By Edmund Zhen
Published: December 5th, 2018
It is no surprise to hear that the e-commerce giant Amazon has decided to alter its original plan to build a new headquarter and instead create two, picking the historically rich states of New York (Long Island City, Queens) and Virginia (Arlington) to be its breeding grounds in the East Coast. Two years ago when Amazon’s search for a new location was announced, cities all across America began evaluating and devising plans to entice the e-commerce giant to select them. But what were some factors of New York and Virginia that attracted Amazon?
For one, a company as large as Amazon would require talent that would most likely be found in cities with large populations. Large cities tend to have a higher educated pool of workers and a strong university system that offers a consistent flow of fresh talents.
But besides the search for talent, subsidiaries played a huge role in reigning in Amazon.
New York offered performance-based subsidiaries of $1.525 billion based on Amazon’s promise to create 25,000 jobs. In this incentive package, it includes a refundable tax credit of up to $1.2 billion through a program called the New York State Excelsior Program. This program was created to build up industries by offering tax breaks to those who introduce new jobs and a significant investment in the region. New York also offered up capital grants that go up to $505 million, aimed to repay Amazon’s construction costs for over 15 years. Despite all the good drawbacks Governor Cuomo thinks, some New Yorkers have major concerns.
For example in 2010, Amazon had 5,000 employees at their headquarters in Seattle. In just 8 years, the number of employees shot up to 45,000, an 800% increase from the original number. During this large influx, traffic congestion soared up and neighborhoods saw massive increases in rent for homes and hotel rooms. This massive gentrification put a strain on people with low income which pushed them further into the brink of poverty. With similar problems potentially occurring in NYC, our city must take what happened in Seattle and learn from it. We would need to restructure the MTA systems and find ways to mitigate rising housing prices. Currently, congestion in the MTA is already causing consumer outcry about their inadequate services and with a tsunami of people coming in, it would only strain the MTA even more if this issue is not ameliorated.
For Virginia, Amazon will also receive performance-based incentives, but only up to $573 million if Amazon successfully creates 25,000 jobs. This incentive includes a cash grant from the Commonwealth of Virginia of up to $550 million based over the next 12 years. According to Amazon Day One, the company will also receive a cash grant from Arlington of $23 million over 15 years based on the incremental growth of the existing local Transient Occupancy Tax, a tax on hotel rooms. The Commonwealth will also be investing $195 million in infrastructure changes in the neighborhood. Some of these include improvements to the Crystal City and the Potomac Yard, Metro stations, a bridge connecting National Landing and Reagan National Airport, and the pedestrian experience crossing Route 1 over the next 10 years.
All in all, Amazon’s presence in those cities bears more gifts than burdens. Creating over 250,000 jobs and supporting businesses such as food carts and local restaurants will definitely lead to a higher level of prosperity. With the cities’ expensive investments in Amazon, the changes that will come are bound to benefit the community. For example, in NYC, there have already been persistent complaints about housing prices and the failings of our subway system, but Amazon’s presence would only force the government to invest more money to fix something they have been ignoring. With such promising returns, I can’t see why Amazon HQ2 would be a bad thing.