Amazon pullout

My read: Amazon will still be here, and will have an increasing presence, just like Google and Apple.

That is even better as only the high paying Tech or management jobs, which contribute the most incremental tax $ (taxes paid vs services consumed) will be in NYC.

As with most of politics, the size of the benefits for both sides was greatly exaggerated. Still, it is important for the overall health of NYC and its public transportation infrastructure to develop substantial job hubs outside of lower Manhattan. The main part of the benefits were attached to hiring 25,000 new employees with an average salary over $150,000 in ten years. That may have been a pipe dream, but it also could have changed the complexion of LIC in a way some envisioned when Citi first moved there ages ago, but put mostly low level jobs there. But the fact that low level socialist politicos (in the second least liberal borough in the city) can derail such a plan made by leaders of their own parties shows how broken our government is on all levels.

And a sizable portion of the theoretical incentives are available as of right for any company that relocates jobs to NYC, and we have doled out property tax incentives like candy for developers for decades. The claimed benefits or detriments here is all politics on both sides, not math.

Sport, You have a great point. It would have expanded the number of business hubs which indeed is incentive worthy. Google and Apple are only expanding in already established locations which is clearly valuable but not as valuable as expanding in Queens. Unfortunately, NYC is full of socialists who elected AOC.

Where was Carolyn Maloney in all this opposition? Supposedly her district.

Some of the incentives are so "as of right" as people have been claiming. the 1.2 billion dollars in payroll tax credit from The Excelsior Jobs Program is not totally as of right. While it is potentially available to any company coming in, you only get it with State approval. So not totally as of right.

As far as Google only expanding in already established locations, although it is in Manhattan I'm not sure you could say St. John's Terminal is located in a thriving business location currently.

Personally, I think the reason Google pulled out isn't that people are whining over the current deal, but that they thought this was just the beginning of the perks that they were going to squeeze out of New York City and State, and based on the vocal opposition they realized they wouldn't be able to run roughshod over local government, business, etc like they have done in Seattle and many other cities for years.

You mean Amazon?

http://gothamist.com/2019/02/14/amazon_real_estate_lic.php

https://www.wsj.com/articles/amazons-pullout-from-queens-n-y-stuns-real-estate-industry-11550182281?mod=mhp

Yes I meant Amazon, sorry.

Which developers rushed into LIC in the last 3 months?

They got screwed. Many did.

Btw, kudos to Bezos to tell FU to socialists in NY. If this is not just posturing, goes to show that NY indeed needed to offer the tax breaks to attract them. Socialists in NY would prefer to spend the tax benefit money offered to Amazon on homeless shelters on CPS and prime UWS and other welfare items rather than increasing the tax payer base.

From WSJ comments:

“Rotten Apple”
Jeff’s spreading this news:

I am leaving today

I want no part of it

New York, New York

De Blasio’s views

Have me longing to stray

From the leeches that live in it

New York, New York

Ain’t gonna wake up in that city

That’s full of creeps

And find their hand in my till

Taxes so steep

I’m done with you

I’ve had my fill.

My Amazon Prime

Makes me king of the hill

I can make it anywhere

Outside New York

It’s up to me

New York,

New York

—William Sheridan

On people loving homeless shelters
https://streeteasy.com/talk/discussion/43449-homeless-shelter-on-billionaires-row

30, opposite to one of the items on your 2019 outside predictions (which i thought was brilliant btw) this is one of the developers that rushed in:
https://newyorkyimby.com/2019/02/new-rendering-revealed-as-silverback-development-acquires-24-16-queens-plaza-south-in-long-island-city-for-80m.html

Amazon was offered much more $ to locate in other areas of the country - I doubt the tax breaks were really determinative in their choice of NYC for their THIRD hq. Such a disingenuous process. They always wanted to be here, and still will be.

pier45,
I guess that is a developer who rushed in, but it's not like that was a development which hadn't been in the works for a long time before the Amazon announcement. Hell, it already topped out. It's just one developer pulling the rip cord and not finishing a project (kind of in line with my prediction) and a "greater fool" jumping in their grave. given both the market conditions and the Amazon deal heading south, it will be very interesting to see what becomes of this project.
PS thank you.

But to be clear, my point was that I heard a bunch of people talkin on various news outlets today trying to imply that the Amazon deal spurred all sorts of new developments, and I just don't think that's the case. I think that Long island City was poised to become a total disaster due to being rapidly overbuilt, and I do think that the Amazon project could have helped bail that out to some extent. With Amazon pulling out I do agree that the crater will be larger than if they hadn't.

