The Communities Amazon Turned Down Should Rejoice
A year ago, I predicted that Amazon’s new headquarters—known informally as HQ2—would come to Washington, D.C., and suggested Crystal City, Virginia, as one of the places they might consider. Now that the company has announced that they’re splitting HQ2 between Crystal City and Queens, New York, I’m going to buy some lottery tickets. After that, however, I plan to ponder how good a deal this will actually be for Crystal City, for Virginia, and for the D.C. region.
On one hand, it’s a perfect match. The D.C. area has the tech talent, airport access, and prestigious address that Amazon wants, and it doesn’t hurt that Jeff Bezos has a house here. Crystal City has millions of square feet of empty office space, the legacy of federal agencies fleeing the area following base relocation a decade ago. Today, the neighborhood is home to 1960s office blocks, highway overpasses, and a sprawling underground mall. But just like South Lake Union, the Seattle neighborhood home to Amazon’s headquarters, much of Crystal City’s vacant office space belongs to a single landlord who wants to remake the area into a new urban playground for tech companies eager to attract young professionals.
A big tech company will be perfect for burnishing D.C.’s credentials as more than just a government town. It will help the city’s transition away from relying on the federal government for its employer base. And that’s to say nothing of the spillover from a new corporate headquarters: the companies that do business with Amazon and will locate nearby, the restaurants that will feed the new employees, the public employees who will teach their kids and protect their homes, the service workers who will cook and clean offices.
On the other hand, this could be a disaster in the making. D.C.-area house prices are high and getting higher, especially in the areas where Crystal City-bound employees may want to live. Investors from around the nation are already circling Crystal City and its surrounding neighborhoods, eager to snap up condos in an untrendy area before it gets hot. The region’s population growth in the past decade has far outpaced development; even as cranes dot the skyline around Crystal City, dumping 25,000 new workers here could prove overwhelming, pushing prices even higher.
Many of those employees, not to mention the many existing residents who won’t have access to six-figure Amazon salaries, will have to move further out. There, they’ll contend with congested highways and a deteriorating Metro system whose board members consider evening and weekend service a luxury.
There’s also the question of whether Amazon will actually have a positive impact on the local economy. The commonwealth of Virginia has offered several hundred million dollars in tax incentives, effectively paying Amazon $22,000 for each job they bring, as well as almost $200 million in infrastructure for the area. New York, which didn’t give Facebook or Google money when they moved there, has offered over $1.5 billion in incentives for Amazon’s other headquarters in Queens. Governor Andrew Cuomo has done an end-run around the city government, promising to let the company avoid its arduous land use permit process. (He also offered to change his name to Amazon Cuomo, though we’ll see if he makes good on that promise.)
Amazon’s search for a new headquarters is emblematic of the regional bidding wars that often occur when a major company announces its plans to relocate, particularly in areas like D.C. that contain multiple states.
In other words, economic development officials in Virginia and New York may not have had Dallas or Cincinnati in mind when they prepared their bids for Amazon. They were thinking instead about their neighboring states. We do know that Maryland and New Jersey each put up even larger incentive packages for Amazon—$8.5 billion from Maryland and $7 billion from New Jersey. And no wonder: they probably assumed that their neighbors would offer more.
Nearly $100 billion changes hands every year between local governments and companies seeking to open offices or factories, some of which include the wealthiest corporations in the world. Here in the Washington area, companies frequently play the District, Maryland, and Virginia off each other, seeking the most lavish tax subsidies. Often, companies do this with no intention of moving: Marriott Hotels has gotten money simply for threatening to move; it most recently received $62 million to relocate just a few miles away within the same county. And these subsidies, handed out in the name of economic development, often choke off the local tax base. Among the most popular incentives are giving payroll taxes back to the employer, depriving communities of the revenue they need to support the new people moving in.
Why would we bet the farm on a single business, considering how fickle companies can be? Indiana gave United Airlines $320 million to build a lavish aircraft maintenance center in the 1990s, only for it to flee town a decade later. In 1998, Maryland and Montgomery County, home to Marriott, condemned and cleared out four city blocks to give Discovery Communications a new headquarters site; after purchasing Tennessee-based Scripps Networks, they’ll move their operations to Knoxville and New York. What will happen to the $10 million in subsidies they received? Maryland will never see that money again.
Besides, in recent years, the D.C. region has added 50,000 jobs annually, such that economic prognosticators say we’ll barely notice the impact of HQ2 on the job market. Our economy already gets an Amazon every year.
Likewise, the 236 communities around North America that won’t get a new Amazon headquarters—including Arlington’s neighbors who were also in the running for HQ2—might consider themselves lucky. After all, they now have the opportunity to take the taxpayer money they’d promised and invest it in building local economies that sustain themselves, enrich their surroundings, and won’t skip town.
That could look like investments in education, from elementary school to college, that give companies the pipeline of workers they need and give current residents access to jobs they might not otherwise qualify for. Or it could mean investing in infrastructure, repairing roads, bridges, and public transportation, ensuring that commuters and deliveries alike can get to their destinations on time. At an even finer scale, it could mean investing in the public realm, creating walkable and bike-able streets that bring foot traffic back to historic downtowns. And it could mean investing in housing so that workers aren’t weighed down by sky-high costs of living and can actually build lives and careers rather than being priced out to cheaper locales with worse job prospects.
That’s money that will return dividends over time. It will also help build a more resilient economy, one that’s not reliant on the Next Big Thing to support itself, one that won’t be devastated by the loss of a single company or industry. It’s not as sexy as a new corporate headquarters, but at least it will stick around.