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The New York Hustle of Amazon’s Second Headquarters
- claydavisss 8y agoBezos played these cities like a fiddle. They'll never offer deals to him like this again but he doesn't care because this was a one-shot stunt. Like sports teams, the impact on the local economies will be negligible. Lets see how many of the 25k jobs even show up...
- thenanyu 8y agoThere are benchmarks baked into the deal, so no jobs = no tax breaks. The cities should have known better than to play this game, but at least there's that.
- claydavisss 8y agoNot true, only a portion is tied to job creation goals
- jblow 8y agoIt’s tax breaks. If you don’t employ enough people, you won’t be paying enough taxes to take advantage of tax breaks anyway.
- __float 8y agoHas anyone seen specifics on how they'll be held accountable? They've made promises for x jobs with $y average salaries, but if they don't meet that, then what? https://ny.curbed.com/2018/11/16/18098589/amazon-hq2-nyc-queens-long-island-city-explained https://ny.curbed.com/2018/11/16/18098589/amazon-hq2-nyc-que... suggests that nearly $1.3 billion is not tied to any amount of job creation at all.
- jhall1468 8y agoThat article is an example of people not understanding what this deal is. Amazon is not receiving $3B in public dollars, they are receiving $3B in tax breaks. They are shifting a small % of that via PILOT and some other funding Amazon has agreed to. I don't understand how people think this is in any way a bad deal for NY.
- rhizome 8y agoTax breaks have a value, some might even say a cost.
- coredog64 8y agoThe NYC REAP is per employee[0]. Zero employees, zero dollars. ICAP is property tax abatement and requires spending 30-40% of the assessed value of the property[1]. Long Island City might be cheap in terms of NYC real estate, but it’s not particularly cheap overall. I can’t imagine they won’t spend more than the ICAP portion. [0]https://www1.nyc.gov/site/finance/benefits/business-reap.page https://www1.nyc.gov/site/finance/benefits/business-reap.pag... [1]https://www1.nyc.gov/site/finance/benefits/benefits-industrial-and-commercial-abatement-program-icap.page https://www1.nyc.gov/site/finance/benefits/benefits-industri...
- maria_ 8y agoThere is no agency, governmental or private, in existence that subsequently measures or keeps tracks of these "job creation" promises. And in the very unlikely event that their broken promises do come to light, it will be explained away in the usual manner as to deflect (e.g. circumstances change, etc.). Just remember one thing: At the end of the day Amazon is a private enterprise and it can and will do whatever they want and are accountable to no one.
- watertom 8y agoAmazon negotiated in bad faith and as such any deals should be voided. I'd like to NYC mayor call out Amazon instead of allowing the good people of NYC to be railroaded. What the cities have submitted were nothing more than proposals, they are not contracts and are not binding. Considering the new information that has come to light mayor de Blasio. More than anything Northern Virginia should withdraw their proposal, Amazon wants the Government cloud business so bad that Virginia has Amazon over a barrel.
- stevenwoo 8y agoIt looks like the only public official who could change the terms now is Cuomo since he used unique powers of the NY governor's office to make the deal to override municipal laws. It might be possible for the state legislature to try to amend it but it's totally out of NYC officials' hands. https://www.thedailybeast.com/jeff-bezos-is-right-at-home-in-the-dc-swamp-but-amazon-might-have-bit-off-more-than-it-can-chew-with-the-big-apple?ref=home https://www.thedailybeast.com/jeff-bezos-is-right-at-home-in...
- jhall1468 8y agoI'm so confused by this. The people that negotiated these deals are perfectly content with what they got. You think Amazon said "jk, going to build two" and got the same deal?
- claydavisss 8y agoWithdrawl would require politicians admitting they were duped. In NY, Democrats have a monopoly on power so they have no need to be responsive to voters.
- victor106 8y agoThis monopoly on power which exists in many states across the US is IMHO very bad. I always theorize that the US would be better if the red states voted blue and the blue states voted red.
- 8y ago
- l8again 8y ago>> Throughout a bidding process that saw dozens of cities vie to be the next location of a proposed hydra-headquarters, there were murmurs that Amazon might really just be looking for a regular office, and rebranding it a “headquarters” to corner those tax breaks. That is exactly what happened.
