The New York Hustle of Amazon’s Second Headquarters | Hacker News Reader

The New York Hustle of Amazon’s Second Headquarters

newyorker.com

65 pointslobo_tuerto75 comments

For the nation as a whole it's a bad deal, in a prisoner's dilemma if everyone cooperates the payoff matrix is globally optimal. But for New York City it's a good deal, and those claiming otherwise refuse to look at the math and instead want to go with how the deal makes them feel.

$150,000 x 25,000 = $3.75B/year. At NYS + NYC effective tax rate of around 9.25% at that income level that's around 350MM in income tax alone. That doesn't include the taxes that Amazon itself will eventually pay, nor any of the knock on economic effects of injecting all that extra money into the local economy. For NYS and NYC this deal is a no brainer.

The federal government is supposed to be the mechanism whereby coordination problems like this are solved. But the federal government (for a long time now, this isn't specifically about the current administration) if anything seems to want to encourage this kind of thing, not discourage them.

So here we are. You can rant and rave about the perfidy of actors acting rationally or you can work to change the rules of the game so as to produce an outcome you think more desirable. I know which one I think is more productive.

As someone facing the implications of a not so good deal in Wisconsin, I agree with Bradley here, NYC got a VERY good deal. It's just that my experience in Wisconsin has made me look at all of these sorts of deals in a different light.

We need to have something like "checks and balances" on these things. Sometimes they just get way out of hand.

you make it sound like those numbers are completely comprehensive and without agenda, and that these subsidies are an unmitigated good. but they completely ignore jobs lost, companies shuttered, environmental impacts, and opportunity costs.

you're looking only at inflows and ignoring outflows. no systems dynamicist would take such an analysis seriously. systems have boundaries (by definition), and you must look at all traversals across the boundaries, not just the ones you like.

plus, you ignore the fact that amazon probably would have set up shop in nyc for far fewer, and probably even zero, dollars in subsidies. i.e., the same benefits without redirecting tax dollars to the already rich.

yes to more, savvy economic development; no to corporate giveaways.

EDIT: to your point about actors acting rationally, i would hope a group of business owners who don't get such subsidies put a bill before the people to either hold amazon accountable to promised performance or rescind/restrict the subsidies (or failing that, vote the bums out). the economic development program dollars they used should be directed toward entrepreneurs and small businesses, not mega-corps.

"you ignore the fact that amazon probably would have set up shop in nyc for far fewer, and probably even zero, dollars in subsidies"

Not a chance. Property tax incentives and subsidies are offered in all 50 U.S. states to encourage employer relocation. There is rampant competition.

but there is only one new york city.

As arrogant as this comment may sound, when you're talking about a facility like Amazon's HQ2, HN user "clarity" is right.

There really is only one place that combines a ridiculous amount of technology expertise, with an east coast location, and multi-modal transport links to both the US and the Europe-Africa side of the world.

But that's all the more reason that NY state did not need to offer that much in subsidies. (Again, I know they got a good deal, but not giving Amazon anything would have been an even better deal.)

Economic development numbers in NY are loaded with many of the things that you talk about.

As the flow of jobs to the south from the north has demonstrated, incentives work and offset the increased costs of doing business in a place like New York. Those costs are often criticized but include things like worker protection, environmental protection and other things that companies generally flee.

What jobs are being lost and companies being shuttered in New York? What environmental impact is being had in New York?

This isn't a walmart that's going to displace local shops. This is a corporate headquarters; an office building.

Last I checked, they don't have to build a stagnant pond next to the building either, so I don't know what you mean by environmental impact.

Amazon is going to exist whether or not it has an HQ in NY, so your points seem tangential and irrelevant.

And yet I just heard that the MTA is raising prices again this year.

How many Fortune 100 companies need to move here before we get a working subway system?

To be fair, you do have a working subway system. If you didn't, no one would care that they raised prices.

