Sarah Holder is a staff writer at CityLab covering local policy, housing, labor, and technology.
New York and Virginia politicians and activists could still make changes to Amazon HQ2 packages—or at least stop the next bidding war from mirroring this one.
Amazon’s long-awaited HQ2 reveal was received Tuesday morning with a mix of glee and disgust. Starting in 2019, the company announced, it will plop a pair of 25,000-worker headquarters outside New York City and Washington, D.C.—one in Long Island City, Queens, and another in a portion of Northern Virginia that’s been newly branded as National Landing. In exchange, Amazon will receive more than $2 billion in state and local subsidies. That is, if a growing opposition party of activists and politicians doesn’t stop them first.
“Our subways are crumbling, our children lack school seats, and too many of our neighbors lack adequate health care,” read a joint statement from New York State Senator Michael Gianaris and New York City Councilmember Jimmy Van Bramer. ”It is unfathomable that we would sign a $3 billion check to Amazon in the face of these challenges.” Amazon’s CEO Jeff Bezos is the richest man in the world. (New York has not committed incentives as high as $3 billion, according to documents released by Amazon.)
“Frankly, I’m mortified,” Lee Carter, a Democratic Virginia House Representative, told me. “We’re paying for the privilege of making our own lives worse.”
The negotiations may be over, but the agreements Amazon and regional leaders produced were written mostly in secret. The details of each package, including incentives, weren’t released to the public until Amazon’s announcement Tuesday—even to key political figures in both jurisdictions.
And the deals are not technically done. Before contracts are signed and money is transferred, local politicians and activists do have a few legal avenues left to alter them. In Virginia, the expenditures must be approved by the state legislature, which will vote on the budget in the January legislative session—a process that for previous deals has been little more than a rubber stamp, but that activists are hoping might be stalled this time by public pressure. In Arlington, the county board will weigh in this February, too. In New York, a way forward is more complicated: Governor Andrew Cuomo signed the deal as a General Project Plan (GPP), a special genre of development that doesn’t need to go through a state or city vote. So instead, some New York legislators are drafting new laws aimed at preventing as much bloodletting in the next bidding war. And others are trying to find a legal way to challenge the GPP retroactively.
Says New York’s Gianaris, the number-two Democrat in the State Senate: “We’re looking to delete what just happened and reset.”
The push to reverse New York State’s “boutique” and “bogus” subsidies
Typically, the political will to slash economic deals after they’re made just isn’t there, in New York or elsewhere, whether the public is angry or not. But in New York, it’s politicians who have been most vocally against the Amazon package.
“I will always advocate for economic development and jobs in New York, but when the process is done behind closed doors, with zero community input and nearly $2 billion in subsidies to a global behemoth, I am going to be skeptical,” New York City Council Speaker, Corey Johnson, wrote in a statement. “I look forward to reviewing the the full details of the package … For now, all I can say is I am very concerned.”
“The coalition is growing,” said Councilmember Van Bramer.
Part of the frustration is that in New York, the biggest concessions to Amazon were made by the state—namely, Cuomo—not the city. According to agreements between the New York State Urban Development Corporation (also known as Empire State Development), the New York City Economic Development Corporation, and Amazon, New York State will give the company more than $1.5 billion in performance-based tax incentives if the company meets its hiring and building promises. And since the deal was specially packaged by Cuomo, it overrides local regulations.
“By going through the GPP they have removed this deal from any binding votes that would need to take place by the city or the state,” said Councilmember Van Bramer. It’s a rare move, but not unique: New York’s 2006 Atlantic Yards development project was also pushed through as a GPP, and was stalled by litigation. Van Bramer says he and fellow councilmembers are looking to the Atlantic Yards case for legal precedent, with the intent to challenge Amazon’s.
The city, meanwhile, has offered Amazon a Payment In Lieu Of Tax (PILOT) program, letting the company off the hook for property tax on part of its site, and instead asking it to use those funds to pay for things like green space and community improvements in the Long Island City region. More infrastructure improvements will likely come out of Long Island City’s planned $180 million investment in the city, which reports have noted might have been budgeted earlier this year with Amazon in mind. (If all that’s not enough, Bezos will also get access to a helipad.)
