Amazon announces controversial HQ2 locations
Wednesday, November 14, 2018
When Amazon announced that it was searching for a new second headquarters location, speculation began to swirl as hundreds of cities competed.
Finally, on Nov. 13, the company announced it will be splitting HQ2 between two locations: Arlington, Virginia; and Long Island City in Queens, New York. It will also build an "Operations Center of Excellence" in Nashville that will provide 5,000 jobs.
Immediately after the announcement, debates kicked into motion. Both the New York Post and the Daily News ran front page stories on the decision. The New York location is especially complicated because the city had to offer $1.5 billion in tax credits and $10 million in job training.
Arlington is offering $550 million in tax credits. For many public subsidization of an already uber-wealthy corporation is nothing but corporate welfare. Not to mention that some contend this will ultimately cost the two cities upwards of $4 billion.
While news of bringing 25,000 six-figure Amazon jobs to New York City is difficult to criticize, it is still controversial. New York City Mayor Bill de Blasio and state Gov. Andrew Cuomo support the move, while U.S. Rep.-elect Alexandria Ocasio-Cortez (D-N.Y.) criticized the move.
The location is in what is called an "opportunity zone," which is federally designated with details still being worked out by the Treasury Department. These zones allow investors to receive preferential treatment in capital gains. According to The New York Times, "Investors who pour unrealized capital gains into funds that invest in real estate or other assets that qualify for opportunity zone status can essentially avoid as much as 15 percent of the taxes they would have owed on their investment gains."
The issue here is that in an opportunity zone like the Long Island City Amazon site, these tax breaks can lead Amazon to buy up more real estate around its office location. Strangely, the company and New York state have not referred to this opportunity zone status as a factor in this decision. But it is being used in the financial agreements between the city, state, and company.
For all the right reasons, people are concerned about how a New York City-based Amazon headquarters will change the city’s politics and Long Island City’s own character.
Is this decision giving Amazon too much power? Will this lead to asymmetric homogeneous development of Long Island City that could ruin the waterfront?
While opportunity zone designation was originally intended to target low-income, high-poverty and unemployment areas, Long Island City’s location represents a location that is "low-poverty, higher-income, rapidly developing…adjacent to low-income zones." Yes, some areas, like Long Island City’s waterfront, are included in the opportunity zone program. But should they be?
Many express concern over how Amazon could transform desirable urban attributes, like quality schools and affordable housing. In Arlington, Virginia, news of Amazon’s arrival has some critics, like Virginia state representative Lee Carter, warning against overcrowded schools and increased traffic: "...thousands will be priced out of their homes with the influx of high-paid tech workers."
The Amazon Arlington location is called National Landing. It is a "a newly branded neighborhood encompassing parts of Pentagon City and Crystal City in Arlington and Potomac Yard in Alexandria." Many claim this new neighborhood was minted so Amazon could take it over.
This recent Amazon announcement is galvanizing debates we have been hearing for years, mainly on the West Coast, about how tech industry money can rapidly transform urban areas — with San Francisco being a prime example.
Higher tech salaries promise to increase rent prices — barely noticeable for those able to afford higher rents. Outside hires always move in on these occasions, which means that people will be commuting from outside these new locations, increasing traffic congestion and pollution. For those new hires relocating to Long Island City or Arlington, quality schools will be in high demand, which can lead to overcrowding.
The question remains: are all the Amazon promises to Arlington and Long Island City over the next decade and beyond enough to shell prime real estate locations over to such a controversial behemoth as Amazon? Many believe that when such a powerful company receives public subsidies, it drives competitors out of business by underpricing them.
Add to these concerns the idea that that new office locations in politically influential places like New York City and the Pentagon will give the company incredible political power. Perhaps this power is best emblemized by the New York helipad promised Amazon in the deal, as residents endure unreliable subway service, much in need of improvement.
Nov. 14 saw the first anti-Amazon protest at the proposed site, attended by state Sen. Michael Gianaris (D-Queens) and city Councilman Jimmy Van Bramer (D-Queens). This will not be the last protest either, considering the already divisive character of New York politics.
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