The suspense is over. Amazon, Inc., has officially announced that it will invest $2.5 billion to establish a new headquarters in Northern Virginia. The facility will be located in the Pentagon City and Crystal City area of Arlington County and the Potomac Yard in the City of Alexandria. In addition to the 22,000 jobs created directly by Amazon, the project is expected to generate an additional 22,000 direct and indirect jobs in Virginia.
“This is a big win for Virginia—I’m proud Amazon recognizes the tremendous assets the Commonwealth has to offer and plans to deepen its roots here,” said Governor Ralph Northam in a press release today. “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.”
Virginia offered a substantial incentive package to induce the commitment from the online-retailing and cloud-services giant, which received 238 proposals from across North America. Originally, the company said it would invest $5 billion in a single second headquarters, but in the end decided to split the project between Northern Virginia and Long Island.
Said Northam: “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 biggest employment growth opportunity in the years ahead will be in tech—from artificial intelligence to cloud computing to cybersecurity, and everything in between,” said Stephen Moret, CEO of the Virginia Economic Development Partnership, which led the recruiting effort. “The tech-talent pipeline investments that Governor Northam and the General Assembly are launching will position communities across the Commonwealth for healthier, more diversified economic growth.”
As part of the Commonwealth’s long-term incentive agreement with Amazon for the creation of at least 25,000 jobs, Virginia will:
- Provide post-performance 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; and
- Invest up to $195 million of non-general fund money in 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.
- In addition, Arlington County and Alexandria will fund another $570 million for transportation projects, including including rail connections, transit facilities, multi-modal streets, and corridor connectivity serving the site.
To support the growth of the technology sector across the Commonwealth, Virginia will:
- Make 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;
- Make performance-based investments of up to $375 million over 20 years for new master’s degree programs in computer science and related fields at George Mason’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; and
- Invest $50 million over 20 years in K-12 tech education and internship programming to connect higher ed students to tech jobs.
According to press reports, incentives will total about $2.5 billion.
Bacon’s bottom line: The announcement is exciting news for Virginia and should prove transformative to Northern Virginia’s economy. If inducements must be made, I would much rather see them in the form of infrastructure improvements, K-12 and higher-ed investments than in payments to Amazon.
As Reed Fawell has opined elsewhere on this blog, a corporate and public investment investment of this magnitude represents a once-in-a-lifetime opportunity to create a functional transportation system in Northern Virginia’s urban core. Will the transportation investments serve the region or just Amazon? The devil is in the details, but the potential benefits are enormous.
The one provision that triggers my gag reflex is the $550 million — up to $22,000 per job created — paid directly to Amazon. Where will those employees come from? How many will be recruited away from other Northern Virginia companies, accentuating shortages of critical skills in a tight labor market and reducing their competitiveness? While many will welcome the coming of Amazon, I would expect others to resent the hefty subsidy. I will be interested in hearing the justification for this particular element of the deal.
Note: I have updated the total figure for incentives to reflect reporting I did not have available when I initially filed this post.