Boon or boondoggle? Officials, lawmakers, academics weigh in on proposed Amazon ‘megadeal’

By: - November 13, 2018 5:31 pm

Gov. Ralph Northam made a video announcing Amazon’s new headquarters in Northern Virginia, borrowing the state’s recognizable tourism logo and slogan.

As expected, Gov. Ralph Northam’s administration announced Tuesday that Virginia landed the whale cities and states across the country have scrambled to harpoon since Amazon launched an open competition last year for the privilege of hosting its new headquarters project.

The company says it will invest $2.5 billion in the new headquarters planned for Crystal and Pentagon cities and Potomac Yard in Alexandria — along with a second headquarters in New York —  bringing to Virginia 25,000 high-wage jobs over 12 years, a bevy of transportation projects in Northern Virginia and a new Virginia Tech campus in Alexandria, among other components of the deal.

The announcement of Virginia as one of the sites for Amazon’s headquarters had been anticipated for days, but details on the deal have been scarce until now. Cities around the country were noticeably secretive about the incentive packages they tried to put together to woo the prolific online retailer.

The project will result in more than $3.2 billion for the state’s general fund over 20 years, the governor’s office claims.

“Virginia put together a proposal for Amazon that we believe represents a new model of economic development for the 21st century and I’m excited to say that our innovative approach was successful,” Northam said in a statement. “The majority of Virginia’s partnership proposal consists of investments in our education and transportation infrastructure that will bolster the features that make Virginia so attractive: a strong and talented workforce, a stable and competitive business climate and a world-class higher education system.”

Virginia’s share of the deal, per the governor’s office: 

  • Direct incentives to Amazon that will be paid annually based on job creation and wage levels, with minimum average wages of at least $150,000. Subject to General Assembly approval, the company will be eligible to receive up to $22,000 per job or up to $550 million in incentives. Additional incentives would be available if Amazon creates more than 25,000 jobs.
  • The state also commits to $195 million of non-general fund money for transportation projects that will improve mobility in the region, including additional entrances to the Metro stations at Crystal City and Potomac Yard, improvements to Route 1, a connector bridge from Crystal City to Washington National Airport, and a transitway expansion supporting Pentagon City, Crystal City and Potomac Yard. Additional funding would be available if Amazon creates more than 25,000 jobs.
  • “Performance-based investments” in bachelor’s degree programs in computer science and related fields that will be distributed statewide based upon a negotiated agreement with each public university or community college that wishes to participate.
  • Up to $375 million over 20 years for new master’s degree programs in computer science and related fields at George Mason University’s Arlington campus and for Virginia Tech to establish a new Innovation Campus in Alexandria, both of which are subject to a one-to-one match from the universities with philanthropic funds.
  • Invest $50 million over 20 years in K-12 tech education and internship programming to connect higher ed students to tech jobs.
  • The Virginia Housing Development Authority will also provide $15 million a year to support affordable and workforce housing in Arlington and Alexandria.

Arlington and Alexandria’s commitments:

  • More than $570 million “to date” for transportation projects, including rail connections, transit facilities, multi-modal streets and corridor connectivity serving the site. The localities say they “are also actively pursuing additional funding opportunities to advance investments in this corridor.”
  • Using the new tax revenue generated by Amazon, the localities plan to fund affordable housing, workforce housing, and public infrastructure, relying on revenues generated from Amazon’s new presence in their communities. Combined, they project putting $15 million to those uses over the next decade.

Reactions: From the glowing to the unimpressed

U.S. Sen. Tim Kaine  congratulated fellow Democrats Northam and former Gov. Terry McAuliffe for negotiating a deal that addressed education and transportation needs.

“I’m thrilled that our skilled workforce helped persuade Amazon to bring a major new headquarters and its tens of thousands of jobs to Virginia,” Kaine said in a statement.

Kaine’s counterpart, Democratic U.S. Sen. Mark Warner, said in a statement that he was excited about Amazon’s potential impact in Virginia but sounded a cautionary note.

“As we welcome Amazon’s new investment in Virginia, we must commit to implementing this announcement in a way that will benefit the whole region and all of the commonwealth,” Warner wrote.