- bradleyjg 8y agoFor the nation as a whole it's a bad deal, in a prisoner's dilemma if everyone cooperates the payoff matrix is globally optimal. But for New York City it's a good deal, and those claiming otherwise refuse to look at the math and instead want to go with how the deal makes them feel. $150,000 x 25,000 = $3.75B/year. At NYS + NYC effective tax rate of around 9.25% at that income level that's around 350MM in income tax alone. That doesn't include the taxes that Amazon itself will eventually pay, nor any of the knock on economic effects of injecting all that extra money into the local economy. For NYS and NYC this deal is a no brainer. The federal government is supposed to be the mechanism whereby coordination problems like this are solved. But the federal government (for a long time now, this isn't specifically about the current administration) if anything seems to want to encourage this kind of thing, not discourage them. So here we are. You can rant and rave about the perfidy of actors acting rationally or you can work to change the rules of the game so as to produce an outcome you think more desirable. I know which one I think is more productive.
- onetimemanytime 8y agoIf NYC was a smaller city you'd have to price in the depression once Amazon went of business or lost market share /cut costs. But NYC is huge and 25,000 people will not skew it that much either way.
- bilbo0s 8y agoAs someone facing the implications of a not so good deal in Wisconsin, I agree with Bradley here, NYC got a VERY good deal. It's just that my experience in Wisconsin has made me look at all of these sorts of deals in a different light. We need to have something like "checks and balances" on these things. Sometimes they just get way out of hand.
- clairity 8y agoyou make it sound like those numbers are completely comprehensive and without agenda, and that these subsidies are an unmitigated good. but they completely ignore jobs lost, companies shuttered, environmental impacts, and opportunity costs. you're looking only at inflows and ignoring outflows. no systems dynamicist would take such an analysis seriously. systems have boundaries (by definition), and you must look at all traversals across the boundaries, not just the ones you like. plus, you ignore the fact that amazon probably would have set up shop in nyc for far fewer, and probably even zero, dollars in subsidies. i.e., the same benefits without redirecting tax dollars to the already rich. yes to more, savvy economic development; no to corporate giveaways. EDIT: to your point about actors acting rationally, i would hope a group of business owners who don't get such subsidies put a bill before the people to either hold amazon accountable to promised performance or rescind/restrict the subsidies (or failing that, vote the bums out). the economic development program dollars they used should be directed toward entrepreneurs and small businesses, not mega-corps.
- jetcata 8y agoThe level of greed that Amazon and Bezos continue to demonstrate is sickening.
- jhall1468 8y agoHe's doing what most companies do: try to reduce their legal tax liability. If CEO's didn't do this, the boards of these companies would replace them with someone that will do it. You are blaming Bezos and an entity for standard corporate fair. That's a symptom of the problem.
- throwaway2048 8y agoI can hate the players that rig the game, thanks.
- jhall1468 8y agoAnd in doing so you become part of the problem. Amazon never rigged the game. The game has been the same for long before Amazon existed, they are simply playing by the rules.
- egypturnash 8y agoPersonally I think it's cool to hate the players and the game. If you make the choice to play an odious game, you're still responsible for the results of you following the rules.
- jhall1468 8y agoYeah, well when the outcome of the game is riches and the outcome of not playing it is being able to pat yourself on the back I think those patting themselves on the back are going to find they are in an extreme minority. And odious is just hyperbolic. They are getting tax allowances, not sacrificing babies.
- my_username_is_ 8y ago
- karpodiem 8y agoI love living in flyover country.
- bilbo0s 8y agoI live in flyover country in Wisconsin. We still got hosed on our Foxconn "deal". Living in flyover country does not make us immune, we can fall victim to these deals as well.
- jorblumesea 8y agoAmazon was just looking to expand satellite offices, and used the HQ contest as a way to get free business info as to where to expand next. They were also looking for generous tax breaks to allow them to operate leaner in high COL high talent areas. My guess is NY and NOVA areas were already being seriously considered and someone had the bright idea to turn it into a race to the bottom. Remember, as way back as 2016, Bezos was buying property in the DC area.
