Photo: Getty Images
Will Amazon’s decision to bail cause a New York backlash?
As the song goes, if you can make it in New York, you can make it anywhere. Based on yesterday’s announcement by Amazon.com that it is abandoning plans to build part of its HQ2 campus in Long Island City, Queens, it appears as though Jeff Bezos and company weren’t willing to deal with the public and political scrutiny of the deal made by local and state government officials to attract the e-tail giant in the first place. Instead, Amazon has said it plans to expand 17 existing corporate offices and technology hubs it has around the country and add workers that would have wound up in New York to those locations.
While recent public opinion polls showed the majority of New Yorkers supportive of Amazon planting roots in Long Island City, the nearly $3 billion in incentives put forward by the state and local governments to attract the e-tail giant was less popular. Politicians and activists questioned the fairness of awarding huge breaks to one of the world’s largest companies when smaller businesses have to compete without any such advantages.
In announcing its decision, Amazon issued a statement that said, in part, “The commitment to build a new headquarters requires positive, collaborative relationships with state and local elected officials who will be supportive over the long-term. … A number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project.”
Mayor Bill de Blasio, who along with Gov. Andrew Cuomo, led the effort to bring HQ2 and the 25,000 jobs that were to come with it to the city, reacted negatively to Amazon’s decision to scrap the project.
“We gave Amazon the opportunity to be a good neighbor and do business in the greatest city in the world. Instead of working with the community, Amazon threw away that opportunity,” said Mr. de Blasio in a statement. “We have the best talent in the world and every day we are growing a stronger and fairer economy for everyone. If Amazon can’t recognize what that’s worth, its competitors will.”
Gov. Cuomo blamed petty politics and politicians including members of his own party.
“A small group [of] politicians put their own narrow political interests above their community — which poll after poll showed overwhelmingly supported bringing Amazon to Long Island City — the state’s economic future and the best interests of the people of this state,” said Gov. Cuomo. “The New York State Senate has done tremendous damage. They should be held accountable for this lost economic opportunity.”
Discussion Questions
DISCUSSION QUESTIONS: What is your general opinion of the bidding process for Amazon HQ2 and the e-tailer’s decision to pull out of plans to build in Long Island City? Do you think there will be any Amazon backlash from residents of New York and the surrounding area?
Poll
BrainTrust
Ryan Mathews
Founder, CEO, Black Monk Consulting
Cathy Hotka
Principal, Cathy Hotka & Associates
I’m very surprised Amazon bailed out on HQ2. After all the effort they spent during the selection process, you would think that Amazon leaders would have understood that not all stakeholders would be agreeable to a project of the size and scale Amazon was proposing. And the first sign of public push-back — they fold their tent? I think there’s a lot more to this story the public doesn’t fully know.
I’m not sure whether the backlash will affect Amazon or the politicians who opposed this move. While I think people have a right to be skeptical about huge taxpayer subsidies (hello, Foxconn), it sounds like this one was based on Amazon hitting hiring targets, etc. The ripple effect in terms of ancillary economic development is likely to be profound, especially in Queens.
Some of the loudest voices in opposition were anti-gentrification groups. Queens is one of the last areas of NYC where middle income and working class people can find (barely) affordable housing. Long Island City has welcomed an influx of corporate offices and workplaces in recent years, and the groups note that the influx of money fails to trickle down to the locals. More so, families who have lived there for generations have had to move out. Rents, for both housing and small retailers, were already surging again in anticipation of the Amazon folks moving in.
Deals of this kind can certainly be beneficial to businesses (and to the politicians they finance), but the jury is still out on whether the transformation it would have brought to LIC is what the community really needs.
The loser here is New York. As far back as one could research, big corporations have always been granted sweetheart deals as incentives to moving or opening new offices in a specific area. Smart politicians see the gains with jobs and revenue beyond taxes, and it often makes sense. However, today we are witnessing political chaos in both parties each struggling to get to the microphone to be heard as the next best person to lead, and this time it backfired by the differences of opinion. We used to elect politicians to lead and to govern, but today we have too many that are only in it for themselves putting the very people who voted for them on the bottom of the list. Perhaps the more significant lesson for politicians to learn here is the damage losing this deal will cost the citizens of New York and just maybe it might force them to start working together again and do what they’re supposed to do which is to lead and not focus only on self-interests.
I think Amazon got a tremendous amount of information about critical markets for nothing, simply by suggesting they might be home for HQ2. As to pulling out of New York, it’s an interesting move particularly since Amazon had to be aware of the on-the-ground political resistance from the time they made their first announcement, and yet they continued on. As to any backlash, I’d bet on it being negligible at best.
There should be an Amazon backlash from residents. This process has cost taxpayers untold resources and money. However, any such response will probably be short lived. It is a surprising move. It will be interesting to watch how it all plays out.
If anything, the other 20+ cities that vied for Amazon’s HQ2 should have shown a backlash. Too many give-aways, too much information shared for what was apparently a pre-wired deal.
