by Brad Stone
The “top-tier” locations were Chicago, Dallas, New York City, Northern Virginia, Philadelphia, and Raleigh. Despite recommending these cities the most, the HQ2 team still expressed concerns about them. They worried that choosing geographically isolated Dallas would make it more challenging to recruit top-notch talent. New York City was the costliest location in terms of local taxes, employee compensation rates, and real estate prices, and with so many other major employers, “we would not be able to leverage our presence in a positive way as we could in other locations.” Northern Virginia was business-friendly but not a hotbed of engineering talent, or particularly inexpensive.
In closing, the HQ2 committee recommended that the S-team settle on a smaller final round of cities so that the company could start talking to elected officials and secure the best real estate. It suggested they announce the winner on September 7, the one-year anniversary of the search announcement. “Our goal with this next HQ2 milestone is to continue driving positive press and fortifying our corporate reputation, while not giving our critics unnecessary ammunition or feeding the perception that this is an over-the-top reality show,” the document stated, before recommending three, surprising finalists from months of travel, meals, speculation, and negotiation:
Chicago, Philadelphia, and Raleigh. “The locations do not have the largest concentration of existing tech talent but we believe they have the foundation for talent growth across our many businesses,” the paper concluded.
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Yet such documents at Amazon present only options and recommendations; they are the beginning of the deliberative process at the company, not the end. Bezos and the S-team met with the HQ2 leaders that month in Seattle, read the document in silence, and then engaged in a multi-hour discussion that changed the course of the entire project.
Raleigh, North Carolina, was business-friendly, had a low cost of living and little traffic, but was too small for Amazon’s expanding needs. Chicago’s governmental institutions were often in conflict with one another, and the city and state were consistently rated by credit agencies as financially unstable. Philadelphia was not a hotbed of engineering talent, and in the meeting, AWS chief Andy Jassy, according to one person’s recollection, opined that he disliked the city, which was the bitter rival of his favorite football team, the New York Giants, and suggested that he and his employees would never want to live there. Jassy was apparently joking, but some members of the HQ2 team, coming off months of detailed, quantitative work, later expressed exasperation that the process was now exposed to the arbitrary personal preferences of senior executives.
HQ2 managers emerged from the meeting with a radically different short list than the one they had proposed. In the second document I reviewed, produced in August, the team reflected that they had left the June session with a decision to follow up on five locations: Dallas, Los Angeles, New York City, Northern Virginia, and Nashville. That eliminated the three top contenders the HQ2 team had recommended, though the paper suggested they revisit Chicago, but only “to minimize potential negative reaction if Chicago does not move forward in the process.”
The priorities in the HQ2 search had changed. The hunt for the most robust incentives package had been replaced by an interest in the largest cities, the best opportunities for recruitment, and the friendliest political environment. That was no accident. For at the same time as executives were honing their shortlist, Amazon’s relations with its hometown were rapidly deteriorating.
Back in Seattle, Kshama Sawant and the leftward-careening city council had again proposed a head tax—dubbed the Employee Hours Tax—that would charge large employers up to $500 per employee and raise up to $86 million to counter problems like homelessness and the lack of affordable housing. It was a draconian measure: by comparison, Chicago had a measly $4 per employee head tax for nearly thirty years before mayor Rahm Emanuel demonstrated that it was responsible for jobs losses and convinced the city council to phase it out.
Under the proposal, raised in April 2018, Amazon’s local tax bill would increase by an additional $22.5 million annually, on top of the $250 million in state and local taxes it paid. That would be a fraction of Amazon’s $10 billion profit in 2018, but it was the antagonistic thought that counted. Seattle was moving to double-tax both corporate income and headcount, a situation necessitated in part because Washington is one of seven states with no personal income tax (a fact that had neatly benefited Bezos and other Amazon execs over the years). Amazon believed the company already paid plenty in municipal taxes, and if the city wasn’t spending its money in the right ways and to address the most pressing problems, that was hardly their fault.
