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

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

It looks like Amazon has chosen the two locations for its new headquarters: Queens (New York) and Arlington (Virginia).

The company has not yet officially announced its decision, but news about the HQ2 sites went last week. The Wall Street Journal reported Monday that instead of a city, Amazon would split its HQ2 into two locations. A few hours later, the New York Times followed a report that the company was approaching Long Island City (Queens) and Crystal City (Arlington neighborhood), a suburb of Washington, DC.

More than 200 local and state governments submitted proposals for consideration by Amazon last year after the company announced it was seeking a North American city housing $ 50 billion in HQ2, which employs 50,000 people. Some cities promised the company several million dollars in tax credits and other incentives.

For its part, New York City claimed that it did not offer Amazon additional incentives. However, New York Governor Andrew Cuomo offered Amazon an undisclosed benefit package. Meanwhile, Virginia allegedly commissioned McKinsey & Co. to prepare its proposal, which has not yet been published.

The road to HQ2

Amazon initially asked local and state governments to submit proposals for HQ2 in September 2017. He points out that communities with more than one million inhabitants and a "stable, business-friendly environment" would have a leg, as well as those with a robust public and large public transport system airports with direct flights to and from Seattle.

"We expect HQ2 to fully meet our Seattle headquarters," said Jeff Bezos, CEO. "Amazon HQ2 will bring billions of dollars for pre-investment and ongoing investment and tens of thousands of high-paying jobs."

Hundreds of cities, from New York City to Gary (Indiana), seized the opportunity to promote the local economy and the labor market. A new Amazon headquarters would create 50,000 new jobs in the chosen city, providing a larger tax base and opportunities for further economic development. And these are just jobs at Amazon: Construction crews would be needed to build the company's new campus or renovate an existing structure, and all Amazon employees will need places to eat and shop.

A total of 238 cities and federal states submitted proposals. Some, including Detroit, Las Vegas and Pittsburgh, made 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 competitors such as New York and Chicago as well as some less likely options like Indianapolis and Dallas.

Some of these cities tried to lure the company with big financial incentives.

A letter received from the Chicago Tribune revealed that Illinois Governor Bruce Rauner, Chicago Mayor Rahm Emanuel, and Amazon officials had pledged more than $ 2 billion, including EDGE tax credits $ 1.32 billion – grants to businesses seeking to create jobs – as well as $ 172.5 million in tax exemptions for government levies and utilities and $ 61.4 million in real estate taxes. The largest of these incentives, the EDGE loans, was equivalent to 50 percent of employee income tax, the Tribune said.

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

"I do everything I can," Cuomo told reporters when asked if his government wanted to win Amazon. "I'll change my name to Amazon Cuomo if it's needed. Because that would be a big economic boost. "

Was the HQ2 selection process a heavily publicized ruse?

Some experts argued that the massively hypocritical selection process had been manipulated from the beginning, and Amazon knew where he wanted to locate his HQ2 all the time. Scott Galloway, a professor at the NYU Stern School of Business, said this at the Recode's Code Commerce conference last month when he predicted that Amazon would opt for Washington – and had always planned Washington, DC, to choose as a second location. however, allowed cities to compete with one another to gain more incentives for both the selected city and its competitors.

"Amazon has changed the HQ2 process and basically created a game that will lead to a transfer of wealth from communities – Fire Ward, School District and Police – to Amazon shareholders," Galloway said. "I think it's one [ruse], I believe that they do not intend to attend any of these places [other] 18 cities. I think this game was over before the start. "

Richard Florida, co-founder of CityLab and a professor at the University of Toronto, similarly stated in May that Amazon always knew where its second headquarters would be. "As with all business websites, the HQ2 process is a rigged game in which the company knows the answer in advance and sets up a fictional competition for maximum incentives," Florida wrote. "What's up is bigger than finding a second headquarters. it is about the further expansion of the company in North America. "

The HQ2 process is an opportunity for Amazon to collect information at locations across the country – not a real competition for a new headquarters – to find out about the placement of new distribution or logistics centers. He called it a "brilliantly cynical exercise in the company's location strategy," and he might be right.

In May, the Wall Street Journal reported that Amazon had begun calling cities whose proposals were rejected in HQ2 to let them know why they were not selected – and some of these cities take the suggestions to heart. Cincinnati, for example, responded to Amazon's criticism that there was not enough local tech talent to focus on a high school education program on information technology. Orlando, reportedly receiving similar criticism, was considering setting up a Community Development Fund to invest in local tech companies. Detroit is looking for ways to improve public transport to lose Amazon's offer.

What does that mean for the winner?

It's likely that despite the large cities and states that were shown that Amazon was home to HQ2, the company knew what it wanted to do all along. In the case of New York and Virginia, all this could mean that additional perks offered by officials can be at the expense of long-term residents.

In May, Matt Yglesias of Vox wrote that Amazon's promise to create 50,000 jobs may not be as good as it seems. Rather than creating jobs needed by "truly needy people", ie underpaid, low-skilled workers, Amazon's presence is likely to lead to an increase in well-paid employees, which will increase real estate values ​​even further.

It's almost impossible to overestimate Amazon's impact on Seattle's real estate market, which employs more than 45,000 people. High-paid Amazon employees in the city have been driving up real estate prices in the city and its outskirts, increasing housing costs and driving low-income families. In 2015, King County declared a state of emergency for homelessness. Conditions have barely improved since then and local legislators have repeatedly pointed to the lack of affordable housing in the city as the main culprit in the homelessness crisis. Housing prices in the city have risen by 70 percent since 2011, and rents have risen with them, according to a Guardian report. Traffic is also a problem. Seattle is facing an excessive burden on the city's public transport system.

It remains to be seen what impact the HQ2 will have on New York and Arlington, and will cities take steps to protect their residents from Amazon's presence.

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