After this pre-wired deal, the company is picking up its ball and going home? We don’t know how much the new tax laws played a part in them changing their minds (seen info on income tax increases because property taxes over $10,000 are now not deductible?) … but I don’t see a backlash, particularly. Many people, like me, have a love/hate relationship with Amazon. I don’t like many of the things they do, but when I need something quickly, it’s my go-to. It will remain so, I think.
I think it was a weird and awkward process. If I were still living in NY, I’d just say adios … see ya soon.
The rents and demand for NYC real estate and commercial properties remain at an all-time high. While we are all frustrated and disappointed by the entire NYC Amazon HQ2 process, especially how it ended up yesterday, all is not lost for NYC. NYC has and always will be extremely resilient. Amazon has gone the distance and committed so many additional jobs to the NYC market, and this is a short term loss.
Google has stealthy gobbled up significant real estate properties south of 34th Street, especially the Hudson Yards and the Chelsea area. NYC has become a tech hub with plenty of larger firms like Google establishing a larger presence, and also a significant amount of innovation-led digital start-ups. Adding Amazon to the mix would have been a significant step in growing the NYC tech environment.
Amazon remains the clear winner here. The publicity machine around the HQ2 process has been all over the news and social media for well over a year.
I was not a fan of the Amazon bidding process; I thought it too hyped. However, NYC wanted to attract Amazon and pulled out all the stops to do so. That it did was necessary: NY state and city have very high business costs and plenty of regulation. Tax breaks – which reduce what companies pay in taxes rather than just give them piles of cash – are not unusual. Indeed, Amazon was simply taking advantage of existing schemes like the Excelsior Tax Credits program.
Unfortunately, New York has a lot of rabid socialists who are opposed to big corporations without a modicum of understanding that business creates wealth and opportunity. Their reaction to NY winning the bid, and their subsequent glee that Amazon pulled out, tells you everything you need to know about why the technology giant made an exit.
There’s clearly more to the story than we know; it’s amazing that Amazon took its ball and went home so quickly.
Now we can have a discussion about giant companies that pay no federal income tax, and there are plenty of them. Why should America’s plumbers, dental hygienists and waiters subsidize these companies?
Unfortunately, the backlash will last only as long as this news cycle. Something else will draw the attention of the media and the politicians. As Ryan pointed out, Amazon got an enormous amount of market data for nothing. A win. It seems the incentives that are offered are just getting bigger and bigger – to the point (like with the Olympics) that the economic benefits may never reach the impact of the incentives. But politicians can’t get out of their own way so I don’t see this changing.
I seriously doubt there will be any organized backlash from Amazon consumers given the current news cycle and our fractious political system. Without bi-lateral party and community support, Amazon saw the opportunity (for business reasons, no doubt) to unceremoniously “change their mind” about the deal they made in good faith with Long Island City. The blame game is just that. There will be no other alternate HQ2 city so the negative impact of facing NY community opposition is a red herring and I believe there is far more to this story than meets the eye.
While I’m not a fan of Amazon, I think the populists who drummed up this opposition have poisoned any major employer for considering a move there. All those retailers who could have gotten a lifeline, all those kids who were without prospects and hope – gone. Amazon wasn’t the enemy – change was. As a New Yorker, I think Cuomo was right on this one.
You’re spot on Bob!
One of the issues that hasn’t been raised is unions. Amazon doesn’t have them and many of the local pols in NYC are beholden to them. Can’t believe Amazon didn’t see that coming. Or, as has been widely speculated, they either thought the blowback wouldn’t be so bad or they had assurances from Cuomo and de Blasio that they would cover for Amazon.
I suspect they will still build another major corporate center, perhaps in Toronto (if Bezos wants to poke Trump in the eye) or Boston.
Every party involved handled this poorly. The governor and mayor should have screamed the benefits — money for transportation, other infrastructure, building a new public school, high school job training and tech training for Queensbridge residents.
They also should have made it clear that nobody was writing a check to Amazon. The $3 billion was tax credits on $30 billion in taxes. The opponents kept saying they could spend the $3 billion on other things, but in reality, without Amazon, there is no $3 billion, just $30 billion paid by Amazon less $3 billion in tax credits.
Amazon should have embraced the community sooner. In the last week, they approached the opponents three times to meet; the opponents refused to meet. (Which tells me the opponents really weren’t interested in highlighting the benefits that Amazon might bring.)
And the loser is NYC and our next generation of young people. After this debacle, if I am a CEO considering making a major development effort in Queens, I simply stay away. No company needs that hassle.
The tax breaks for the Brooklyn Navy Yard and Hudson Yards far exceed what Amazon was going to reap. Unfortunately, a small group of politicians saw an opportunity to make a bogeyman out of a well known company and ran with it despite New Yorkers wanting it.
Sad, sad, sad.
