WASHINGTON - Amazon made it official Tuesday, announcing that it will build new headquarters in northern Virginia and New York City, pledging to create 25,000 jobs at each site and ending a year of intense speculation and competition.
The company also announced that it has selected Nashville for 5,000 jobs as part of a new operations hub responsible for customer fulfillment, transportation and supply-chain and similar activities.
The choice of Crystal City in Arlington County as one of the winners cements northern Virginia's reputation as a magnet for business and will potentially reshape the Washington region into an eastern outpost of Silicon Valley over the next decade.
The triumph came with a price tag, details of which became public for the first time Tuesday after months of closed-door negotiations. Virginia Gov. Ralph Northam, D, and Arlington leaders agreed to give Amazon direct subsidies totaling $573 million based on the company creating 25,000 jobs with an average salary of $150,000.
The state and county also will invest a total of $223 million for transportation improvements that will benefit Amazon as well as the rest of the community, officials said.
"We are excited to build new headquarters in New York City and northern Virginia," Amazon founder and CEO Jeff Bezos said in a statement. (Bezos also owns The Washington Post.) "These two locations will allow us to attract world-class talent that will help us to continue inventing for customers for years to come. The team did a great job selecting these sites, and we look forward to becoming an even bigger part of these communities."
The money, subject to approval by the Virginia General Assembly, also includes $195 million in transportation improvements to nearby Metro stations and to Reagan National Airport, as well as construction of a pedestrian bridge connecting the airport to company's new hub - which will be in a newly branded neighborhood called "National Landing" encompassing parts of Pentagon City and Crystal City in Arlington and Potomac Yard in Alexandria.
Virginia's tech talent and stable business environment were keys to landing the project, Northam said.
Standing in a Crystal City warehouse that will be redeveloped for the company, Northam vowed that with Amazon on the way, the complex of dated and largely vacant government office buildings would put the commonwealth "on the leading edge of the next technology and innovation breakthrough."
Other states offered the company more money, and Northam paired the announcement of the deal with a plan to spend up to $1.1 billion over 20 years to expand tech education at the state's community colleges and universities - allowing him to assert that the heavy majority of the spending would not benefit just Amazon.
Virginia Tech announced plans to build a $1 billion graduate campus in Alexandria focused on innovation.
"The vast majority of the commonwealth's proposal represents investments in our people and our infrastructure that will align with Amazon's long-term goal while supporting the growth and competitiveness of businesses all across Virginia," Northam said.
The decision hands Northam and local leaders the largest economic-development prize in a generation - one promising $2.5 billion in capital investments and $3.2 billion in net tax revenue over 20 years - but could also put pressure on the region's already steep housing prices and congested roads, and its yawning divide between wealthy and low-income residents.
According to a 25-page agreement between the company and the state, Amazon expects to hire 400 people in 2019 and 1,180 the following year. It expects to create a minimum of 25,000 jobs by 2030 and potentially a total of 37,850 by 2034.
New York Mayor Bill de Blasio, D, and Gov. Andrew Cuomo, D, - who had joked that he would change his name to "Amazon Cuomo" if necessary to land the project - also claimed victory Tuesday.
New York leaders offered Amazon more money than Virginia - more than $1.5 billion, much of it also tied to the company's job growth and salaries.
The final suitors included the District of Columbia, Montgomery County and 16 other jurisdictions Amazon considered since narrowing its list in January. District Mayor Muriel Bowser, D, and Maryland Gov. Larry Hogan, R, both applauded the announcement.
Neither will have to pony up incentives to the company, but experts say both should see economic gains as a result. Bowser called on regional leaders to create concrete affordable-housing goals to address an acute problem that economists say is likely to worsen as Amazon grows.
"Amazon in Arlington is a win for D.C.," Bowser said in a statement. "We will continue preparing residents with the skills and knowledge they need for the jobs of the future, including at Amazon."
Maryland officials had offered one of the richest known incentive packages, at $8.5 billion. Sen. Benjamin Cardin, D-Md., said that while he was "rooting for Montgomery County," Amazon's investment would draw many new residents to Maryland.
