NY State Budget Director on Amazon

The open letter on Amazon from Robert Mujica, New York State’s Budget Director, is on fire. It shines an unflattering light on many people involved in the Amazon decision but its analysis of twitter mobs goes well beyond Amazon.

In my 23 years in the State Capitol, three as Budget Director, Amazon was the single greatest economic development opportunity we have had. Amazon chose New York and Virginia after a year-long national competition with 234 cities and states vying for the 25,000-40,000 jobs. For a sense of scale, the next largest economic development project the state has completed was for approximately 1,000 jobs. People have been asking me for the past week what killed the Amazon deal. There were several factors.

First, some labor unions attempted to exploit Amazon’s New York entry. The RWDSU Union was interested in organizing the Whole Foods grocery store workers, a subsidiary owned by Amazon, and they deployed several ‘community based organizations’ (which RWDSU funds) to oppose the Amazon transaction as negotiation leverage. It backfired.

…Organizing Amazon, or Whole Foods workers, or any company for that matter, is better pursued by allowing them to locate here and then making an effort to unionize the workers, rather than making unionization a bar to entrance. If New York only allows unionized companies to enter, our economy is unsustainable, and if one union becomes the enemy of other unions, the entire union movement – already in decline – is undermined and damaged.

Second, some Queens politicians catered to minor, but vocal local political forces in opposition to the Amazon government incentives as ‘corporate welfare.’ Ironically, much of the visible ‘local’ opposition, which was happy to appear at press conferences and protest at City Council hearings during work hours, were actual organizers paid by one union: RWDSU. (If you are wondering if that is even legal, probably not). Even more ironic is these same elected officials all signed a letter of support for Amazon at the Long Island City location and in support of the application. They were all for it before Twitter convinced them to be against it.

…Furthermore, opposing Amazon was not even good politics, as the politicians have learned since Amazon pulled out. They are like the dog that caught the car. They are now desperately and incredibly trying to explain their actions. They cannot.

…Third, in retrospect, the State and the City could have done more to communicate the facts of the project and more aggressively correct the distortions. We assumed the benefits to be evident: 25,000-40,000 jobs located in a part of Queens that has not seen any significant commercial development in decades and a giant step forward in the tech sector, further diversifying our economy away from Wall Street and Real Estate. The polls showing seventy percent of New Yorkers supported Amazon provided false comfort that the political process would act responsibly and on behalf of all of their constituents, not just the vocal minority. We underestimated the effect of the opposition’s distortions and overestimated the intelligence and integrity of local elected officials.

Incredibly, I have heard city and state elected officials who were opponents of the project claim that Amazon was getting $3 billion in government subsidies that could have been better spent on housing or transportation. This is either a blatant untruth or fundamental ignorance of basic math by a group of elected officials. The city and state ‘gave’ Amazon nothing. Amazon was to build their headquarters with union jobs and pay the city and state $27 billion in revenues. The city, through existing as-of-right tax credits, and the state through Excelsior Tax credits – a program approved by the same legislators railing against it – would provide up to $3 billion in tax relief, IF Amazon created the 25,000-40,000 jobs and thus generated $27 billion in revenue. You don’t need to be the State’s Budget Director to know that a nine to one return on your investment is a winner.

The seventy percent of New Yorkers who supported Amazon and now vent their anger also bear responsibility and must learn that the silent majority should not be silent because they can lose to the vocal minority and self-interested politicians.

…Make no mistake, at the end of the day we lost $27 billion, 25,000-40,000 jobs and a blow to our reputation of being ‘open for business.’ The union that opposed the project gained nothing and cost other union members 11,000 good, high-paying jobs. The local politicians that catered to the hyper-political opposition hurt their own government colleagues and the economic interest of every constituent in their district. The true local residents who actually supported the project and its benefits for their community are badly hurt. Nothing was gained and much was lost. This should never happen again.

Even if you think the end result was fine, as I do, this was a political fiasco for New York. Amazon was wise to exit when they did because the pecking of the chickens would only have intensified as they sunk investments.

Comments

Even if the result was fine ?? Tell us what you really think ?

What does "fine" even mean?

And why/how is losing 25k jobs and 27billion in revenue "fine?"

The outcome was bad for New York but Amazon will expand more elsewhere, so for the United States as a whole and Amazon it was fine.

The author is correct on all points. However I still believe that politicians should not have the legal ability to give companies advantages, period. Treat everyone the same, same laws, same regulations etc. IF the laws and taxes in existence must be altered to coerce a business to come to your state than it is obvious that your laws and taxes are the problem.

Nothing was given to Amazon. The as-of-right tax credits are what every relocating business gets. The amount for Amazon would be larger because their job creation numbers were larger.

On the other hand, Amazon was held up for many disadvantages, including having to bankroll a new school, an arts center, an incubator, a small industry lab, and other crap demanded by local politicians, who seemed on the verge, at the final city council meeting, of asking Amazon to fix the subways, which is the city's responsibility, not Amazon's. Tax Amazon, and other New York businesses, make a plan and a budget, and fix the subways with that.

'which is the city's responsibility'

The state's actually - New York is really quite bizarre. https://en.wikipedia.org/wiki/Metropolitan_Transportation_Authority

'Tax Amazon, and other New York businesses, make a plan and a budget, and fix the subways with that.'

NYC is not allowed to do that, and Albany always seems to have other uses for revenue generated in NYC.

It resembles the relationship of DC and Congress in a certain fashion.

"Nothing was given to Amazon. The as-of-right tax credits are what every relocating business gets."