NY exemplifies everything wrong with NIMBY politics. We continue to stop worthwhile projects that would improve the city, increase productivity, raise tax revenue and bring job growth. This isn't the first time. NIMBY politics also prevented a high speed rail to La Guardia and Westway. Ed Koch who was a vocal advocate against westway years later said killing it was a huge mistake. The Federal Funds were there.

So now the city will have a lower tax base and less jobs. we gave up 25,000 jobs at an average salary of $150,000. And those incomes would have been spent supporting additional local businesses

Losing Amazon is a big miss for NYC. You don't need an economics degree to figure that out. Nothing is perfect, however the upside was very tangible.

From WSJ. Well put. If Amazon did not go squeezing various tax payers for money, they wouldn’t have to deal with the socialists.

“Amazon was right to pull out of New York City, but it would have avoided a lot of grief if it had made its original headquarters decision on the business “fundamentals.””

https://www.wsj.com/articles/amazon-escapes-from-new-york-11550189053?mod=mhp

I'd respectfully disagree with the people here who are A) assuming this will definitely be a loss for NYC and B) blaming "socialists". I think Josh Barro's take on this at NY Mag is nuanced and makes several good points:

http://nymag.com/intelligencer/2019/02/the-lessons-of-amazon-abandoning-plans-for-nyc-headquarters.html

1) "Amazon is still coming here. They're just not going there [meaning LIC]...[Amazon] says it expects to boost the current workforce of 5,000 employees who [already] work in Manhattan, Brooklyn, and Staten Island."
2) "...neither party truly needed the other. New York City didn't need a new corporate headquarters campus...particularly one it would need to subsidize to the tune of $3 billion"
3) "...while Amazon needs to have a large and growing workforce in New York City, it doesn't necessarily need as many as 25,000 employees here..."

As for LIC itself, understand that it's possibly getting overbuilt but the city as a whole isn't really producing enough housing as it is to keep up with economic demand and population growth.

Amazon needs NY because there is a large pool of top talent that demands to live here. They can't get around that.

Dean, Many may not have liked the terms of the deal with Amazon but the fact is that it was signed by duly elected officials. Why should unions and local politicians start to make life difficult for Amazon by demanding more union jobs and villifying them. That is exactly the socialist problem. I have no sympathy for Amazon but taking actions to scuttle an agreed upon deal?

https://nypost.com/2019/02/15/blame-amazons-retreat-from-nyc-on-the-humiliating-dance-monkey-competition/

One may reasonably conclude that if you take public money in the manner Amazon did, you will be beholden to the politicians. Progressive democrats got trumped by extreme left.

I would call that NY Magazine piece neither nuanced nor relevant. Of course the cost benefit of tax incentives is debatable, but much more so when given to developers already bent on developing residential properties than when given over lengthy periods based upon jobs. Let's face it, the likelihood the full benefit threshold would have been achieved (25,000 jobs = a $4 billion annual payroll) likely was illusory. But to say that Amazon may add to the barely above minimum wage jobs at a warehouse on Staten Island or fulfillment roles elsewhere is meaningless. To have already concluded that LIC is "overbuilt" is circular. If the tens of thousands of residents in the apartments there did not need to cross the river to work, it would be hard to call it overbuilt, and it would alleviate strains on mass transit in and out of Manhattan. Other developments outside of Manhattan, like Atlantic Yards, should have/should be much more balanced between office space and residential, sitting atop a major transit hub.

I think the original sin was created by Cuomo and De Blasio when they agreed to the terms of the deal in a very closed door fashion and worked to mitigate any public input. Seems very reasonable to me that the current residents of the neighborhood might have strong feelings about the agreement, and should have had more input into the process. Things blew up from there, and it is too bad, but I for one and somewhat encouraged that voters and citizens are getting out there and getting heard. And I'm glad that there's more attention paid to these perverse system of corporate incentives that states have put in place, of vary dubious effectiveness. I heard that these types of programs are outlawed in Europe, recognizing that it all leads to a race to the bottom. Makes sense to have massive coordination of public services given ambitious scope of development, but underwriting it, given the rich talent pool and all the other splendors of NYC? It's just gilding a very rich lily, one with a very good corporate tax avoidance practice.

I think the original sin is existence of these programs including property tax abatement and subsided housing in prime areas. However, not every decision can be subject to community input. We have elections for that. The public suffers from the decision of who they elected.

Btw, current tax paying residents of LIC support Amazon. It is the unions and elected leftist leaders who may not even represent that area like AOC.