You guys have the best subway system in the US if we're being honest here. That's part of the reason why you get things like Amazon's HQ2 instead of anyone else.

> You guys have the best subway system in the US if we're being honest here.

The biggest (in the US), certainly. "Best" depends on your perspective. https://www.nytimes.com/2018/10/18/nyregion/chicago-l-train-...

Having lived in both NYC and Boston for decades, I'm tempted to say the T is better than the subway, but I really just hate crowded trains in general and the T train I took was always empty because I reverse commuted.

I am a happy suburb driver now :p

The MTA's problems have far more to do with inefficiency, mismanagement, and corruption than they do with a lack of money. A big part of the problem is that it doesn't have an accountable governance structure. The current MTA board is made up of appointees of: the governor, the mayor, and the county executives of Nassau, Suffolk, Westchester, Rockland, Putnam, and Orange counties. There needs to be one elected official, preferably one with the power to really negotiate with the contracting companies and the unions, that has ultimate responsibility for the system and it's problems.

Huh, I just looked it up, I guess the Mayor represents the five burroughs but you'd think Kings, Queens, Manhattan, the Bronx, and Staten Island would have representatives that represent them alone if Nassau, Rockland, Putnam, and Orange counties do.

Bizarre.

It gets even more bizarre. Rockland, Putnam, and Orange get board members but they only get 1/3 of a vote each. Three different unions get non-voting board members, as do three commuter councils (which are in turn not membership organizations but made up of political appointees).

I'm amazed they even manage to even get minutes printed with a board organized like that.

Yea I was checking it out and mainly focused on voting members for my post. Who knew? It's something I'd never even thought of until now. Seems like something that might be worth looking into as a New Yorker considering these fifteen or twenty people are making decisions that affect six million riders a day along with countless bridge crosses and ferry takers.

If NYC was a smaller city you'd have to price in the depression once Amazon went of business or lost market share /cut costs. But NYC is huge and 25,000 people will not skew it that much either way.

>> those claiming otherwise refuse to look at the math and instead want to go with how the deal makes them feel.

its more than a little immature to accuse this of those who disagree with you.

your model relies on the fact that this would all be additional tax revenue that wasn't collected earlier. While a lot of these jobs can be people who already work in NY and simply switch jobs. In addition, it neglects the cost to the govt of servicing this company and all its employees. It also neglects the negative externalities and consequences for current residents (only looking at it through a money lens which is a typical neoliberal fallacy).

thats true whether there are subsidies or not.

these are higher paying jobs than current averages no matter how the average is done, using less space than average, and the subsidies pay for themselves.

so............... thats why the model can exist in a vacuum

right but how do you factor in longer commutes for existing residents? or current residents having to move or have their children go to different schools? What is your dollar value on that? and before you say that isn't relevant, thats the exact mindset that brought us trump. valuing the dollar value over quality of life of existing people. it also outsources alot of the quality of life to visa holders instead of residents.

and you think ANY of that is a relevant argument for Long Island City's 3-year residents? LIC is the perfect place to build this. A lot less contrived than when Google bought a block of lower Manhattan for $1 billion back in 2011.

> and before you say that isn't relevant, thats the exact mindset that brought us trump.

is this post copypasta?

I feel like you would recycle this post as a counterpoint for any form of upward mobility in an area.

The model exists in a vacuum because the subsidies make a profit and create minimal overhead.

its more than a little immature to accuse this of those who disagree with you

Indeed. Especially when those who are quick to accuse others of not doing the math themselves are not... really doing the math.

Or you could think NYC could have negotiated more because it was a likely choice anyways, having already major offices for other tech offices, for example. I don’t have a horse in this race but I don’t think this math is the comprehensive picture.

I posted similar math on reddit several days ago too, and didn't receive a response when I asked to counterpoints to that specifically

Most people's counterpoints are about what ifs related to corporate and human welfare, and will go on a tangent about that, emboldened by headlines about the dollar amount each new york tax payer would have contributed to the subsidy.

