space to grow.

Amazon stands to get nearly US$2.5 billion in tax breaks and other incentives as part of its deals to open up the two new offices.

In New York, the incentives offered to Amazon include performance-based direct incentives of US$1.525 billion, based on 25,000 full-time, high-paying jobs created. This includes a refundable tax credit of up to US$1.2 billion calculated as a percentage of the salaries Amazon expects to pay employees over the next 10 years, which equates to US$48,000 per job for 25,000 jobs with an average wage of over US$150,000.

It will get a cash grant of US$325 million based on the square footage of buildings occupied in the next 10 years.

Amazon will also apply for as-of-right incentives, including New York City's Industrial & Commercial Abatement Program and New York City's Relocation and Employment Assistance Program. There was no dollar figure immediately attached to this benefit.

The city gets more than 25,000 full-time jobs; US$2.5 billion investment from Amazon; facilities totalling 4 million square feet, with the potential to double in size; and projected incremental tax revenue of more than US$10 billion over 20 years.

In Arlington, the incentives offered include performance-based direct incentives of US$573 million based on 25,000 jobs created with an average wage of over US$150,000; and cash grant of US$23 million over 15 years based on the incremental growth of existing tax on hotel rooms.

The city gets more than 25,000 full-time jobs with average wage exceeding US$150,000; US$2.5 billion investment from Amazon; facilities totalling 4 million square feet, with the potential to double in size; and projected incremental tax revenue of US$3.2 billion over 20 years.

Nashville has offered performance-based incentives of up to US$102 million based on 5,000 jobs created over seven years with an average wage of over US$150,000; cash grant of up to US$15 million based on US$500 for each job created over the next seven years; and job tax credit to offset franchise and excise taxes from the state of Tennessee of US$21.7 million based on US$4,500 per new job over the next 7 years.

The city gets 5,000 full-time jobs with an average wage exceeding US$150,000; more than US$230 million in investment; one million square feet of energy-efficient office space; and estimated incremental tax revenue of more than US$1 billion over the next 10 years.

New York, already a financial and media powerhouse, has been trying to attract more tech workers. And northern Virginia has been looking to fill its 1980s-era buildings after thousands of federal employees moved elsewhere.

Amazon is referring to the two new locations as headquarters even though with 25,000 jobs each, they would have fewer workers than its Seattle hometown that houses more than 40,000 employees. Amazon said Seattle will remain as one of Amazon's three headquarters.

The extra space will help the rapidly growing company. Launched in 1995 as an online bookstore, Amazon now produces movies, makes voice-activated Echo devices, runs the Whole Foods grocery chain, offers online services to businesses and designs its own brands of furniture, clothing and diapers.

There were early signs that Amazon had its sights set on New York and northern Virginia. Among its 20 finalists, the company had selected two locations in the New York metro area and three in the DC area.

Being near the nation's capital could help Amazon with lobbying efforts as the company, and other fast-growing tech giants, face rising scrutiny from politicians. Plus, CEO and founder Jeff Bezos has a home in Washington, DC, and he personally owns The Washington Post.

Amazon's workforce has ballooned to more than 610,000 worldwide, and that's expected to increase as it builds more warehouses across the country to keep up with online orders. The company recently announced that it would pay all its workers at least US$15 an hour, but the employees at its second headquarters will be paid a lot more.

AP