Amazon pulls plug on New York City headquarters

By David Shepardson and Jonathan Allen

(Reuters) - Amazon.com Inc abruptly scrapped plans to build a headquarters in New York after opposition from local politicians and some of its would-be neighbours, the third most-valuable public U.S. company said on Thursday.

Amazon's search for a second headquarters, which it described as HQ2, was deemed a massive, year-long public relations success, garnering worldwide publicity and interest from cities across the United States and Canada.

Accustomed to fawning advances from municipal leaders around the country, Amazon seemed startled by the brusque, even rude, welcome it got from some New Yorkers.

Some residents of the Queens neighbourhood mounted protests. Politicians from the Democratic Party's leftward flank, including the freshman U.S. Congresswoman Alexandria Ocasio-Cortez, decried the state's promise to give the company, controlled by the world's richest man, billions of dollars in tax breaks.

 

People briefed on the decision said Amazon had made the decision early Thursday after intense talks starting Wednesday and amid rising concerns about the small vocal minority. The people said Amazon will not shift any of the planned jobs to Tennessee or Virginia but plans to grow its existing network of locations.

Amazon had planned to have 700 employees in New York as part of the HQ2 project by the end of the year and did not plan to hit 25,000 in Queens for 10 years.

The company had begun considering alternatives last week. The online retailer has not yet acquired any land for the project, which would make it easy to scrap its plans, a person briefed on the matter told Reuters on Friday.

The proposal ran into opposition from local politicians who opposed the $2.8-billion in incentives promised to Amazon in a deal secretly negotiated by New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio.

In a statement, de Blasio blamed Amazon for failing to address local criticism.

"We gave Amazon the opportunity to be a good neighbour and do business in the greatest city in the world," he said. "Instead of working with the community, Amazon threw away that opportunity."

The company said, "for Amazon, the commitment to build a new headquarters requires positive, collaborative relationships with state and local elected officials who will be supportive over the long-term."

NO PLANS TO REOPEN HQ2 SEARCH

Some residents of the neighbourhood, once a scruffy haunt of artists that has rapidly gentrified with a burst of recent high-rise development, had also opposed the plan.

Long-time residents feared being forced out by rising rents and untenable pressure on already overburdened subway and sewage systems.

Cuomo was a staunch advocate of the project, joking that he would change his name to Amazon Cuomo if it might help sweeten the deal. He touted not only the jobs it would create but the long-term tax revenues it would generate.

Mark Hamrick, a senior economic analyst at Bankrate.com, said the about-turn could spook other companies thinking about expanding in New York.

"This is a stunning development, with Amazon essentially giving in to vocal critics," he said.

Amazon said Thursday it did not plan to re-open the yearlong search that drew 238 proposals from cities across North America.

Nashville, a finalist that was awarded a consolation prize of a 5,000-employee location, said it remained open to an expansion of Amazon's plans in Tennessee.

Shares of Amazon were down 0.5 percent.

"I think the PR event turned out to be a mistake," said Jason Benowitz, senior portfolio manager at the Roosevelt Investment Group, who owns Amazon shares.

"It went on for too long and started a frenzy. You can compare this to Google sinking billions of dollars into the Chelsea neighbourhood in Manhattan without making noise or Apple investing in Austin."

Rival Alphabet Inc's Google said in December it plans to invest more than $1 billion on a new campus in New York to double its current headcount of more than 7,000 people.

'REALLY GOOD POKER PLAYERS'

Hours before the announcement, Amazon officials in New York betrayed no knowledge of the deal's cancellation when they met with local community members on Thursday morning, said Kenny Greenberg, a neon artist and member of Long Island City's community board.

"Either they are really good poker players or they were not aware," Greenberg said of the Amazon representatives. "There was no hint of this at all."

Greenberg said he had been open to Amazon's arrival if it had led to improvements in infrastructure, but that "unanswered questions" continued to mount as time went on.

The meeting with Amazon officials had been held to answer concerns from the community about labour conditions for Amazon's warehouse and delivery workers and the company's opposition to labour unions.

"Defeating an unprecedented act of corporate welfare is a triumph that should change the way we do economic development deals in our city & state forever," Jimmy Van Bramer, a city councilman from Queens who had opposed the project, said on Twitter.

One of the city's most powerful private-sector unions, the Retail, Wholesale and Department Store Union, said the company's abrupt exit confirmed its criticisms.

"Rather than addressing the legitimate concerns that have been raised by many New Yorkers Amazon says you do it our way or not at all, we will not even consider the concerns of New Yorkers," union spokeswoman Chelsea Connor said in a statement. "That's not what a responsible business would do."

Chicago, Miami and Newark are among the passed-over finalists that have expressed interest in another chance to become the home of an Amazon project.

(Reporting by David Shepardson in Washington and Jonathan Allen in New York; Additional reporting by Dan Trotta and Joseph Ax in New York, Nandita Bose in Washington, Jeffrey Dastin in San Francisco; Editing by Nick Zieminski)