< Previous34 JANUARY 2019 SI T E S E L E C T IO Nthat Amazon named three locations in that MSA as nalists: D.C., Northern Virginia and Montgomery County, Maryland. e National Landing site in Crystal City in Arlington ultimately o ered Amazon what it wanted: access to a deep and talented pool of tech and headquarters professionals in a thriving urban environment. e site is less than three miles from downtown Washington and is served by three Metro stations and Reagan National Airport.“ e community has a variety of hotels, restaurants, high-rise apartment buildings, retail and commercial o ces,” the company stated. “National Landing has abundant parks and open space with sports and cultural events for residents of all ages throughout the year.”A $-million incentive package approved by the state sealed the deal. Amazon will receive performance-based incentives of $ million based on the company creating , jobs in Arlington that pay an average annual wage of over $ ,. is includes a workforce cash grant of up to $ million based on $ , for each job created over the next years.Amazon will also receive a cash grant from Arlington of $ million over years based on the incremental growth of the existing local Transient Occupancy Tax, a tax on hotel rooms.In return, Amazon pledges to construct a -million-sq.-ft. campus that is expandable to million sq. ft. — a project that will result in estimated incremental tax revenue of $ . billion over years as a result of Amazon’s investment and job growth.Additional incentives include infrastructure funding of $ million by the state into improving the Crystal City and Potomac Yards Metro stations; building a pedestrian bridge connecting National Landing and Reagan National Airport; and upgrading the pedestrian experience crossing Route . Arlington will also We made an o er we felt was prudent for the Commonwealth. If we made an o er purely on incentives, we were going to lose.” —Stephen Moret, President & CEO, Virginia Economic Development PartnershipProximity to transit and to talent were big pluses for the Crystal City location chosen by Amazon. Photo by Jeanine Finch courtesy of City of Arlington36 JANUARY 2019 SI T E S E L E C T IO Ndedicate an estimated $28 million based on 12 percent of future property tax revenues earned from an existing Tax Increment Financing district for on-site infrastructure and open space in National Landing.“This is a big win for Virginia,” said Gov. Ralph Northam. “I’m proud Amazon recognizes the tremendous assets the Commonwealth has to offer and plans to deepen its roots here. Virginia put together a proposal for Amazon that we believe represents a new model of economic development for the 21st century.”Assembling an Army of 500 RespondersFor Virginia Economic Development Partnership President and CEO Stephen Moret, the deal marked the culmination of 14 months of hard work. “We started on September 7 of last year,” he says. “We put together three world-class proposals — one each for Richmond, Hampton Roads and Northern Virginia. There was a very intense effort on the front end.”The first six weeks brought a whirlwind of activity, he notes. “Those three proposals were about 1,000 pages. We put together custom websites, custom drone videos of the sites and tons of new content. Once they pared the list down to 20 locations, Amazon scheduled a visit to check out four sites in Northern Virginia. They came to learn more about the sites, our colleges and our K-12 system.”The second round was “an enormous undertaking” that involved the work of more than 500 people in Virginia, says Moret. “It was much bigger than the original proposal. They had questions about talent and growth, etc. They got more focused on the National Landing Site in Arlington and our site in Alexandria. We then put together an MOU.”Everything about the project was unprecedented, Moret says. “It was a site competition for a major project on steroids. It was just a much bigger project and more on the public stage. We were not going to compete primarily on incentives. It was not a large offer in a national context. More than 70 percent of our commitment was an investment into public assets like higher education and transportation infrastructure. The remainder was all post-performance.”Project Cooper changed in two substantial ways: First, when it was divided into two projects, and second, when the average annual wage increased from $100,000 to $150,000. “That was a big, big deal for us,” says Moret. “The costs did not go up at all.”The Virginia Major Employment and Investment (MEI) Project Approval Commission approved the deal, which now must go to the full Virginia General Assembly for a vote in January.