A lot has already been written about what is wrong with the Amazon deal and a lot more will be as the project has brought together opponents from both the left and the right. I have my own reservations about the deal, but I would be a complete hypocrite if I didn’t come clean. As a former state economic development professional, who would have once sawed off his right arm for a shot at a deal of this magnitude, I totally understand why the state and city felt they had to compete. The Amazon HQ2 competition was the Superbowl of economic development contests, (which might be the problem in and of itself) and winning matters. Well usually, winning Foxconn didn’t work out so well for Governor Walker, more on that later.
At the end of the day, Amazon located exactly where they wanted and needed to be, in the two labor markets with the most tech talent in America, New York City and Washington, DC. Might they have gone to New Jersey, sure but who really wants to go to New Jersey? I mean even 9/11 didn’t scare the green eyeshades at Goldman Sachs back to New Jersey. In making any deal, economic development professionals always weigh the question of the CEO premium, is Jeff Bezos a Jersey guy? I don’t think so. New Jersey, all the high taxes, corrupt politicians, miserable transit issues and yes crappy pro football of New York, without the charm, the skyline and the sexy address.
Did New York overpay, probably. But it’s not an exact science and on paper, no matter which way you cut it, the deal is probably still technically worth the price. As my former colleague and much smarter friend John Bacheller points out in his blog, Policy By the Numbers, by traditional economic development metrics this deal drives real returns for the state.
And when compared to the Foxconn mega deal, Amazon looks like a bargain. It’s hard to imagine but two pro-union, progressive New York Democrats totally out negotiated a Republican, union busting, conservative. Walker’s deal with Foxconn provides $4 billion in state and local taxpayer subsidies in exchange for an actual guarantee of only 3,000 jobs paying an average of $53,000 a year in Wisconsin. Whereas, New York is providing $1.5 billion in direct state subsidies for 25,000 jobs with an average salary of $150,000. (Then again, consider, Foxconn is going to Mount Pleasant, Wisconsin, which I couldn’t point to on a map and Amazon is going to be literally just outside Governor Cuomo’s Manhattan office window across the river in Queens, which every 5th grader in America can locate.)
After you strip away the philosophical concerns regarding the state’s increasing reliance on corporate welfare and consider the deal on it’s own terms, my biggest single problem is not the return on the state’s investment, I think ultimately the deal is a net plus for the state. My problem is not the structure of the deal, because it’s clear reading the documents that real economic development professionals are back in charge, congratulations Mr. Zemsky.
My problem is the where! New York City doesn’t need this deal. The New York City market, despite it’s high taxes, broken subway, booming homeless population, gridlock and ridiculous regulations and red tape is somehow still working on its own.
In fact, the New York City economy, as compared to the rest of the state, is doing quite well and when you compare it to Upstate, it is absolutely booming.
Moveover, as a result of the November elections, the gap between the haves (NYC and downstate) and the have nots (Upstate) just became wider at the exact same time more political power has shifted to the haves. Some downstate pols who oppose the deal juxtapose the Amazon incentive offer against the real, dire needs for transit repairs and affordable housing in New York City. Others are arguing about helipads. There isn’t a whole lot of talk about the jobs. As a born and bred Upstater, even though I totally get it, it’s a bit galling. We’ll take the jobs, the helipad too and deal with our crumbling roads and bridges.
And at the core of it, that’s increasingly the problem. Upstate is starved for good jobs and in the process becoming more and more working class, save for our university suburbs. As David Brooks wrote recently in the New York Times, “Businesses like Amazon will invest in rich places like New York and Northern Virginia, but they won’t invest much in working-class communities in Ohio or Kentucky.” Add Upstate New York to the list. Which makes you wonder if Walker’s deal in Mount Pleasant, Wisconsin is by order of magnitude what would be necessary in Upstate.
Amazon isn’t alone. And Amazon didn’t create the problem of the Upstate economy and long suffering working class, but with some nudging from the state, they can be part of the solution The deal is done, but Amazon and the state should get to work shipping some of the benefits of the HQ2 decision beyond the five boroughs.
5 Things Amazon Can Do for Upstate
Leverage Amazon R&D with Upstate Universities – The Daily News headline, ShAmazon, was amusing but misleading. In 2017, Amazon led all U.S. tech companies spending $22.6 billion on research and development, 41 percent more than in 2016 (when it also topped the list). Amazon invested resources into AWS, Alexa and technologies like computer vision to support projects such as the Amazon Go cashierless store of the future. One of Upstate’s strengths are all the great universities that conduct leading research and development. The state should work with Amazon to leverage research development partnerships with SUNY Albany, Binghamton, Cornell, Clarkson, SU and others.
DrOne-ida – Amazon has a leadership role developing drones as part of their goal to develop a fleet of unmanned aerial vehicles that can get packages to customers in 30 minutes or less. Here in New York, we boast one of only six federally authorized sites for drone testing in the United States. The Northeast UAS Airspace Integration Research Alliance (NUAIR) at Griffiss Airbase has a leadership role in developing the first air corridor in the nation where unmanned aerial vehicles can safely fly beyond line of sight for testing and development. The state should work with Amazon and strongly encourage it to center it’s drone testing and R&D at Griffiss Airbase in the heart of upstate, Oneida County, New York.
ReSkill the Upstate Workforce – Amazon chose its New York and DC locations because of access to high-tech talent, at the same time Upstate working class employees continue to be left behind as companies like New Era close. Working class, as defined in an excellent study out just this week by AEI and Brookings, are New Yorker’s with at least a high school diploma but less than a four-year college degree living in households between the 20th and 50th income percentiles—roughly $30,000 to $69,000. New York should work with Amazon and other leading tech companies to immediately develop a well-funded program targeted specifically to reskill working class Upstate New Yorkers.
Improve and Increase Rail Between NYC and Upstate – While much is written about the poor performance of the MTA and subway system, Upstate rail is still lacking and little is written about the state’s obligations to AMTRAK service. As the Empire State Passenger Association has argued, the state could immediately impact rail service by developing an aggressive pro-rail strategy that focuses on adding and replacing 40 plus year old cars and engines. Long-term high-speed rail should be a priority. New York should increase access to job opportunities downstate, by making short and long-term improvements to AMTRAK that add capacity and shorten travel times.
Targeted Upstate Job Recruitment Goals – As too many Upstate communities hollow out, it may feel like soul sucking irony to suggest creating targeted Upstate recruitment goals for Amazon’s HQ2, but better here then the Southwest or God forbid, Florida. State’s typically set aside employment goals for underrepresented and underserved populations, New York’s working class is approaching that status. New York should work with Amazon to establish a goal of recruiting 10% of their workforce from “working class” Upstate New Yorkers.
Finally, one last suggestion that might enure value downstate – if I’m running the MTA, I’m on the phone with Jeff Bezos. A huge part of the Amazon magic is its genius managing logistics, successfully moving over 608 million packages a day, by comparison the MTA is only moving a little under 6 million persons a day. The Byford Plan is solid, but New York’s congestion and growing transportation problems could benefit from some out of the box thinking.
Amazon, welcome to New York, now get to work earning that subsidy.