clock menu more-arrow no yes mobile

Filed under:

Amazon’s HQ2 deal with New York, explained

New, 5 comments

Everything you need to know about Amazon’s deal with New York

The waterfront in Long Island City. There is a pier with a sign that reads: Long Island. Behind the sign are many tall apartment buildings. Max Touhey

Update: On February 14, Amazon reportedly canceled its HQ2 deal with New York City.

Amazon’s HQ2 search is officially over: The company confirmed via a blog post that Long Island City and Crystal City, a neighborhood in Arlington, Virginia, were the locations chosen for its new, split-up headquarters.

After the decision was made public, Mayor Bill de Blasio and Gov. Andrew Cuomo gathered with other city and state officials to gleefully announce that they had sealed the deal, which includes just shy of $3 billion in subsidies.

Cuomo, the legacy-focused executive who prides himself on cutting deals and incentivizing private sector growth and job creation, was clearly delighted by the decision. “This is the largest economic development initiative that has ever been done by the city or the state or the city and the state, together,” the governor said during the press conference. (He was also sure to note the proposed HQ2 location’s proximity to new infrastructure projects like Penn Station and the LaGuardia AirTrain.)

For de Blasio, who ran for mayor in 2013 on a tale-of-two-cities message, the deal was in keeping with two of his main goals: his vision of making New York a five-borough city, not solely reliant on Manhattan, and creating high-paying jobs in the tech sector, which he says will benefit average New Yorkers. He called the deal an “astounding return on investment” that would create “literally an unprecedented number of jobs” that “blows away anything we’ve ever seen.”

“In the public sector, we don’t measure success in corporate profits,” he said. “We measure success in how many everyday people benefit.” (It also made the case even stronger, he said, for his pet transit projects: Brooklyn-Queens streetcar and recent ferry expansion.)

But for the project’s critics, the opacity of the deal—which Cuomo hammered out with Amazon execs—reinforced the governor’s my-way-or-the-highway attitude, as well as his willingness to throw money at often ineffective economic development initiatives. And de Blasio, who has strayed from his prior rhetoric on corporate subsidies, was intimately involved in bringing what many regard as overly generous corporate subsidies to an employer with a suspect (at best) record on labor.

There are plenty of moving parts to this story, and it’s only going to get more complicated as it barrels toward being finalized—here’s what you need to know.

What is Amazon getting?

Amazon will build a campus of at least 4 million square feet near the Anable Basin on the East River waterfront, on a site that’s partially owned by Plaxall Realty and partially owned by the city. But rather than going through the city’s extensive land use review process, known as ULURP, the state will take the lead and override local regulations on the lot, currently zoned for manufacturing space.

To facilitate the necessary rezoning for the project, the state will make use of a General Project Plan (GPP), which was used in recent years to advance the Javits Center expansion, Atlantic Yards, and Moynihan Station. (The GPP includes an environmental review and input from the City Planning Commission and local community board, though they’re nonbinding).

The agreement comes with a number of incentives: Specifically, Amazon will receive $897 million from the city’s Relocation and Employment Assistance Program (REAP) and $386 million from the Industrial & Commercial Abatement Program (ICAP). It will receive an additional $505 million in a capital grant and $1.2 billion in “Excelsior” credits if its job creation goals are met. That brings the total amount of public funds granted to $2.988 billion—in other words, the city and state will pay Amazon $48,000 per job.

Amazon could also earn even more tax breaks separate from the city and state subsidies: The census tract in Long Island City where HQ2 (or HQ3) will be built is designated as an opportunity zone under a provision of the so-called Tax Cuts and Jobs Act, the tax overhaul President Trump signed into law almost a year ago.

Opportunity zones, the brainchild of Silicon Valley financier Sean Parker, allow people to invest capital gains—the profit made from the sale of an asset like a house, stock, or even a painting—in “distressed” areas and defer taxes on those gains until 2026.

Amazon will also lease 1 million square feet at One Court Square, also known as the Citigroup building; the banking firm will vacate its space in 2020.

What is New York getting?

According to the state, Amazon will generate $27.5 billion in state and city revenue over 25 years, a 9:1 ratio of revenue to subsidies—an arrangement Cuomo called “the highest rate of return for an economic incentive program the state has ever offered.” This is predicated on the assumption that after the company begins hiring in 2019, Amazon will create 25,000 jobs over the next decade (with up to 40,000 when all is said and done), with an average salary of $150,000. The state estimates the project will facilitate 1,300 construction jobs and 107,000 in total direct and indirect jobs.