Agreed, all of these market distortions add up to the crazy situation we have here in NYC. But I respectfully disagree about public input. I know I would want a say in any large complex being put down in my neighborhood, and I suspect most people would. We elect our City Council members for this reason, and in the Amazon case, that part of the process was purposefully avoided. Trust was broken and obviously, things spiraled out of control. Not a great outcome but hopefully there's a useful dialogue that comes out of this and we collectively reexamine these perverse incentive systems that have been built over the years. While I like to see the community engaged, the activist types lost me when they were bashing around a piñata of Jeff Bezos in celebration.

How do you balance community input vs private property rights? Does every one in the community get a vote or only people who pay certain amount of property taxes as presumable the tax payers have the biggest stake? Do people who live in public housing get a say?

Also does a community who is a net receiver of tax $s from the city and state get to have a say or are they surrendering some of their rights to elected officials of city and state who are subsiding them?

I do not have an answer to the questions above which is why any distortion in form of tax abatements or credits to property owners or corporations is fundamentally flawed. Outside of the philosophical debate, LIC property owners, its local politicians, and labor unions are the biggest losers.

Unless you are proposing a huge step backwards to where only property owners get to vote then everyone gets their say.

We have a system of elections with every one getting a vote. Once the officials/leaders are elected as in Cuomo and De Blasio, why is community decision or Union employment needed for every decision? It is upto the elected govt to move affordable housing elsewhere or not have it at all. While voting to elect representatives is a constitutional right, subsidized housing is not. Community groups/organizers or Unions are not elected and do not have governing rights.

Cuomo and de Blasio sat on their hands and let AOC and Gianaris control the narrative. They assumed they didnt't need to do anything further; they should have made every effort to sell the community on the deal and even organize Amazon's local supporters.
AOC led her constituents into thinking that Amazon was getting $3B in their pockets and kept insisting even today, I heard her on TV that the community has better ways to spend $3B. I hear she has an economics degree; doesn't seem like she understands a whole lot. This isn't the first time she has not got her facts straight.
I believe this is a big loss for NYC in so many ways. And it may cause other companies to think twice about coming here. NYC has lost a lot of revenue due to the new tax laws. The Amazon deal deal could have made a difference in this respect. Projections were for a return of $27B. Even 10B would have made it a great deal. I read people are leaving the city. I heard Buffet's colleague discuss this on CNBC.
That said AOC did a lot to hand Trump a win in 2020.

This city has been booming for the better part of 2 decades. Even after the 2008 crisis (which considering was a "Wall St crisis you would have thought we would have gotten hit the hardest) we bounced back within a couple of years whereas there are still a lot of places in the country where real estate prices, incomes, etc still haven't gotten back to 2008 levels.
So given that, this city is going to fall apart because one deal didn't happen? I don't think so. But we do have potential big problems: when DeBlasio came into office the city's budget was just under $70 billion a year. The new budget proposed for 2020 is over $92 billion. So where is that money going to come from? Even at it's most optimistic the Amazon deal promised $27 billion over 10 years. So where is the rest coming from?
And these budgets don't include another ?$80 billion? to fix NYCHA and the subways. Not to mention untold billions more for our crumbling infrastructure and diminishing federal funds to put towards it. If we couldn't find the money outside of crushing real estate tax hikes during these boom years, what's going to happen in the future? Especially when an inevitable recession hits?

And BTW the city is budgeting close to a 20% hike in Real Estate Taxes over the next 4 years - so it's bound to be more than that.

The irony of the Amazon situation is that apparently local residents in Queens were in favor of the project: "A HarrisX poll showed 80 percent of Queens residents and 77 percent of the residents of the state senate district where HQ2 would have been built approved of Amazon’s bid."

NYS and NYC fiscal situations are both time bombs. I don't think people realize how bad the situation is: https://www.crainsnewyork.com/op-ed/fiscal-picture-new-york-darker-you-think

Thoth, Thank you for the HarrisX poll info.

toth, thanks for that link. Very informative.

30, Inceasing NYC budget is indeed a problem. Our duly elected leftist officials are beholden to Unions and increased welfare spending as in homeless housing in prime areas.

https://www.wsj.com/articles/1-973-leds-and-the-green-new-deal-11550274408?mod=mhp

@ 30 yrs.
This is not one deal that fell apart. It would have been a major impact and placed NYC as the Silicon Valley of the East. So many other businesses would have been created and therefore so many more jobs to name a few things. And more businesses would want a presence.
The fact is NYC and the State have become so anti business. I recently had a banking audit, and the rules and regulations that have changed over the past ten years are staggering. I am considering discontinuing doing loan originations. Other people I know have already handed in their license.
I've seen a lot in this city, such as "Ford to NYC, Drop Dead", Wall Street threatening to leave the city, 9/11, but I always knew NYC would come back. Now with so many negatives, I am fearful.

