Amazon cancels New York City HQ2 amid opposition

by Ike Obudulu Posted on February 14th, 2019

New York CIty, USA: Amazon.com Inc. said it’s axing plans to build a new corporate campus in New York City, bowing to fierce opposition from some residents and politicians and denying the city what the mayor and governor had called its biggest ever economic win.

New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio lobbied hard to bring the deal to the city, with the governor even jokingly offering to change his name. They touted the promise of as many 40,000 jobs in the city over the next two decades with an average salary of $150,000.

But local opposition was fervent from the beginning. Lawmakers resented being excluded from negotiations for the deal, and decried the $3 billion in government subsidies offered to a company run by the world’s richest man, while the city itself is facing budget cuts. Community groups feared rising rents in the neighborhood would push out long-time residents, and that the influx of workers would strain an already overburdened subway system.

“Amazon’s decision to withdraw from New York is no doubt a blow to our local economy,” said Julie Samuels, executive director at Tech: NYC. “New York City is today one of the most dynamic tech hubs in the world, but there is no guarantee we will maintain this status in the future, which makes this news so disappointing.”

In a series of meetings at the New York City Council, Amazon executives were grilled about their view on unions, specifics about jobs in the neighborhood and the fact that their chosen site is located in an opportunity zone, enabling it to qualify for federal and state tax breaks there. Amazon said it wouldn’t claim the break.

Instead of reopening what was a year-long search for a second headquarters, Amazon said it will proceed with plans for other major offices at a site in Northern Virginia and Nashville. “We will continue to hire and grow across our 17 corporate offices and tech hubs in the U.S. and Canada,” it added, in a statement Thursday.

After reports emerged last week that Amazon was considering withdrawing from New York, some pundits speculated that it was a negotiating tactic designed to see how far the opposition was willing to go. But it wasn’t a ploy, according to a person familiar with the matter. The company planned to hire 700 people this year in New York City and has plenty of time to adjust and absorb that growth at other sites, the person said.

Amazon captured North America’s attention in 2017, when it announced plans to build a second headquarters, prompting gushing overtures from politicians and publicity stunts from hopefuls eager to stand out. A group from Tucson offered to send a 21-foot-tall cactus to Seattle, which the company donated. A Georgia town offered to name a new city “Amazon.” Beyond hype, cities dangled generous tax incentives. Former New Jersey Governor Chris Christie publicly offered $7 billion in tax breaks and other benefits to bring Amazon to Newark. Most cities and states kept their offers private.

In the end Amazon decided to split the so-called HQ2 between Long Island City and Arlington, Virginia, and open a smaller office in Nashville.

Earlier this week De Blasio called the potential for Amazon’s tech jobs “mission critical” for the city, which wants to build up its tech industry as it can no longer rely on Wall Street as an economic generator.

“This is a stunning development, with Amazon essentially giving in to vocal critics,” said Mark Hamrick, an analyst at Bankrate.com. “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.”

Prospective employees, small businesses and state and local governments looking forward to tax revenues, as well as the broader community, will miss out from improved growth prospects, Hamrick said. The decision could also prompt other businesses to think twice before setting up shop or expanding in the region.

“While polls show that 70 percent 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.

Author

Ike Obudulu

Ike Obudulu

Versatile Certified Fraud Examiner, Chartered Accountant, Certified Internal Auditor with an MBA in Finance And Investments who has both worked for and consulted with some of the world's largest companies on main street and wall street in over 20 countries, Ike brings his extensive reporting and investigations experience to bear on his role as Chief Editor.
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