So, which is it; Nothing was given to them or they all get free stuff? The legislators should not have the ability to carve out winners and losers or make some groups more equal than others. Laws and regulations should be applied fairly and equally. If it becomes obvious that the tax laws and regulations are inhibiting business or are unfair then they should changed for all. There is no amount of weasel wording that can apologize for NY Cities unfair business climate.

The as-of-right tax credits go to every relocating business in the same per-job-created amount, in a mechanical, automatic process, like when you claim the standard deduction on your 1040. You move a liquor store to New York and you get the same tax breaks as Amazon, per job created.

This has been so misunderstood that many, like Pesco at Slate, have said that officials didn't explain it well enough, but I went back and listened to Cuomo, and he was quite, repetitively, explicitly clear on that point.

And I explained it above and in your response you obviously didn't read or understand what I wrote.

I can only think that this is some sort of cognitive dissonance that prevents people of a certain politics slant from mentally processing words that go against a deeply held stereotype. Amazon is big. Bezos is rich. Obviously then the state gave them unique benefits. That's the only message that the left wing brain is neurological capable of hearing, even though, in this case, it is the opposite of what happened.

I don't think "nothing was given" means what you think it means. But either way it begs the point. The government should not "give" any business something not equally given to any other business. We know, no matter how you dress it up, that government offer incentives to new businesses. Usually the incentives end up costing more than is ever returned to the government by that business. Why??? Why not keep your government nose completely and 100% out of it.

By the way, show me that NY City offered Walmart any deals...

Yep, Alex's last paragraph sums it up very well.

I'm not sure if this is "fine" for amazon but they will be okay in the long run.

But the public conversation is about NYC versus Amazon (corporations) and the progressive wing of the democratic party has touted this as a victory for NYC. You sounded as if you agreed with them.

What amazon should have done is relocated to a a different city, say memphis or Raleigh, or Charlotte and have some sort of comparison of the two after 15 years.

"The outcome was bad for New York but Amazon will expand more elsewhere, so for the United States as a whole and Amazon it was fine"

True, but not really the best way to run a country. In fact, such a self-centered screed makes the Amazon decision seem like karma.

"... self centered screed ..." by whom?

EDR...Robert Mujica...Not a good loser...

Unless you think a public official throwing what in essence is a temper tantrum is okay.

I thought it lucid measured and cogent. If our officials aren’t allowed to get mildly upset over a lost opportunity to improve matters (including fiscal health), I’d be disappointed. Isn’t his job to defend the public interest in the State of NY?

I understand how you feel. I'm not personally invested in his remarks. i just think he could be classier, and really dislike this style of government ,as pervasive as it is, and even understanding how pragmatism leads to this.

Except he doesn't come off as mildly upset. He comes off as a sore loser. He blamed the 30% of NYers who protested Amazon for being too loud and the 70% of NYers who supported Amazon for being too quiet. Do the math. It's everybody's fault except him!

LOL, 30%! As if!

"The outcome was bad for New York but Amazon will expand more elsewhere, so for the United States as a whole and Amazon it was fine."

Agreed. It would be nice to see Amazon to locate to a city outside of NY, Boston, D.C., Seattle, Portland, L.A., Chicago, ... etc. The concentration of wealth and cosmopolitanism in large cities has been toxic for national politics and culture.

We are almost on the verge of a civil war.

Only in your fevered dreams are we close to civil war.

This entire thing is absurd. Amazon will still get the majority of their tax breaks ($2.5 / $3 billion), they will still expand their presence in nyc, it will boil down to nothing.

And you and the equally nonsensical Yglesias don’t seem to understand that companies move to where the talent is. High skilled workers need a network of companies in their field to make the market for their labor robust. Amazon can’t move to nowheresville USA, because high skilled workers won’t move to an area without a robust market for their labor.

I am not sure if it boils down to nothing. Maybe it will. It seems likely both Amazon and NYC will continue to thrive.

As for understanding tech workers, you are wrong. I have been a hiring manager in Silicon Valley for decades and have hired scores of engineers - in software, development tools, middle-ware, medical, television, and mobile. Most want suburban lives, except for the entry level H1Bs from India. They will move to the big city until they have kids.

If you believe San Jose, Orinda, Walnut Creek, or San Ramon is “nowheresville” USA, outside of commuting distance to the most robust labor market for tech workers then you are either an imposter or mentally retarded.

I’m guessing the former.

If you are a hiring manager you would know how difficult it is to hire top technical talent even in Silicon Valley. Now imagine you are in Topeka, KS. How much harder is it to pull talent there? Infinitely harder.

Personally, I thought we were close after the Hodgkinson / Charlotte incidents; they represented the culmination of months of tit-for-tat violence, a cycle that's hard to break.

Fortunately, President Trump's oft-criticized(!) call for peace seems to have worked.

Blaming union organizers for manufacturing fake grassrooots opposition. How original.

It’s interesting that union advocacy is framed as somehow fake and illegitimate, but a company’s army of lobbyists, PR hacks, and attorneys - all paid to be there - are deemed perfectly acceptible

One hopes you are not being mean to billionaires, and their well paid flunkies, lackies, toadies, and lickspittles?

lickspittles. lol

There seems to be an epidemic underway

Blaming clouds for blocking the sun isn't particularly original either. Describing the commonplace rarely is.

Or in this case, describing a cherry picked subset of the commonplace.

"... lickspittles ..."

Lol! I shouldn't have read this while eating lunch - I almost laughed some rice through my nose! 👃

It's bizarre that the retail workers union was going after Amazon before they had created a single job in Queens. What's up with that? I think the union needs leadership with more brains. All I can think of is that they thought Amazon couldn't walk away from the table. That's Negotiation 101, be prepared to walk out.