Taxpayers got a good deal.

Their corporate and human welfare argument will hold true whether there were subsidies or not, at any arbitrary salary figure, at any arbitrary number of jobs. So it is a total red herring to this deal, which is profitable whether 24,999 people get minimum wage and 1 person gets $100,000,000 annually, as long as they are taxed by New York in some capacity. (income, sales tax, property tax via direct ownership or rent paid to someone else that pays income and property tax)

Do you expect more automation in the workplace from Amazon or less? Cause the numbers only work if the jobs are created, however Amazon has about a decade as a cushion. A few years from now, Amazon could conclude that it may not be worthwhile to create all the 25,000 jobs and the better option is to return the government's money in year 10, this will be a loss for the city.

This is not an upfront payment. Amazon gets the money once they have actually created the jobs.

What is with all these posts that just assume that 25,000 new humans are going to be plopped down in NYC?

Has Amazon come out and said that they’re going to be relocating 25,000 employees here? If not, then I suspect a solid majority of those hired will already be living and working in the greater NYC area. In those instances, any gain in income tax revenue will be meager.

Do you think 25,000 positions are going to disappear from the rest of the local economy?

New York City's population growth from 2010-2017, without Amazon, averages out to 64k/year [0]. Adding 25,000 humans to New York is an entirely ordinary and expected occurrence that's been playing out every 4.5 months, not some sort of outrageous hypothetical.

[0] https://www1.nyc.gov/site/planning

No, I don’t think 25,000 positions will disappear. I think many previously filled positions will become unfilled as those employees get hired by Amazon.

Obviously, many (most?) of those positions will in turn be filled by someone else (and so on). But because of a strong preference to hire locally, that imbalance tends to ripple through the local labor market for some time before enough new labor is brought in to cancel it out.

Point is, dropping 25,000 “new jobs” into the local economy does not result in an automatic gain of 25,000 new taxpayers, so acting like it’s an automatic $3.75 billion in net new taxable income is just absurd. Eventually it may get close to that number, but there will be a significant lag before it gets there.

It’s 25k new jobs though. Not replacing existing. So the relocation aspect doesn’t really matter.

Any time a new job is created somewhere, regardless of whether or not it is filled by someone who was already local or not, the total number of available jobs + filled jobs goes up, as long as positions are backfilled. Positions usually are backfilled.

So even if every person that works at Amazon NYC already lived in NYC, they will have left 25,000 other jobs that are now available.

There are a few ways in which these previous jobs get backfilled:

1) More people moving around locally. This will generally increase the pressure for local businesses to keep their employees happier, to prevent the attrition. This will generally increase the pressure for the businesses looking to hire to also compete. The easiest way both parties do this is increasing salary - which increase tax revenue. Other ways are other employee perks, which might not directly result in more tax revenue, but should result in increased QoL for the employees.

2) People moving into the city. People move to where the jobs are. People moving directly increases tax revenues, because they're increasing the tax base. If they're not moving in large enough quantities to fill all the open positions, then again, companies have to do something to increase their attractiveness. Since this is usually increasing pay, when it gets high enough to attract someone to move it then is an even larger effect.

3) People coming of age for work that already lived there/graduating college there/etc. They might already reside in the city, but weren't part of the workforce. They'll need jobs, and again, a market that is competing for employees is one where employers have to differentiate themselves.

NYC doesn't need the Amazon jobs to be filled by people moving to the city for it to be an economic win. They just need to have properly balanced tax incentives/breaks vs. the benefit achieved from these factors. I'm not an expert so I don't know if they've successfully done that, but there's no reason to think that this being successful is dependent on Amazon directly bringing in people from out of city/out of state.

As long as this is allowed nationally, cities and companies are being rational actors in trying to make these sort of deals. It doesn't mean that they always work out (See: Wisconsin, Foxconn, as mentioned repeatedly), but it is certainly possible for a deal to be created that is mutually beneficial to the company and the locale.