After the head-tax proposal, Bezos contacted John Schoettler and ordered the real estate division to stop construction on “Block 18,” a seventeen-story tower near Day 1, and to sublease most of the 800,000-square-foot building that Amazon had completed at nearby Rainier Square rather than occupy it. The real estate team predicted that the move would cost the company more than $100 million, according to a person familiar with its calculations (although this person said the company later broke even on the transaction). But Bezos said he didn’t care: Amazon wasn’t going to grow in a city that didn’t want it.
At the same time, Bezos instituted another internal edict: he capped Amazon’s Seattle headcount at around fifty thousand employees. Amazon, which already occupied more than 19 percent of prime office space in the city, was due to hit that number within twelve months. After that point, managers inside the company would have to funnel their headcount growth to Amazon offices in other cities. Schoettler and the real estate team scrambled to accommodate the new demand. Since Amazon employed around seven hundred people only fifteen minutes away, across Lake Washington in Bellevue—an affluent Seattle bedroom suburb that at the time was opportunistically running promotional campaigns targeting local corporations—Amazon execs decided that the Seattle overflow could go there, and established a target of moving twenty thousand employees. That fall, Amazon would sign a lease in Bellevue for the twenty-story former headquarters of online travel company Expedia.
While the cap was never publicly revealed, Amazon loudly publicized the move to stop construction on Block 18 and to sublease Rainier Square Tower. This was a power play, a muscular showing of Amazon’s influence in its hometown and of the business maxim “Capital goes where it is welcome and stays where it is well treated.” “I saw it as an unusually strong move by a company that doesn’t do that lightly,” said Maud Daudon, the former head of the Seattle Metropolitan Chamber of Commerce.
But city officials heard the message loud and clear. In May, the $480-per-employee head tax was downgraded to a $275-per-employee levy, a compromise that they mistakenly believed was acceptable to Amazon. The tax unanimously passed the city council, and then Amazon promptly contributed $25,000 to a committee to put a repeal on the November ballot. Other local firms, like Starbucks and Vulcan, as well as family-owned favorites like the fast-food chain Dick’s Drive-In, also contributed and aligned against the new tax.
With that, the public turned against the city council in voter polling and sided with their local companies and largest employers; stunned council members were now outmaneuvered. When it became evident that the referendum against the tax would amass enough signatures to get on the ballot and likely pass, the council ignominiously changed course and repealed their own tax with a 7-to-2 vote. Seattle mayor Jenny Durkan, who had signed the head-tax bill, now signed its repeal.
But these weren’t the only miscalculations at play. Bezos and other Amazon executives saw only a city council captured by leftist legislators hostile to business. They didn’t seem to recognize or care that shifting public sentiment in Seattle also represented something broader: resistance to tech companies and to the dizzying changes they were bringing to their communities. That was the so-called techlash, unfolding outside the visible spectrum of Amazon’s well-compensated senior leadership. Their failure to recognize these forces was ab
out to have serious repercussions.
In addition to identifying Bellevue as an immediate alternative for headcount growth, some Amazon executives concluded that HQ2 would now have to be bigger than previously planned and most likely ramp up faster than initially expected. By the time the seventeen-page August document was written, the HQ2 and S-teams were homing in on New York City and Crystal City in Northern Virginia—regions they believed could accommodate the coming expansion. “If costs and business climate are primary factors, we recommend Northern Virginia as the top site. If existing talent is primary driver, we recommend New York City,” the paper read.
The HQ2 team predicted that both cities would be politically welcoming—even if Amazon selected Long Island City in Queens, just outside the Manhattan business core, a once gritty industrial community that over the last fifteen years had gentrified at disorienting speed. “We have support from the state and have worked closely with New York State’s economic development director, who is a close confidant of governor [Andrew] Cuomo’s,” the document read. “Mayor [Bill] de Blasio will not be an outspoken champion for the project and is generally critical of big business, but we believe he is supportive of New York City being selected.”