In regards to Amazon pulling out of coming to Long Island City:
One thing which seems to have been largely ignored is the extent to which Cuomo and DeBlasio lying to Amazon factored into their decision to pull out. It is fairly obvious that they said to Amazon that they could control the process. They told them they would bypass the City Council, ULURP etc, give it to the Public Authorities Control Board and it would sail right through.
But what happens? Amazon gets dragged in front of the City Council where they get viciously grilled. People are protesting in the streets against them. And then the Senate Democrats nominate someone staunchly opposed to the project to the Public Authorities Control Board who would have Veto power.
You can blame AOC all you want here, but she's a federal representative who has exactly ZERO power to do one God-damned thing in terms of this project. But the two who were supposed to be the project's rabbis obviously made representations which turned out to be bullshit. And that's the type of shit that queers business deals.

I see you point but I don't think I"d label it a lie, but a profound error of judgement (and I'm no fan of Cuomo). It is clear that the political environment changed dramatically after the midterm election and the levers that Cuomo planned to use to control the process weren't working in the same way. I think maybe the appointment to the Public Authorities Control Board was the moment of truth - Cuomo could have blocked the nomination, but didn't. And he's allegedly irate about it, but even he wasn't willing to spend any political capital to push it forward.

Also - I think the costs and benefits of this project are likely overstated on both sides. Amazon will still be here, and they will continue to grow. All the same ingredients that made the City attractive to Amazon continue to be unique to NYC; talent and capital are not wholesale disappearing to Nashville and Crystal City.

jas,
I wouldn't necessarily disagree with any of that.

@30 yrs,
I am not blaming AOC entirely, but she was very vocal with her unconscious lies and that stirs people up, which is a lot of power, (it's the power of protest)but I do realize she's a Federal representative.
Certainly as I mentioned in my initial comment, Gianaris although I didn't mention Stewart-Cousins, and exactly what their role in the debacle was, but it was huge.
But most of the blame can also go to Cuomo more than de Blasio who didn't see this coming and figured that with 3 billion in incentives, Amazon would not walk. But it definitely was not Cuomo and de Blasio lying to Amazon in and of itself. Cuomo did not realize that he should have organized the locals in order to sell the deal even as Gianaris was appointed to a board that could kill the deal. He was out of touch.

@jas
I don't think Cuomo had the political skill to prevent the appointment of Gianaris to the board.

Seems like everyone was flexing their new powers, and Amazon was extremely thin skinned. I don't know about Cuomo's political skills, but his political capital surely changed after the election. In the end, I think Stewart-Cousins ended up like the dog who caught the car. Too bad there wasn't someone with some gravitas who could have stepped in and taken the heat down a notch.

I SO rarely ever agree with Bill DeBlasio, but in this case, I think he was right. Amazon couldn't stand the heat. And since Amazon never really needed a second HQ ( and in fact, chose TWO, to make three) they called BS on their own stupid disingenuous contest and declined to play ball. But they're still here, Cornell Tech is still here (and just getting started) and Google and Facebook are here. The fertile ground for innovation isn't going anywhere, and our access to and understanding of capital is second to none.

You said de Blasio said Amazon couldn't stand the heat, but wasn't the deal on thin ice when Gianaris was appointed to the board and chances are the board would have killed it, and rather then be shown the door, Amazon left.
As far as de Blasio goes his initial response to Amazon leaving was not in very good taste to say the least.
As far as Amazon not being able to take the heat, why should they have to. Why should every move he would have made be open to scrutiny. These radicals would have only gotten far worse. They acted like Amazon needed NYC; now they know otherwise.

Google announced their expansion in December after the Amazon deal was announced.

Do you think Amazon was looking for Cuomo to block Gianaris's appointment? I wonder. Listen, I'm not sure we can apply private sector deal-making protocol to this deal, and that may have been Amazon's expectation. The politics changed, the players changed, and, to some degree, the public's mood changed. Since the negotiation involves public resources, all of this became relevant in an instant. Where we differ in opinion is in whether or not Amazon should have shown better heat tolerance. In my opinion, they put on this huge national competition for public dollars, which many localities bent over backward trying to accommodate. Given that they want something from the public, which only our elected representatives can provide, they shouldn't be surprised when the public makes its thoughts known or new players come into power. I'm not happy that the deal went down, on balance, but remain riveted by its dynamics.

