The Wall Street Journal: New York Dangled Extra Incentives in Initial Bid to Lure Amazon HQ2

Originally published in The Wall Street Journal

ALBANY, N.Y.—State officials offered Inc. $800 million more in incentives than was previously known to win its second-headquarters contest and were even prepared to pay part of some employees’ salaries if the tech company developed a campus in New York.

Documents reviewed by The Wall Street Journal show the scope of what state and local officials initially put on the table as part of the 2017 HQ2 competition, in which more than 200 cities submitted bids to host a facility that Amazon said would house 50,000 jobs.

The company said in November 2018 that sites in Northern Virginia and the Long Island City neighborhood of Queens would split the new headquarters. New York state and city officials agreed to give $3 billion of incentives to the e-commerce giant to hire as many as 40,000 employees.

Facing opposition from some local elected officials, Amazon abandoned its plans for New York on Valentine’s Day last year.

The Journal obtained the records through a Freedom of Information Law request to Empire State Development, the state’s economic development authority.

The documents show that in its first formal bid to Amazon, in October 2017, the state offered to provide up to $2.5 billion of incentives to the company for a campus in New York. The offer also applied to sites that state and local leaders proposed in the Hudson Valley, Albany, Central New York, Buffalo, Rochester and on Long Island.

The state’s initial offer included $1.4 billion of tax credits based on the number of employees hired and $1.1 billion of various grants. That was $800 million more than the ESD agreed to in a memorandum of understanding signed a year later: The state provided $1.2 billion of tax credits and $505 million to reimburse some construction costs.

Before Long Island City was selected, different New York localities made site-specific incentive offers. Nassau County officials offered $2.2 billion in tax exemptions to build a facility at the Belmont Park.

On top of the state’s final $1.7 billion package, New York City ultimately offered Amazon up to $1.3 billion of extra incentives through two programs open to any company.

Officials also presented alternative campus sites, including near the World Trade Center in lower Manhattan, on the island’s West Side near Penn Station and in downtown Brooklyn. The city proposed that Governors Island, a former Coast Guard base between Manhattan and Brooklyn, could serve as an “island retreat” for Amazon employees.

ESD initially proposed to spend $500 million to create a Center for Commercial Innovation near the selected site that would let Amazon partner with various colleges for research relevant to its business. The site would also subsidize job-training programs, according to the proposal, and the state pledged to pay 25% of certain graduates’ first-year wages with Amazon to help it achieve workforce diversity.

An ESD official said on Friday that the initial offer was higher to reflect the original, larger scope of HQ2 and to draw Amazon to the negotiating table. The workforce incentives were designed with upstate areas in mind, the official said, and to help disadvantaged populations.

“Throughout the negotiating process, we sharpened our incentive package and ultimately secured a better return on investment for the state and the biggest economic development opportunity in New York’s history,” ESD spokesman Matthew Gorton said.

Amazon executives have said the HQ2 decision was based on where their employees would want to live more than incentives. Neither Virginia nor New York presented the most generous packages during the nationwide competition: Newark, N.J. dangled $7 billion, while officials in Maryland offered $5 billion.

A company representative declined to comment. City officials have said they presented the best proposal they could to attract the company to strengthen the city’s tech economy.

State Sen. Mike Gianaris, a Democrat from Queens and one of the leading opponents of the Long Island City campus, said news of the initial offer underscored his call to re-examine state incentive programs.

“The more we learn about this twisted process, the worse it appears,” Mr. Gianaris said. “I think it’s good we didn’t have to provide any incentives to get Amazon here, because they appear to be coming anyway.”

In December, Amazon announced plans to lease space for 1,500 employees in Manhattan’s new Hudson Yards neighborhood.

New York Gov. Andrew Cuomo, a Democrat, has repeatedly pointed out that Amazon’s Queens campus was projected to increase city and state tax revenue by as much as $27.5 billion over 25 years.

Kathryn Wylde, president of the Partnership for New York City, a business group, said the incentive offers were justified.

“They demonstrated to Amazon that New York City and state cared about the project and that they had skin in the game. That’s really the point when you’re trying to attract major headquarters operations,” she said.

Read this article on The Wall Street Journal here