WASHINGTON (Sinclair Broadcast Group) — Amazon’s surprise announcement Thursday that it is backing out of its plan to build a new headquarters in New York City was the result of a series of missteps by the company and political leaders over the last year and a half, experts say.
“It really reveals their overall site selection strategy to be very flawed,” said Ron Starner, executive vice president of Conway Inc. and Site Selection magazine.
The ecommerce giant selected Long Island City and Northern Virginia as sites for its HQ2 expansion last fall after a massive 14-month search, promising to bring 25,000 high-paying jobs to both locations in exchange for tax incentives. The company also announced plans for a smaller facility in Nashville.
In a blog post Thursday, Amazon blamed a lack of support from state and local officials for driving it out of Long Island City. The Northern Virginia and Nashville projects will proceed as planned, and Amazon expects to spread the 25,000 jobs that would have gone to New York across its 17 corporate offices and tech hubs throughout the United States and Canada.
“While polls show that 70% 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.
The move sparked a flurry of celebrations and recriminations in New York Thursday as community activists welcomed the announcement and supporters of the deal fretted over the message it sent about the state’s support for economic development.
“It’s extraordinary when individual workers and independent businesses can beat the richest man in the world, with his army of lobbyists and consultants. We are at a turning point in this country. The American people are no longer going to bow down to wealth and corporate control,” Zephyr Teachout, a member of the board of the Open Markets Institute, said in a statement.
In a Fox News op-ed, Seth Barron of the Manhattan Institute said liberal opposition prevented Long Island City from reaping the benefits of a major employer building and hiring in offices that will instead remain vacant.
“Critics of the Amazon plan can rejoice in their success in having prevented economic development in a moribund area of western Queens. They have preserved stagnation and called it progress,” Barron wrote. “Nice work, guys.”
Experts said Friday Amazon executives, Governor Andrew Cuomo, and Mayor Bill de Blasio should all have seen the backlash coming and should have worked closely with local leaders from the start to avert it.
“This is basically economic development 101: you don’t leave the local entities out of the equation,” said K.C. Conway, chief economist for the CCIM Institute in Chicago and director of research for the Alabama Center for Real Estate at the University of Alabama.
After making a very public spectacle out of the bidding process, Starner said Amazon failed to do its due diligence to understand the local political landscape.
“The fact that Amazon did not see that coming, I’m shocked,” he said.
Amazon has struggled with local political opposition before, recently wrestling with city officials in Seattle over an attempt to impose new taxes there. With a vocal critic, New York State Sen. Michael Gianaris, recently appointed to the state board that would have to approve the deal, this may have been a way to avoid unnecessary headaches down the road.
“There are lots and lots of ways a city can make life miserable for a local company,” said Amihai Glazer, an economics professor and director of the corporate welfare program and the University of California, Irvine.
Critics of Amazon and the $3 billion in tax incentives New York offered the company included Rep. Alexandria Ocasio-Cortez, D-N.Y., who represents the part of Queens next to the area where the headquarters would be built.
"Anything is possible: today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon's corporate greed, its worker exploitation, and the power of the richest man in the world," Ocasio-Cortez tweeted Thursday.
Supporters of the Amazon deal emphasized its economic benefits for the local community, but the expected influx of high-wage workers threatened to overwhelm aging infrastructure, drive up rent, and leave current residents unable to live or shop in their neighborhood.
“Amazon prides itself on having all this data. You cannot tell me Amazon did not understand it was going to create a strain,” Conway said.
Some business groups have warned the hostility toward Amazon belies New York’s claim that it is “open for business,” but experts doubt this will discourage companies from considering setting up shop in the state in the future.
“My sense is New York is attractive for so many reasons we won’t see an effect,” Glazer said.
While the HQ2 debacle may be embarrassing for Amazon, it could keep other technology companies who already have offices in New York from packing up and leaving.
“I would say there are lots of winners: first of all, every existing tech company doing business in New York City,” Starner said.
Conway said some companies were already eyeing other locations out of fear of a wage war with Amazon over a very limited pool of skilled workers.
“What we were hearing from tech company after tech company was existing contractors and data companies were very paranoid and very afraid of the Amazon impact,” he said.
Glazer noted Amazon is not announcing another site for the HQ2 development that was planned for Long Island City.
“It sounds like they don’t want this massive investment in the first place...,” he said. “I think Amazon is having second thoughts about the whole idea.”
Glazer pointed to Foxconn and General Electric rethinking announced investments in Wisconsin and Boston, respectively, in recent weeks despite tax incentives they were offered as indicative of a broader pattern.
“This isn’t strange. It has happened elsewhere,” he said.
Despite complaints about the tax incentives New York offered to one of the richest companies in the world, experts cautioned against reading too much into the role of incentives in this whole drama. Newark, New Jersey, which sent Amazon a huge Valentine’s Day card Thursday reminding the company of its bid, had promised more than twice what New York did, and Maryland ponied up billions more than the $570 million in incentives that drew Amazon to Northern Virginia.
“It’s safe to say incentives were not the driving factor in why Amazon chose the locations it did,” Starner said, or in why Amazon chose Thursday to walk away from one of them.