Throughout its 14-month search for a second headquarters — which has concluded with the dual selection of Long Island City, Queens, and Arlington, Va. — Amazon talked of its need for things like transportation, housing and a business-friendly environment.
But did Amazon really select New York City for its transportation system? The subways are a shambles. The company couldn’t have chosen New York for its affordable housing because, as in Seattle, there isn’t any. As for outdoor recreation, our beaches and parks are jammed, our soccer fields overrun. There’s a lot more green space elsewhere. Cost of living? Hardly a selling point, unless you are seeking to increase your operating expenses. And no, Amazon didn’t choose New York because we have real bagels — although it couldn’t hurt.
Amazon wants to develop a four-million-square-foot campus by the East River because of the talent that resides in New York. Lots of it. According to the Metropolitan Policy Program at the Brookings Institution, New York has more than 320,000 tech workers in the labor pool, the most in the nation. (Washington is second.) That talent commands high salaries, great benefits and won’t move to Pittsburgh or Austin or any other of the perfectly nice cities that tried to woo the online giant.
Which raises the question: if New York has what Amazon wants, why is it paying the company so much to make the move? Mayor Bill de Blasio and Gov. Andrew Cuomo, who offered to replace his given name with the company’s to land the deal, are doing a victory dance.
“New York can proudly say that we have attracted one of the largest, most competitive economic development investments in U.S. history,” Amazon Cuomo said. They seem to have done so by overpaying.
Landlords and real estate developers can rejoice at the prospect of soaring property values and rents, and restaurateurs, craft brewers and kombucha makers will see new customers among the 25,000 jobholders with an average salary of $150,000 that Amazon promises to hire over 10 years.
But the plan calls for the state to dispense $1.525 billion to the company, including $1.2 billion from its Excelsior program, which will reimburse Amazon $48,000 for every job. Another state agency, Empire State Development, will offer $325 million to the Amazonians tied to real estate projects. As for the city, Amazon can apply for tax credits from programs known as ICAP and REAP that reward companies for job creation generally, and outside Manhattan specifically, that could be worth north of $1 billion. (And the campus is in a federal redevelopment area that qualifies for corporate tax breaks, letting the company’s major stockholder, the world's richest man, keep more of his wealth.)
Oh, and Amazon wants a helipad for its chief executive, Jeff Bezos. No problem.
Cities that lost out to New York offered far more in financial incentives. But the Commonwealth of Virginia is spending a piddling $22,000 per job in the initial phase of development in Arlington, and payments will max out at $750 million if Amazon creates 37,850 jobs. The state is also throwing in $295 million in transportation improvements, including a bridge to nearby Reagan National Airport so Mr. Bezos can remain close to his copter. That’s still less than half of what New Yorkers will be paying out.
The prospect of handing Long Island City over to a company recently valued at $1 trillion seems distorted to some Queens politicians. They sense gentrification by fiat — another neighborhood sacrificed to the tech elite.
“I welcome the jobs if it means Amazon investment in L.I.C. infrastructure, without us having to pay a ransom for them to be here,” said the neighborhood’s state senator, Michael Gianaris.
That is, rather than the city paying off Amazon, Amazon should be required to invest in the subways, schools and affordable housing. It could also be required to include job guarantees for lower-income residents of Long Island City, not just flimsy promises of job training.
Nothing has been carved in stone yet. The agreement is a memorandum of understanding, not a binding contract. No final deal should be pushed through without public input or approval. The mayor and governor would benefit from soliciting ideas from New Yorkers themselves, both those who live in Long Island City, and the other taxpayers footing the bill for the generous subsidies about to be given to the company.
It’s distressing that a mayor and governor who can’t come together for the sake of the subways or public housing somehow managed to find common ground by doing an end run around the City Council and steamrollering the land-use process.
We won’t know for 10 years whether the promised 25,000 jobs will materialize. We do know that for decades states and cities have paid ransoms in the tens of billions of dollars to attract or “keep” jobs only to find themselves at the losing end of the proposition when companies moved on after the taxpayer freebies ended. During the Great Recession, it became commonplace for the auto industry to abandon one community after another despite lining its pockets with government money. Job promises were left in the dust of bankruptcy. Even in better times, economists have made a convincing case that these job development payout schemes aren’t worth it.
New York City has long played this incentives game to encourage companies to bring jobs here or expand. (The New York Times Corporation has been a beneficiary.) The mayor argues that the increase in net tax returns of $13.5 billion that Amazon will provide over 25 years is ample return on investment.
But the requirements of job creation and retention now favor big cities such as New York. Throughout the world, big cities have become economic powerhouses because of their ability to concentrate the resources that global corporations increasingly need. The days when companies such as General Electric, IBM, AT&T and Mastercard fled the city for boring suburban campuses, where innovation goes to sleep, are over. Building infrastructure for Amazon’s future benefit may be too generous a bargain for it when there’s a compelling need for housing and schools and transportation for all New Yorkers right now.
Mr. Bezos has owned a home here for years. He knows what our city has to offer; and as the web’s biggest retailer, he knows what he’s getting in setting up shop in Long Island City: a discount. So welcome, Jeff. Hope you enjoy your helipad.
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