Hogan said he expects to see other companies relocate to the state for proximity to Amazon. "Collectively, we will not only gain 25,000 corporate-level jobs, but also many businesses that are part of Amazon's supply chain," Hogan said.
Opposition to the move started shortly after the announcement, however, as groups dedicated to fighting inequality and opposed to corporate subsidies began rallying their supporters in New York and Virginia as details of the deal began to emerge.
"We've been getting calls and outreach from Queens residents all day about this. The community's response? Outrage," said Rep.-elect Alexandria Ocasio-Cortez, D-N.Y., who will take office in January.
Many were concerned about the impact on the cost of living and questioned why a company run by Bezos - the world's wealthiest person - needed any public funds.
But Cuomo said the benefits dwarf the subsidies.
"The revenue-to-incentive ratio is 9-to-1. That is the highest rate of return for an economic incentive program that the state has ever offered," Cuomo said. He contrasted it with the return from the state's film tax credit, which he said brings the state $1.15 for every $1 it invests.
Similar concerns emerged in Virginia.
"Thousands of new high-paying jobs could be a boon to our community, but we deserve to know the cost," said Anna Scholl, executive director of the advocacy group Progress Virginia. "Tens of thousands of new workers and their families are sure to strain community resources when it comes to affordable housing, mass transit and traffic, and quality local schools. It's only right that Amazon pay their fair share."
Residents in the nearby Del Ray neighborhood expressed concerns earlier this year that Amazon's arrival would worsen daily rush-hour backups that already slow traffic to a crawl and would erode the quality of life in their neighborhood of mostly single-family homes.
Jay Carney, Amazon's senior vice president of worldwide corporate affairs, said that the company considered all the locations carefully and reviewed 100 metrics but ultimately made its decision - including the choice to split the project - based on how best the company could recruit the talent it needs.
"We came to realize that of course these are two fantastic metropolitan areas, and each of the areas has an existing pool of talent and are fantastic places to live," he said in a phone interview.
Carney said that Amazon would apply some of the lessons it had learned from its growth in Seattle - where housing costs rose dramatically during the company's expansion - to its new locations. He said Bezos was "involved very deeply" in the process and was in every leadership meeting where it was discussed.
Amazon's decision to split the project rather than open a second headquarters on par with its Seattle campus has angered some who said the company had ginned up competition among cities only to change the rules midstream. Some said it was unfair that the company seemed to consider only sites in more-affluent communities.
"One thing that's different here is we are planning in advance with these cities," Carney said. "Amazon started in a garage. Nobody foresaw, not even Jeff, when they got launched that Amazon would become what it became or that we would have tens of thousands of employees in Seattle alone."
Amazon launched the project in fall 2017, dubbing it "HQ2" and issuing search criteria for "a second corporate headquarters" with as many as 50,000 jobs and an investment of $5 billion.
Although 238 locations initially submitted proposals to Amazon, many experts considered the Washington region a favorite from the outset because of Bezos's personal connections in the region, particularly the $23 million mansion he purchased in the city's Kalorama neighborhood last year and his ownership of The Post.
Carney said those were not among the 100 metrics the company looked at. "It's not a factor," he said. "He lives in Seattle. He has a family there."
In picking Crystal City, Amazon opted for a close-in suburban site, just across the Potomac River from Washington and a half-mile from National Airport.
Among the announced transportation improvements are new access points to the Crystal City Metro station and the planned Potomac Yard station. Amazon also wants a helipad, and Arlington has said that the county staff will help obtain the necessary local, state and federal approval, according to a letter from County Manager Mark Schwartz that was released with other information about the deal.
Since launching the high-profile search last year, Bezos and the company made several announcements some expected would soften Amazon's image as it moves to open its second hub.
Bezos announced in September that he would donate $2 billion of his own money to support groups battling homelessness in the United States and to create a network of preschools in underserved communities.
In October, after bearing months of criticism from Sen. Bernie Sanders, I-Vt., over its treatment of workers, Amazon announced that it would raise its minimum wage for all employees to $15 per hour, although the decision is not likely to have much effect on the company's hiring in northern Virginia.
