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A First Look At Everything New York Will Give Amazon To Come To Queens
By
Neil deMause
Published Nov 13, 2018
Modified Nov 13, 2018
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Mark Lennihan/AP/Shutterstock
By
Neil deMause
Published Nov 13, 2018
Modified Nov 13, 2018
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For everyone wondering when we would find out how much boodle Andrew Cuomo and Bill de Blasio offered to Amazon in exchange for coming to Long Island City, the answer is now: As part of its official announcement designating New York City and Arlington, Virginia as the new dual homes of the company’s second headquarters (plus Nashville, which will be getting an “Operations Center of Excellence” as a consolation prize), Amazon has released its full memorandum of understanding [MOU] laying out exactly how much money New York taxpayers will be spending on the deal.
The MOU has a lot of pieces and almost certainly some key details hidden in the fine print, but here are the initial takeaways:
- The big-ticket item is up to $1.2 billion in “Excelsior tax credits” under the state’s Excelsior jobs incentive program. These are flat-out subsidies underwriting employee salaries: For every dollar spent on wages, the state will kick back 6.85 cents to the employer — the rough equivalent of taking Amazon workers’ state income tax checks and signing them back over to the company. If Amazon follows through on its pledge to bring 25,000 jobs to New York in the next ten years, it can cash in the full $1.2 billion; if less than that, the credits will be pro-rated.
- The state is also offering up to $505 million in “capital grants” to repay Amazon’s construction costs over 15 years, if the company achieves its reach goal of 40,000 new jobs. (This is being reported in several places, including Amazon’s press release, as only $325 million, because that’s how much the company gets if it hits the lower 25,000-job target.) Likewise, this is a straight-up gift to induce the company to bring its jobs and spending to New York instead of someplace else.
- The state will indeed create a General Project Plan to take control of all the land for the project — several square blocks along the East River waterfront surrounding Anable Basin between 44th and 46th Avenues, some currently owned by the city, some by private landholders — which means it will get to evade City Council oversight of the project. (Though the project will still have to go through the less-onerous state environmental review procedures, much as the state-controlled Atlantic Yards project in Brooklyn did.) Council speaker Corey Johnson has already issued a press release declaring the end run to be “extremely troubling” and saying he’s “very concerned” about the deal.
- With the state owning the land, it won’t pay property taxes to the city. Instead, Amazon will agree to payments in lieu of property taxes, or PILOTs, equal to what the company would have owed normally. Only half of these PILOTs, however, will go to the city’s general fund, with the rest getting parked in an “Infrastructure Fund” to be used for “streets, sidewalks, utility relocations, environmental remediation, public open space, transportation, schools and signage” related to the project. (This is similar to the much-derided PILOT setup in Hudson Yards, though at least Amazon won’t get tax breaks on top of getting to direct its PILOT money to infrastructure that benefits the company directly.) This could conceivably be considered a violation of de Blasio’s pledge not to provide special city subsidies for Amazon, only those available to all companies; though since it’s officially the state offering up the city’s money, he probably gets away on a technicality.
- Amazon will pay the city $850,000 a year in rent, scaling up with inflation, which was the fee set for the city’s land back when it was going to be a bunch of apartment towers.
- The company will separately apply for “as-of-right” subsidies that the city offers up to all takers, such as Industrial and Commercial Abatement Program property tax breaks for new development and per-employee tax rebates under the Relocation and Employment Assistance Program; neither has a dollar figure spelled out in the MOU, but the REAP benefit could come to as much as $900 million if Amazon reaches 25,000 jobs.
- The city, state, and Amazon will each spend $5 million a year on tech training programs, in hopes of a few of these HQ2 jobs trickling down to locals.
- Amazon will be provided with a company helipad on the site. This is hardly the most important perk Jeff Bezos is getting out of the deal, but it gets a whole line item of its own in the MOU, so clearly somebody cared about it a whole lot.
In all, barring any hidden surprises, this is $1.5 billion in bonus taxpayer cash, plus perhaps another billion in as-of-right money, in exchange for importing 25,000 jobs (or $1.7 billion if it reaches 40,000 jobs). If you assume an equal number of indirect jobs for all the food truck operators who’ll be needed to feed the Amazon hordes — which Upjohn Institute for Employment Research economist Tim Bartik told us last week was a reasonable figure for a project like this — that’s comes to a cost ratio of $50,000 in subsidies per job, which is neither the best bang for the buck nor the worst.
So did Cuomo cut a good or bad deal here for New York state? It certainly could be worse: Even at $1.7 billion, New York would be getting off easy compared to the $7 billion offered by New Jersey or the $8.5 billion by Maryland — clearly at least someone in state government realized that New York is an attractive place to plunk down your tech employees, and decided that they didn’t have to try to outbid everyone else with tax breaks.
On the other hand, Arlington is getting away with a little over $1 billion in total available public cash for the same number of jobs, so one could argue that Cuomo overbid by at least $500 million. And there’s no telling whether the New York and D.C. metro areas would have gotten the nod even if they’d come in with less lucrative gratuities — the genius of Bezos’s nationwide lottery was that no one will ever know where he wanted his new headquarters to go, only which cities he picked after their money was showing.
“The wheelbarrow full of tax subsidies looks even worse than we thought,” says David Kallick, deputy director at the Fiscal Policy Institute. Amazon’s press release, he notes, cites all the right reasons for coming to Queens — good public amenities and public transit, a vibrant and diverse neighborhood, and an educated workforce. “So, why should the state be putting up $1.5 billion and counting to ‘lure’ Amazon to Long Island City? Why should there be any subsidies at all to get a company to come to one of the most desirable business locations in the country?”
In the end, New Yorkers will each have to come to their own decision about whether offering up this kind if cash to Amazon is a cost-effective investment in the city’s economic growth, or an outrageous giveaway to America’s richest dude. Not that your decision will matter much, since with the City Council sidelined and the entire project in the hands of Cuomo’s Empire State Development group, there will be few chances for voters or their representatives to weigh in on the deal. But it’s important for grumbling rights, and we know how dearly New Yorkers value those.
Tomorrow morning, politicians and community groups are holding a rally in Long Island City to "say no to the richest company in the world robbing over $1 billion from state funding for our schools, transit and housing."
Additional reporting by Christopher Robbins
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