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As before, the document was only the starting point for an S-team discussion. And when HQ2 managers emerged from the meeting that September, they stunned their colleagues with the leadership group’s decision. Bezos and the S-team had opted to split HQ2 between New York City and Northern Virginia and to establish a smaller “Operations Center of Excellence” in Nashville. Amazon had spent an entire year hunting for a single location, but considering the company’s talent needs, as well as Bezos’s edict that Amazon expand primarily outside Seattle, one site would no longer be enough. Said an employee on the HQ2 project: “I couldn’t believe it, but at the same time, I could. It’s Amazon, and shit is weird.”
The decision put Amazon’s corporate spinmeisters in an uncomfortable spot. For more than a year, they had aggressively refuted the most cynical interpretations of the HQ2 process and any intimations that the fix was in for one of the dual centers of power on the East Coast. Now Amazon was about to validate that pessimism: one of the richest companies in the world, led by the world’s richest person, was expanding its presence in the political and financial capitals—cities where Jeff Bezos owned lavish homes. Adding to the awkwardness, on the morning of Tuesday, September 4, Amazon’s shares were worth as much as $2,050—briefly tipping the company’s market capitalization over the momentous threshold of a trillion dollars, before the stock price retreated.
The third HQ2 document that I reviewed, dated October 2018, addressed this challenge and outlined options for how to announce the decision and circumnavigate a potential hurricane of negative reaction. It acknowledged that “the announcement is going to dominate the national news cycle no matter what we do” and contemplated “well-funded critics” who might accuse Amazon of going back on its word to select a single city equal to Seattle.
Listing these likely critics, the paper cited the advocacy organization Good Jobs First, which promoted corporate and government accountability in economic development, and the Institute for Local Self-Reliance, which supported the interests of communities and small businesses against chain stores and conglomerates. It also mentioned by name NYU professor Scott Galloway, who had charged that HQ2 was a “hunger games beauty contest” preordained to land “where Jeff wants to spend more time. My bet is the NYC metro area,” as well as Lina Khan, who had authored an article for the Yale Law Journal accusing Amazon of anticompetitive behavior and the nation’s antitrust laws of being woefully out of date.
Ominously, the paper neglected to mention the progressive politicians on the New York City Council, or the charismatic Democratic candidate for the House of Representatives running that fall in New York’s 14th Congressional District—Alexandria Ocasio-Cortez. “Given that we see this announcement as an opportunity to demonstrate that Amazon is a positive investor in the economy and job creator and good community partner, we think it’s important to minimize the airtime of our critics… who we believe are champing at the bit to use our announcement to further their own agendas,” the document read.
The company revealed the winners a few weeks later, on the morning of Tuesday, November 13. “Amazon Selects New York City and Northern Virginia for New Headquarters,” trumpeted the press release. Curiously absent from the announcement, and from the talking points of Amazon spokespeople, was any mention of the abbreviation “HQ2.” For a company and CEO who agonized over each word in every document, that could not have been accidental; Amazon was trying to obfuscate some of its very own messaging from the last fourteen months.
As expected, there was a dust storm of disappointment from the other finalists. They now recognized that Amazon chose the largest population centers’ corridors of power and technical talent over other aspects highlighted in the original RFP, such as cost of living, geographic diversity, and the size of incentive packages. Holly Sullivan called Dallas mayor Mike Rawlings to deliver the bad news. The financial incentives from Dallas and the state of Texas had totaled $1.1 billion, considerably higher than the $573 million in cash grants offered by Arlington County and Virginia, though not quite as much as the city and state of New York’s enticement of $2.5 billion in tax credits and rebates. It was also about 40 percent cheaper to build in Dallas than on the East Coast—but in the end, that hadn’t mattered at all. “Help me here, why did you put us through all of that if this is where you were going all along!” an exasperated Rawlings asked Sullivan.
