By William Mooney and Mike Oates
Amazon’s decision to cancel its HQ2 project in New York, after gauging the local political and community reaction, is a very unfortunate and missed opportunity.
It is also a learning opportunity. Economic development professionals need to educate elected officials and the public that performance-based incentives are necessary to level the playing field when attracting major businesses in a competitive environment. When trying to attract jobs to our region, we cannot just blindly take the side of the corporation. Each deal must be evaluated on the value of the jobs created and the investment in the region. We want high quality, high paying jobs and we must create incentives that encourage that type of investment. We do not operate in a vacuum. Other states are more than willing to offer incentives to businesses. Amazon had over 200 communities competing for the HQ2 Project. It is simply a fact that New York is an expensive place to conduct business. If we do not offer a competitive incentive package to attract businesses, then other states will fill the void. New York will simply lose out on the jobs and the prosperity that comes with them.
Misinformation was a major factor in Amazon pulling out of its Long Island City headquarters project. Short-sighted politicians clearly did not understand the value of incentives that were performance based. Not only did it kill this project it also created a negative impression that will impact businesses considering locating here in the future. New York is now viewed by site selectors as having officials who are ambivalent toward creating high quality jobs, tough to work with regarding incentives and, even worse, untrusting and easily swayed by false, negative campaigns in the community. To reverse this fate, economic developers must communicate why economic performance-based incentives are not only important, but also necessary.
Governor Cuomo, New York City Mayor DeBlasio, along with Empire State Development and others, worked hard to successfully attract one of the world’s most lucrative companies. A total of nearly $3 billion in tax abatement incentives were offered. In return, Amazon would have generated $27.5 billion in state and city revenue over 25 years, a 9:1 ratio of revenue to subsidies – which Governor Cuomo called “the highest rate of return for an economic incentive program the state has ever offered.” Amazon would have created 25,000 jobs over the next decade (with up to 40,000 when all is said and done), with an average salary of $150,000. The project would have included an additional 1,300 construction jobs and 107,000 in total direct and indirect jobs. The further domino effect also would have provided 25,000 New Yorkers who would become consumers. Now there will be 25,00 less New Yorkers with the income to buy a car, a first home or providing quality care for a parent or grandparent. There will also be less money spent in the local economy helping countless other businesses.
When misinformation becomes fact, it is easy to say, “We don’t need incentives.” There was a false impression given that New York has a bucket of money that could be spent on subways, schools or infrastructure improvements but we decided instead to give it to a wealthy company to convince them to come and set up shop in New York. This is simply false. For example, the $3 billion offered to Amazon was an abatement of the $30 billion in tax revenues that would have been generated by Amazon over the next 25 years. They don’t get the money UNLESS they create the jobs, tax income and investment that they promised. That’s how performance-based incentives work. The company must perform BEFORE they get any incentive. The public needs to know how the incentive packages work in order for them to make educated decisions on whether the deal makes sense for their community. A simple message was lost in the rhetoric. Amazon wouldn’t have gotten the check up front.
Traditionally, a booming New York City has led to positive economic growth in Westchester County and the Hudson Valley. Indirect jobs would have been created in Westchester County that support the company and its employees. And, there would be a spillover effect – local employees would have filled those Amazon jobs, creating openings in other businesses where the employees had worked, and those jobs would have needed to be filled.
An opportunity was lost to continue to diversify the regional economy. We could have continued to expand on the technology and innovation cluster and drive the tech message about New York State. By diversifying, obviously, it would have protected us in an economic downturn.
All this said, while this is a huge loss for the state of New York, both Westchester County and the Hudson Valley are still well-positioned to attract and retain high quality jobs. We have a strong and growing biotech and healthcare sector with companies like Regeneron. We have new opportunities for development with the exciting North 60 Biotech and Life Science campus and Marist Health Quest School of Medicine in Poughkeepsie. We have smart growth planning in communities like New Rochelle that encourages development and investment. We have fast growing food and beverage, tourism and hospitality sectors with projects like Legoland New York, and Bellefield at Historic Hyde Park. We have strong infrastructure and an international airport (New York Stewart International Airport) that is ready to take off. And, we have a highly skilled and educated workforce and creative entrepreneurs who are bringing innovative companies and projects to the region.
We just need to make sure our region remains in the very competitive world of economic development.
