March 1, 2019

Noodling Around: The Failed Amazon Deal

I've been thinking about the Amazon deal that just went poof in NYC, coming to terms with why I supported this project even though I long have questioned the value of most economic development projects, and thinking about my utter frustration with politicians in New York State.

The deal would have provided performance-based incentives over the course of a decade, in addition to other incentives under local programs designed to encourage development in 'opportunity zones' as well as a Payment in Lieu of Taxes (PILOT) agreement on property developed for community use on the Amazon campus.

There was to have been a new school, job training, infrastructure improvements, and more. And yes, there would have been issues to deal with along the way - there's no question about that on a project of this size. But these incentives are not new - the state regularly offers these deals, and others, to companies large and small, for a variety of promises. Counties and cities across New York also offer their own incentive programs, with similar mixed results.

A deal of this significance falling apart? That's new for us, so I'm trying to understand what happened.

Right from the get-go, why did Amazon walk away so quickly? Lots of speculation there, including the possibility that they weren't really committed to Long Island City in the first place. I admit to some surprise that any location in New York was chosen; for better or worse, we're a blue state, after all. And our Sonofa Gov's protestations notwithstanding, we're not really a business-friendly state.

So, while questioning the company's haste in leaving is certainly valid, it seemed clear the local (and national) killer attack progressives didn't want to play with Amazon. I say that because, at least from their public comments, they were happy to see the deal fall apart and happy to criticize Amazon, Bezos, de Blasio and Cuomo, and not all that interested in running towards salvaging the deal. If I were Amazon, and wanted to expand into an area that said they wanted me to be there, only to find out that I'm going to be fought at every single turn by folks who seem uninterested in negotiating with me, and that apparently even doing the things that the opponents wish were going to be done wasn't going to be enough, I'd think hard and fast about putting down roots, too. And my answer would likely have been the same as Amazon's.

Meanwhile, Virginia, a more business-friendly state, has moved forward quickly to approve their (much smaller) incentive package, clearly showing a welcoming attitude and a willingness to participate fully to bring  HQ2's 25,000 $150K jobs to their neck of the woods. Similarly, things look pretty upbeat in Nashville, which will be getting another 5000 high-paying Amazon jobs.  And yes, the incentives are smaller, but they can be, because of the differences in the business climate, as well as the political climate.

Let's untangle a few more noodles.

How could NY pols have done such a bad job with this? The Sonofa Gov was all gung-ho, the mayor was all gung-ho - did they fail to include the locals or were the locals not willing to play? How much did union/labor requirements impact the deal? What were the inhibitors and what was put on the table to mitigate them? Anything? Nothing? And what about the state Legislature? Were members of the Senate and Assembly, including those from the upstate area, included in the discussions? If not, why not?

de Blasio has turned on Amazon now, blasting them on their way out of town, even after he was widely praised (as was Andrew Cuomo) for their efforts in securing the deal. I get that he's mad, but this is not helping. Did he do everything he could have done, up front or since, to make this work? Or is he preparing for his next election? Wasn't he just in Iowa?

What about Jeff Bezos bothers people so much? I believe this deal was killed primarily because of Bezos, and the hatred that progressives have for him and others who are extremely wealthy. He's the richest man in the world - I get that - but on a scale of zero to 5, I worry exactly zero about him and his financial situation. I'm not envious of it, and I'm not mad that he has his money and all of the crap that goes along with being the guy on the top of the heap. My concern is with my family's financial situation, and with what politicians are doing to make it better or worse when given a direct opportunity.

Is Bezos' personal wealth a reason to turn this deal down?  In my opinion, no - and it's going to take a whole lot of effort to convince me that if Amazon had been owned by Joe Six-pack the anger against this project would have been the same.

And those killer attack progressives? Here are a few questions for them:
  • if Bezos was the richest man in the world but he had made his money selling solar panels, would you despise him just the same?
  • if he wanted to bring 25,000 high-paying renewable energy tech jobs (instead of Amazon tech jobs) to Long Island City, would you have been just as eager to kill the deal?
  • if Amazon paid federal income tax, would you have been just as upset?
  • exactly what do you consider worthwhile economic development? What project with a potential $27,000,000,000 impact to the state would be worthy?
The answers to the first two questions must be yes, if we are to believe the ultra-progressive messaging; sadly, we may never know, unless the trajectory of the renewable energy sector changes significantly (and/or the trajectory of the progressive movement changes significantly).

Similarly, we may never know the answer to the other two questions. First, there seems to be little chance in making any signification changes to the corporate tax code to actually require companies to pay some taxes. And, I don't know if anyone's working on putting together a plan to attract either the number or the level of jobs to NYS or NYC that Amazon was prepared to promise. I've reached out to my state senator to find out her take on this, and am still waiting for a response of any kind.

Other questions remain. This one's a done no-deal, but what will happen the next time?
  • Will there be a next time? Is any other major company going to propose bringing anything of this scale to New York in the future? 
  • Are we going with the interstate compact idea to not compete for this type of project at all? 
  • All of New York stood to benefit from the Amazon deal, with some $27B in benefits if fully realized, for the price of the incentives which would only be paid out if the project was fully realized. What do you say to the rest of us?
  • How does 'upstate', which to downstate means everything north of Yonkers, and which is not anywhere near as 'progressive' as NYC, go toe-to-toe to with the unions and their politicians and demand that the whole state be considered when these deals are made?
  • When will the progressives come to terms with their stance that $15 is a living wage, but (at least in Amazon's case) $150K is not?
  • What are the politicians - the AOCs and the Mike Gianarises and the de Blasios and their progressive supporters - going to do instead to significantly improve things in their opportunity zone?  The deal for 25,000 new jobs is over, so now's the time to see what the better deal is to bring in similar opportunities.
Economic development deals are tricky -- there are many that I simply can't stand, and there are many that get off the ground and then fall through, bringing no benefit to taxpayers (and sometimes costing us money to boot) either where the project was to have occurred, or across the state as a whole - so yes, there's a lot we could do to make the deals work better.

But when we have an opportunity like this, one would think that there would be a way that we could bring the smartest people to the table, representative of all interests for the entire state, to try and come up with a workable plan, before the plan is submitted. Once that plan has been selected, our best efforts should be applied to ensuring that the plan be brought to fruition, not ensuring that it cannot go forward.

We have our work cut out for us, we surely do, in trying to balance the demands of the progressives and the needs of the people of the entire state. Why we would want to do anything else, with all of the issues we have in New York State, is completely beyond me.

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