Mr. de Blasio in a statement said: “We have the best talent in the world and every day we are growing a stronger and fairer economy for everyone. If Amazon can’t recognize what that’s worth, its competitors will.” Mr. Mayor, Who will? #bigloss
Pulling out of New York was not Amazon’s original intention, but the result of so many residents saying that the city and state were abusing their tax dollars attracting HQ2. Everyone loses with this, but there is so much that we, the public, do not know. The backlash has already started (verbally), but that is all there can be, as no action was ever done. This will be tomorrow’s fish wrap soon enough.
New Yorkers were two to one in favor of Amazon.
The HQ2 search was a circus from the day it was announced. But that kind of circus plays to Amazon’s advantage and they seem to have reaped tremendous benefit with it establishing them among the broad population as one of the new industrial giants.
I’m not surprised the deal fell apart. It never looked like a great deal for New York from my point of view. There will be some losses to NYC in the added business and vibe that would attend to an HQ2 location.
But Amazon? It won’t have immediate negative impact. But Bezos should be concerned that now that they ARE an “industrial giant” the bloom is off the rose. They will be expected to be good corporate citizens. As one more proof that they big business and not what they’ve hyped themselves up to be, it will have some negative impact long-term.
The whole process was a PR play gone bad. It’s common for states and cities to offer tax incentives to attract new companies and bring new jobs to the state. What’s not common is the amount of publicity this got. By announcing a contest, bringing the bidding process to the public eye, Amazon opened itself up to more public scrutiny than it would have otherwise.
Amazon isn’t leaving New York by any stretch. It already has 5,000 employees in the five boroughs and those numbers are likely to grow. The controversy over its proposed mega-development in Long Island City will fade, and other tech businesses will certainly invest in the market as the mayor predicts. The twin attractions of a massive local talent pool and a massive capital pool are too compelling to pass up for ambitious firms.
Long Island City’s waterfront will undoubtedly be developed in a series of less overwhelming projects, and the tax breaks will likely add up to similar scale. Area residents will still complain about gentrification, but the changes will be unstoppable, if more gradual.
It’s worth noting that Cornell University has opened a major technology campus a few hundred yards across the East River on Roosevelt Island, which will add to the numbers of interns and new grads with coding skills.
As for Amazon, it looks like it is finally putting on some big-boy pants and facing facts: It’s far too big and too high-profile to duck local politics any longer.
Last question first: you’d need a microscope to see the effect.
My opinion of the process was like that of many or most on here … I hated everything about it: government subsidy, monopoly (or at least “really big company”) power and (as noted) unequal competition.
So am I pleased? I don’t know, that will depend on whether or not the result is a search that is free of or at least less saddled by the complaints above, or the burden is simply shifted … maybe to a city less able to afford it.
Let’s face some harsh realities of this whole HQ2 process. There’s no question Amazon expected to choose either NY or the Washington DC metro area as it’s HQ2 winner. It may have surprised people that they picked both. The process was never about making a choice but about 1) gathering tremendous data about every major geographic location Amazon may ever want to build into, and 2) securing the sweetest deal they could form the winners.
Did Amazon really need the $3B in tax credit (which as Gene Detroyer points out is not a cash payment)? No, considering they still aren’t paying any federal taxes (how much discussion do you think that earns at Walmart board meetings?). But they wanted to show the world they really are a big-boy company and they not only play by big-boy rules, but they can also MAKE the rules any way they want. However, they underestimated the local backlash that ensued — mostly due to today’s highly divisive political environment. They underestimated the opportunity their presence created for political gain by local politicians.
So, Amazon now walks away keeping all of this great data they accumulated from the process — they still have an HQ2 in Northern Virginia, and they still have 5000 employees sitting in NY with every likelihood that number will grow by some modest amount (who doesn’t grow an existing presence in NY? It’s simply too tempting a talent pool and too powerful a financial center. So in the end, after some clever PR, Amazon walks away a winner, and everyone talks about them thus granting them even more PR newsworthiness. What does NY get? Not much. Will they lose customers in NY? Doubtful.
Large companies making HQ decisions are always polarizing depending on which side you are on. For the company, its duty is to get the best deal possible from the local government, while the cities have to balance the voice of the community and long-term economic health. Given Amazon’s culture of try fast and fail fast, I think they saw the political climate change and decide better to give up while its physical investments are minimum to shorten the PR fight.
I don’t think there will be a long term Amazon backlash that would affect its business, any effect would be short term.
The competition for Amazon was like a king demanding tribute from his subjects. It was unsettling to watch all these cities (many you knew were not viable from the get go) prostrate themselves before King Amazon. What is Bezos worth? $180 billion? Getting 3 billion in tax breaks off the back of Queens was red meat for various groups.
Lesson #1 for Amazon is to control the benefit narrative going forward. Of course, all parties lose in the aftermath. Amazon had a ready supply of tech talent from Cornell and NYU, and NY loses untold future tax revenues and retail development. Each party will soldier on. Amazon is far too engrained into the culture now. NYC is NYC.