It was really pretty funny the way Amazon did it, a terse web page, announcement, and ... gone. The reactions of the local pols were classic. And AOL's video: manic joy, a little too manic. I think the opponents to Amazon should have a celebration, a festival. The local politicians can give speeches. AOL can lead a parade. Maybe this should be celebrated annually. Never forget this day of victory.

The local union's strategy is fair fodder for critique.

But in both cases of unions and Amazon, it is fair to question what were their true goals and motives. There is reasonable doubt that Amazon was ever that deeply committed, given how readily they quit.

Exactly. Those grapes were probably sour anyway.

What are you suggesting Amazon's true goals were?

>how readily they quit

They had dozens of places lining up to attract their business. The $27 billion in revenues is real money that can do real things. Someone smarter than New York will get it.

Yes. The next city in the breach will behave like a puppy dog!

$27B is just enough to build 10 miles of subway in NYC

Amazon won't create another HQ2 because outside of a few places of which NYC was one, there really is no talent or ability out there to run a world class enterprise tech company like Amazon. If anything, we need MORE immigration to raise the IQ of every state in the union so that companies like Amazon could move anywhere without worrying about basic competence.

'it’s analysis of twitter mobs'

Leaving aside an apostrophe, the idea that there is such a thing as a twitter mob is hilarious. For example, do you honestly think that Amazon is going to change its attitude to unions because of twitter mobs? And a slightly more cynical person just might assume that Bezos et al were taking an opportunity to show that no union was ever going to benefit from Amazon's presence as long as the union had any voice which could influence policy.

And is he an elected official, because writing 'This is either a blatant untruth or fundamental ignorance of basic math by a group of elected officials.' followed by '...and thus generated $27 billion in revenue. You don’t need to be the State’s Budget Director to know that a nine to one return on your investment is a winner.' seems to be a contradiction - Amazon would have been paying 30 billion in tax revenue, instead of 27 billion? Or is someone intentionally conflating two types of revenue to score political points?

Wut? You're not making any sense. Reread the article, it's all pretty straight forward.

Not much to read apart from the quote - basically, if that 27 billion was supposed to be tax revenue collected from 25,000-40,000 jobs (and associated multiplier effects like sales tax, though ironically Amazon used to be aggressive in not paying sales tax, and thus giving itself a notable advantage compared to local merchants), then it is obvious that in this generation too, only the little people in NYC pay taxes.

@clockwork_prior: No. The original sum, had Amazon not had the incentives, was to pay $30 billion in taxes. A $3 billion discount yields $27 billion. New York was to forgo $3 billion in (potential) taxes to incentivize Amazon to locate there and pay the $27 billion....a 9 to 1 ratio.

And, by the way, the little people always are the ones paying taxes....everywhere. When you tax a corporation, the money comes from their customers. At the end of the day, all of us are the ones paying all taxes....not corporations, who have no choice but to pass them on to us.

' At the end of the day, all of us are the ones paying all taxes'

Oddly, Amazon seems to have discovered a way to keep a big shareholder like Bezos from paying all the taxes.

'to incentivize Amazon to locate there and pay the $27 billion'

As noted below by TH, those numbers are not serious - 'How is this $27 billion calculated? Is that a gross or net number? And why is it 27 irrespective of whether its 25 or 40k "new" jobs?'

Again, look...it is a simple concept. Corporations make their income from their customers. Sometimes it is other corporations - who also get their income from customers. This eventually finds its way to ordinary people as the ultimate customers.

Any money that is paid in taxes came from ordinary people....raise the corporate taxes and we all pay more taxes via higher prices. Corporations, by extension, have no choice but to pass the costs onto us...because ultimately that's where the money came from.

Of course, the $27 or $30 billion are estimates based upon expected income allotted to the NY operations. I don't think anyone expects that number not to change based upon a lot of factors, including number of employees. But this gives people an 'order of magnitude' estimate, and, if you read the original post, is more than an order of magnitude bigger than any other opportunity NY had. Arguing over the exact numbers misses the point, and doesn't make a good argument against Amazon.

And again, it is a simple concept. Shareholders make their profits from - well, any number of things, such as having a corporation pay less in taxes.

'Any money that is paid in taxes came from ordinary people'

Tell that to Romney, who was able to figure out elegant ways to use capital gains as a way to pay less than the taxes that come from the little people. 'Here’s how it works: Bain partners earn a cut of the profits from the investments they manage – usually 30 percent. This “carried-interest” is not a return on any personal investment they made – it’s just another form of compensation, like an ordinary paycheck. Yet under the carried-interest loophole, the earnings are taxed at the capital gains rate of 15 percent, rather than the income-tax rate of 35 percent. (They’re also completely exempt from payroll taxes, which support Social Security and Medicare.) “When Romney says, ‘I have a low tax rate because most of my income comes from investments,’ that’s not really true,” says Fleischer. “He’s receiving carried interest in exchange for past services.”' https://www.rollingstone.com/politics/politics-news/mitt-romneys-tax-dodge-126974/ I trust that Bezos is able to hire - out of his spare pocket change, so to speak - the sort of talent that Romney did.

'the $27 or $30 billion are estimates based upon expected income allotted to the NY operations'

Actually, considering that the range is between 25 or 40k "new" jobs, the 27 billion is not an estimate, it is just convenient.

'But this gives people an 'order of magnitude' estimate'

An order of magnitude change between 27 billion is either 2.7 billion or 270 billion - magnitude is probably not the unit best used for this.

'is more than an order of magnitude bigger than any other opportunity NY had'

In terms of jobs, yes, order of magnitude is appropriate.

'and doesn't make a good argument against Amazon'

I'm not making any argument for or against Amazon, I'm just pointing out how a public official seems to be trying to make the best case for his position - a position that seems more than a bit dishonest, actually, as compared to merely distorted.

