Moving is easy when you're rich.
Just ask Amazon, which last month invited cities to vie for the prize of the company's second headquarters, which they expect to be a "full equal" to their 8 million-square-foot campus in Seattle. Since then, politicians and economic development organizations from seemingly every municipality in North America have frantically lined up to court the e-commerce giant, and to toss taxpayer-funded incentives at Jeff Bezos's hulking robot feet.
In New York City alone, two dozen property owners in 23 different neighborhoods have cobbled together proposals at the request of the New York City Economic Development Corporation. The owners of Industry City in Sunset Park are now scrambling to apply for a $1 billion redevelopment, while Brooklyn Borough President Eric Adams has suggested Williamsburg as a prime option for the company (which, fair). And while Mayor Bill de Blasio has said that he doesn’t "believe in the traditional forms of subsidy," his position on union-busting, local-business-killing corporate behemoths has apparently evolved, and he's now itching to meet with Amazon's leaders.
Meanwhile in Albany, Governor Andrew Cuomo — a man with no shortage of experience doling out corporate tax breaks — has quietly hired commercial real estate firm Newmark Knight Frank to figure out how New York can best give Amazon what it wants.
What Amazon wants, of course, is money. They've been clear about this from the start, citing "incentives offered by the state/province and local communities" as a chief factor in their site selection. For a project of this magnitude — the company will invest $5 billion in construction, and hire as many as 50,000 workers — most observers anticipate they'll net billions of dollars in subsidies, potentially more than any corporate tax break in history.
In that respect, at least, New York may have a leg up on the competition. According to Good Jobs First, a national policy resource center that tracks subsidies from local and state governments, New York leads the country in overall spending on megadeals — defined as corporate incentive packages that total more than $75 million. Among those recent megadeals, New York has awarded packages to Goldman Sachs (estimated subsidy value: $425 million), mall developer Pyramid Companies ($600 million) and aluminum manufacturer Alcoa Corporation ($5.6 billion).
These packages typically involve a complex mix of sales and income tax credits, and can include tax exempt bonds for financing, property tax abatements, straight cash and other incentives.
In total, New York has given companies $11.4 billion worth of subsidies in recent years, easily outpacing Michigan, the runner-up, which spent $7.1 billion, according to Good Jobs First. The next five states — Oregon, New Mexico, Washington, Louisiana, and Texas — were all in the $3 billion range.
But despite New York's reliance on corporate welfare, there's little evidence that these policies offer any material benefit to the taxpayers who fund them. A report released earlier this year by Timothy Bartik, a senior economist at Michigan's W.E. Upjohn Institute for Employment Research, found that New York's economic development programs are not just the most expensive in the country, but among the least effective. In his analysis, Bartik noted that "the majority of studies suggest incentives are not cost-effective, with either no statistically significant effects or large costs per job created."
New York's incentives rank as the costliest as a percentage of gross taxes in the country. Its use of incentives is 2.5 higher than the national average. (via Citizens Budget Commission)
"With these megadeals, you're putting so many eggs in one basket that it's a guaranteed loser for taxpayers," said Greg LeRoy, the executive director of Good Jobs First. "It's a transfer of wealth to the corporations — that's the only objectively true thing you can say about it."
While Bartnick's report reached a similar conclusion, the economist did find that customized job training — the least popular incentive type — produced some favorable results. That incentive, Bartnick argues, is "highly effective, and the dollar might have 10 times the effect of a dollar devoted to cash incentives and other tax incentives.”
Hoping to better understand the efficacy of these incentives, members of both the state Senate and Assembly introduced legislation earlier this year that would bring more transparency to the state's economic development policies. But those bills never received a vote, a fact that some critics blame on Cuomo, and his desire to control Empire State Development, the quasi-public organization through which he dispenses taxpayer money, with minimal oversight.
"When a bill doesn't move forward in the legislature, and you have a sense of which legislators are for it, that usually means something has come down from the governor's office," Alex Camarda, a senior policy consultant at the watchdog group Reinvent Albany, told Gothamist. "Making transparent what individual companies receive is the most basic reform — it should not even be an issue, it should just be done."
In response, Empire State Development spokesperson Amy Varghese told Gothamist, "Our programs undergo rigorous reporting and transparency measures." She conceded that there's no single state government resource showing how much each company receives, but pointed to "100-plus economic development-related datasets available at data.ny.gov." Varghese also noted that the state’s Excelsior Jobs Program had attracted 57,000 new jobs in the state, through performance-based tax credits dependent on the company actually delivering the promised jobs.
Other models are not so rigorous. In 2014, for example, Governor Cuomo vowed to create 350 jobs as part of the state's investment in the Central New York Hub For Emerging Nano Industries — a $15 million, high-tech film studio in Onondaga County. By the summer of 2016, a total of two people were employed there full-time.
And then there's the much-touted 'Start Up NY' program, which excused university-affiliated companies from paying taxes for 10 years. Despite an eye-popping marketing budget of $53 million, the program created just 76 jobs in its first year. It's since been rebranded, but continues to fall far short of projections.
More recently, the state has been promoting its other newly acquired Amazon properties. Within the last month, Empire State Development has announced two new Amazon facilities in New York City — a fulfillment center in Staten Island and an administrative office in Manhattan. Together, the two facilities will create 4,250 jobs, in exchange for $38 million in tax breaks.
Per job, those incentives aren't particularly high, but the news still drew skepticism from some tax policy experts. As James Parrott, the director of economic and fiscal policy at the Center for New York City Affairs, told Gothamist at the time, "Taxpayers are justified in wondering why New York state needs to provide any subsidy to a mammoth corporation like Amazon."
The answer to that question, according to people who study the issue, is that it doesn't. No one is forcing New York or any other state into a taxpayer-funded bidding war in which the only guaranteed winner is an exorbitantly rich corporation. Amazon is going to build its headquarters either way, the argument goes; whether its ultimate destination will be out an extra billion or so dollars is up to the politicians.
"We've had federally sanctioned state-eat-state behavior for too long, it's the dark side of how federalism plays out in economic development," LeRoy argues. "But the way the site location system has evolved, public officials get confused about cause and effect, and the only thing they know to do is get out the money bags."
"Amazon, with its sophisticated site location capacity, presumably knows what the short list looks like," he added. "They're just going to have lots more leverage now."