“We never really changed the basic structure of our offer,” says Moret. “It did go down when the total jobs numbers went down. We needed to have a credible offer. We made an offer we felt was prudent for the Commonwealth. If we made an offer purely on incentives, we were going to lose.”Taking a Bite Out of the Big AppleNew York officials took a similar approach to wooing Amazon. While New Jersey offered Amazon $7 billion in incentives and Maryland pledged $8.5 billion, New York put together an MOU that outlines $1.7 billion in incentives from the Excelsior Jobs Program via tax credits and from Empire State Development via a capital grant.In return, Amazon promises to invest $2.5 billion and create 25,000 high-paying jobs in Long Island City in Queens, just across the East River from Midtown Manhattan and the Upper East Side in New York City. By locating there, Amazon nabs a talent-rich environment known as a place where the arts and industry intersect. “It is a diverse community with a unique 38 JANUARY 2019 SI T E S E L E C T IO Nblend of cultural institutions, arts organizations, new and converted housing, restaurants, bars, breweries, waterfront parks, hotels, academic institutions, and small and large tech sector and industrial businesses,” Amazon noted. “Long Island City has some of the best transit access in New York City, with eight subway lines, 13 bus lines, commuter rail, a bike-sharing service, and ferries serving the area, and LaGuardia and JFK airports are in close proximity.”As in Virginia, Amazon plans to construct a 4 million-sq.-ft. campus in Queens, expandable to 8 million sq. ft., and generate an estimated incremental tax revenue of more than $10 billion over 20 years as a result of investment and job creation. City and state officials forecast a 9-to-1 return on investment.The total state and local incentives package for Amazon could reach $2.8 billion if the company meets all targets and qualifies for all performance-based payments. That would come about if Amazon employs 40,000 workers by 2034 at an average annual salary of $150,000 and reaches $3.6 billion in total investment. The company is separately applying for as-of-right incentives including New York City’s Industrial & Commercial Abatement Program (ICAP) and New York City’s Relocation and Employment Assistance Program (REAP).Gov. Andrew Cuomo called the deal his biggest win yet. “When I took office, I said we would build a new New York State — one that is fiscally responsible and fosters a business climate that is attractive to growing companies and the industries of tomorrow,” he said. “We’ve delivered on those promises and more, and today, with Amazon committing to expand its headquarters in Long Island City, New York can proudly say that we have attracted one of the largest, most competitive economic development investments in U.S. history.”New York City Mayor Bill de Blasio joined in, saying, “This is a giant step on our path to building an economy in New York City that leaves no one behind. We are thrilled that Amazon has selected New York City for its new headquarters. New Yorkers will get tens of thousands of new, good-paying jobs, and Amazon will get the best talent anywhere in the world.”End of an Era, or Start of a New One?Greg LeRoy, executive director of Good Jobs First in Washington, D.C., said he was not surprised that Amazon chose New York City and Northern Virginia. “I said from day one that a company this sophisticated in site location must have known the list long before it launched the public auction,” he says. “Incentives seldom affect where companies locate. They could have gotten a lot more in Pittsburgh.”So, in the end, what were the decisive factors? “We learned that executive talent meant everything. It was factor one, two and three combined,” says LeRoy. “Secondly, I was always skeptical they could hire 50,000 brainiacs in any one market. They had to split it up.”On the plus side, he says, “I don’t think the American public have ever been so educated on the site location consulting industry and the incentives sector. They did not understand how secretive the negotiating process is at the front end of the deal. If there was ever a moment when we as a country could revisit this whole system and rewrite the rules to prevent another HQ2 process like this one, now is the time.”Will other firms follow Amazon’s lead and embark on highly publicized site searches? No, says LeRoy. “I don’t think this is new norm. Everything will revert to the old system. It will become secretive again,” he adds. “Everybody was burned out by this process.”Noted author, economist and speaker Richard Florida, however, does not think the process is over. “I said from the beginning that this was about more than a single HQ2 site,” he says. “It was about siting many things. I think these three announcements in New York, D.C. and Nashville are just a start. There will likely be more.” The location where Amazon will establish a new corporate headquarters in Long Island City, Queens.Photo: Kevin P. Coughlin/Office of Governor Andrew M. Cuomo40 JANUARY 2019 SI T E S E L E C T IO NSITE SELECT ORS SUR VEY: AMAZON HQ2In his Inaugural Address President Gerald Ford’s statement “Our long national nightmare is over ...” referred to the impeachment and resignation proceedings of President Richard Nixon after the Watergate scandal. Many of us in the site selection community no doubt expressed similar sentiments when the long, winding and at times unseemly -month Amazon HQ search concluded on November , — one week after the mid-term elections, a date our rm had gone on the record to predict.While over-the-top and in-your-face as only an Amazon could pull o , HQ is very much in sync with the heightened trend of corporate headquarters mobility. Today, corporations are no longer keeping the headquarters location o the table when it comes to restructuring, cost-cutting and re-branding their companies. Head o ces are now just as footloose as any o ce, plant or warehouse of the modern corporation.I have