Officials in the losing cities had other reasons to be cynical. At a conference for economic development executives held in Salt Lake City in March 2019, some three hundred attendees would hear Holly Sullivan mention offhand that she had spoken regularly throughout the process to Stephen Moret, CEO of the Virginia Economic Development Partnership. “I appreciated that she was so candid about having regular discussions with him about the project,” said one of several people in the audience who heard the comment. But it “really opened up questions about the true sincerity of that exercise.”
In Arlington County, Moret and other officials were jubilant over their victory. But in New York, and in the borough of Queens, an immediate outpouring of dissent mounted among local officials who were out of the loop and taken by surprise by the news. City council speaker Corey Johnson issued a statement condemning Amazon, the governor, and the mayor for bypassing community input and cutting the city council out of the negotiations. Jimmy Van Bramer, deputy leader of the city council, issued a joint statement with state senator Michael Gianaris, proclaiming inaccurately that the tax incentives being dangled before Amazon were unparalleled. “We are witness to a cynical game in which Amazon duped New York into offering unprecedented amounts of tax dollars to one of the wealthiest companies on Earth,” they wrote, neglecting the larger hauls in other states delivered to Boeing, Foxconn, and others.
The newly elected Ocasio-Cortez jumped into the conversation: “We’ve been getting calls and outreach from Queens residents all day about this,” she tweeted. “Amazon is a billion-dollar company. The idea that it will receive hundreds of millions of dollars in tax breaks at a time when our subway is crumbling and our communities need MORE investment, not less, is extremely concerning to residents here.”
As they prepared to respond to this criticism, Amazon’s HQ2 team was hit with another unpleasant surprise. Their counterparts on the real estate team, they learned, had at the very last minute inserted into the “memorandum of understanding” with both cities a provision requiring them to help secure the necessary air rights and permit approvals for the development and operation of a helipad.
It should be ideally “onsite,” but if not, “in reasonable proximity” to the company’s offices, according to an email that an Amazon attorney had sent earlier that month to the head of the Empire State Development Corporation. Amazon would cover all the c
osts. Both cities, accustomed to indulging the tech giant’s whims during the fourteen-month HQ2 bakeoff, had agreed to accommodate yet another one.
Local media quickly reported and ridiculed this new stipulation (“Queens Ransom,” shouted the November 14 New York Post, with an illustration of Bezos hanging out of a helicopter and holding bags of money). Members of the Amazon HQ2 team were confused: the company did not own any helicopters. The optics of well-heeled internet executives zooming over gridlocked city streets and packed subway cars were awful. Even the idea itself was un-Amazonian. Frugality—and the humility it conveyed—was one of the company’s prized fourteen leadership principles.
Several employees argued that the helipads were a terrible idea but were told the request came right from the top and wasn’t going to be rescinded. “The helipad was the worst thing they could have ever asked for,” mourned Mitchell Taylor, bishop of Center of Hope International church in Long Island City and a supporter of HQ2. “Why do you have to put that front and center? They could have had a helipad after the fact.”
Amazon employees were now just as perplexed as their counterparts at Blue Origin were when a company called Black Ops Aviation and its cofounder, former television personality Lauren Sanchez, started appearing at New Shepard launches in West Texas to record promotional videos for the secretive space firm. Unless something significant had changed, making a grand aerial entrance into a company office was hardly Jeff Bezos’s style.
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In the wake of the awkward HQ2 announcement and the uproar over the helipad, grassroots opposition to Amazon’s proposed expansion into Long Island City exploded. Grassroots organizers, energized by Alexandria Ocasio-Cortez’s election victory, pivoted to this new cause. Protests were organized at local churches; volunteers walked the streets handing out fliers warning residents that the same forces of gentrification and displacement that had overwhelmed Seattle were going to alter Queens as well.
