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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 [1], 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.

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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 [2] 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 [3], 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 [4], has offered over $1.5 billion in incentives for Amazon’s other headquarters in Queens. [3] Governor Andrew Cuomo has done an end-run around the city government, promising to let the company avoid its arduous land use permit process [5]. (He also offered to change his name to Amazon Cuomo [6], 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 [7] and $7 billion from New Jersey [8]. And no wonder: they probably assumed that their neighbors would offer more.

Nearly $100 billion changes hands every year [9] 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 [10]; 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 [11] 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 [12] 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.

Dan Reed is an urban planner and writer in Montgomery County, Maryland. He blogs at Just Up the Pike [13]. On Twitter, he’s @justupthepike [14].

10 Comments (Open | Close)

10 Comments To "The Communities Amazon Turned Down Should Rejoice"

#1 Comment By Fran Macadam On November 15, 2018 @ 6:16 am

The self interest of a predatory billionaire are not coincident with the interests of ordinary Americans.

With these opaque insider ploys, with no accountability to the millions of regular folks who end up paying for them, democracy dies in darkness.

#2 Comment By Wilfred On November 15, 2018 @ 9:32 am

Why is it even legal for a government to offer special tax breaks for specific companies? Why should tax laws apply to some, but not to others in the same circumstances?

This is corruption: Give me a break for my company, and I’ll help your re-election campaign.

We see this all the time in professional sports. The NFL, NBA etc., can afford to pay ridiculously high salaries to their players, because public tax money goes to build the monstrous sports arenas they require.

#3 Comment By mrscracker On November 15, 2018 @ 11:17 am

Wilfred says:
“Why is it even legal for a government to offer special tax breaks for specific companies? Why should tax laws apply to some, but not to others in the same circumstances?”

*******************
I don’t know either. We had the same sort of situation, though on a much smaller scale, with Costco in a nearby parish.

#4 Comment By CLW On November 15, 2018 @ 1:25 pm

We need to free ourselves from the illusion that just because Amazon, Wal Mart, et al provide us with consumer goods at low prices, they somehow care about the best interests of the American people and our communities, large or small: these corporate behemoths pursue their own narrow interests (profits, high share value, etc.) and don’t care about us outside of the merchant/customer context. Amazon’s prolonged grandstanding and flexing of its economic muscles to unduly influence public planning and government policy making to its advantage should be a warning to communities and governments everywhere.

#5 Comment By EliteCommInc. On November 15, 2018 @ 2:27 pm

“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.”

not so fast, the idea of a tax break is to the offset by the private money from which a community will benefits, even if it only breaks even — the community benefits from the employment.

#6 Comment By Anne (the other one) On November 15, 2018 @ 2:30 pm

I now official hate Amazon. I’ve hated Cuomo since he renamed the Tappen Zee Bridge to Mario Cuomo Bridge, after his father.

Long Island City is surrounded by safe, walkable, family friendly areas – Sunnyside and Woodside, Queens and Greenpoint, Brooklyn. These were middle class neighborhoods until the last decade when housing prices went from $250,000 to a $1,200,000-$1,300,000 for a three bedroom home. With Amazon moving in, the middle class will be pushed further away.

Cuomo’s lack of transparency is unforgivable. The talk is he’ll be running for president. Guess that’s pretty expensive. . . .

#7 Comment By Zgler On November 15, 2018 @ 2:38 pm

Tax breaks for corporations should always be coupled with claw-back measures to take the money back if the jobs don’t materialize or if the infrastructure costs aren’t paid back.

#8 Comment By Hypnos On November 15, 2018 @ 4:40 pm

$22k/job is nothing considering that most of the positions Amazon will open in Virginia will be professional roles paying over $150k/yr. Virginia will likely make that back in income, sales, and property taxes in the first year of each job. The $200 million in infrastructure investments should of course get the same scrutiny as any such expenditure, but Amazon would hardly be the only entity to benefit.

So, it’s not clear that Virginia got a bad deal here. Coincidentally, Virginia also has a distinct lack of taxpayer subsidized overpriced sports facilities.

#9 Comment By Hypnos On November 15, 2018 @ 4:45 pm

$22k/job in Crystal City is nothing, considering that most of those roles will be professional positions paying $150k/yr or more. Virginia and Arlington will make that back in the first year of each job between income, sales, and property taxes. The $200 million in infrastructure deserves scrutiny, but Amazon won’t be the only one to benefit. So, it’s not clear that Virginia got a bad deal here.

Virginia also, coincidentally, has a marked lack of professional sports teams or superpower college sports programs.

#10 Comment By jay kalend On November 17, 2018 @ 4:38 pm

Virginia represents what is wrong in urban vision: Long Island City, I think, actually represents what is right.

I note Amazon’s project in Queens will have enormous benefits, because the area can absorb the benefits. The Brooklyn Navy Yard is right next door, and being put to good use by a variety of startups with no particular Multinational Corporate Clout. Rails and bridgeways will benefit, as they will need continued construction and refurbishment. Underdeveloped areas from Ridgewood to East New York will improve in livability, The Bronx too will benefit as a traffic and commuter hub, however butchered it was in the name of such development under Robert Moses.

The apparent model for Amazon, which we really can’t inveigh against, is to bring new ideas and businesses to market as quickly and efficiently as possible. I see in Virginia only a distorted effort in this direction. Under Obama, defense spending and the creation of a bank regulator class simply siphoned money from the rest of us to make glory to government. Now they can sit in the swamp of their own stimulus and goo-goo residents espousing Southern serendipity, but who I believe lack the intelligence and productivity to sustain their fruits without government support.

Surprising how many dumb turds you will find in Red Country, or what you may now term as Snowbird Country, despite their presumed virtues of hard work and patience. Truth is, government subsidies are everywhere.