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What will NYC lose after Amazon HQ2 deal crumbles?

February 15, 2019

In a stunning reversal, Amazon has pulled out of bringing half of its second North American headquarters to New York City. 

 

After some four months of vocal opposition, the e-commerce giant has decided its had its fill of the tongue-lashing the company has taken from elected officials, labor leaders, and residents on a deal that would bring 25,000 jobs and $27 billion in tax revenue to New York. In a Thursday afternoon blog post the company announced that it is cancelling plans to bring a new campus to Long Island City, Queens—leaving a $3 billion incentive package on the table.

 

“A number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City,” the post reads.

 

The hotly contested project triggered transparency concerns when officials opted for the deal to go through a General Project Plan (GPP) in lieu of the traditional Uniform Land Use Review Procedure (ULURP) that would require a lengthy review and vote by the New York City Council. Political opponents were swift to praise Amazon’s change of heart, including Council Speaker Corey Johnson, who grilled Amazon executives in a pair of fiery Council hearings. 

 

“I look forward to working with companies that understand that if you’re willing to engage with New Yorkers and work through challenging issues New York City is the world’s best place to do business,” Johnson said in a statement. 

 

“I hope this is the start of a conversation about vulture capitalism and where our tax dollars are best spent. I know I’d choose mass transit over helipads any day,” Johnson added, referring to the private helipad Amazon had planned for executive joyrides.

 

While critics challenged the deal and argued Amazon wasn’t delivering its fair share of incentives, others praised it as an economic boon for the city with not only an influx of jobs and tax revenue heading to city and state coffers, but also infrastructure upgrades including new school seats, parkland, and other improvements that are sorely needed in the booming neighborhood.

 

For many, Amazon HQ2 stoked fear over how it could irrevocably change the city. Now that the online retailer has pulled out of the deal, here’s a look at some of the major things Amazon is taking with it.

 

Jobs
 

Amazon would have reportedly generated $27.5 billion in city and state revenue over 25 years—a 9:1 ratio of revenue to subsidies. This arrangement was predicated on Amazon creating at least 25,000 jobs over the next decade—and up to 40,000—with an average salary of $150,000, the memorandum said. Another 1,300 jobs were in the pipeline for construction and some 107,000 in total direct and indirect jobs were anticipated, according to state estimates.

 

Amazon, the city, and state initially planned to commit $5 million each toward workforce development. The deal also planned for a local nonprofit to open a training center on the HQ2 campus to mentor and recruit Long Island City locals, according to the city. A $10 million expansion of the city’s JobsPlus program into the Queensbridge Houses—the largest public housing complex in the country—was set to take shape. Additionally, the de Blasio administration planned to launch a $3-5 million program geared toward training NYCHA residents for careers in IT, cybersecurity, and web development.

 

Infrastructure
 

To fund local infrastructure—streets, sidewalks, open space and the like—Amazon planned to utilize the city’s Payment In Lieu of Taxes (PILOT) program, estimated by former Deputy Mayor Alicia Glen at $600 to $650 million over four decades. Amazon would have also built a 600-seat school and 3.5 acres of public, open space along the waterfront at Anable Basin.

 

When the deal first landed, transit advocates and elected leaders promptly called on Amazon to beef up transportation infrastructure in Long Island City, worrying that existing options weren’t enough to serve the rapidly growing neighborhood. Advocates pointed to the ongoing bus and subway crisis plaguing the city and packed train cars that run on the 7 and G lines through the area.

 

HQ2 was also piggybacking off of city infrastructure investments that were already in the works, or in the midst of being proposed, including $46 million for sewer and water-main upgrades, $60 million for a new school and a new Long Island Rail Road stop, and $180 million in new spending for overall improvements to Long Island City, the city has said.

 

Economic Impact
 

As part of the contested incentives package, Amazon was to receive nearly $3 billion in tax breaks, abatements, and grants. The state was committing up to $1.7 billion in Excelsior Tax Credits and capital grants—again, based on Amazon’s delivery of job and investment commitments. On the city side of things, the Industrial Commercial Abatement Program (ICAP) would have abated approximately $386 million in property taxes, while the Relocation and Employment Assistance Program (REAP) would have been worth $897 million, according to city and state officials. Incentives aside, the state would have reportedly earned $14 billion in tax returns, and the city would have received more than $13.5 billion in tax revenue over a 25 year period.

 

But officials revealed at a January City Council hearing that the price tag to bring Amazon to Long Island City could have cost $987 million more than the city previously claimed because city estimates only accounted for the minimum job and infrastructure investments that Amazon was expected to make, according to a report from the Council’s Finance Committee.

 

Real Estate
 

Long Island City transformed from a buyer’s to a seller’s market practically overnight after Amazon’s HQ2 announcement. The change came after a slump that in October saw 13 percent of the area’s listings slash their prices. Real estate experts speculated that Amazon’s move to Long Island City could paved the way for other large companies to move into the neighborhood. Amazon’s sudden reversal will undoubtedly lead to “whiplash,” as one StreetEasy expert put it in a statement.

 

The HQ2 cancellation has sent some developers scrambling, namely family-run plastics company Plaxall that was initially due to rent 4 million square feet of Long Island City land to Amazon for its headquarters.

 

Amazon said Thursday that it doesn’t plan on restarting its search for another location. The company will still move forward with its HQ2 location in Crystal City, Virginia, and a smaller operations center in Nashville, Tennessee.

 

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