Yes, exactly. There is an inherent and substantial lag between the time when 25,000 new job ‘capacity’ is added to the local labor market vs. when that capacity is filled.

Obviously, the mere presence of another employer seeking out highly skilled talent will have other effects, like raising wages and rent.

Like you, I don’t know whether this deal will be a net win or not. And I’m not suggesting Amazon has to bring in 25,000 new people for it to be a gain.

I’m just calling nonsense on the posts with impossibly optimistic math (“25k jobs x $150k/yr = $3.75B in new taxable income, so it’s obviously a win, Q.E.D.”).

The thing that seems the most interesting to me is the control over the financial narrative.

Here's a bunch of numbers, and if they add up to more than zero, we should do the deal.

There seems to be very little questioning of wether the accounting given is appropriate. What's the chance that Amazon would put staff in NYC even with no money? I'd say reasonable. Is anyone concerned about rising prices when 25k new high income people show up? Will they show up, or are they already there?

Plenty of things in the details can be challenged, I'm not saying I know the answer to any of these things.

But the narrative seems to be that there's these numbers, and they point to "we should do it".

Normally the only tax/subsidy I'm in favour of is externality related, eg Pigouvian. And I'm not seeing a lot of that argumentation here, though admittedly I'm not the keenest observer on this one.

Has anyone seen specifics on how they'll be held accountable? They've made promises for x jobs with $y average salaries, but if they don't meet that, then what?

https://ny.curbed.com/2018/11/16/18098589/amazon-hq2-nyc-que... suggests that nearly $1.3 billion is not tied to any amount of job creation at all.

That article is an example of people not understanding what this deal is. Amazon is not receiving $3B in public dollars, they are receiving $3B in tax breaks. They are shifting a small % of that via PILOT and some other funding Amazon has agreed to.

I don't understand how people think this is in any way a bad deal for NY.

Tax breaks have a value, some might even say a cost.

The NYC REAP is per employee[0]. Zero employees, zero dollars. ICAP is property tax abatement and requires spending 30-40% of the assessed value of the property[1]. Long Island City might be cheap in terms of NYC real estate, but it’s not particularly cheap overall. I can’t imagine they won’t spend more than the ICAP portion.

[0]https://www1.nyc.gov/site/finance/benefits/business-reap.pag... [1]https://www1.nyc.gov/site/finance/benefits/benefits-industri...

There is no agency, governmental or private, in existence that subsequently measures or keeps tracks of these "job creation" promises. And in the very unlikely event that their broken promises do come to light, it will be explained away in the usual manner as to deflect (e.g. circumstances change, etc.). Just remember one thing: At the end of the day Amazon is a private enterprise and it can and will do whatever they want and are accountable to no one.

Eh. Everyone is acting like $3B is some massive some of money. The State of New York recently sealed a budget for ~$168B and and the economy of the state itself is somewhere around $1.2T. Hell, Amazon itself has a market cap of nearly 800B.

As of 2017, "[m]ore people are leaving the New York region than any other major metropolitan area in the country":

https://nypost.com/2017/04/01/people-are-fleeing-new-york-at...

So, 25k additional people is closer to stemming the tide of people leaving rather than overcrowding an already hot market.

The tide of people leaving because NYC is becoming completely un-afforable if you make less than 60k a year.

The median household income is $59k. It’s not unreasonable that a large metropolis cost above average, given the higher population, while declining, still represents high demand for housing and local amenities.

>> Throughout a bidding process that saw dozens of cities vie to be the next location of a proposed hydra-headquarters, there were murmurs that Amazon might really just be looking for a regular office, and rebranding it a “headquarters” to corner those tax breaks.

That is exactly what happened.

Amazon was just looking to expand satellite offices, and used the HQ contest as a way to get free business info as to where to expand next. They were also looking for generous tax breaks to allow them to operate leaner in high COL high talent areas.

