What Amazon's decision means for New York's bottom line
ALBANY – For months, New York Gov. Andrew Cuomo painted Amazon's decision to come to Long Island City, Queens, as a game-changing boon to the entire state's bottom line.
Now the prospect of up to 40,000 new, high-paying jobs is no more.
Amazon's abrupt decision Thursday to abandon its plan for a headquarters in New York City left proponents of the plan lamenting the loss of billions of dollars in state and city tax revenue and economic activity the massive project promised.
For months, Cuomo had painted the deal as simple math, claiming the $3 billion in state and city tax breaks and grants would be paid for many times over by an estimated $27.5 billion in new tax revenue.
But Cuomo's argument was never persuasive to opponents of the deal, who raised issue with providing big tax breaks to one of the world's wealthiest companies and the effects of gentrification in Long Island City.
"We get $27 billion in revenue, they get $3 billion back," Cuomo said Feb. 8. "I would do that all day long."
In a statement Thursday, Cuomo accused a "small group of politicians" of putting their political interests ahead of "the state's economic future and the best interests of the people of this state."
"Bringing Amazon to New York diversified our economy away from real estate and Wall Street, further cementing our status as an emerging center for tech and was an extraordinary economic win not just for Queens and New York City, but for the entire region, from Long Island to Albany's nanotech center," Cuomo said.
Economic boost was expected
There was little doubt Amazon's planned headquarters would have created significant new economic activity, though critics had questioned Cuomo's numbers.
Most of the subsidies were tied directly to job creation.
Cuomo's $27.5 billion tax-revenue estimate was based in part on a state-funded study conducted by Regional Economic Models Inc., or REMI.
That study looked at the state's proposed tax breaks (up to $1.7 billion) and estimated it would create an estimated return of about $14 billion in tax revenue over the next 25 years.
A separate, in-house estimate by the New York City Economic Development Corp. estimated the city would see $13.5 billion in new tax revenue over 25 years. Amazon had been set to receive up to $1.3 billion in city tax breaks.
Those estimates, however, were based on Amazon creating 40,000 jobs and receiving the maximum tax incentives. The company's deal with the state and city called for a minimum of 25,000 jobs and raised the possibility — but not a pledge — of 40,000.
The study also didn't consider any potential negative effects of the Amazon deal or the economic impact of projects at the Long Island City site that would have happened had the company not come.
The tax revenue, spread out over 25 years, would have represented a small portion of the state's annual budget, which currently exceeds $170 billion annually.
Still, economic analysts generally agreed that the impact of Amazon's headquarters would have been tangible, regardless of whether Cuomo's estimate was accurate.
Credit rating agency weighs in
In November, Moody's Investors Service said Amazon's decision to come to Queens was "credit positive" for the New York City metropolitan area.
The credit-rating agency noted the city would gain "significant high-wage employment, capital investment, and associated economic multiplier effects."
"The addition of high-wage HQ2 employment opportunities in the cities’ already tight labor and housing markets will increase demand for both people and housing, pushing other salaries and local property values higher," Moody’s wrote.
"We also expect to see increased spending on goods and services, all of which should drive meaningful increases in tax revenue to local governments in both areas."
On Thursday, Moody's called Amazon's decision a "setback for the city," but acknowledged that it remains in a good financial position overall.
The city gained 71,000 private-sector jobs from December 2017 to December 2018, according to to the state Department of Labor.
"High-tech employment will grow more slowly without Amazon’s expected 25,000 new jobs, but the city’s economic fundamentals remain positioned to grow strongly in the future," said Nick Samuels, Moody’s Investors Service vice president.
Business groups in the New York City region also railed against the failed deal, saying the whole area would have benefitted.
Al Samuels, president of the Rockland Business Association, said he's never seen anything that "approaches the shortsightedness and failure of the members of the elected community who caused the furor that led Amazon to withdraw from Queens."
Blame game ensues
Cuomo placed the blame squarely on Senate Democrats, who took control of the Legislature's upper chamber in January.
Earlier this month, Senate Majority Leader Andrea Stewart-Cousins, D-Yonkers, picked Sen. Michael Gianaris, a leading opponent of the Amazon plan, to serve on the state Public Authorities Control Board.
It is an important post that would have given Gianaris, D-Queens, the ability to block at least some of the incentives promised to Amazon.
On Thursday, Cuomo — a Democrat who has the ability to reject Gianaris' appointment — did not hide his displeasure.
The New York State Senate has done tremendous damage," he said in a statement. "They should be held accountable for this lost economic opportunity."
In her own statement, Stewart-Cousins faulted the Amazon deal for not being "inclusive and transparent" from the start.
She said the deal failed because the local community and lawmakers weren't included in the process and accused the company of avoiding discussions that could have improved the deal.
"It is unfortunate that rather than engage in productive discussions about a major development, Amazon has decided to leave New York," she said.
Gianaris, whose district includes Long Island City, said he wasn't interested in doling out credit or blame for Amazon's decision to drop its Queens plans.
He said Amazon's impact on the neighborhood's housing market and public-transit systems were never fully analyzed, noting that it has long been considered on the upswing before the company ever eyed it for a headquarters.
“You don’t need Amazon for New York to be great," he said. "New York will continue to be great.”