Behind the Decision

 

 

 

 

 

Following Amazon's release of their RFP in September 2017, the Virginia Economic Development Partnership (VEDP) collaborated with economic developers in Greater Richmond, Hampton Roads, and Norther Virginia to develop regional proposals for HQ2. With matching state funds, each region contributed financially and substantively to the research, content development, design, and execution of the proposals.

Northern Virginia's Unprecedented Collaboration

In Northern Virginia, the City of Alexandria, Arlington County, Fairfax County, and Loudoun County chose to partner to respond as a region. This unprecedented collaboration amongst the four jurisdictions resulted in the creation of significant new data and assets that the communities used for the HQ2 pitch, and have continued to utilize in their ongoing economic development efforts.

A Site Positioned for Growth: National Landing

Situated at the heart of the D.C. metro area, National Landing is a vibrant and growing destination for businesses and residents that is comprised of the neighborhoods of Pentagon City, Crystal City, and Potomac Yard. The branding of the area was jointly proposed by the economic development teams from Arlington and Alexandria to foster partnership between the two jurisdictions and enable a seamless, mixed-use corridor to evolve. Ultimately Amazon selected National Landing as the location for their new headquarters campus, in part due to the existing inventory of office space that could accommodate their initial presence and the developable land to pursue construction of their multi-million-square-foot headquarters.

Arlington and Alexandria's Pragmatic Approach

In Arlington and Alexandria, economic development leaders first evaluated the company’s space and jobs requirements, comparing those with their individual and combined assets (e.g., highly-educated workforce, existing extensive infrastructure, and amenity-filled business districts) as well as adopted long-term growth plans that emphasize transit-oriented nodes. After completing that evaluation, they determined that Amazon's second headquarters would be an ideal fit for their communities.

 

 

 

 

 

 

Commonwealth of Virginia

From the outset, Virginia was committed to match the scale and structure of its financial commitments for HQ NOVA with the ambition of the project through a combination of performance-based incentives and investments in state and regional competitiveness that will benefit tech firms and corporate headquarters located across the Commonwealth.

Doubling Virginia's Tech-Talent Pipeline

The foundation of the Commonwealth’s pitch for Amazon’s headquarters was a statewide, performance-based investment program to double the annual number of graduates with bachelor’s and master’s degrees in computer science and closely-related fields, ultimately yielding 25,000 to 35,000 additional graduates over the next two decades that will benefit tech employers across Virginia. A significant component of this investment is for new master’s degree programs in computer science and closely related fields at George Mason’s Arlington campus and for Virginia Tech to establish a new Innovation Campus in Alexandria.

Regional Transportation Infrastructure Improvements

Subject to HQ2 job-creation performance, the Commonwealth has committed up to $195 million (for 25,000 jobs) to invest in transportation projects that will provide robust, multi-modal connections between National Landing and the regional transportation system. Planned projects for state support include 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. 

Post-Performance Incentives

While Virginia’s proposal primarily focused on new investments in public assets that would benefit companies and citizens across Virginia, it also includes a performance-based incentive offering to Amazon, with annual incentive payments to be made only after the company has produced new, qualifying jobs. Specifically, the Commonwealth 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, plus benefits, escalated at 1.5% annually. The company will be eligible to receive up to $550 million in incentives if it creates 25,000 qualifying jobs (i.e., $22,000 per new job). Up to $200 million in additional company incentives (for a cumulative total of $750 million) is available if the company were to create a total of 37,850 qualifying jobs within 20 years (i.e., $15,564 per new job in excess of 25,000 jobs, up to 37,850 jobs).

Arlington County

Arlington's proposed package includes 95% of the total consisting of investments in affordable housing and infrastructure as adopted by the Board as part of the County’s Capital Improvement program (CIP) process, and 5% of proposed direct pay for performance financial incentives will come from taxes paid by tourists and business travelers on hotel rooms or other paid lodging.

Investments in the Site and Market

As a smart growth community, Arlington County will invest $360 million in transportation projects to serve the National Landing area. These are designed to further enhance the site to ensure that development, transportation, public open space and features work in concert to achieve high-quality placemaking and a vibrant urban place.

Arlington has projected $7 million per year of new commitments towards the implementation of 1,000 affordable housing units (100 per year for 10 years) in and around south Arlington, which will directly benefit the immediate neighborhoods surrounding the proposed site. This proposed level of investment is based on both the average annual affordable housing investment over the past decade in these areas and the anticipated proportion of the area’s housing growth as a share of housing in the County over the next 10 years.

