Yahoo Finance Amazon’s break-up with New York sets other cities up for gains
Amazon (AMZN) just gutted plans to open a headquarters in New York – taking with it promises of 25,000 jobs and $2.5 billion in investment in the local economy.
The Seattle, Washington-based tech giant announced Thursday that it will not develop a new headquarters in Long Island City, New York, just three months after announcing its plans in the first place. Amazon cited a slew of backlash as the main cause for the unexpected pivot, with many constituents and state and local officials having voiced concerns over the city’s and state’s proposed $3 billion in subsidies to the tech giant, as well as potential wage inflation and rent hikes.
"This is a stunning development, with Amazon essentially giving in to vocal critics who bemoaned the tech giant’s decision to set up a new substantial outpost in Long Island City, New York,” Mark Hamrick, senior economic analyst for Bankrate.com, wrote in an email Thursday. “For those who didn’t want Amazon to bring the promised 25,000 new jobs and added economic vitality to the area: Be careful what you wish for.”
The announcement is an economic blow to New York, Hamrick argues, especially as the state grapples with rapidly declining tax revenues. New York state tax collections fell another $2.3 billion below projections for the fiscal year ending March 31, officials announced earlier this month.
"Now, all of the prospective employees who would have otherwise been hired, all of the small businesses that would have benefited from Amazon’s Queens presence and indeed state and local governments looking forward to tax revenues, as well as the broader community, will miss out from improved growth prospects,” Hamrick said. “This outcome could also prompt other businesses to think twice before setting up shop or expanding in the region.”
Mixed reviews
Amazon in September 2017 first announced plans for an HQ2 outside of its original Seattle headquarters. Tens of cities across the country fought to win over the company and become the beneficiary of promised high-tech job opportunities and economic stimulus.
But the Queens, New York city ultimately announced as the center of one of two new headquarters back in November greeted Amazon with a much chillier welcome. Amazon endured more than a month of public grillings over its plans, and protestors continued to lambast the company.
“While polls show that 70% of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City,” Amazon said in a statement Thursday.
However, not every New York official was opposed to Amazon’s big move to the city. New York Governor Andrew Cuomo and New York City Major Bill de Blasio had each pushed hard for Amazon’s New York headquarters. Cuomo, for his part, earlier in November had joked he would change his name to ‘Amazon Cuomo’ if it meant winning the HQ2 bid.
Carolyn Maloney, U.S. representative whose district includes Long Island City, expressed disappointment about the failed new headquarters in a Twitter post on Thursday.
“Disappointed that NYC won’t be home to 25K+ new jobs from HQ2 & that LIC will lose out on infrastructure improvements that would have accompanied this project. This is not the Valentine that NY needed,” Maloney said. “The deal could have been improved. There were legitimate concerns raised and aspects that I wanted changed. I was ready to work for those changes. But now, we won’t have a chance to do that and we are out 25K+ new jobs and hundreds of millions of dollars in new investments.”
Other cities’ gains
New York’s loss, however, sets other existing tech hubs already in Amazon’s orbit up for gains. The company said in its statement Thursday that it will “continue to hire and grow across its 17 corporate offices and tech hubs in the U.S. and Canada.”
In other words, Amazon plans to reallocate the 25,000 jobs it had promised New York as part of the original memorandum with the city to its existing tech hubs. New York, with several thousand Amazon employees currently in the state, is itself among the existing tech hubs, meaning it too will likely still receive a chunk of the employment gains and capital investment originally earmarked for it from the HQ2 announcement. It is unclear exactly how much of the $2.5 billion in investment Amazon had proposed for its New York location will be allocated to the existing tech hubs, as the amount would depend in large part on the number of new jobs created in each location, which is also still yet to be determined.
Not to mention, Amazon has received a much warmer welcome from Crystal City, Virginia – the site the company’s other proposed new headquarters. Virginia Governor Ralph Northam earlier in February signed legislation that would facilitate the state’s pledge to provide Amazon with as much as $750 million in cash incentives if the company succeeds in creating 37,580 high-paying jobs in the region.
Amazon said it still intends to proceed with its original plan to inject 25,000 jobs in the local economy and about $2.5 billion in investment in Northern Virginia. Amazon’s memorandum with the state economic development authority had added that the company could “create potentially 37,850 new jobs” total in a second development phase, but did not commit to the additional 12,850 positions.
Amazon on Thursday said it also intends to proceed with plans in Nashville, Tennessee, where it announced in November it would create 5,000 high-paying corporate jobs as part of its decision to build out a new operations hubs.
Here are the locations of Amazon’s current tech hubs, which could benefit from the diversion of 25,000 Amazon jobs initially planned for the New York headquarters:
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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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