Amazon's 'muted' impact on New York, Northern Virginia
Amazon's "second" world headquarters will have "at most a muted impact" on the economies and credit quality of Arlington County, Virginia, and New York City, Fitch Ratings said Tuesday.
The retail behemoth announced Tuesday that it will split its much-ballyhooed "HQ2" between New York's Long Island City and Crystal City in Arlington.
The Seattle-based company also announced plans for an East Coast operations hub in Nashville.
The announcement culminated a process that began more than two years ago and triggered frenzied competition — out of control, skeptics have said — for the so-called HQ2 among cities as Amazon dangled 50,000 new jobs with an average salary upwards of $100,000 and more than $5 billion in investment for up to 17 years.
Long Island City, just across the East River from Manhattan, is a developing part of Queens borough where modern mixed-use buildings are replacing old warehouses. Crystal City, across from Washington and consisting largely of office towers, is recrafting itself after losing thousands of federal jobs. Amazon has chosen the National Landing area of Crystal City.
Hiring at both the new headquarters will begin next year, as it will in the so-called Operations Center of Excellence in downtown Nashville.
"New York can proudly say that we have attracted one of the largest, most competitive economic development investments in U.S. history,” Gov. Andrew Cuomo told reporters.
Virginia Gov. Ralph Northam called the news "a big win for Virginia."
According to New York Mayor Bill de Blasio, the announcement will accelerate his city's buildout as an international technology hub.
"We’ve been growing, growing, that’s an ecosystem if you will and economic ecosystem that already has hundreds of thousands of jobs. We have an opportunity to take it much, much farther," de Blasio said. "I think it has a tremendously positive impact on the future of Queens as an economic hub and a place for new jobs to be created."
"The additional economic activity could positively affect two of the four local government key rating drivers Fitch assigns, revenue framework and long-term liability burden, over the long term," Fitch said in its commentary about Amazon's announcement.
An Amazon HQ2 split, Fitch added, would have little effect on employment. An analysis Fitch conducted earlier this year said that even the full impact of HQ2 would have represented a modest 1.5% of the labor force in the Washington, D.C., Metropolitan Statistical Area and only 0.5% in metropolitan New York.
"We do not expect much change in home prices in either location as healthy economic dynamics are already pushing up prices and supply should be sufficient to absorb the needs," Fitch said. "The Washington, D.C. area is more likely to benefit than New York City as it has slower growth in rents and home prices."
Amazon will receive performance-based direct incentives of $1.525 billion based on the company creating 25,000 jobs in Long Island City, chief executive Jeff Bezos said in a statement.
This includes a refundable tax credit through New York State’s Excelsior Program of up to $1.2 billion calculated as a percentage of the salaries Amazon expects to pay employees over 10 years; and a cash grant from Empire State Development of $325 million based on the square footage of buildings occupied over that time.
The company will receive these incentives over the next decade based on the incremental jobs it creates each year and as it reaches building occupancy targets. The company will separately apply for as-of-right incentives including New York City’s Industrial & Commercial Abatement Program and New York City’s Relocation and Employment Assistance Program.
The city will provide funding through a payment in lieu of tax, or PILOT program based on Amazon’s property taxes on a portion of the development site to fund community infrastructure improvements. Amazon has agreed to donate space on its campus for a tech startup incubator and for use by artists and industrial businesses, and Amazon will donate a site for a new primary or intermediary public school.
Amazon, which opened a fulfillment center on Staten Island borough this fall, said it will also invest in infrastructure improvements and new green spaces in Long Island City.
The Infrastructure strain could be heavy, especially in New York. Mass transit advocates say Long Island City is underserved. In addition, obtaining permanent funding streams for the Metropolitan Transportation Authority, the state-run agency that operates the city's subways and buses, have been subject to political wrangling. The system is one of the nation's oldest.
"This might be good news for the local economy, but the influx of new jobs and residents will put even more pressure on the city’s struggling transportation network," said Nick Sifuentes, executive director of the Tri-State Transportation Campaign.
In a joint statement, City Council member James Van Bremer and state Rep. Michael Gianaris, D-Queens, said they had "serious reservations" about the deal.
"We cannot support a giveaway of this magnitude, a process that circumvents community review ... or the inevitable stress on the infrastructure of a community already stretched to its limits,” their statement said.
Crystal City is served by the Washington area's Metro rail transit system, which has had its own series of breakdowns and other operational problems. Crystal City is home to three Metro stations, commuter rail access and Reagan National Airport.
In Virginia, Amazon expects to receive performance-based direct incentives of $573 million, which includes a workforce cash grant from the commonwealth of up to $550 million based on $22,000 for each job created over 12 years. The company will also receive a cash grant from Arlington of $23 million over 15 years based on the incremental growth of the existing local Transient Occupancy Tax, a levy on hotel rooms.
The commonwealth is budgeting $195 million in infrastructure in the neighborhood, including improvements to the Crystal City and the Potomac Yards Metro stations; a pedestrian bridge connecting National Landing and Reagan National Airport; and work to improve safety, accessibility, and the pedestrian experience crossing Route 1 over 10 years.
Arlington will also dedicate an estimated $28 million based on 12% of future property tax revenues earned from an existing Tax Increment Financing, or TIF, district for on-site infrastructure and open space in National Landing.