Arlington County proposed using a portion of new incremental revenue generated by Amazon's arrival within the existing TIF (Tax Increment Financing) area that covers Crystal City, Potomac Yard, and Pentagon City to make strategic infrastructure investments in and around National Landing.

Direct Benefit to Amazon

Arlington's proposed direct financial incentive to Amazon is an annual pay-for-performance grant tied to the company meeting office occupancy targets. No money currently assigned for community priorities like transportation, housing, and infrastructure will be used. The incentive would come from a percentage of the new incremental revenue generated by the County’s Transient Occupancy Tax (TOT), which is a tax paid by tourists and business travelers on hotel rooms or other paid lodging. Amazon is expected to generate significant additional TOT revenue from business-related travelers who will stay in Arlington to do business with the company. Over the 15-year performance period, the County estimates the grants will be worth a total of $23 million.

Benefits to Amazon Employees

As Arlington offers to economic development attraction projects, the County offered to provide a variety of in-kind relocation and acclamation support services to help Amazon employees who may be relocating to our region.  Services included:

  • Branded orientation website
  • Area familiarization materials and tours
  • On-site resource center and materials
  • Transportation and community assistance through Arlington Transportation Partners
  • Employee welcome celebration

 

According to Amazon itself, the primary driver behind the decision to locate their second headquarters in Arlington was their ability to attract world-class talent, both from the existing workforce and those seeking to relocate for the nearly unmatched assets offered by the Washington, D.C. region. Combined, the following assets helped guide Amazon to its decision in November 2018:

    Tech Talent

    Greater Washington is the country’s most educated region, and it produces more computer science graduates than any other metropolitan area. The region also has a ready base of talent, with the country’s third-largest pool of software developers and fourth-largest pool of management and legal professionals. The combination of depth, concentration, and growth of talent available in the Washington, D.C. metro area, with additional tech talent production from Virginia’s world-class higher education system, will ensure NOVA maintains and enhances its edge with access to the best and brightest.

    Diversity and Inclusivity

    Greater Washington is a global power center, the capital of global democracy, and one of the country's most racially, ethnically, and internationally diverse regions. Women are twice as likely, and African Americans five times as likely, to work in the technology sector in NOVA than in Silicon Valley. Approximately one-quarter of its residents were born outside the United States, and the children in NOVA schools speak approximately 100 native languages. Communities in NOVA are ranked among the most LGBTQ-friendly nationwide, and diversity is one the region’s core strengths.

    Quality of Life

    Northern Virginia offers something for everyone, with access to some of the country's most interesting cultural and historical sites, sports teams in all major leagues, and a dynamic food and wine scene. The area is home to a broad range of outdoor activities, from kayaking on the Potomac to hiking in the nearby Shenandoah National Park, all as part of a mild four-season climate. The region offers a diversity of housing options, some of the country’s top-ranked public schools, and one of the country’s top-rated public transit systems.

    Ease of Doing Business

    Virginia is consistently rated among the best states in which to do business by leading publications, and Northern Virginia local governments are well-managed, have a history of visionary leadership, and a commitment to innovation. Of all the Fortune 500 companies based in the greater D.C. area, two-thirds have chosen to locate in NOVA. In 2017, U.S. News & World Report ranked Virginia as the No. 2 best state for governance, considering fiscal stability, budget transparency, and state integrity.

    Accessible Transit

    Northern Virginia has one of America's most robust multimodal transportation systems, which includes services such as Metrorail, regional rail (Virginia Railway Express), regional bus, local bus, express bus and bus rapid transit, longer-distance commuter bus, vanpool, slugging (casual carpooling), and bikeshare. Even more unique, the National Landing area is within walking distance of Ronald Reagan Washington National Airport, which offers nonstop flights to over 95 destinations.

     

    Project Scope

    Within 12 years from Amazon's initial landing in Arlington, the headquarters will be home to at least 25,000 new jobs paying a minimum average wage of $150,000 per year, plus benefits. By occupying over 4 million square feet of office space, the company's expected capital investment in Arlington will exceed $2.5 billion.

    Economic Impact

    At both the local and state level, HQ2 will generate significant revenues through its job creation and capital investment. For Virginia, the project is estimated to generate at least $3.8 billion in general fund revenue after 20 years, which would be a greater than 6-to-1 return on the state's incentive package. For Arlington, the project is estimated to generate at least $174 million in revenue after 12 years, which would be a greater than 5-to-1 return on the County's incentive package.

     


     

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