Economic Development
On the west side of Manhattan, from the west village, where we live, to the Javits Center on 34th Street and the west side highway, runs an abandoned elevated train track called The Highline.
Eleven years ago, the Gotham Gal and I took a walk on the old Highline with Joshua David, one of the two founders of Friends Of The Highline, and I wrote this post about what was going to happen.
The Highline cost something like $400mm to renovate. Some of the funds came from the city and state, but most came from private donations, like the one the Gotham Gal and I made after taking that walk.
And then we got to watch what happened. The neighborhood exploded and is still exploding. There has to have been tens of billions of dollars of investment in real estate along The Highline over the last ten years and it is still going on. I am not including Hudson Yards, which sits at the northern end of The Highline, which is another economic development story but not the one I am telling.
And into those buildings move companies and people. New homes get created. Then the coffee shops and grocery stores and restaurants come. And the local economy expands, by a lot. The city and the state taxes this economic activity and its coffers fill up a bit more as a result.
When we took that first walk on The Highline, I asked Joshua if there was some way to tax the
That is the power of economic development. It is a virtuous circle. You invest, you grow, you produce economic returns, you invest, you grow. Rinse and repeat.
Why am I telling you this story today?
Well I got this tweet in my timeline sometime yesterday:
Amazon Is Getting $1.5 Billion to Come to Queens https://t.co/B4ITzuSXmj <- Why? @fredwilson Did NYC really need to pay Amazon $1.5B to come there? Will they get it back?
— Peter Radizeski (@radinfo) November 13, 2018
It is a great question. And some economist should do the work. The city probably already has.
My bet is that the City will get a return on this investment. Possibly a very large one. Twenty-five
The annual salaries for those 25,000 employees will be more than the $1.5-2bn that the city and state are committing to this project. When you add to that the real estate that will be constructed and renovated, all of the new homes that will be created for people, and the salaries for all of those construction workers, the local commerce (coffee shops, grocery stores, restaurants, etc) and the salaries that all of those employees will take home, etc, etc, I think it is a “
You can all tell from the posts I have written on this subject over the last week that I am a big fan of economic development. I think it is one of the things that makes a city vital and allows a city to retain its vitality. In the thirty five years we have lived in NYC, we have seen much of Manhattan and Brooklyn rebuilt. Now we are seeing Queens do the same thing. The Bronx and Staten Island are not sitting idle either. It is a magnificent thing to see and I pinch myself every time I think about it.
Comments (Archived):
The Highline looks amazing.There’s a plan to copy the idea in London;https://www.camdenhighline.comI definitely agree that there should be a tax on the added value brought to properties along corridor. It seems only fair and equal. Who could possibly argue against that principle?P.S. Your original Highline post received zero comments. It takes commitment to build a thing. Glad you stuck at it.
Ah, the highline.. loved the experience, the materials and design of the benches, the stairs, even the concrete. Top quality attention to detail.If Amazon contributes in the same way, integrating their buildings to the city, it should be good for the city.Just cancelled a trip.. missing NYC!https://uploads.disquscdn.c…
I didn’t know about the Highline. Soooo, the truth is that actually some people in NYC actually like grass and trees and are not totally in love with asphalt and concrete!!! Hmm. Maybe they’d pay millions for my backyard — chipmunks, squirrels, rabbits, raccoons, possums, deer, and, some years ago, foxes. Actually, the US has many millions of acres of just gorgeous grass and trees.What if the people of NYC also discover family formation, i.e., having a good marriage with, gee, who’d think of that, children????
Nice backyard Dr. Sigma!If I were you, I would put on the greycat shroud and go to look what is going on in town. 🙂
I’ve been in Manhattan: Lutece, La Cote Basque, Four Seasons, a very good wine shop, season tickets to the NYC Opera, some plays, some YMCA concerts, worked on Wall Street, etc. Nice place to visit; wouldn’t want to live there; yup, nice back yard!But just now am mud wrestling with the ACLs of Microsoft’s NTFS and writing some code to correct some directory time/date stamps changed by XCOPY — for files it copies the existing time/date stamps but for directories applies the time/date of the time of the copying. I want the original time/date stamps. I’ll assign the latest appropriate time/date stamp of the subtree — slightly cute little tree problem. Point: Going into NYC won’t get that work done!
Nice bug. If you are copying a directory tree one expects an actual copy, metadata included. Haven’t noticed how it goes in Linux.
Nice problem. One would expect a directory tree to be copied with its metadata intact. I understand ROBOCOPY can do that using some switches.