My guess is NY and NOVA areas were already being seriously considered and someone had the bright idea to turn it into a race to the bottom. Remember, as way back as 2016, Bezos was buying property in the DC area.

We should ban these kinds of deals at the national level. They're rational for companies, and rational for regions, but overall they allow extremely large companies to avoid paying their share of taxes.

They do seem to open up a much more complex calculus in the tax system.

I think you can make an argument that these deals can improve efficient allocation of capital. But like credit default swaps and other complex financial instruments, I think you run into the issue of, is there a level of complexity that's just too much for the rest of the system to be rational around.

One of the purposes of tax structures is to allow people to make predictions about what the exact financial consequences of various choices they might make. If you add this kind of one-off negotiation into that, you undermine our collective ability to be rational about our financial choices.

However, if you allow this kind of negotiation, and you allow governments to try to compensate organizations for the systemic benefits they bring to an economy, that also has some utility. You can create an incentive to these organizations to create value outside of just their bottom line. And if we allow these kinds of deals, then over time we'll be able to systematize them and then eventually make them broadly available under standard terms.

So, I don't know. I'm not sure rushing to an outright ban is the way to go. But I do think there's some merit to the idea that in financial transactions there's a limit to how far the contracts can be recursive. Allowing it to be infinite makes for a chaotic fuzzy edge to the markets.

Being from New York and having followed this situation closely, I can say that this entire fiasco serves as a good example on how the politicians we elect _ought to_ protect their constituents from predatory corporate power.

However, this is not the case. Its mere political theatre as De Blasio and Cuomo pose for the cameras, as what matters is not the actual success they have achieved for the city in terms of job creation, but the _perceived_ success. That's how politics works. Otherwise some kind of protocol would exist to enforce, track and hold to account the job creation promises alleged by corporations or federal economic policies (NAFTA anyone?). How convenient that it does not exist. How convenient that we forget that as a private enterprise, Amazon has no obligations to the public.

The old tired adage "socialism for the rich, capitalism for the poor" sounds about right. Supporters of Amazon can work out all the math they want to try to convince others (and mainly themselves) of any public benefit. When taxpayer dollars are diverted to corporate welfare, that's when we, the public, get those austerity policies that we love so much. All in exchange for the 25k high-paying jobs not applicable to the working and middle class folks who in addition, will no longer be able to afford living there and will be forced out.

Isn't NAFTA pretty much very favorable to the US?

I agree with your sentiment that corporate welfare sucks and would have been much happier with the tax breaks being distributed to startups somehow, however, you're talking about LIC, where home prices already average above one million dollars.

Gentrification in LIC started a long time ago. These 25,000 people, many of whom will be hired from within the already vast tech talent pool, probably aren't going to drive prices up very much.

I think it really underestimates just how big NYC is to think such a thing.

I love living in flyover country.

I live in flyover country in Wisconsin. We still got hosed on our Foxconn "deal". Living in flyover country does not make us immune, we can fall victim to these deals as well.

The level of greed that Amazon and Bezos continue to demonstrate is sickening.

He's doing what most companies do: try to reduce their legal tax liability. If CEO's didn't do this, the boards of these companies would replace them with someone that will do it.

You are blaming Bezos and an entity for standard corporate fair. That's a symptom of the problem.

I can hate the players that rig the game, thanks.

And in doing so you become part of the problem. Amazon never rigged the game. The game has been the same for long before Amazon existed, they are simply playing by the rules.

Personally I think it's cool to hate the players and the game. If you make the choice to play an odious game, you're still responsible for the results of you following the rules.

Yeah, well when the outcome of the game is riches and the outcome of not playing it is being able to pat yourself on the back I think those patting themselves on the back are going to find they are in an extreme minority.

And odious is just hyperbolic. They are getting tax allowances, not sacrificing babies.