The expected windfall from the development will not immediately solve local governments' budget woes, either. Schwartz said Arlington County is still considering layoffs and budget cuts in the coming year.
"Everybody thinks it's going to be this magical elixir right away," he said.
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The Washington Post's Patricia Sullivan, Michael Laris and Fenit Nirappil in Washington and Gregory S. Schneider in Richmond, Virginia, contributed to this report.
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By the numbers
- $573 million: Amazon will receive a $550 million workforce cash grant from Virginia, based on $22,000 for each job created over the next 12 years, and $23 million from Arlington County.
- $2.5 billion: Gov. Ralph Northam, D, said the deal promises that much in capital investments, plus $3.2 billion in net tax revenue over 20 years.
- 400 and 1,180: Hires Amazon expects to make in 2019 and 2020. It expects to create a minimum of 25,000 jobs by 2030.
Amazon will benefit from government subsidies and investments totaling more than $2.4 billion from Virginia, New York and Tennessee to build its new facilities, spurring complaints that taxpayers shouldn't be subsidizing one of the nation's most prosperous companies.
A big gap in the size of incentives promised by New York and Virginia also stirred concern in the Empire State - and quiet satisfaction in the Old Dominion - that Richmond had cut a better deal than Albany. In the largest single subsidy offered by each state, New York offered tax credits equal to $48,000 per new job, while Virginia agreed to workforce cash grants of $22,000 per job.
The incentives packages also worried affordable housing activists that too little was promised to deal with the potential effect on housing costs of an influx of tens of thousands of new employees with an average salary of more than $150,000 a year.
It's normal for job-hungry state and local governments to offer tax credits, grants and other incentives to lure companies, and the contest for Amazon's second headquarters, HQ2 - widely seen as the biggest economic development prize in a generation - was no exception.
But the prospect of granting hundreds of millions of dollars of subsidies to a company led by the world's richest man - Amazon CEO and founder Jeff Bezos - also drew condemnation in some quarters. (Bezos owns The Washington Post.)
Two New York lawmakers representing constituents in Long Island City, where one of the two new Amazon headquarters will be located, have pledged to oppose the deal.
"We are witness to a cynical game in which Amazon duped New York into offering unprecedented amounts of tax dollars to one of the wealthiest companies on Earth for a promise of jobs that would represent less than 3% of the jobs typically created in our city over a 10 year period," state Sen. Michael Gianaris and City Council Member Jimmy Van Bramer said in a joint statement issued after the announcement.
The total of incentives for Amazon - including direct subsidies and public investments designed to help attract the company - appeared to be considerably less than the package of up to $8.5 billion offered by Maryland and $7 billion by New Jersey. That suggested that factors such as access to talent and airports, and overall business climate, were more important for the company.
New York was the most generous among the winners, promising more than $1.5 billion in direct subsidies for Amazon provided it creates at least 25,000 jobs in Long Island City, which is in Queens across the East River from Midtown Manhattan.
Virginia appeared to have made a better deal, as the state and Arlington County offered direct subsidies of $573 million for 25,000 jobs to place the other new headquarters near Reagan National Airport in what will now be called National Landing.
Virginia and Arlington also pledged investments totaling $223 million for transportation improvements including upgrading two Metro stations - an incentive that will help Amazon and the rest of the community.
Most of the incentives are conditional on Amazon delivering the 25,000 new high-paying jobs. The promised salary of $150,000 a year is an increase from the $100,000 salaries that Amazon originally guaranteed. Both New York and Virginia offered additional subsidies if the company creates more than 25,000 jobs.
Nashville, Tennessee, a surprise last-minute addition to Amazon's plan, promised $102 million in subsidies for a new operations center with 5,000 jobs.
In describing its rationale for picking northern Virginia and New York to share the top prize, Amazon stressed that access to tech talent was paramount.
"We were looking for a location with strong local and regional talent - particularly in software development and related fields," the company statement said.
