Winning Incentives: What NYC and Northern Virginia Offered to Capture Amazon’s HQ2s

November 13, 2018, 11:35 AM UTC

Amazon is expected to announce the location of its HQ2 on Tuesday—and the hot money is on New York City and Northern Virginia.

The yearlong selection saga began with 238 candidate cities. Amazon then slowly whittled down the list of contenders based on a list of factors, including the incentives each city offered. In New York, the company will be based in Long Island City; in Northern Virginia, Crystal City, near Washington, D.C.

With Amazon promising 50,000 jobs and $5 billion in investment to the lucky winner (or, as it’s likely to turn out, winners), Amazon’s arrival has the potential to make a huge impact. Question is: what set N.Y. and Northern Virginia apart from the rest?

New York City

Both the city and the state of New York were involved in pitching several neighborhoods, with Governor Andrew Cuomo even jokingly offering to re-name a city—and himself—after the company.

The financial incentive package has been kept tightly under wraps, but reports indicate that its full value is in the hundreds of millions of dollars. Mayor Bill De Blasio’s announcement of a $180 million investment strategy to prepare Long Island City for the future, was also “suspiciously well-timed“. In addition to subsidies, Amazon has been sold a neighborhood with 13 million square feet of real estate and 150 restaurants, cafes, and bars.

Northern Virginia

Like New York, Northern Virginia has kept the specifics of its pitch top secret—even from the county board. The Northern Virginia proposal was reportedly drafted and submitted by the Arlington Economic Development Office, without the knowledge or approval of local government, even though they’ll need to approve any offer to Amazon before it goes into effect.

The company’s incentives to move to the D.C. metro area aren’t only monetary: the nation’s capital is also home to the nation’s highest-educated workforce. Brookings recently named it one of America’s eight most digitally inclusive tech cities, with women making up about a third of the city’s tech workforce.

D.C. is also the seat of power—and home to Jeff Bezos’s $20 million mansion. Plus, there’s the small matter of him owning local newspaper, The Washington Post.

The competition

The top secret N.Y. and Northern Virginia bids must have been fairly sweet to beat some of the bids we do know about. Chicago offered the company an incentive of up to $1.32 billion through the redirection of 50-100% of income taxes paid by Amazon employees back into the company’s coffers. Chula Vista, CA, offered the company $100 million worth of land for free and deferred property taxes. New Jersey’s offer came in at a whopping $7 billion in total.

Playing both sides against the middle

The choice to split HQ2 between two cities may somewhat reduce the dollar amount of the tax incentives with which New York City and Northern Virginia lured Amazon. As CityLab explains, much of the tax savings offered to Amazon will be tied to head count, wage levels, and capital expenditures. Therefore, if they spend $2.5 billion locally instead of $5 billion, and hire 25,000 people instead of 50,000, their savings will be cut in half.

That aside, there is one major advantage of splitting the second headquarters: both winners know that if Amazon ever wants to consolidate HQ2 into a single location, then the costs for the company will be extremely low.