Critics of Amazon Deal are Product of Political Climate
by Andrew Cuomo
Nov 20, 2018 | 1477 views | 0 0 comments | 76 76 recommendations | email to a friend | print
The Amazon transaction is an historic transformative moment for the entire New York City region. I have done enough development work during my career to know there is no large development project that is accomplished without controversy: especially in a city like New York and especially in this polarized, hyper-political time. While I appreciate the ideological and political points of view, we must still govern and analyze based on facts. In fact, given the current political turmoil, it is more important than ever.

Amazon publicly held a national competition for over one year essentially challenging governments all across the country to "bid" for their headquarters location. The upside for taxpayers was tremendous: 25,000 to 40,000 direct jobs paying an average of over $150,000; 1,300 construction jobs on average each year during the 15-year construction period; and a major advancement in the tech sector for the future. To put these job gains into perspective, Amazon is committing to an annual payroll of over $3.75 billion annually within 10 years—far and away the state's largest economic development transaction in modern history. Several cities across New York State and over 238 cities across North America competed for the Amazon headquarters and the Long Island City proposal is the only NYS project that was selected as a finalist.

This transaction is a lightning rod for the political rhetoric on both extremes. The extreme conservatives and the socialists both now vehemently oppose "incentives" for Amazon, which is one of the most profitable companies in the country. Compounding the situation, Jeff Bezos owns the Washington Post and Amazon and is a competitor to many interests currently involved in the discussion.

The New York Post, which is representative of extreme conservatives, says essentially that New York "gave Amazon $1 billion." Their argument is factually baseless. New York State and New York City gave Amazon nothing. Amazon, by our current tax structure, would generate approximately $1 billion per year in new revenue. Our proposal offered that, when and if those revenues are realized, the government would effectively reduce their $1 billion payment by about $100 million for a net to New York of approximately $900 million. New York doesn't give Amazon $100 million. Amazon gives New York $900 million. The revenue is from state and city taxes, including income taxes [in New York State and New York City: one of the highest rates in the country] with the second highest millionaire's tax in the country (only California is higher).

The Post uses this to bolster their constant refrain, which is that we should lower taxes for all businesses rather than just provide incentives. Their theory is that if taxes were reduced, you wouldn't need to incentivize any company to come to this state because taxes would be irrelevant in their economic calculus. It sounds simple and appealing, but it's also unrealistic and impossible. On their overall theory, unless all states had the same tax rate, there would always be economic incentives to move to one state or the other. For high wealth individuals or large employee corporations, taxes would always be an economic decision point and several percentage points in tax rates makes a big difference. It also denies the reality that this state has cut taxes across the board and held state spending to record lows—a point the Post ignores as it is inconvenient for them politically.

Nothing in the Amazon transaction is new. The tax incentives we provide for single business transactions are usual and typical and have been operational for decades. They are long standing programs supported by both Democrats and Republicans in both the city and the state. Nor are tax incentive programs unique to New York. Every state offers incentives to attract businesses and we are in a constant competition with other states and nations to attract and keep good businesses. One could argue that in a perfect world no city or state would be legally allowed to offer incentives and there would be no competition for individuals or businesses. True. But this is not a perfect world. Our state is in an intense daily competition with other states and, indeed, other countries. Wisconsin lured Foxconn Technology with 13,000 jobs for a $3 billion incentive package. A locality in Texas lured Exxon Mobil with 400 jobs for a $1.2 billion subsidy. Louisiana attracted DXC Technology and 2,000 jobs with a $115 million incentive. The list goes on.

This ongoing economic competition among the states was the basis for the much-publicized Amazon competition. Everyone was aware that the competition was ongoing and the media sensationalized bids for over one year. As Amazon's benefits were extraordinary, so were the efforts launched by governments to win the competition. Ironically, New York's bid for incentives was not close to being the highest bid compared to other states. While confidentiality was required during the bidding process, we now know that New Jersey offered $7 billion, Maryland offered $8.5 billion and Louisiana offered over $6 billion. Chicago offered to build a separate train service for Amazon employees. Amazon, regardless of its wealth, acted in its own best economic interest. So did New York and Washington D.C. and every other state and city that competed. Most corporations act in their own economic interests. This is nothing new and the Post is being totally hypocritical. Companies controlled by Rupert Murdoch, the owner of Fox and the Post, a New York company, have aggressively sought and received hundreds of millions in government tax incentives from New York State.