The letter runs sixteen paragraphs, yet never acknowledges that there would have been real losers in the deal, namely local residents who would have been gentrified out of their neighborhoods. Neither Amazon, the state, nor the city pursued a Coasian bargain with them. They’re just the “vocal minority” to this guy. I thought progressives were supposed to care about minority rights. Only up to a certain dollar amount, I guess.

Low productivity people who rent should decide that large chunks of the most valuable real estate in the world should be closed off because they don't want to move?

What exactly do you want? We are going to pay renters in geographic area X a bribe of Y to go away? Why do they deserve that?

Well, their could have been a promise of new public housing, or some sort of requirement for zoning deregulations to allow for more new units to be built.

That is, if the real estate in Metro NYC is so valuable, why let any of the local residents decide that it cannot be built out to its most economically profitable use? Why should there be any single family homes in metro NYC?

a promise of new public housing,

Oh, I can't wait.
https://www.youtube.com/watch?v=5gRuyhf2opY

St. Louis got new public housing in the 1950s(Pruitt-Igoe). In twenty years they had stacked up slums(actually it was obvious within 5 years followed by 15 years of dithering. Then they blew them up!

Owners of real estate determine how it can be used. Renters don't take on any of the liabilities and risks that come with ownership. They don't get to decide jack.

I'm normally quite friendly to the idea of local owners having input on things like zoning. They are protecting an asset, usually against blights like public housing.

But Amazon clearly would have been great for current property owners. Those that wanted to live near that prosperity could stay and see their are improved, those that wanted to cash out could sell high and have more capital to move wherever they wanted.

Amazon and/or its government partners could have pledged to hire a certain number of locals. Or they could have agreed to pay a year’s rent for the residents of Long Island City. Or they could have agreed to pay compensation to anyone who moves out of the neighborhood due to rent increases.

Wut? $27 billion with a B in new government revenue and you don't think the government would increase spending to assist the poor in general, and specifically not the poor displaced by Amazon? Seems pretty obvious the failing there is government, not Amazon.

How is this $27 billion calculated? Is that a gross or net number? And why is it 27 irrespective of whether its 25 or 40k "new" jobs?

Silicon Valley created trillions in wealth but so little of that trickled down to its middle and lower classes. I think you are naive about how the system works. Palo Alto is rich. East Palo Alto was, is, and will continue to be poor.

"so little of that trickled down to its middle and lower classes"

Are you joking?

namely local residents who would have been gentrified out of their neighborhoods.

In normal real-estate markets, renters typically move every few years. New York's rental real estate market has been comparatively sclerotic due to rent control, though it's less so now than it was a generation ago.

A great many people were injured financially trying to pay off mortgages on property whose value was ruined by the urban mayhem which erupted after 1962 and others were inconvenienced at least as much as people having to depart neighborhoods due to gentrification. It's just that common-and-garden bourgeois and propertied wage-earners aren't mascot groups of the Anointed and bien-pensants don't care about such people.

+1 Their mistake was not negotiating with (i.e., compensating) a significant group of "stakeholders."

... any New York State Budget Director/bureaucrat has zero credibility on economics or budgeting --- NY State Government finances are a total, dysfunctional mess... as are NYC finances.

This 'budget bureaucrat' voices a completely one-sided, rosy scenario, speculation about supposed Amazon bountiful impact on NY ... absolutely no downside or losses to anyone.

And how it just for NY governments to to tax similar businesses at much different rates, based on politicians' guesses of which businesses will be most successful?

Should tax laws apply fairly to all --- or should each business/person have custom crafted tax rates ?

And you chose this as your line in the sand? Not some sports stadium deal?

@Moo cow- good point, as study after study has shown that building stadiums is a society money loser net-net, while building an R&D center like Amazon planned to would surely have been a net-net positive to society. If anything, NYC should have given them more than the $3B in tax breaks.

Bonus trivia: I noticed an increase in our slum DC area rental vacanies from NYC prospective tenants post the Amazon quit-NYC HQ decision. Coincidence? Probably, but you never know, it could be 'Escape from NY'.

Ray, I know you are a member of the 1%(you tell us enough), but a slum lord?

"This should never happen again"

Couldn't agree more. It shouldn't. New York doesn't deserve these projects.

NYC seemed an almost pathologically odd choice from the start.

I’m surprised the bulk of the financial industry hasn’t left yet; given modern communications there’s no compelling reason to pay the overhead cost to be there anymore.

What's their supply chain like?

Real estate's expensive in and around New York, but there's good quality of life there to be had. The city government's made real strides in making it a good place to live.

I suspect the supply chain would evolve is say Chase moved elsewhere. Chase plus 2 or 3 other major headquarters could probably create a preference cascade for any of several dozen reasonable locations.

Recall the response after the Brexit vote with regards to Frankfurt getting the finance jobs? The general sentiment was "but Frankfurt is a boring place to live." Bankers could move to, say, Charlotte. Except that Charlotte makes Frankfurt look like Paris or Berlin, and people with lots of money don't want to live there.

Except that Frankfurt is getting the Brexit jobs, as are Paris and Amsterdam, as it turned out that bankers do not have much leverage over their bosses.

Shh - don't mention Brexit here. Or how it will impact things like the UK auto industry over the longer term, particularly in light of the EU-Japan free trade agreement.

If the banks move, it will be to a location where there executives want to live and their workforce is willing to commute. Not because of regulation, taxes, or some other garbage. Banks remain in NY because they require large hordes of ambitious young single professionals.

“The banks”...mkay.

