Amazon Cancels HQ2 Plans in New York City

Company will move ahead with plans in Virginia and Nashville and will hire at other tech hubs

Amazon.com Inc. abandoned its $2.5 billion plan to build a New York City headquarters, undoing one of the country’s biggest economic-development deals because it said it was troubled by growing political opposition to subsidies to one of the world’s richest companies.

The move reverses Amazon’s very public, yearlong sweepstakes that sparked bids from more than 200 locales around the country and left Northern Virginia and New York City the winners.

The retreat, less than a week after news that the retailing and computer services powerhouse was having second thoughts, will cost New York 25,000 potential jobs on a new campus that was to be located in Long Island City, Queens, across the East River from Manhattan.

Amazon had agreed to spend up to $2.5 billion to build the new campus and bring at least 25,000 workers to the location over the next decade. In exchange, New York City and the state offered $3 billion in tax incentives.

The deal’s detractors, including some state and city elected officials, called it corporate welfare and opposed Amazon’s antiunion stance and resistance to organizing its New York employees.

Some 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,” Amazon said, despite majority support from local residents.

The decision caught the deal’s biggest backers—New York Gov. Andrew Cuomo and New York City Mayor Bill de Blasio, both Democrats—by surprise. Mr. Cuomo had just left the newsroom of the New York Daily News in lower Manhattan when the announcement came. It wasn’t clear if Amazon had given him advance notice of its decision.

Mr. de Blasio said he received a phone call from an Amazon executive Thursday morning, right before the news was announced. “No warning, no dialogue, just a fait accompli,” he said. “I had had a conversation with a senior Amazon official 48 hours ago, and there was no indication of this kind of problem.”

Earlier this week, Amazon touted polls showing the majority of New Yorkers supported the new headquarters, and its executives continued to meet with local and state officials.

On Thursday at 8 a.m., two Amazon executives who had been working on the project met with top aides to Messrs. Cuomo and de Blasio and a group of community leaders who had been tapped to give input on the project. People at the meeting said it lasted until 9:40 a.m., with Amazon executives fielding questions from attendees.

“There was no indication whatsoever that they were pulling out of the deal,” said Jose Ortiz Jr., a member of the community advisory group who was there.

By noon, Amazon was out.

With the search, Amazon had hoped to showcase its ability to create jobs and help local economies. It said Thursday it wouldn’t restart the process and hunt for a new city, and instead would add jobs in other offices around the country, including Seattle. Its plans to open a second headquarters in northern Virginia are proceeding and received state approval last week.

New apartment buildings, left, and an old warehouse, right, in Long Island City. Some government officials were worried Amazon might abandon plans to create 25,000 jobs and invest $2.5 billion. PHOTO: MARK LENNIHAN/ASSOCIATED PRESS

After months of public hearings and growing opposition in New York, the nomination of Democratic state Sen. Mike Gianaris to a seat on the state’s Public Authorities Control Board, where he could have ultimately vetoed state action on the project, helped doom the company’s plans, people familiar with the matter said. Pro-union comments by Mr. de Blasio last week also played a role, they said.

Ultimately the Amazon team led by Chief Executive Jeff Bezos decided to pull the plug, people familiar with the matter said. The move is straight out of the executive’s usual playbook—demonstrated last week, with his missive on alleged blackmail by the National Enquirer—to take a bitter pill quickly that will pay off in the future.

“Amazon thinks long term,”“This is a short-term loss, and yeah, there could be some short-term damage,” one of the people familiar with the process said. But that is better than continuing to get beat up for years, the person said.

Mr. Cuomo issued a statement Thursday touting the project’s benefits and blaming Democrats in the New York state Senate.

“A small group of politicians put their own narrow political interests above their community—which poll after poll showed overwhelmingly supported bringing Amazon to Long Island City—the state’s economic future and the best interests of the people of this state,” Mr. Cuomo said. “The New York State Senate has done tremendous damage. They should be held accountable for this lost economic opportunity.”

Mr. de Blasio said in a statement that Amazon “threw away” the opportunity. “You have to be tough to make it in New York City,” he said.

Some New York progressive politicians crowed after the deal’s collapse. “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,” Rep. Alexandria Ocasio-Cortez, a Democrat who represents parts of western Queens, wrote on Twitter.

Amazon in November said it would split its so-called HQ2 operations between Virginia and New York, partly to ensure it could recruit enough tech talent. While the northern Virginia site was well-received, critics of the New York location quickly emerged. Mr. Cuomo and city officials had assured Amazon during the highly secretive process the deal would move forward with little resistance, according to people familiar with the matter. But Amazon immediately tapped into antibusiness sentiment. The public image of Big Tech had begun to sour over the course of Amazon’s search, amid increasing concerns about its influence and reach.

New York City Council Speaker Corey Johnson organized hearings to examine the closed-door negotiations between Amazon and state and city officials that sealed the deal. At a Dec. 12 City Council hearing, protesters tried to drown out the testimony of Holly Sullivan, Amazon’s head of world-wide economic development, and Brian Huseman, vice president of public policy.

Amazon made efforts to demonstrate HQ2’s value. Roughly two weeks ago, it said it would provide computer-science courses to more than 130 area high schools and unveiled a plan to hire 30 residents of a public-housing complex, the nearby Queensbridge Houses, for jobs at a customer-service center.

But it was Mr. Gianaris’s appointment to the Public Authorities Control Board and other local political backlash that spooked Amazon and sparked internal discussions about whether it made sense to continue with investments in the project, according to some of the people.

Despite news Friday of growing hesitation at Amazon, state and city officials had the impression the project was still on course.

Amazon executives including Mr. Huseman had a sit-down Wednesday morning with Mr. Cuomo and three labor leaders at the governor’s Midtown Manhattan office, according to labor leader Stuart Appelbaum, whose union, the Retail, Wholesale and Department Store Union, is trying to organize workers at Amazon’s warehouse on Staten Island, in New York City.

“We all agreed it was a good meeting and we were going to move forward and get back to each other with some proposed language,” Mr. Appelbaum said.

In the end, Amazon’s decision to pull the plug proves it would have been a bad neighbor, Mr. Gianaris said. “New York will be just fine. And for starters, it’s going to save us $3 billion.”

Write to Laura Stevens at laura.stevens@wsj.com, Jimmy Vielkind at Jimmy.Vielkind@wsj.com and Katie Honan at Katie.Honan@wsj.com

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Appeared in the February 15, 2019, print edition as ‘Amazon Cancels Plans for Tech Hub in New York.’


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