On the other side of the extreme, the socialists argue that we gave a $1 billion grant to one of the richest men in the country and that we should have given that money to the poor and the needy. Once again, it is a politically appealing argument; but also, it is once again wrong. We give Amazon nothing and their revenues give us approximately $900 million annually. If Amazon does not employ 25,000 New Yorkers, we lose $900 million. They also argue that we should let Amazon come to New York but provide no incentive. However, without the incentive Amazon, which owes duties to its stockholders (including the New York Pension Plan) would not come to New York and would not bring their revenues or jobs. The essence of the Amazon competition was that they were shopping for the best economic benefits. Amazon could have located all employees in Virginia or gone to Newark - just across the river - for a larger incentive - a $7 billion incentive package and a giant revenue loss to New York.

The New York Times also argues that New York was wrong. The New York Times is also being totally hypocritical. While I believe in the old adage, "never argue with an institution that buys ink by the barrel," I also believe in the old adage, "speak truth to power." The New York Times itself makes the same economic decisions and has also received significant tax benefits from New York State and New York City in making decisions on their locations. In fact, when the Times announced in 2001 that it would move into a new building in Times Square, it received tens of millions in tax breaks from New York City. What's more, the Times asked the State to use its powers to override city zoning processes over local opposition—the same powers now being criticized for their use in the Amazon deal. In response to criticism, the company asserted, ''It's our responsibility to all of the stake holders in this company to be as competitive as we can be. We're going to take advantage of the opportunities out there.'' Should the Times not apply the same rules and theory they operate under to the Amazon transaction? The inconsistency is striking. Warner Media, which owns CNN, also criticized the transaction. They have also been the recipient of significant public subsidies receiving over $1 billion in state tax credits, among others to do business in New York.

As for the local officials who now oppose the project, many of these same individuals signed a letter supporting the application for the same location knowing full well it was a national competition in which states and cities were putting together incentive packages. These same officials voted and authorized the long-standing economic development programs deployed in the Amazon transaction. It is pure political posturing.

Mark my words, come election time, when the opponents of these politician's side with the businesses and residents who are benefiting from the Amazon infusion, these same politicians will find a way to change their position once again. Political winds blow strong in New York, but they also shift rapidly.

I applaud Mayor de Blasio for acting responsibly as a government official rather than catering to a convenient political position.

I appreciate the anxiety of the neighboring community. Any large development will cause disruption if steps are not taken to mitigate these issues. However, the answer for a smart society is not to stop growing but rather to manage the growth and its consequences.

I am in politics and just completed an election. I understand the current political intensity. This is a time of anger, frustration and hyper-political extremes. Symbolism reigns over reality. However, the bottom line is still the bottom line and facts are still facts. A long standing essentially vacant site in Long Island City will see a $3.6 billion construction project and 25,000 to 40,000 permanent jobs at an average salary of over $150,000. The tech sector will be enhanced, further diversifying the New York City economy, which is still heavily reliant on Wall Street. It will strengthen the entire region and the Long Island tech sector, which will also be synergized. There will be a new school in the community, new residential apartments, investments in public transit, a tech incubator, a partnership with the local housing authority to create employment opportunities and myriad other local benefits.

The only other alternative course is that we could have decided not to compete or we could have lost. In either case, the criticism would have been worse and it would have hurt more - because it would have been true. New York would have lost out on a tremendous growth and economic opportunity.

The reaction by some on the extremes to the Amazon transaction is merely a sign of the times—and the times are troubled. Political polarization tears at our social fabric. But when the lens of public officials is fogged by political expediency, bad decisions are made. When opinion-makers cater to hyper partisan ideologies and take hypocritical positions, honest debate suffers.

I am sure that as these entities have now been highly critical of the concept of "tax payer subsidies" we will see Rupert Murdoch, the Times, Warner Media/CNN rebate the incentives they have been receiving, refuse them in the future, and will remain in New York. Once we receive their rebates it will more than compensate for the Amazon benefit!

I am also sure the local elected officials opposed to tax payer subsidies will sponsor legislation demanding a rebate from these entities. In addition, there are many other incentive packages such as the film tax credit and small business programs and many other businesses receiving similar credits that I am sure they will also cancel.

My father used to say, "we campaign in poetry but we govern in prose." The essence of this saying was that during campaigns political rhetoric soars for the aspirational and the perfect. However, in government, we must deal with facts and reality.

Is it inflammatory that Amazon, the New York Times, Warner Media/CNN, Rupert Murdoch and other profitable entities receive tax incentives? Yes, it is. In a better world, they would not.

Let us strive for a nation that creates a better world where the Federal tax code is fair and progressive and states don't compete amongst each other for the businesses and wealth that is truly a national asset. But we live in the here and now. For today, let's do our best to see New York thrive and grow.

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