The hedge funds have largely left, since they pay enough that it’s immaterial. Their client side offices are still in Manhattan though. PE has largely moved out, although they also still have offices (to impress potential creditors/financiers).

The finance sector in general has largely moved out. What’s remaining (and will remain) is client side. Need to raise money? Pitch bonds? Convince corporation X to trust you with the IPO, or the financing structure of M&A deal Y? That will stay in New York.

Most of the back end shit has either already moved or in the process of moving. Virginia, Carolinas, Texas...they’re even moving some to Toronto. The labor cost just doesn’t make sense. Except of course...anything involving clients.

So why did Amazon choose NY over places that were willing to offer their first born?

Cloud computing and finance aren’t the same industry. Does...that need more explanation or are we done?

The every day blah blah programming shit is already mostly off-shored, in my experience some to Shenzhen and some to India. So not to Connecticut or Delaware. To Asia.

But, Amazon clearly wants a strong talent pipeline on the east coast. The difference in productivity between the best database architects/cloud engineers and average ones are the reason some make $500,000 a year and some make $90,000. Plus, you want a mix onshore: Product Managers, Project Managers, etc that coordinate with the offshore teams but report to American management. So you combine the facilities in an area young high productivity labor wants to live. Win-win.

There’s talent on the east coast, especially coming out of MIT, (and RIT) and they’d be stupid not to try to catch it.

That still doesn't explain why Amazon wanted NY. regulatory tax hell union town of dimwits tammanys that it is.

Because that’s where the talent wants to be. Talent wants to be where exit opportunities are good and where they can spend their money.

And it’s not “wanted.” They’re not going anywhere, it just won’t be LIC.

Thank you for coming full circle and endorsing my point

Your point was that of an ignoramus, “the banks will..”

My refutation was that “the banks” had already moved their back end functions out of New York City.

If your point was that client side finance sales would remain in NYC that’s an utterly uncontroversial stance and one you didn’t make.

Honestly I view your “the banks” as an unfiltered representation of your views about “the Jews.” That’s what you’ve been railing against the whole time.

McMike: “the Jews wont leave New York.”

Thanks McMike. We won’t.

Yes, the Zionist Entity must be stopped. This is God's Will.

As others have noted, it's all about the talent, where they are and where they want to live. On the East Coast, Boston and NY, and to a lesser degree DC, are head and shoulders above any other metro area.

Indeed. It seems to me like Amazon dodged a bullet here. If the NY pols hadn't shot the deal down prematurely, they'd certainly have come up with a whole salvo of new taxes and fees a few years down the line, once it was too late for Amazon to change its mind.

Its all relative. Seattle turned up the heat on Amazon. NY would have some leverage to extract what they could without making Amazon leave. But tech companies are limited by the pool of tech workers they can find. This eliminates 40 states from any consideration for headquarters. States need more immigrants or need to do better at teaching math.

New York's pols need to clean up the tax code and stick to their last, which is producing quality public goods and quality schooling (and doing that right is going to require going nose-to-nose with public employee unions and one might home smashing them). The only regulators who should have been involved in this decision should have been the planning and zoning apparat in New York City's government, and their concerns should have been limited to loads on infrastructure, health and safety, and the aesthetic aspects of the facility.

They are not going to do anything about the unions, nor are they going to go nose-to-nose with them. Large quantities of campaign resources come from those unions.

Only a competitive educational environment is going to give low income children a chance at better education...including improved public schools, once there is sufficient competition.

Maybe it’s time for a more thoughtful version of Ayn Rand.

A better argument against the tax relief is a norm against tax competition.

"The city, through existing as-of-right tax credits, and the state through Excelsior Tax credits – a program approved by the same legislators railing against it – would provide up to $3 billion in tax relief, IF Amazon created the 25,000-40,000 jobs and thus generated $27 billion in revenue. You don’t need to be the State’s Budget Director to know that a nine to one return on your investment is a winner."

-----------

A pretty big if. I would discount this a hype.

The real issue was probably two fold. NYC is a big delivery market and New Yorkers will continue to pay the extra half day of costs for delivery in NYC traffic.

The other issue was tech workers, and they don't need them there, Seattle is fine.

He's not accounting for parties whose business is constricted by the higher general rates necessary to provide for the various subsidy schemes. The Albany nomenklatura doesn't think that way.

Thanks -- probably the best analysis of the Amazon issue i have seen

Shorter version: waah, I didn't get my way.

And it's the fault of the people I don't like.

To think that is a perfect summation of Brexit from a Tory perspective too.

Okay, but, the deal had no benefit to him personally. He's upset because he thought it would be a huge benefit to the people of New York. And his explanation is cogent and on the mark.

I disagree I am sure he had major professional investment, and clearly personal/ego attachment. I also think political ambition is playing a role here. Not least trying to parlay this outrage into a run for higher office.

@McMike - what's your ax to grind? Seems you're very bitter about the whole thing, even though your side, the hobos and unemployed of Queens, "won".

hmm. I'm not the one who keeps bringing it up. Seems like a lot of people are intent on reframing this as economic suicide and the return of evil unions, rather than a victory for local voices and free markets.

He’s a lib. His side lost hard. He knows his side controls the media so he doesn’t hear about it very often but he, like all snowflake libs, is triggered when he hears about it.

TL;DR:
He’s a poor little lib and his feels were hurt.

The "winning" side were also libs. How come they can't get the media to be okay with their ideas instead of trash talking unions and Queens voters? The media only cares about rich libs like Bezos but poor libs are just garbage to them.

"rather than a victory for local voices and free markets."

It was neither. 70% of the locals wanted amazon there. The loud minority and paid demonstrators got their way instead.

ooh paid activists, scary! just like the commies. Bussed in from some socialist enclave I bet. I wonder if they had crisis actors as well.