Besides the $1.5 billion in discretionary spending, Cuomo has also promised Amazon exemption from the city’s typical land use proceedings. The plot of waterfront land Amazon plans to occupy in Long Island City is not currently zoned for commercial development, meaning it would need to be approved for rezoning before company construction begins. To start that process, new developments usually have to go through a Uniform Land Use Review Procedure (ULURP), which allows public input and oversight from offices like the Department of City Planning, the City Planning Commission (CPC), and the City Council. But on Tuesday, Cuomo said he’d use his power as a state officer to greenlight the project, without all that fuss.
“[Cuomo] is usurping ULURP with a bogus argument that this requires state involvement,” said New York City Councilman Brad Lander. “The state is offering both a boutique set of economic development subsidies and a boutique land use process, in place of the city’s rule-bound process.” It’s bogus in that its justification is thin, Lander clarifies, but the state is technically able to control city land-use processes.
Without going through ULURP, city leaders and city residents likely won’t have control over Amazon’s physical footprint. “We’re giving away a really important piece of property to a company that has already shown a lack of transparency,” said Maritza Silva-Farrell, the executive director of the Alliance for a Greater New York (ALIGN).
But legislators are also drafting policy that will change the nature of future economic development deals—and perhaps retroactively shake up this one.
State Assemblyman Ron Kim plans to introduce a bill this January that would eliminate the billions New York spends each year on economic development subsidies, and use it to buy up and cancel student debt. In 2015, New York gave away more than $8.5 billion in “corporate welfare,” Kim told me, which could have covered about 84 percent of the state’s distressed student loan debt.
“If you look at the actual economic returns of investment, alleviating working families living in debt would result in a much higher GDP as well as job growth,” said Kim. “While there’s absolutely no statistical correlation [with] giving billions to Jeff Bezos, the richest man in the planet.” He cited research from the W. E. Upjohn Institute indicating that incentivizing companies doesn’t lead to significant economic boons.
If Kim’s legislation passes (which might be easier after this November’s midterms, with a newly Democrat-controlled State Assembly and State Senate), Governor Cuomo’s $1 billion-plus deal to Amazon could be at risk of reversal. “We’re hoping to put in some clawback clauses to divert as much of the money as was agreed back to the hands in the people that need it the most,” Kim said. New York Congressmember-elect Alexandria Ocasio-Cortez called the legislation “fire.”
While Kim came up with the proposal before Amazon’s announcement, the deal has brought him renewed energy: He plans to pitch the program to a Virginia legislator, too.
And Lander, too, has found a path to make sure a bidding war like Amazon’s won’t unfold so opaquely next time. He will propose legislation that would prohibit the city from signing non-disclosure agreements (NDAs) regarding any economic development bids. (Amazon required a signed NDA from all of its applicants.)
“The city put in a proposal that described a range of things about how the city would work with Amazon on its siting,” said Lander. “And there’s no reason any of that should be kept from the public.”
In Virginia, legislators hope to stop the “rubber stamp”
Virginia legislators, too, say they were mostly uninvolved with their region’s proposal process, and were caught off guard Tuesday by the details of the state’s agreement, which is smaller than New York’s. None of it was in the Virginia State Legislature’s last two-year budget, passed this summer, according to delegate Carter. In order to free up the Amazon funds, the incentive package will have to be put to a vote.
“All this has to go through the budgetary process in the next legislative process,” Carter said. “And all of it can stop there—it just takes legislators saying we’re not going to rubber stamp [it], we’re going to actually legislate.”
From the state, Amazon was promised an estimated $550 million, contingent on how many jobs the company creates, and a promise that Virginia will spend millions in neighborhood infrastructure improvements. From Arlington, Amazon is set to get $23 million in cash grants from local hotel tax revenue, which the city predicts will grow with an Amazon in town.
The county will also invest $7 million a year of its own budget in affordable housing construction, says Arlington County Board President Katie Cristol. That commitment had been planned by the county independent of Amazon’s arrival, she says, but Virginia has since agreed to match the affordable housing fund with $15 million of state money each year. “That’s a new commitment, specifically tied to Amazon,” she said.
And the largest announced investment is a new, 1 million square-foot, $1 billion “Innovation Campus” at Virginia Tech, which will graduate students with computer science and software engineering-focused majors. The university and the state will provide $250 million in seed funding each, and the city of Alexandria has agreed to help expedite construction on the site, which will be located in the city of Alexandria’s portion of National Landing.
Several people CityLab spoke with were skeptical of the university’s role. ”Honestly it seems like what this is going to be is just a partially state-funded tech pipeline for Amazon to get workers,” said Alex Howe, an organizer with the Metro DC Democratic Socialists of America Northern Virginia Branch.
