Amazon losing out on Arlington HQ2 cash incentives due to coronavirus

The payments are tied to Arlington's tourism industry hobbled by the virus

Arlington County won't be doling out a cash payment to Amazon this year for its second headquarters in Northern Virginia due to the stifled tourism industry, according to a new report.

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Arlington Economic Development said that the shopping behemoth won't recieve the first of 15 planned incentive payments, the agency confirmed to FOX Business.

The problem is that the funds were directly tied to the tourism industry, which was battered by the spread of the novel coronavirus in mid-March, just ahead of Washington's busy spring tourism season.

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According to the Washington Business Journal, the first payment was supposed to be disbursed on Aug. 31.

Last year, the Arlington County Board approved a $23 million incentive package in an effort to bring the company to the area, Journal reported. As part of the deal, 15 payments will be disbursed to Jeff Bezos' company through 2034 as long as it hits its yearly office square footage goals.

In total, Amazon is projected to occupy about 6.06 million square feet of commercial office space in Crystal City and Pentagon City through 2035. The company’s presence in Arlington "will continue to diversify our economic base and solidify our community as a leading technology hub," the agreement read.

The money, however, is supposed to come from an increase in revenue collected from the county hotel tax, otherwise known as a transient occupancy tax, meaning tourists are the key driver in generating this cash flow.

"The Transient Occupancy Tax is a tax on the total cost paid on hotel rooms or other paid lodging," the agreement states. "This tax is paid by tourists or business travelers, not Arlington residents."

(Reuters)

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So even though Amazon pulled its weight of the bargain by reaching 64,000 square feet of office space for the year, hotel occupancy in the area dwindled when the local governments issued stay at home directives to keep residents from spreading the virus, the outlet reported.

"The COVID-19 travel restrictions put in place, not just here in Arlington but globally, have negatively impacted the county's TOT [transient occupancy tax] collection," a spokesperson for Arlington Economic Development told FOX Business.

As a result, the county's transient occupancy tax revenues for the 2020 fiscal year, "will not yield the incremental growth necessary for Amazon to receive a grant disbursement for the first performance year," the organization said.

And although Virginia is in its third phase of reopening, hotels in the area remain quiet. What's more, the industry's recovery is further impeded by another round of closings and layoffs triggered by a resurgence of the coronavirus in communities around the nation.

Hotels in Arlington had done pretty well prior to the pandemic, according to the Journal. In fact, in February, Arlington collected $17.6 million in taxes for the first nine months of the fiscal year, representing a nearly 8 percent increase from the year prior, the outlet reported.

However, AED expects the county's transient occupancy tax to rebound over the long term once business and leisure travel resume.

"As Amazon ramps up its operations, the company is expected to generate significant hotel room nights from business travelers, which is still expected to occur once this pandemic has passed," the spokesperson added.

Representatives for Amazon did not immediately respond to FOX Business' requests for comment.

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This story has been updated to include comment from Arlington Economic Development