You're doing yourself a real disservice to compare paid activists to crisis actors. One is a conspiracy theory, the other is not at all.

I've been following this story from the start, and am a New Yorker, so I have a vested interest. I'm still not sure about whether the deal was good or bad for New York City and the State and am open to being convinced one way or the other. Based on performing many analyses of public/private deals, my bias is that big companies are good at getting metrics that are tied to money counted on technicalities without actually delivering on the spirit of the contract.

My main question is where is this 70% support figure coming from? I've searched and searched and can't find a single sourced poll or report that supports the oft cited 70%. The two most often claimed sources are Quinnipiac University and Siena College phone polls (which are basically garbage because who the hell picks up their phone and participates in a poll?). Still, I'll link them here for posterity:
- QU poll claiming 46% of New York City registered voters support (https://poll.qu.edu/new-york-city/release-detail?ReleaseID=2589) +/- 3.8
- Siena poll claiming 56% of New York State registered voters support (https://scri.siena.edu/wp-content/uploads/2019/02/SNY0219-Crosstabs-021219.pdf) +/-4.3%

"... your side ... hobos and unemployed ... "won"..."

Lol!

hobos and unemployed

activists
(unemployed is assumed).

"Shorter version: waah, I didn't get my way.

And it's the fault of the people I don't like."

Is this also your shorter version of the Holocaust through 1944?

If this Amazon facility is necessary for its operations why must it be located in Long Island City? And why would anyone who doesn't live in that area care? This is a local issue that's been blown up to national proportions as part of a continuing narrative. If you're not an Amazon shareholder there's no reason to give it a moment's thought.

The subsidy auction gave good government / anti-cronyism types pause. The subsidy auction also probably pained those who believe in government i.e., net loss in tax revenue nationally.

Yeah, Silicon Valley displaced a lot of lower income and middle income folks.

We never should've allowed Silicon Valley to happen.

You're right. Existing citizens should cheer thankfully, as their government grants subsidies to companies that will eventually drive them out of their homes, and be grateful for the access to better coffee drinks and avocado toast.

My parents house went up in value a lot because they were located near NYC. They were able to take that capital gain and retire well in a lower cost of living area.

Yes gentrification can favor retirees who plan to cash out, IF they can handle the increase real estate taxes. Otherwise, they can get driven out along with the renters.

Even if they can't afford the taxes, they get paid well to leave.

Not in California. Prop13(A GOOD THING) fixes your taxes at 1%(plus bonded indebtedness-- usually about .25%)of purchase price and allows increases of 2% a year.

I understand there are, for example, fairly large areas of Detroit that don’t suffer from this gentrification problem. Always useful to have a real world benchmark.

Indeed, Detroit probably has too much regulation and won't offer generous enough subsidies

Oakland County has the twelfth-highest per capita income in the country among counties with a population of more than 1 million, a bit behind #10 Manhattan but well ahead of #19 Queens. On the other hand, the City of Detroit is an emptying wasteland that recently went bankrupt.

So, you tell me, what explanation other than local government policy could possibly explain why prosperity exists on one side of Eight Mile Road but not on the other?

The Bay Area housing issue is less a problem of high income earners joining the neighbourhood as it is a problem of highly restrictive new construction policies that limit the ability to build housing (and America's general hesitation to build up).

The Bay Area housing issue is

well known to those who live here and presumably to anyone contemplating moving here: dont. You can't afford it. There are too many people here already.

Roger that. The Santa Clara Valley was a marvelous place before all the silicon yokels moved in. And all you ever got out of it was infotainment screens that welcome you when you open the door to your own car, and slow strangulation by bloatware that you think is somehow improving your quality of life.

That and 24/7 surveillance and profiling, be fair.

Yes, but any thought that the Govenor’s state-level stable of geniuses would’ve done better does not survive passing awareness of the debacle of the so-called Buffalo Billion that features an $800 million Tesla solar-panel, err . . . solar-shingle, errr. . . something-someday factory.

This "analysis" shows how much pretty much *everyone* misread why Amazon - or rather, Jeff Bezos - choose NYC and DC. The only reason was because of proximity to Bezo's east coast homes.

Scott Galloway of L2/Gartner nailed it immediately after Amazon announced the "search." Meanwhile, Google announced a large expansion in NYC without any tax incentives.

https://www.l2inc.com/daily-insights/no-mercy-no-malice/hq2-and-3

Exactly. Unless it's for another sweatshop, new locations will always be located where the executives want to live.

Google is adding maybe 5k jobs to NYC every decade? So about 10-20% of the rate of job creation that NYC has foregone here.

On the other hand, what if the already existing business that provide millions of jobs learn that getting a tax relief is that easy?

If tax relief is given to Amazon, what would you tell to business that will open the week after?

Or what do you tell an incumbent business that threatens to leave?

That ties nicely to the discussions about legalized extortion.

They all get essentially the same tax break.

That’s why this whole thing is so absurd.

And amazon is still going to increase its footprint in nyc. They don’t have a choice. And yes, they will still get most of the break.

I have to admit this is a good argument. "It is not ideal free market capitalism, but hey, it is 25,000-40,000 jobs."

Yes, the old “replace earthmovers and dump trucks with teaspoons” argument.

At least you guys never change.