But the university maintains that the growth will help both the community and the company. “What we’re doing is responding to a need in the region,” said Michael Stowe, a Virginia Tech spokesperson. “The catalyst for doing that was the Amazon project.”
With enough public pressure, the legislature could be influenced to vote the state package down, DSA’s Howe says, especially because every state senator and delegate is up for reelection in 2019. “That gives us a lot more leverage: We can push the argument out to groups all across Virginia,” Howe said. “Southwestern Virginia is dealing with the opioid crisis, and having huge issues with funding schools.” They have a vested interest in keeping public money public, he says.
“I think my colleagues in the General Assembly better think long and hard before they choose to raise their constituents’ rent,” added Carter, referring to the projected housing price spikes across the region, after Amazon’s highly paid workforce descends.
But Virginia’s House of Delegates and State Senate are both Republican-controlled, while the lawmakers who have spoken in opposition are Democrats. And the same legislative body approved a $3 billion deal to expand Micron, a semiconductor manufacturing plant, just months ago, freeing up $70 million in incentives. “In both cases, this money just magically appeared out of thin air without a single word for the legislature,” said Carter. “Also in both cases, those of us who were elected who were likely to criticize the deal were excluded from negotiation.”
As for Arlington County’s comparatively tiny package, that, too, will be up for a February vote, according to County Board President Cristol. The board held a virtual town hall on Tuesday night, which will be the first of a few opportunities for public comment, Cristol says. “The package we’ll be voting on in February is, on balance, a package of investments in our own community,” she said.
Beyond HQ2 sites, all eyes on Amazon
From the opposite coast, communities whose identities have been transformed by tech—Seattle and the Bay Area, mostly—are watching closely as two new cities embark on what could be similar paths. With the Amazon deals comes two new opportunities to redefine what a “tech-driven economy” looks like, says Catherine Bracy, co-founder and executive director of the Bay Area-based tech organizing group TechEquity Collaborative.
Part of getting it right in Queens and Arlington will be focusing on local hiring and job development, she says, and committing to developing affordable housing even as high-income employees change the housing market. But the other piece of advice she has—for Amazon, and for its new hosts—is to start their soon-to-be-long-term relationship on a less adversarial note.
“I think the one thing that’s made it hard for us to get big things done here [in the Bay] is that it’s been framed as us versus them: Tech is the interloper, and the cause of all of our problems,” she said. “In order to avoid that toxic civic dynamic, tech folks have to be part of the conversation.”
Amazon’s relationship with Seattle has already been tested this year, after the company helped kill a tax on businesses to fund affordable housing and homelessness initiatives. Tensions among other tech groups flared later in San Francisco, after advocates tried to pass something similar (and succeeded).
In Queens and Arlington, leaders have the chance to step up early, Bracy says, and start identifying ways to “harness this growth, rather than everyone saying, how do we mitigate the harms.”
To that end, legislators in the host communities could use their votes not to shut down the economic incentives entirely, but to instead ask for more direct community investment from Amazon. Roshan Abraham, the Steering Committee leader of progressive organizing group Our Revolution Arlington, says he hopes that, at public hearings in the coming weeks, the community can slide things like local hiring quotas into the final agreement.
But not all advocates are sold on that strategy. “They can say we’re going to give you everything the community wants,” said Silva-Farrell. “If I don’t see it happening, I can’t believe it.”
Neither do the angriest legislators. “We’re not trying to find more pennies to satisfy us; that’s not what we’re talking about,” said New York’s Gianaris. “We’re not looking to squeeze more concessions from them.”
Already, leaders are fired up. And as they scour agreements in coming days, the relationship could get worse before it gets better. It’s unusual that a company would include tax breaks in their initial press release at all, says Greg Leroy, the executive director of corporation accountability nonprofit Good Jobs First—suspicious, even. “The company seems very chastened by the blowback they’ve gotten. They’re trying to control the denominator,” by focusing on the per-job, performance-based discretionary incentives, he continued. But there are already some large omissions from the press release, which could add up: There are pre-earmarked infrastructure investments, like Long Island City’s $180 million capital improvement plan, as well as community development expenses, like Virginia Tech’s $1 billion campus.
Leroy predicts that won’t be all the hidden expenses governments are actually putting toward Amazon. “We think there are other pots of money.”