Late last year, business giant Amazon announced that they would split the location of their coveted second headquarters, dubbed “HQ2”, between Long Island City, part of the Queens Borough in New York City, and Crystal City, a neighborhood in the southeastern corner of Arlington County, Virginia. However, Amazon has just announced they are pulling plans to build in New York City after staunch local opposition and lawmakers who were unhappy with tax incentives the company was promised.
The rescinding of the deal not only effects Long Island City, but has economic repercussions that will ring throughout New York City as a whole. For example, the area could become less attractive to other businesses because they will know that the “Big Apple” kicked out one of the world’s largest companies and rejected the biggest economic impact in the history of the state.
Amazon’s exit will mean tens of billions of dollars in tax revenues and overall economic growth will be lost, as well as tens of thousands of jobs, potential increases in real estate value, possible infrastructure upgrades, and more.
Amazon has stated that it will not be looking to build in another location, and will continue to move forward with plans to build in Crystal City in Northern Virginia. In tandem with creating at least 25,000 high-paying jobs, the Commonwealth’s side of the deal means around $2.5 billion in economic development funding from the company in the Washington metropolitan area.
Announced in November, the Memorandum of Understanding (MOU) between Virginia and Amazon includes more than $1 billion in state incentives through 2038. This is in addition to a state commitment of nearly $300 million for transportation projects among other things.
According to a state fiscal impact study, there will be an increase of more than $260 million in annual state general fund revenues once 25,000 jobs have been created by year 12 of the deal, with at least $3.8 billion cumulative by year 20. Within two decades, the cumulative increase will hit nearly $3.3 billion in state general fund revenues for the 25,000 new jobs, after subtracting post-performance company incentive payments.
In accounting for all “potential related state expenditures,” including company incentives, higher education investments, and K-12 expenditures associated with increased school enrollments, there will be a $1.2 billion increase in the state’s general fund within 20 years, if all 25,000 jobs are created. Furthermore, there is a projected increase of more than $430 million in state non-general-fund, transportation-dedicated revenues, excluding the 0.7 percent regional sales tax for Northern Virginia, the fiscal impact statement reveals.
The deal made between Virginia’s Economic Development Partnership Authority and Amazon is said to have a “more than 6-to-1 return on state incentives over 20-year life of performance agreement.”
Although Amazon is said to not be looking at other cities to replace New York City as the second half of HQ2, that does not mean that they will not build the second half. The Commonwealth could be in waiting to receive the entirely of the deal, which would mean at least 50,000 high-paying jobs for Virginians.