New York City Tech, Post Amazon

by |February 25, 2019

The day before Amazon jilted New York City, I wrote, “no one should pretend this deal is good, but it is necessary.” Modern businesses are highly mobile and cities and states aggressively compete for them. Amazon’s HQ2 competition was a disgusting display of corporate arrogance, but America’s state and local governments were unable to resist the competition, and once New York won, it needed to try to finalize the deal. I thought that losing Amazon would be a little bit like losing the Brooklyn Dodgers: a psychological blow and one that in some ways could never be overcome. And then I thought about the Mets. Yes, the Dodgers and Giants left New York for California, but eventually the National League realized they needed a franchise in the nation’s largest city; baseball needed New York as much as New York needed baseball. But it would take Brooklyn years to get over the loss of the Dodgers.

One of the ironies of the Dodgers departure was that they left because they could not secure the city’s help in finding a new home in Brooklyn. The Dodgers had the money to build a new stadium to replace the decaying Ebbets Field, but Robert Moses, the land use tsar of New York, would only offer a stadium site in Queens (not in Brooklyn) that eventually became Shea Stadium, the home of the New York Mets. Even more ironic, the site the Dodgers wanted was where today’s Barclay Center was built, at the intersection of Flatbush and Atlantic Avenue. While our emotional attachment to Amazon was nothing like Brooklyn’s love of the Dodgers, the two losses shared one common element: government mistakes were at the center of the loss.

New York’s dysfunctional political leadership was on full display after losing Amazon. First, Governor Cuomo blamed liberals for chasing Amazon away. Then Mayor de Blasio blamed Amazon for not being tough enough to handle the rough and tumble of New York’s politics. Both seemed more interested in blaming someone for the loss than for trying to learn from the mess and figure out what to do next. Long Island City remains a great place to locate a tech business. Is Amazon the only company in the world that needs high quality workers, good mass transit, and a city that never sleeps? Maybe some Chinese tech firms would be attracted to an American city with nearly 500,000 people who speak Chinese as their first language. Tech companies are coming to New York and are starting up in New York. Tech is growing organically as part of of New York’s overall economic transformation. Without Amazon’s flash and greed, Google seems to be heading toward a local presence approaching 20,000 workers. This past November, Wall Street Journal reporters Douglas MacMillan, Eliot Brown, and Peter Grant filed a story about Google’s plans for expansion in New York and quoted Google as stating that it had “not applied for subsidies or tax incentives for any of its properties in New York.”

I believe that Cuomo and de Blasio were played for suckers by Amazon and their high-profile sweepstakes. The competition’s rules required secrecy and did not allow for the normal give and take of New York City’s political process. A secret siting process is doomed to failure in New York. Remember, this is a city with no Walmarts, no West Side interstate highway, no Olympic stadium, and is thriving without a wide variety of other projects that did not survive our siting process. It was foolish for these leaders to believe that our political process could be sidelined even for the financial benefits that Amazon could bring. The lesson our leaders should have learned is that we didn’t lose Amazon because Amazon wasn’t tough enough or the New York State Senate was suddenly too liberal, but because our leaders thought they could short-circuit local politics. It’s easy to understand why they did it. Amazon made the rules; they set the terms of the competition. The only way to compete was on Amazon’s terms. The lesson is the next time a company presents us with an opportunity like that, we need to pass. Passing would have been better than competing, winning, and then very visibly losing.

Now, instead of casting blame for losing Amazon, we should be crafting policies to encourage location of technology companies in New York. Government should also be doing all it can to incentivize those companies that are already here. As Steve Lohr reported in the New York Times this past November, tech is one of the fastest growing segments of New York’s economy. According to Lohr:

“Measurements of tech sector jobs vary, depending on definitions. But the broad picture is a growing labor market for well-paying jobs. From 2010 to 2017, according to government statistics, tech sector employment grew by 53,000 in the city, or 65 percent, to an estimated 134,700. And the average salary of $147,300 in 2016, the most recent estimate available, was far higher than the citywide average of $89,100 for all private employers.”

Both New York State and New York City have a number of programs designed to provide financial incentives to businesses. Perhaps we should build on the effort to attract Amazon to Long Island City to create a program of incentives to attract tech sector businesses to that specific part of Queens. The multi-billion-dollar program of tax expenditures promised to Amazon were largely reductions in business taxes that would be paid once the company’s new jobs were filled. These tax discounts only develop if businesses locate here and have tax obligations they must pay to the state and city government. These tax expenditures could be offered to other technology companies willing to locate in Long Island City. In addition, infrastructure improvements in transit, energy, and public space could be developed and used to attract tech businesses. We should create a Long Island City technology district and see what we can to do to attract tech businesses to that neighborhood.

The city and state government should also encourage and even provide incentives for Cooper Union, Cornell, Columbia, NYU, and other engineering schools in New York City to open up life-long learning opportunities in the Long Island City technology district. The city’s Economic Development Corporation should create annual job fairs and other networking opportunities in Long Island City to ensure a steady supply of highly trained personnel.

Looking back at the Amazon fiasco is only useful if we use it to guide more effective policies to build our technology industry. The governor may be interested in political retribution because he was visibly humiliated by the failure of the Amazon’ deal, and the mayor may want to use Amazon’s loss to attack corporations in an effort to pander to his imaginary presidential constituency, but they should both resist the temptation. There is a lesson in Amazon’s loss, but it is not that we don’t know how to attract businesses to New York. It’s that even bad deals need to be vetted and explained to our communities, elected leaders, unions and other stakeholders. Let’s learn from our mistakes and do all we can to build this growing industry.

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