Well put. If you take significant public money, you do have to deal with nasty politics and can’t expect to be treated like white knight.

I should say public money in form of tax breaks which are not availble to existing businesses.

I'm saying that Amazon did not want to deal with future scrutiny. From what I am reading Amazon unlike NYC not going forward is not expected to have any effect on their bottom line. Nevertheless I do think that Amazon could have reached out. I guess they were blindsided by the backlash. And read some of the numerous tweets about what people were saying and so many people thought that Amazon was getting the $3billion as cash in hand. AOC was touting this constantly and was inciting many. You saw on TV how vocal they were.
Amazon was going to build a campus literally next to the biggest affordable housing complex in the country. That would have been very beneficial to the residents there. Many of them have already expressed disappointment.
From what I see is that a minority was able to defeat something that the majority wanted. Just this morning I heard someone who worked in the Obama administration (couldn't get his name)lamenting so so much about how Amazon leaving will have such a negative impact on the lives of so so many minorities in need. He repeated this a number of times; he went on, minorities not only in Queens, but in the Bronx also.
Again 3B in tax incentives bringing in $27B, not really shabby or maybe only $15B, still not so bad. Or for every dollar in tax incentive nine dollars NYC gets back in revenue not counting all the other revenue gotten from the other business that would have been created. Is that what you call taking significant public money? Actually the tax incentives were not very out of line; it was commensurate with the jobs that would have been created. Other companies have gotten tax incentives, not as much but then again their job creation wasn't as huge. New York unlike Virginia is a high tax state and therefore incentives were bigger here. Just wait until we get our real estate tax bill in the ensuing years.
What does NYC get out of Amazon reneging? And again 70% of people wanted the deal. It just wasn't sold to the community.
I am betting that at some point not maybe in the near future but at some point Amazon may come back, not just in creating jobs in Manhattan, but back in LIC.

I agree with many of the things you are saying. Socialists have become very loud. How do you get $15b of taxes paid (presumably you are not talking about total money paid to employees over time ) vs $3b of tax breaks?

I hear you. But there's a legitimate point raised by AOC and the like. Why are we subsidizing this huge, profitable company, run by the world's richest man? Yes, that's the way things have worked for a long long time. BUT economists have long had questions about this practice, and there are real, not insignificant questions that remain unanswered. Me, I'd love to see the due diligence on this deal and the enforcement mechanisms. Remember, Amazon is really good at not paying taxes, and who knows what other maneuvers they'd wrastle out of the tax code. Net net, this is a loss, but the silver lining may be that someone finally called BS on a rather disingenuous practice.

Also, on the polls, the devil is in the details. Yes, broadly speaking, 70% of 'people' wanted this deal. But there's a lot of nuance in the polling, especially when you ask immediate residents. Ask yourself how you'd feel, as a renter, if this went up two blocks from your apartment. Even as an owner, I"m not sure I'd be that happy.

If AOC proposed fewer freebies in terms of public housing and railed again spending on Unions (I am sure every one has seen the articles about how it is 5 times as costly to build a subway va equally crowded London), I would be very sympathetic to what she is saying. She wants to take 3b tax break, which will only exist if there is some one to tax, and spend it on Freebies.

http://bfy.tw/MOnX

It is very interesting to me how AOC is consistently brought up in context of the broader AMZN discussion, and she doesn't even represent the area in question. I'm in awe of the amount of power she seems to have accrued in a short amount of time.

FWIW, here's the L.A. Times's take: https://www.latimes.com/business/hiltzik/la-fi-hiltzik-amazon-nyc-20190220-story.html?fbclid=IwAR1FcejGKBBpoyugUwnFAbak6TtnCj5uyo-ZssjKDVvCo2k0B4iRl4PMU8Q

Amazon continues to prove it was coming to NYC without the extra tax breaks:
https://commercialobserver.com/2020/11/amazon-red-hook-brooklyn-warehouse-lease/#.YBx4P19My4g.linkedin

I wouldn't be surprised to see them start their own ferry service to transport merchandise into Manhattan etc.

There was a lot of hand ringing when Amazon pulled out of the Long Island City deal. Blaming AOC, "liberals," crying about "lost jobs." At the time I had called bullshit especially because the deal was cut in private with Bill de Blasio and Andrew Cuomo with an NDA signed.

Now look at Amazon HQ2. After billions in tax breaks, special zoning, land gifts, etc how would NYC/NYS have fared?

https://www.nytimes.com/2023/03/03/technology/amazon-second-headquarters.html

We dodged a bullet with this one. Hudson Yards was bad enough.