Amazon has decided to cancel their plans to move ½ of their “HQ2” campus to Long Island City Queens. This collision of so many of my passions (tech, cities/urbanism, politics) has me extremely conflicted.
One one hand, I believe that Amazon building a 25,000 employee headquarters in Long Island City would probably have been a good thing for NYC. Cities with more geographically diverse business districts are better places to live for more people as transportation and infrastructure investment becomes less centralized, and this could have been the start of a major commerce hub in Queens.
Additionally, I’m highly skeptical of the stated and unstated motivations of the loudest opponents of the HQ2 plan. So much of the opposition messaging featured the idea that good jobs moving to an area = gentrification and higher housing prices for existing residents. This is some of the most dangerous thinking in modern urban politics, both because it ignores the real causes and possible solutions to the housing crisis (a bad thing) and incorrectly pins the responsibility on a job growth (a good thing). Throw in the needless “billionaires are the real source of all our problems” messaging (a distraction) and the fact that the huge majority of NYC residents supported LIC HQ2 and I’m left feeling anxious that this particular opposition strategy has worked.
That said…. I can’t help but be happy that Amazon HQ2 NYC has fallen through.
The reasons Cuomo and De Blasio made the deal in the first place were just so bad and wrong. NYC offered Amazon $3 billion in tax breaks to move “25,000” jobs to LIC. This exact form of economic development almost never works and I’m thrilled whenever such a plan backfires.
“Economic Development” plans via tax incentives almost never deliver the promised jobs. Amazon “promised” to 25,000 workers to Long Island City. The simple math would suggest that if the new tax revenue from those 25,000 workers is greater than the tax breaks given, then it’s a win for NYC! The problem is:
- Many % of those jobs will not actually materialize. These deals do not require the company to actually hire 25,000 people, and it’s extremely rare that all the promised jobs actually come to fruition. In extreme cases, like Trump’s Wisconsin / Foxconn deal, almost none of the jobs materialize - yet the tax breaks and investments remain. There is already credible speculation that even Amazon’s decision to pull out of HQ2 was due to a change of heart internally at Amazon about the viability of the HQ2 concept as a whole. This change of heart could have happened at any time in the next 20 years with no consequences.
- Some % of those jobs would have been filled by other companies, including employees at other companies that were already being moved out to make room for Amazon.
- Some % of those jobs at Amazon would have come to NYC anyway, which (incredibly) Amazon itself freely admits in its press release for canceling Amazon HQ2.
Ultimately the net return on investment in these deals is always less than expected and is almost always negative. But that’s not all! It also turns out these deals get worse over time because governments are not built to make 1:1 deals with private businesses. Yes, it’s possible that if Cuomo and De Blasio were lifetime kings of New York State and City respectively they could make a deal with Amazon and effectively manage it over the next 20 years. But they’re not! De Blasio is certainly in his last term as Mayor of NYC and Cuomo will likely not be Governor of New York forever (let us pray). As new politicians take their places, there is absolutely no guarantee that their strategies and priorities will match their predecessors. In almost every case, this leaves these deals in a terrible position for years after they’re made.
If New York City did truly believe that developing Long Island City, they could simply create a dedicated tax incentive for any company moving high earning jobs to the area. Oh shit hold on - they did! It turns out there is already a market price to move jobs to Queens, and for some reason, the Governor and Mayor decided to make a 1-time exception for Amazon to give them an even bigger tax cut. This is a TERRIBLE idea! This undermines the entire tax incentive plan, making it impossible for other companies to compete with Amazon to build headquarters in LIC and Queens. If NY/NYC felt the existing incentives were not generating enough job growth, they could have simply extended a bigger incentive to the entire market, allowing the fluid influx of new companies that the market can facilitate without needing active government deal-making. It is so discouraging to see private companies and governments consistently undermine markets, and the destruction of true “markets” is one of the driving forces behind the growing American disaffection towards markets as a whole.
There are some additional benefits to this deal falling through as well. I’m an NYC resident, but as an American, I’m incredibly happy to see these jobs go to areas that need them far more than New York City. Also, this is one of the best examples of how the people and governments still have a ton of power over large corporations and billionaires. I believe wealth inequality and money in politics are huge problems for Democracy, but the severity of those problems is overstated and this is just the latest proof.
American cities need to rally around this HQ2 madness to focus on what matters. American companies will move to cities with great transit infrastructure and high qualities of living because that is where they can attract great talent. There is no need for ridiculous economic development deals in any city, but least of which New York City. Build transit. Building housing. Ban street parking in Manhattan. Thank you.