Talent would not necessarily explain the choice of Northern Virginia over Maryland's Montgomery County, however, as the two are across the Potomac River from each other and in the same metropolitan area.
However, northern Virginia is widely seen as more business-friendly than Montgomery County, partly because Virginia is a right-to-work state, where it is prohibited to require membership in a union as a condition of employment. Also, Amazon said it wanted good access to airports, and the Arlington site is a half-mile from Reagan National Airport, whereas the Montgomery County site would have been more than a 30-minute drive from that airport.
In Virginia, the bulk of the direct incentives will come in the form of workforce cash grants from the state of up to $550 million, based on $22,000 for each job created over the next 12 years.
The state will also invest $195 million in infrastructure in the neighborhood, including improvements to the Crystal City and Potomac Yards Metro stations and a pedestrian bridge connecting the Amazon site to Reagan National Airport. The Potomac Yards station is not yet open.
From Arlington, Amazon will receive a cash grant of $23 million over 15 years linked to incremental growth of the tax on hotel rooms. The county also will dedicate about $28 million of future property tax revenue for on-site infrastructure and open space at the site.
The Virginia General Assembly will have to approve the Amazon subsidies, but legislators predicted they would win passage. The Arlington County Board will take up the package in February.
Although it is not a direct subsidy, Virginia's package also included an ambitious plan to spend nearly $1.1 billion over 20 years to expand tech higher education in the state. Amazon said this was an initiative by the state and not something that the company proposed.
One aim is to raise the number of bachelor's and master's degrees awarded in the computer sciences and related fields by 25,000 to 35,000 over the next two decades, beyond what was already forecast. The plan includes construction by Virginia Tech of a graduate campus focused on innovation in Alexandria, and expansion of George Mason University's tech program in Arlington.
Virginia Gov. Ralph Northam, D, described the package as "a new model of economic development for the 21st century."
One provision in Virginia's package is not financial at all. Virginia agreed to give Amazon at least two days notice if the media or the public filed a Freedom of Information Act request about the agreement. This would "allow the Company to seek a protective order or other appropriate remedy."
New York's package included direct state incentives of $1.2 billion, most of which is to be provided via a refundable tax credit equivalent to $48,000 per job over the next 10 years.
New York also offered a cash grant of $325 million based on the square footage of buildings occupied in the next 10 years.
In addition, Amazon will benefit from two other New York City incentive programs, which are available to all companies.
It wasn't immediately clear why New York had offered so much more in incentives than Virginia. New York Gov. Andrew Cuomo, D, defended the incentives by saying that the total state and city revenue is estimated at $27.5 billion, which he said would be about nine times larger than the incentives.
Virginia's top economic development official, who led negotiations with Amazon, said his state historically has been less generous than others in granting subsidies.
"Virginia is generally a relatively low-incentive state, typically the lowest incentives in the South," said Stephen Moret, director of the Virginia Economic Development Partnership.
"We wanted to win this in a Virginia way, and that was more about emphasizing our assets, in particular our stable, competitive business climate and our outstanding education systems," Moret said.
He said that the total incentive package was cut by half when Amazon decided to change its original plan to build a single new headquarters with 50,000 jobs.
But even with the shrinkage in the size of the prize, Moret said, the state estimates that the increased revenue in personal income taxes and sales taxes over 20 years will be so high that the net gain for the state's general fund will total $3.2 billion after paying the incentives.
"It's a gusher" of tax revenue, he said.
Affordable housing activists hope that some of that revenue will ultimately go to offset the expected negative effect on rents and home prices. They were displeased that while Virginia and Arlington offered large sums for transportation improvements to deal with congestion, the package did not include any new money earmarked for housing.
"There's excitement that HQ2 is coming but concern that there is not more than has seemingly been committed for low- and moderate-income folks for housing," said David Bowers, vice president and Mid-Atlantic market leader for Enterprise Community Partners. "It's a challenge moment for regional leaders - public and private sector - to determine whether we will proactively make investments at the scale of need to meet the region's housing affordability challenges."
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The Washington Post's Michael Laris and Taylor Telford contributed to this report.