Amazon’s Decision To Pull Out of NYC Is a Massive Blow To Corporate Welfare

David Dayen February 14, 2019

Facing mass public opposition, Amazon canceled its New York City headquarters project. (Photo by Holger Hollemann/picture alliance via Getty Images)

Ama­zon announced Thurs­day the com­pa­ny has can­celed its bid to acquire near­ly $3 bil­lion in pub­lic dol­lars to locate a facil­i­ty in New York City — the most sub­stan­tial set­back for cor­po­rate wel­fare in recent memory. 

Sig­nif­i­cant­ly, Ama­zon states in its announce­ment of the deci­sion that it will con­tin­ue to expand its work­force in the New York City area, up from the 5,000 work­ers the com­pa­ny already employs in Brook­lyn, Man­hat­tan and Stat­en Island. In oth­er words, Ama­zon still plans to main­tain a head­quar­ters-sized pres­ence in New York, the nation’s finan­cial and eco­nom­ic hub. It just couldn’t win the polit­i­cal bat­tle to obtain bil­lions of dol­lars in sub­si­dies from it.

As In These Times report­ed, last week Ama­zon turned to the Wash­ing­ton Post, owned by its CEO Jeff Bezos, to float that it was recon­sid­er­ing the pro­posed HQ2 head­quar­ters in Long Island City, Queens, esti­mat­ed to house 25,000 employ­ees. This move was seen by many as a veiled threat to pack up and aban­don New York if politi­cians didn’t turn over bil­lions of dol­lars in tribute.

But oppo­nents in New York’s city coun­cil and the state leg­is­la­ture refused to buck­le to Amazon’s demands. They doubt­ed the neces­si­ty of hand­ing over tax­pay­er cash to the world’s most valu­able com­pa­ny, at a time when New York has strug­gled to fund pub­lic tran­sit and afford­able hous­ing. Fur­ther­more, they feared a wors­en­ing of con­ges­tion, gen­tri­fi­ca­tion and dis­place­ment in Long Island City.

Amazon’s refusal to remain neu­tral if its New York City work­ers attempt­ed to union­ize was in many ways the last straw for oppo­nents of the deal. Accord­ing to the New York Times, New York Gov. Andrew Cuo­mo set up a meet­ing between Ama­zon exec­u­tives and union lead­ers on Wednes­day, but Ama­zon made no con­ces­sions at the meet­ing, and broke up with the state the next day.

State Sen. Michael Gia­naris, a vocal crit­ic of the deal, was tapped by his col­leagues for a seat on the Pub­lic Author­i­ties Con­trol Board, which reviews and approves state-based eco­nom­ic devel­op­ment sub­si­dies. He would have had an effec­tive veto on about $1.5 bil­lion of the sub­si­dies for the project. After Thursday’s announce­ment, Gia­naris said in a state­ment, Like a petu­lant child, Ama­zon insists on get­ting its way or takes its ball and leaves… The only thing that hap­pened here is that a com­mu­ni­ty that was going to be pro­found­ly affect­ed by their pres­ence start­ed ask­ing questions.”

Gia­naris high­light­ed the fact that Ama­zon still plans to expand its New York work­force regard­less of the new facil­i­ty, sug­gest­ing that the bil­lions of dol­lars the city and state would have forked over appeared mean­ing­less con­sid­er­ing Amazon’s resolve to build its pres­ence local­ly anyway.

In its announce­ment, Ama­zon cit­ed the need for pos­i­tive, col­lab­o­ra­tive rela­tion­ships with state and local elect­ed offi­cials” over the long-term, which the com­pa­ny did not see mate­ri­al­iz­ing in New York City. Ama­zon cit­ed a poll show­ing 70 per­cent of New York­ers in sup­port of the deal; a more recent poll showed 56 per­cent sup­port, while anoth­er showed major­i­ty oppo­si­tion in Man­hat­tan and a split in Brooklyn.

Accord­ing to Ama­zon, it would not re-open the HQ2 sweep­stakes, but would pro­ceed with its oth­er HQ2 site in Crys­tal City, Vir­ginia, as well as a 5,000-employee Oper­a­tions Cen­ter of Excel­lence” in Nashville, Ten­nessee. Politi­cians in those loca­tions have been gen­er­al­ly hos­pitable to the deals, which will yield close to a bil­lion dol­lars more for Ama­zon. Restart­ing the bid­ding would have poten­tial­ly com­pound­ed the neg­a­tive atten­tion Ama­zon has received over HQ2. The com­pa­ny has 17 oth­er cor­po­rate offices and tech hubs across North America.

More broad­ly, the HQ2 debate in New York broad­ened aware­ness of the sor­did process of eco­nom­ic devel­op­ment deals, by which pow­er­ful com­pa­nies raid cities and states to the tune of up to $90 bil­lion annu­al­ly, while local ser­vices suf­fer from lack of funds. While these sub­si­dies are often grant­ed under the cov­er of secre­cy, Ama­zon turned its demands into a spec­ta­cle, which appears to have back­fired. All com­pa­nies that enjoy cor­po­rate wel­fare will like­ly now receive more scruti­ny for such mas­sive sub­sidy deals.

Nathan Jensen, a pub­lic pol­i­cy pro­fes­sor at the Uni­ver­si­ty of Texas who stud­ies eco­nom­ic devel­op­ment deals, cit­ed the secre­cy as the main prob­lem with the New York deba­cle. The Gov­ern­ment and May­or tried to impose a secret­ly nego­ti­at­ed deal with Ama­zon, that wasn’t released to the pub­lic or pub­lic offi­cials, and it led to resis­tance. That should be the les­son here. If you want to make good pub­lic pol­i­cy, you have to include the public.”

David Dayen is an inves­tiga­tive fel­low with In These Times’ Leonard C. Good­man Insti­tute for Inves­tiga­tive Report­ing. His book Chain of Title: How Three Ordi­nary Amer­i­cans Uncov­ered Wall Street’s Great Fore­clo­sure Fraud won the 2015 Studs and Ida Terkel Prize. He lives in Los Ange­les, where pri­or to writ­ing about pol­i­tics he had a 19-year career as a tele­vi­sion pro­duc­er and editor.
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