Arlington County has officially begun disbursing incentive payments to Amazon as part of its long-standing agreement tied to the company’s second headquarters, HQ2, located in the region. This marks the first time since the incentive program’s inception in 2019 that the county has released funds to Amazon, triggered by the growth in hotel tax revenue reaching the predetermined threshold.
In May 2023, Amazon inaugurated the first phase of HQ2, known as Metropolitan Park, a $2.5 billion development comprising over 2.1 million square feet of office space across two skyscrapers, along with a 2.5-acre public park and retail outlets. Currently, approximately 8,500 employees are based at the site, working there five days a week.
The county’s recent decision to award Amazon an incentive payment of approximately $81,745 is based on the county’s Transit Occupancy Tax (TOT) revenue, which is a lodging tax. This payment is contingent upon the TOT surpassing a baseline of nearly $25 million, a benchmark set in 2019 when Arlington approved a performance-based agreement with Amazon.
Under the terms of this agreement, Amazon was expected to expand its office footprint in Arlington gradually over 15 years and contribute to local economic growth through increased hotel stays and business travel. Although occupancy targets were consistently met, the lodging tax threshold was only achieved this year, likely impacted by pandemic-related travel declines. The most recent fiscal year ended with TOT revenue exceeding the baseline by approximately half a million dollars.
County officials have highlighted the positive implications of this milestone, emphasizing Amazon’s role in bolstering Arlington’s economy. A spokesperson from Arlington’s Economic Development Office noted that the first half of the fiscal year showed signs of recovery in both business and leisure travel, with Amazon continuing to influence demand, particularly in National Landing. However, they clarified that the county does not attribute overall lodging growth solely to Amazon.
Economist Terry Clower, a professor at George Mason University, praised Arlington’s performance agreement as a model for effective economic incentives — one that sets clear, measurable goals before disbursing funds. He pointed out that this approach is more prudent than unconditional incentives, which often lead to delayed or underwhelming results.
The first phase of HQ2 also includes a vibrant retail component with over 50,000 square feet of commercial space hosting 13 small businesses, primarily owned by women and minorities.
Despite these positive developments, Amazon’s HQ2 project has encountered challenges. Originally, Amazon committed to creating 25,000 jobs by 2030. However, in a recent application for incentive payments, the company expressed moderate confidence in meeting this target by 2038 — a departure from previous high-confidence assessments.
To date, Amazon has hired about 7,232 incentive-eligible employees, falling short of the 10,000-job goal set for 2024. The company also paused construction on PenPlace, the second phase of HQ2, which would add an additional 3.3 million square feet across three towers. Amazon’s spokesperson affirmed that the project remains a long-term commitment, with ample space available at the existing Met Park campus.
The company highlighted its investments in local communities, noting that it has invested over $2.5 billion in capital, contributed nearly $240 million to nonprofits and affordable housing, and created thousands of jobs. Arlington’s county board recently granted a three-year extension to the development timeline for PenPlace, allowing work to proceed until mid-2028.
While progress has been slower than initially anticipated, both Amazon and Arlington remain committed to the project’s long-term potential, adapting to economic fluctuations while continuing to invest in regional growth.