Still, it's a game that should be stopped. The federal government should stop things like this from happening, as it extracts value from local governments and gives it to corporations

It does NOT extract local value... it reduces Amazon's tax burden in exchange for high paying, highly taxed jobs. There's no money being paid to Amazon.

The state should appoint companies past a certain size a board member. It is not like taxes are unnecessary.

Bezos played these cities like a fiddle. They'll never offer deals to him like this again but he doesn't care because this was a one-shot stunt.

Like sports teams, the impact on the local economies will be negligible. Lets see how many of the 25k jobs even show up...

There are benchmarks baked into the deal, so no jobs = no tax breaks. The cities should have known better than to play this game, but at least there's that.

Not true, only a portion is tied to job creation goals

It’s tax breaks. If you don’t employ enough people, you won’t be paying enough taxes to take advantage of tax breaks anyway.

Amazon negotiated in bad faith and as such any deals should be voided. I'd like to NYC mayor call out Amazon instead of allowing the good people of NYC to be railroaded.

What the cities have submitted were nothing more than proposals, they are not contracts and are not binding. Considering the new information that has come to light mayor de Blasio.

More than anything Northern Virginia should withdraw their proposal, Amazon wants the Government cloud business so bad that Virginia has Amazon over a barrel.

Withdrawl would require politicians admitting they were duped. In NY, Democrats have a monopoly on power so they have no need to be responsive to voters.

This monopoly on power which exists in many states across the US is IMHO very bad. I always theorize that the US would be better if the red states voted blue and the blue states voted red.

Nothing would change. There's only one party in this country, the Property, War, & Corporate Party.

Poppycock. One of the top stories from this election is how establishment NY Dems are facing a challenge from the left, e.g. Ocasio-Cortez who is critical of the Amazon deal.[1]

[1] https://www.cnbc.com/2018/11/13/alexandria-ocasio-cortez-ama...

Cynthia Nixon was also a thorn in Cuomo's side during the primaries, and much further left.

> I'd like to NYC mayor call out Amazon instead of allowing the good people of NYC to be railroaded.

The announcement goosed property values in Brooklyn and Queens. I wouldn't be on a call out anytime soon.

NYC is majority renter.

This renter is hoping and expecting it to put upward pressure on wages. The NYC metro area isn't the Bay Area, the incumbent landowners can't take all the surplus value.

>I'd like to NYC mayor call out Amazon instead of allowing the good people of NYC to be railroaded...

To be honest this is part of the problem. The Mayor IS deadset against giving any subsidies, but it doesn't matter. The state politicians can still do whatever they want.

So you're talking about "the good people of NYC", but that's not the level at which the decisions are being made. Same thing happened to us in Wisconsin. Maybe you had some mayors around the state dead set against giving Foxconn anything, but Walker is the governor, (or WAS the governor rather), so it didn't matter.

In short, de Blasio can call out whatever he wants, but he'll get nowhere. (In fact he has been calling it out, and got nowhere with it anyway.)

The answer really is to put these deals to a vote. We need a law that makes it so that politicians can still make these deals, but they are null and void until approved by a popular referendum.

> More than anything Northern Virginia should withdraw their proposal, Amazon wants the Government cloud business so bad that Virginia has Amazon over a barrel.

Don't they already have this essentially locked in?

https://aws.amazon.com/govcloud-us/

https://www.youtube.com/watch?v=DEc6kVAXSs8&feature=youtu.be...

Second link has the CIO of the CIA talking about it

It looks like the only public official who could change the terms now is Cuomo since he used unique powers of the NY governor's office to make the deal to override municipal laws. It might be possible for the state legislature to try to amend it but it's totally out of NYC officials' hands. https://www.thedailybeast.com/jeff-bezos-is-right-at-home-in...

I'm so confused by this. The people that negotiated these deals are perfectly content with what they got. You think Amazon said "jk, going to build two" and got the same deal?

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