witnessed a number of high pro le, trend-setting corporate headquarters relocations over the years, including those of longtime Boyd clients such as Sun Life Financial, which was the face of corporate head o ce migration from Montreal to Toronto during the separatist movement in Quebec in the late ’ s; UPS, whose move from Greenwich, Connecticut, to Atlanta in brought into the modern era Atlanta’s reputation as a major international center for transportation and logistics; and our Boeing client, whose move from Seattle to Chicago in ushered in the current era of accelerated head o ce mobility and the crafting of headquarters-speci c state incentive programs.But for all of the fanfare and trend-setting signi cance of those three high-pro le moves, they all pale in comparison to the epic, transformative HQ search, clearly one for the ages.Due to the magnitude of the project and duration of the search, HQ brought our cottage industry of corporate site selection out of the shadows of con dentiality and shroud of client anonymity and into the sunlight. e media’s fascination with the e-commerce giant Amazon and its founder, Je Bezos, along with the -hour news cycle, propelled this epic search from the back pages of the business section to front-page news. I have even been approached to write a book on the search with an eye toward a movie script. I am sure the legendary late McKinley “Mac” Conway, founder of Site Selection years ago, would not believe it, seeing the industry he created “going Hollywood.”Some Takeaways from HQ2When it comes to the controversial topic of incentives, Amazon, for years, has been a master by JOHN H. BOY De ditor @ site s ele c tion.c omTHE CONTEXT42 JANUARY 2019 SI T E S E L E C T IO Nof securing hefty financial incentives from local and state governments for its North American network of warehouses and fulfillment centers. Not surprisingly, Amazon brought its “A” game to the negotiating tables for HQ2. New Jersey pledged $7 billion in incentives, Pennsylvania offered $4.5 billion, New York offered $2.8 billion, Virginia offered $750 million, North Carolina offered over $1 billion, although the exact number has not been released.The notion of giving the richest man in the world millions of dollars in incentives was low-hanging fruit for the anti-incentive movement led by people like progressive Senator Bernie Sanders, futurist Richard Florida and free market libertarian groups like the Cato Institute and the anti-incentive think tank, the John Locke Foundation. There was a bit of irony here too, as Amazon placed its New York HQ2 smack in the middle of the district of newly elected Alexandria Ocasio-Cortez, the ultra-progressive firebrand who has already come out strongly against Amazon’s incentive windfall. Expect to hear more from her in the days ahead.Agree with them or not, incentives are now ingrained into the corporate site selection process. Today, our clients want it all. They want us to recommend the optimum location for their plant or office and then have government step up to help write down the cost of the move. The harsh reality is that incentives are a necessary evil when it comes to a city’s being in the game, especially for trophy projects like HQ2 and for states with comparatively high taxes and high costs of doing business.To those who oppose incentives, I would have them challenge the politicians to first do the heavy lifting of pension reform, lowering taxes, easing onerous regulations and generally making business climates more friendly. Another point here is that most incentive packages go beyond tax credits and abatements and often S I T E S E L E C T I O N JANUARY 2019 43include things like infrastructure investments and workforce training grants that serve a greater public good and enhance the overall operating environment for small business and entrepreneurs.The SplitOf all the drivers in the HQ2 site search, it was available talent that ruled the process from day one. The decision to split HQ2 into two cities was not at all surprising given record low unemployment rates coast to coast and the robust national tech economy. What was surprising is how late in the curve Amazon indicated they were moving in that direction. At the outset of the search, it should have seemed a bridge too far that any market, regardless of how large it is, could provide and sustain a 50,000-strong high-tech workforce.That said, recruiting 25,000 workers in each of the two winning cities will be no walk in the park for Amazon’s HR team. I would not be surprised to see additional satellite offices in proximate locales having quick access to Crystal City and Long Island City getting a sliver or spillover of HQ2 jobs. A Newark satellite office of Long Island City or Baltimore satellite office of Crystal City would fit this bill nicely.My Take on the WinnersI know both Long Island City, New York, and Crystal City, Virginia, very well. My first site selection experience with Long Island City was warehousing-related, when Sony housed a huge inventory of its consumer electronics during the heyday of its Walkman, Trinitron TV and video recorder sales. (In those days, that was the tech economy.)The New York media is now giving a loud voice to the backlash against Amazon’s Long Island City decision. Many New Yorkers feel the area is already too congested and are concerned about Next >