The New York Times almost gets it right when they criticize the Hudson Yards project. It’s the massive buildout on the far West side of Manhattan that was once warehouses, factories and tenements. It is now a “colossal complex of office towers and residential buildings.”
At 16 structures on 28-acre, it is bigger than Rockefeller Center, the 19 commercial buildings covering 22 acres between 48th and 51st Streets.
The criticism is over Amazon’s $3 billion in tax breaks versus tax breaks and other government assistance for Hudson Yards at $6 billion. “The city spent about $2.4 billion to extend the No. 7 subway line to Hudson Yards and set aside $1.2 billion for about four acres of parks and open spaces called Hudson Park and Boulevard.”
Here is the thing: the city and state are supposed to build subway lines and park spaces. And schools, sidewalks, streets, water processing plants, airports, highways, tunnels, pedestrian esplanades, and public spaces. They regulate land use, collect taxes, and provide police, fire and emergency services. That is what municipalities are supposed to do, it is their core function, and they better be good at it.
I don’t know why the City Council “stepped up to pay $359 million in interest payments on bonds;” nor can I rationalize “$25 million in state tax credits” if Blackrock adds 700 jobs at Hudson Yards, or for L’Oreal USA to get $5.5 and WarnerMedia getting $14 million.
The difference between these incentives and Amazon’s is that any company that elects to relocate to Hudson Yards can obtain the tax giveaways. In Long Island City, they were for one company – Amazon.
Consider the sorts of deal Amazon had negotiated:
New York State:
• $1.525 billion from NYS should Amazon hire 25,000 people over the next decade, at an average salary of $150,000 and occupy at least 4 million square feet of space.
• $1.7 billion if Amazon gets to 40,000 jobs by 2032.
• $1.2 billion from the state’s Excelsior Jobs Program or $48,000 per job.
• Up to $505 million in the form of cash grants dispersed over 10 to 15 years, depending upon whether Amazon hits its job goals.
• The State of New York will override local regulations on the lot currently zoned for manufacturing space, replacing the city’s extensive land use review process.
New York City:
• Business income-tax credits worth $897 million (“as-of-right” offered to companies that relocate to NYC from elsewhere)
• Property-tax break worth $386 million over 25 years
• Offered other tax breaks traditionally aimed at very poor neighborhoods.
Imagine if the people who created the HQ2 deal instead tried to do something similar to the unopposed Hudson Yard deal:
Amazon HQ2 Smart Project
• Create a waterfront esplanade and park;
• Upgrade the subway lines and stations near LIC;
• Replace roads, bridges and sidewalks;
• Build new schools and day care facilities;
• Create a new East River ferry service running from LIC to Manhattan.
The $3.4 billion dollars committed to parks, subways, etc. in the Hudson Yard project is exactly what the government is supposed to do. You can create incentives for companies to relocate in a way that directly benefits every taxpayer in the region. The incoming company could have burnished their reputation as a good corporate citizen, instead of being perceived as rapacious and greedy. Instead, they are left with a rep as an abusive employer whose Warehouse workers are not allowed time to go to the bathroom who does not play nice with the locals.
The Amazon HQ2 deal as proposed was too clever by half. As Scott Galloway predicted, the winner of the contest was always going to be the town where Bezos wanted to live.
The shame is it’s a giant missed opportunity for all involved. This could have been a bright shiny win, a happy place for the city, the state and Amazon. It’s too bad Governor Cuomo, Mayor De Blasio, and Jeff Bezos did themselves a disservice in missing a giant opportunity that was right there in front of them, hidden in plain view on 28 acres in Manhattan.
And yet, Bezos could still be a local hero. Take the best of the Hudson Yards approach as a yardstick for what makes sense when incentivizing companies that relocate. Create a win for everybody – without resorting to the sorts of cronyism that gives capitalism a bad name.
If these three are as smart as they are believed to be, they could still revisit this and make it right. Otherwise, welcome to your lasting legacies, the final word in your obits.
Its Not Capitalism, its Crony Capitalism, March 1, 2019
Bulls & Crony Capitalism, March 7, 2019