- intopieces 8y agoEh. Everyone is acting like $3B is some massive some of money. The State of New York recently sealed a budget for ~$168B and and the economy of the state itself is somewhere around $1.2T. Hell, Amazon itself has a market cap of nearly 800B. As of 2017, "[m]ore people are leaving the New York region than any other major metropolitan area in the country": https://nypost.com/2017/04/01/people-are-fleeing-new-york-at-an-alarming-rate/ https://nypost.com/2017/04/01/people-are-fleeing-new-york-at... So, 25k additional people is closer to stemming the tide of people leaving rather than overcrowding an already hot market.
- throwaway2048 8y agoThe tide of people leaving because NYC is becoming completely un-afforable if you make less than 60k a year.
- intopieces 8y agoThe median household income is $59k. It’s not unreasonable that a large metropolis cost above average, given the higher population, while declining, still represents high demand for housing and local amenities.
- deleted 8y ago[deleted]
- lordnacho 8y agoThe thing that seems the most interesting to me is the control over the financial narrative. Here's a bunch of numbers, and if they add up to more than zero, we should do the deal. There seems to be very little questioning of wether the accounting given is appropriate. What's the chance that Amazon would put staff in NYC even with no money? I'd say reasonable. Is anyone concerned about rising prices when 25k new high income people show up? Will they show up, or are they already there? Plenty of things in the details can be challenged, I'm not saying I know the answer to any of these things. But the narrative seems to be that there's these numbers, and they point to "we should do it". Normally the only tax/subsidy I'm in favour of is externality related, eg Pigouvian. And I'm not seeing a lot of that argumentation here, though admittedly I'm not the keenest observer on this one.
- jefftk 8y agoWe should ban these kinds of deals at the national level. They're rational for companies, and rational for regions, but overall they allow extremely large companies to avoid paying their share of taxes.
- erikpukinskis 8y agoThey do seem to open up a much more complex calculus in the tax system. I think you can make an argument that these deals can improve efficient allocation of capital. But like credit default swaps and other complex financial instruments, I think you run into the issue of, is there a level of complexity that's just too much for the rest of the system to be rational around. One of the purposes of tax structures is to allow people to make predictions about what the exact financial consequences of various choices they might make. If you add this kind of one-off negotiation into that, you undermine our collective ability to be rational about our financial choices. However, if you allow this kind of negotiation, and you allow governments to try to compensate organizations for the systemic benefits they bring to an economy, that also has some utility. You can create an incentive to these organizations to create value outside of just their bottom line. And if we allow these kinds of deals, then over time we'll be able to systematize them and then eventually make them broadly available under standard terms. So, I don't know. I'm not sure rushing to an outright ban is the way to go. But I do think there's some merit to the idea that in financial transactions there's a limit to how far the contracts can be recursive. Allowing it to be infinite makes for a chaotic fuzzy edge to the markets.
- maria_ 8y agoBeing from New York and having followed this situation closely, I can say that this entire fiasco serves as a good example on how the politicians we elect _ought to_ protect their constituents from predatory corporate power. However, this is not the case. Its mere political theatre as De Blasio and Cuomo pose for the cameras, as what matters is not the actual success they have achieved for the city in terms of job creation, but the _perceived_ success. That's how politics works. Otherwise some kind of protocol would exist to enforce, track and hold to account the job creation promises alleged by corporations or federal economic policies (NAFTA anyone?). How convenient that it does not exist. How convenient that we forget that as a private enterprise, Amazon has no obligations to the public. The old tired adage "socialism for the rich, capitalism for the poor" sounds about right. Supporters of Amazon can work out all the math they want to try to convince others (and mainly themselves) of any public benefit. When taxpayer dollars are diverted to corporate welfare, that's when we, the public, get those austerity policies that we love so much. All in exchange for the 25k high-paying jobs not applicable to the working and middle class folks who in addition, will no longer be able to afford living there and will be forced out.
- codyb 8y agoIsn't NAFTA pretty much very favorable to the US? I agree with your sentiment that corporate welfare sucks and would have been much happier with the tax breaks being distributed to startups somehow, however, you're talking about LIC, where home prices already average above one million dollars. Gentrification in LIC started a long time ago. These 25,000 people, many of whom will be hired from within the already vast tech talent pool, probably aren't going to drive prices up very much. I think it really underestimates just how big NYC is to think such a thing.