In order to fund local infrastructure—streets, sidewalks, open space and the like—Amazon will utilize the city’s PILOT (payment in lieu of taxes) program, estimated by Deputy Mayor Alicia Glen at $600 to $650 million over four decades; the specifics of how those funds will be allocated will be decided upon via community engagement.

Amazon has also agreed to allocate $5 million for workforce development and to host job training sessions and job fairs at the nearby Queensbridge Houses, although no hiring guarantees were made in the memorandum. Amazon will also build a new school with as many as 600 seats on its campus, along with a “tech startup incubator.”

And then there’s the helipad: The memorandum allows for the construction of a private helicopter landing, which will be limited to 120 days of use each year.

Is the deal finalized?

Not yet—the general outline of the plan and many of its key parts have now been made public, but the GPP has yet to get underway. The memorandum of understanding that Amazon, the city, and the state worked out is a non-binding agreement, and will need to be solidified in the coming months. It remains to be seen how much, if at all, the plan will be adjusted in the months ahead in response to concerns voiced by local officials and the community in the surrounding area.

Plus, a number of questions remain unanswered. Cuomo and de Blasio both said with relative certainty during Tuesday’s press conference that union jobs would be created by Amazon’s new campus, but unions are not mentioned in the MOU (and Amazon’s record with organized labor is less than stellar).

Additionally, de Blasio on Tuesday floated building an additional Long Island Railroad station in Long Island City, where there are already two LIRR stations. Asked to clarify, a spokesman for the mayor, Eric Phillips, told Curbed a new station is “one option we’re looking at.”

“We’ll be working with the MTA to explore lots of options,” he said.

How did we get here?

In September 2017, Amazon announced it was looking for a U.S. location to build a second North American headquarters, dubbed “HQ2.” A 14-month search followed, with hundreds of cities competing to woo the company (depending on how you look at it, this was merely a dog and pony show, given the company in the end landed in the nation’s capital and its largest city). New York had pitched four locations as possible spots for HQ2 (Midtown West, the Financial District, LIC, and the so-called “Brooklyn Tech Triangle”), and it was named a finalist in January.

Still, HQ2 prognosticators did not have New York City as a frontrunner; the thinking was that Amazon would choose somewhere in the Washington DC area, where the company’s billionaire CEO Jeff Bezos recently bought a home.

In October, Cuomo met with Amazon execs in both New York City and Seattle; he joked he was so intent on wooing Amazon, he’d name the Newtown Creek the Amazon River if the company came to New York; and he infamously quipped that he would change his own name to “Amazon Cuomo,” if the company set up shop in the Empire State).

But rumors began to spread last week that not only would Amazon split its HQ2 into two (HQ2 and HQ3?), it was also strongly considering Long Island City for one of the sites. Confirmation—and the backlash—came on Tuesday.

The case for HQ2 in NYC

For Cuomo and de Blasio, the case for Amazon HQ2 is straightforward: Amazon will create jobs and bring revenue to the city. In 2017, de Blasio announced his “New York Works” plan to bring 100,000 high-paying jobs to the city; Amazon’s facility will put the city on a good path toward that goal. And the generous tax breaks, which the company will not receive unless they deliver jobs, were a necessary means of bringing it here, according to both men, especially given the high cost of doing business in New York and the competitive nature of the HQ2 process.

James Patchett, the president of the New York City Economic Development Corporation (NYCEDC), said that Amazon’s presence is a way of diversifying New York’s economy—if Wall Street goes south, for instance, the tech giant would still be pumping money into the city.

“It helps in recessions, because we know different industries will be impacted different ways when the economy takes a turn for the worse,” he said. “Amazon is the technology of the future.”

That’s a statement Cuomo agrees with: “Either you are a part of the economy of tomorrow, or you are a part of the economy of yesterday,” he said during Tuesday’s press conference.

A number of state and city officials have also expressed their support, including Queens Borough President Melinda Katz; Assemblywoman Cathy Nolan; Rep. Carolyn Maloney; and Sen. Chuck Schumer, who in a statement said “the number one thing we can do for New Yorkers at every rung of the economic ladder is create jobs, and the number one way to do that is to bring companies like Amazon to New York.”