I am still baffled by Amazon's folding and leaving. Leave aside for now whether the incentives were right or wrong, good or bad, leave all the politicians out, leave all that out: did Amazon think that they wouldn't get pushback from various groups in NYC? The city that loves to argue and rant? So they got pushback which I would call sort of Level I on a I to V scale (think about Boston pushback to the Big Dig, SF pushback to ANYthing, etc.)... and retreated. I have to get Straussian/Conspiratorial here: I think Amazon NEVER WANTED A NYC HQ AT ALL, and was looking for a reason to bolt. Seattle is the commercial HQ, Virginia is the regulatory/legislative HQ, they needed a third? But by folding and walking away from this (IMHO) not-very-serious proposal, they gain crucial leverage: over Virginia now ("give us trouble, we're outta here") and any future locations they want to build in ("you think we won't walk if you push back? Look at what we did in NYC?"). I remain baffled that this massive corporation, when up against a famously recalcitrant location, put up less fight than, say, a local real estate developer might, when faced with a landmarks commission....

The whole purpose of the national competition though, was to establish who would roll out the red carpet and not give Amazon any lip. A real estate developer has to fight city hall because the real estate can't leave. I don't think the rabble rousing spooked Amazon, it was when the politicians, who Amazon was expecting to stand up to the pleb pushback for them started caving to it instead.

Thanks for this helpful reply. I disagree mildly with your first sentence: when any city gives the keys to any entity, that entity can't be sure that ALL opposing voices in the city will be silenced, and thus No Lip Will Be Given. I completely agree with your second sentence, I hadn't thought of "the real estate can't leave." And I think you are probably spot on in your third sentence, that it was the politicians not the people. Still, though, when one thinks of the scale and wealth of Amazon, if a few politicians start yapping, do you really fold and bolt within just a few days? Did anyone from Amazon meet with any of the opposition politicians and ask "How many tens of millions of bucks for your constituents' new community center would it take to get you to STFU?" Seemed to me a very fast retreat, still. But thanks for your reply, it was very helpful.

A perfect example of liberals “adding value” by being thugs.

Of course our media will only give this story a minimum of coverage.

Given tyler’s Track record of cowardice, I do wonder his play here. Does he think that the left has gone off the rails and that the media will not be able to whitewash it? Does he think that he will have more employement in his home area if he treats Amazon fairly? Does he actually think that Jeff will give him a platform?

My mistake it was Alex. Makes far more sense. He is the real deal.

Now would be a great time to turn New York in to a right-to-work state.

Does New York have the initiative. In Missouri after years of pushing the legislature by a 2/3 vote passed right to work. By a similar margin the voters repealed the legislature's work.

Seems protests are ramping up in Arlington.

"The true local residents who actually supported the project and its benefits for their community are badly hurt."

What does this mean?

Strangely, except for the advisability of union negotiations "up front" on the Bezo's non-move to NYC, I think that NY is the loser in this fiasco, but the NYC NIMBYs are the short term winners.

Seattle, just 30 miles to my north, HQ to the Bezo's Empire (Bempire), capitalizes daily on Amazon as THE tax base for the city, and derides them or just proposes to tax again with some new permit, fee or head tax. (We are not an income tax state.)

By the way, neither are we a "right-to-work" state, so the Bempire had already calculated on union involvement.

But while you granted Amazon a $3B break over whatever time period, you gave up $27B PLUS whatever local taxes and income taxes these 25,000 (to 40,000) not underpaid high-tech employees would owe the state and city (and burrough) coffers. You just gave up a hell of a lot.

Now they will re-evaluate some places like north of DFW (in a non-income tax state, with its own power grid, and is "right to work").

Where I think you cityfolks dodged a bullet is the gentrification Amazon (and MSFT or Google or that idiot at FB) cause. These Amazon employees have money. And they want to live somewhere near work. So the rent and house/condo prices will escalate, like Seattle, and drive more population to homelessness. I grant that NYC is no stranger to gentrification. In fact I would argue that over the centuries, it is precisely this gentriciation that gives the rest of the country it's Italian Restaurants or Polish sausages. NYC gentrification is the heat that makes America the melting pot. Seattle will figure it out sometime in the next century or two.

In the meantime, your NIMBY political folk avoided the short term gentrification issues and just passed it on to someone else who won't be able to handle it even in the long term like NYC can.

And as for the unionization questions, I am not up on particular NY/NYC unions and their LOCAL politics (the one mentioned was RDWSU); but, if they are wont to resurrect Tammany Hall, companies like Amazon will just robotize.

I don't think Apple elected to invest over $1 billion in Austin, Texas because executives had homes in the nearby hill country.

My favorite part was where he essentially said, “You people don’t understand the New York way - first you get them to irrevocably commit, THEN you shake them down.”

Bezos dodged a bullet. New York should never have been considered for such a facility.

Agree or disagree with the letter, it's more logical and freer of emotional polemics than most political communications. If more Democrats wrote and thought like Robert Mujica, there's hope for the party and political discourse. Oh, wait. From Queenslatino.com:

"On last year’s list we pointed to reports that Gov. Andrew Cuomo’s administration was trying to poach the veteran Senate Republican staffer as reason to bump him up a few spots. Well, the rumors came true. Cuomo tapped him to be his new budget director late last year, and in this year’s negotiations Mujica found himself on the other side of the table.

By all accounts he seemed to take to the new role well. With much of the logjam surrounding the budget negotiations centered around conflicts between Cuomo and the Republican-controlled state Senate, Mujica’s nearly 20-­year history with the GOP conference was invaluable in reaching an agreement where all sides could walk away happy."

We will probably never know the reason for the sudden surrender by Amazon. The most likely reason, in my opinion, is that new information emerged that scared the crap out of Amazon.

We can only guess about reasons. But NYC is an unfriendly place for companies dealing with union labor. The Mafia's grip on NYC unions is notorious. Amazon should've realized this before choosing NYC for HQ2.