Before the Amazon deal is official, the General Assembly must approve it. Two key Republicans already appear to like the proposal.

“Strategic investments made in recent years to position Virginia as a business-friendly state have produced excellent results, and we look forward to investing further in our higher education system to catalyze growth in the tech sector,” said Del. Chris Jones, a Suffolk Republican and chairman of the House Appropriations Committee in a release issued by the governor’s office.

“I am proud of the responsible agreement we negotiated for the commonwealth, with incentives paid to the company only after new jobs are created that pay at least $150,000 per year, plus benefits and new revenues are received.”

Speaker of the House Kirk Cox, R-Colonial Heights, called it a “once-in-a-generation opportunity” that includes provisions protecting taxpayer dollars and creates possibilities for the collaboration between state’s universities and the giant online retailer.

“In recent years, Virginia has strengthened its economic development oversight to include rigorous, post-performance evaluations. I’m pleased to see this is a performance oriented incentive agreement that includes provisions to protect taxpayer dollars and ensure all parties meet the objectives that have been outlined. The House of Delegates must thoroughly review the parameters of this agreement during the 2019 session to ensure that every aspect of this agreement is beneficial to both Amazon and Virginia,” Cox said.

However, those provisions weren’t enough to quell every concern about the project.

“This deal will price tens of thousands of us out of our homes,” Del. Lee Carter, D- Manassas, tweeted. “It’ll overcrowd our schools and clog our roads, too, and we’re expected to pay $500m for the privilege.”

State Del. Lee Carter, D-Manassas. (Ned Oliver/Virginia Mercury)

Carter, a Democratic Socialist, has criticized another major economic development in Northern Virginia, citing concerns primarily about housing.

“Something the corrupt Micron deal and corrupt Amazon deal have in common: elected critics were excluded from the negotiations,” Carter tweeted. “That means our constituents were excluded too.”

He vowed in a separate tweet he would put up a fight in the General Assembly.

The Commonwealth Institute for Fiscal Analysis, a nonprofit, nonpartisan policy group in Richmond, said it’s “critical that elected leadership, media, and the rest of us take a careful look at the realistic benefits and drawbacks of the deal,” before public dollars are committed.

“Early details do not appear to show any required direct support by Amazon in the provision of affordable housing, instead relying on local governments to make some investments, although the projected additional housing units fall far short of the projected shortfall for the region,” the group said in a statement.

The institute also said it’s worth asking whether the jobs Amazon brings to Virginia should be subsidized at all, given that the company is coming to “an already congested area of the state with a low unemployment rate.”

“The Washington, D.C., region already has a shortfall of about 45,000 homes, leading to difficulty for many families in finding decent affordable housing,” the group said. “That’s expected to increase to a shortage of over 100,000 homes by 2040, even without a big new megadeal.”

Also, the secrecy of the deal up until this point didn’t give the public and elected officials enough time to fully consider the idea, the institute wrote.

“Same-day delivery is great for toilet paper, but not for public subsidies that could reshape a region’s future for better or ill,” the group said.

In a policy briefing Tuesday titled “Amazon HQ2 is the only competition where the losers are winners,” George Mason University Mercatus Center researchers Michael Farren and Anne Philpot argued that “both theory and experience suggest that cities and states are throwing their money away when they court Amazon’s favor through subsidies.”

“We find it implausible that Amazon’s corporate leaders didn’t already have a good idea of where they would locate HQ2 even before launching the competition between cities,” they wrote. “The research on corporate location decisions finds that subsidies rarely affect the final decision, lending weight to our skepticism. It also suggests that any relocation subsidies would simply be extra icing on the cake that Amazon had already picked.”


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Mechelle Hankerson
Mechelle Hankerson

Mechelle, born and raised in Virginia Beach, is a graduate of Virginia Commonwealth University with a degree in mass communications and a concentration in print journalism. She covered the General Assembly for the university’s Capital News Service and was among 12 student journalists in swing states selected by the Washington Post to cover the 2012 presidential election. For the past five years, she has covered local government, crime, housing, infrastructure and other issues at the Raleigh News & Observer and The Virginian-Pilot, where she most recently covered the state’s biggest city, Virginia Beach. Mechelle was with the Virginia Mercury until January 3rd, 2019.