City Council member Paul Vallone, who is the chair of the council’s economic development committee, called Amazon choosing Queens “a once-in-a-generation victory for all New Yorkers.”

The case against HQ2 in NYC

The backlash to HQ2 came swiftly after the announcement was made this week. Many worry about opening the floodgates of real estate speculation (and, in turn, gentrification and displacement) in Long Island City as well as surrounding neighborhoods. There’s also the less-than-transparent nature of the process, with officials signing non-disclosure agreements and many kept out of the loop.

The optics of the situation—Amazon and its accompanying helipad moving in next to the nation’s largest public housing project, where 60 percent of its residents rely on food stamps—are also not great. The “synergy” that de Blasio described at Tuesday’s briefing is for others a symbol of inequality, and prioritizing corporate welfare at the expense of the needy.

Plus, Cuomo and de Blasio’s ability to play nice with the aim of impressing Amazon—after the two have fought in recent years on matters both trivial (a Harlem deer) to fundamental (MTA funding)—has raised eyebrows. “They can’t come together for housing, they can’t come together for MTA, but effing Amazon?” Council member Jumaane Williams told Politico.

But perhaps the biggest bugbear for critics is the nearly $3 billion in subsidies being offered to Amazon, which surely has enough money to build an office without any public dollars. Amazon should be selling itself to New York and pitching what it will bring to the city, not the other way around, many have said.

“I’m not against jobs—we want employment—but when it gets to the point where we’re spending almost 3 billion dollars of public money into this thing, if you said to me, ‘We’ve got 3 billion dollars to spend, how would you spend it?’ Amazon would be very low on the list of where that money would go,” state Sen. Michael Gianaris said on NY1 earlier this week.

Gianaris, along with City Council member Jimmy Van Bramer—both of whom represent Queens—have put both Amazon and the governor and mayor on blast since the announcement, citing both the subsidies and the fact that the public (and NYC officials) will be cut out of the process.

“When Jeff Bezos needed $3 billion, the governor and the mayor found it sure damn quick,” Van Bramer said on Wednesday at a rally with other opponents of the deal. “The governor and the mayor conspired secretly to cut a deal with Jeff Bezos to the exclusion of everyone else. This is the ultimate case of ‘three men in a room.’”

The Association for Housing and Neighborhood Development said in a statement that what Amazon would bring to New Yorkers came up short.

“The promised job growth and supposed positive impact of Amazon’s expansion to New York don’t outweigh the major infrastructural, housing, and equity challenges it is sure to bring,” they wrote. “A deal created to fund one of the largest mega-projects in New York City’s history without any public process, input, or deliberation not only disempowers the very communities that will be most impacted, but entirely erases their agency and their voices.”

Other opponents include the Working Families Party, which backed Cuomo in the recent midterm elections; the Retail, Wholesale and Department Store Union (RWDSU); several City Council members, including speaker Corey Johnson; Rep.-elect Alexandria Ocasio-Cortez; and Sen. Kirsten Gillibrand, who—in opposition to the other senator from New York—who said in a statement that she was “concerned about the lack of community input’ involved, and that a company of Amazon’s wealth “should not be receiving financial assistance from taxpayers.”

Comptroller Scott Stringer, for his part, took a more measured stance, mostly issuing a process complaint.

“I welcome the potential that economic development can bring to our City, but any company looking to tap into New York City’s talent pool and vast resources should be willing to make its case in a public, transparent way,” he said in a press release.

What happens next?

Moving forward, much of the plan, as of Wednesday, was said to need approval by the Public Authorities Control Board, a five-member body where unanimity is necessary for the project’s approval. It wasn’t announced exactly when that vote would take place.

In addition, city and state leaders opposed to the Amazon deal have vowed to block it—or perhaps alter it to better suit their preferences—via other means.

“We will go to court if we have to,” said Gianarris at Wednesday’s press conference. “We will take legislative action if we have to.”

But on Thursday, the Daily News reported the governor planned to circumvent the board. “Not all capital grants have to go through,” Robert Mujica, Cuomo’s budget director, told the News. “It’s not required to go through the [Public Authorities Control Board].”

We’ll continue to update this story as more news becomes available.