Amazon agreed in advance to hire only union labor among the rank and file. Without being experienced with unions and things like extortion and kickbacks perhaps the executives from Seattle were naïve about doing dirty business on the other coast.

The real reason is that Seattle people don't understand New Yorkers. New Yorkers always complain about everything especially if they like it. Its in their blood. Seattle people are the quiet, easily offended types and they mistook NY hotbloodedness for something else. It's not about the money because the $3B in free money was still there for them. Amazon took personal offense and Bezos is basically a snowflake.

Good piece, thanks for posting it.

Serious question for Alex and, God help us, for Tyler too:

Have you learned anything from this? Or will you just keep voting Democrat across the board? Please answer.

You know the traffic would be snarled for months as trucks filled with unmarked twenties off-loaded at the Amazon vault.

New York paid for being a union shop. They need right to work status.

In addition, a professor of mine always said "If an investment doesn't make economic sense before taxes, it won't make economic sense after taxes..."

I am not sure why anyone is surprised by this. As with Brexit and other self-destructive and brand-destroying behaviour, a disenfranchised and self-empowered group have found an increasingly available opportunity to destabilize a threat to their desire for an anti-gentrified society; a mob-centric anti-elitist, and anti-merticratic platform that values seniority, the impassioned proletariat, and traditional values of tribalism and non-meritocratic cronyo-diversity. So a diminished union environment, abetted by an anti-ambitious and anti-individualistic generation, finds a vulnerable corporate or developmental project to flagship their self-anger and self-betrayal. They will tear off their nose to spite their face in hope that they can normalize a world that is a bit uglier and poorer, thus equalizing, 'diversifying', and institutionalizing a non-threatening mediocrity. It is not their fault, for they are a product of the current family, community, and populist values that shame personal ambition, self-sacrifice for one’s own goals, and a desire to reach above for one’s own dreams. They do not know why and are angered that they cannot be complacent and successful. They care not for opportunity and wealth forgone. Ayn Rand would be smug in her prescience.

pretty sure that's not it. pretty sure.

Long-time, somewhat ambivalent, Queens resident here with a couple of points:
Western LIC had been “gentrifying” long before the Amazon debacle. What was a sparsely populated primarily non-residential area 10 years ago is now surrounded by a forest of high rises. The price of those condos & new rentals would have no doubt gone up, but there’s simply not much of older middle class housing stock amid the warehouses & factories in the neighborhood that would be physically affected.
On the other hand, to a regular NYC subway user the prospect of several thousand new riders adding further pressure on a decrepit system is downright scary.

What is Amazon's track record in terms of hiring and paying employees well? To be angry that LIC lost 25k to 40k jobs implies that Amazon would have actually followed through with that. I guess it would have been different in Long Island City than it is everywhere else?

Probably this depends on what the nature of the job is?

There's been controversy over the working conditions in Amazon warehouses; I don't know what the truth is but it's easy to imagine that many of those jobs are not terribly attractive. (I'm guessing that many of Nashville's jobs will be of that nature.)

For Seattle though, just ask any Seattleite about the big influx of high-paid high-tech Amazon workers. And the effect on housing prices and traffic congestion. Those fancy Amazon spheres that they built on their "campus" (that's what Amazon calls it) in downtown Seattle are definitely not warehouses, and the Amazon employees in downtown Seattle are not warehouse workers.
https://si.wsj.net/public/resources/images/BN-VM018_SEATTL_GR_20171006172853.jpg

I don't actually know the nature of the jobs that Amazon says would've been located on Long Island but I'm guessing most of them were of the high-skill variety. If you're going to be hiring tens of thousands of low skill workers for a massive warehouse operation, I don't think New York City would be your first choice of location. (Unless the operations include a lot of overseas shipping? I suppose that could be the case.)

HQ2 was intended as high-pay employment area, mostly Software Development Engineers and Machine Learning Scientists. And my mostly, I don't mean a lot more than you usually see. I mean an overwhelming majority of software-related engineers with a smattering of business analysts, economists, lawyers, etc.

There would have been a lot of support positions for cleaning staff and drivers and such, all pretty well paid, but not professional level pay. Most of those would be privately contracted.

Amazon does pay it's warehouse workers very well. Critiques on that are way off the mark. But Amazon can be abusively demanding on work results and Amazon is terrible at maintaining standards for management behavior. A bad manager can easily abuse employees without being called on it if they are able to produce the desired metrics, as long as their negative impact is on metrics that aren't getting measured.

Some of the politicians such as AOC claimed that the new jobs would strain infrastructure and that having more people was bad for the city--as if Amazon was bringing 25,000 new people to town rather than hiring locally and reducing unemployment. AOC also confused Amazon warehouse workers wages with the new headquarters office wages, saying NYC did not need min wage jobs (if there aren't enough people willing to take the min wage jobs then they would have to raise wages, wouldn't they?). Amazon wasn't even going to locate in AOC's district. It boggles the mind.

I may have missed it, but so far nobody I have seen here has picked up on all the commentary out there that Amazon was definitely attracted by the amount of high tech talent in the New York area, which suggests that the metro area may have a leg up on other possible alternative locations. in particular, supposedly communities in Northern New Jersey have been making overtures to Bezos, which may well pan out.

Does r/LateStageCapitalism have this blog on speed dial?

It amazes me that in 2019 a racist and classist term like gentrification gets tossed around with such ease. Horrible.

Hey guys, can anyone tell me what's the 27 billion that gets thrown around? I'm getting everything from annual tax revenue (ridiculous) to total revenue from the project which would include salaries or at least income of the salaries? It seems misleading to quote this along the employment number and the 3 billion incentive as if these were separate and comparable parts of an equation.

Comments for this post are closed