That XCOPY just slaps the current time/date stamp on the copy version of the directories is a common gripe. And ROBOCOPY is commonly recommended as a solution.Last night I confirmed that both Windows 10 64 bit Home Edition on the HP laptop I got and Windows 7 64 bit Professional SP1 on the server, AMD FX8350, 64 bit, 8 core, 4.0 GHz standard clock speed, I’m building both have ROBOCOPY (I have yet to check the version dates) with the operating systems.I will look over the ROBOCOPY options and write two scripts for invoking them. One script will be for copying a full subtree. The other script will be for doing an incremental copy, that is, based on the archive bits.For either one, there could be two versions: Given a directory, D:programsMicrosoft, (1) copy the directory and everything it or (2) copy everything in that directory.And I want the scripts to use a little device I have that is a nice solution to a standard problem: The directory names to copy from and to are commonly quite long, and no way do I want to type in such stuff — not a chance.So, I have a little solution I like a lot: In each console window, I have running all the time a little program I wrote in Rexx. This program acts like a command line shell. So some of the shell commands are for moving up and down in and among the directory trees. So, R (root) makes the root directory of the current drive current. U (up, regarding the directories as trees with their roots in the sky) makes the parent directory of the current directory current. DN (down) takes an argument and makes current the subdirectory with the name of the argument the current directory. If there is a directory with exactly the name of the argument, then DN just does the appropriate, old, standard CD (change directory) command. Else DN gives a simple menu, a list, numbered, of the directory names in the current directory that match the argument regarded as a prefix and only part of the directory name; then, sure, get to pick from the menu by typing a number.So, with R, U, DN, can move up and down easily.Command MARK with an argument, say, A, sets environment variable MARK.A to the fully qualified tree name of the current directory. Then, later, with any directory on any disk current, command GO A makes the directory in environment variable MARK.A current. So, with MARK and GO, can quickly jump around among several directories.Command G (goto) regards the contents of the system clipboard as a fully qualified directory name and makes it current.Then for copying, I have two more commands, FROM and TO. Command FROM makes current the directory in environment variable MARK.FROM and similarly for TO. But if environment variable MARK.FROM has no value, then it is given the value of the current directory, and similarly for TO.Then for copying, I will have a script, say, roboft (ROBOCOPY honoring environment variables MARK.FROM and MARK.TO), based on ROBOCOPY, that will copy from the directory named in MARK.FROM to the directory named in MARK.TO.So, for doing a copy, I use R, U, DN, MARK, G let me quickly do “tree walking” to set MARK.FROM and MARK.TO. To check again and again, just running FROM and TO lets me see the from and to directories and check if I’m sure that’s what I want. Then I can just run, say, roboft with just any directory current and get the copying done. Yes, maybe for incremental copying the script would be robofti.Each of these ROBO scripts should report the details of the proposed copying operation and ask for confirmation.I have such scripts based on XCOPY but, of course, am unhappy about XCOPY changing directory time/date stamps. The guy who wrote XCOPY just wanted to do me his favorite, little secret favor, undocumented, etc, right? And for a big directory tree, quite difficult to correct. Having those directory time/date stamps changed at times causes me a lot of trouble.This stuff about FROM and TO go back to a Prime computer based on MULTICS. So does the distinction between copying the contents of a directory or just some one directory and its contents.
People don’t understand economics in the US let alone finance. There are costs/opportunity costs to everything. There is no free lunch. The increase in property values along the Highline is called a positive externality. If your neighbor plants roses in their yard, you get a positive externality. There are negative externalities too. We can “fix” them with taxes or subsidies, but when a central planner gets involved things generally get screwed up.Coase Theorem is a theory that everyone should know. https://youtu.be/RIugTo0ivWI Is a link to a video on externalities.The theory is deep but as long as property rights are clearly assigned and bargaining costs are zero, whatever two private people decide is the best outcome. Traditionally it’s presented in economics classes as fisherman who fish in a river vs a factory that pollutes.How one looks at these problems depend a lot on the framing. In the Amazon case, some economists will ignore some inputs while others will add them. That’s how you get a different viewpoint. It’s all about the input and framing.On a broader note, that is the root cause of a lot of the difference in the way each political party sees the world.
on the extreme left there is 0. on the extreme right there is 1.
Pareto optimality (basically non-inferiority) was a question, and I got the right answer, on an oral exam during my Ph.D. Inferior would be where there is an alternative that would make everyone the same or better off — all boats rising. E.g., in engineering, is there an airplane vertical flight plan that would get the plane to its destination BOTH in less time AND for less fuel? In the applied math of best decision making over time under uncertainty (current a hot topic at the Princeton department ORFE), to speed up the computing want to keep only the non-inferior options. And this stuff is important in the applied math of multi-objective optimization, e.g.. as in a book by Jared Cohon at one time President at CMU.But arguments of economists, e.g.. Coase’s theorem as in the video clip, typically have me upchuck. E.g., for this video clip, they start with supply/demand curves, just freehand curves with no assumptions stated. When I had an econ prof draw such curves, after class I asked him what he was assuming about his curves, continuous, differentiable, continuously differentiable (which is likely most of what they need to assume), infinitely differentiable (which maybe he didn’t know about), convex (from their free hand pictures I’m guessing they want that), pseudo-convex, quasi-convex (the last two are useful assumptions for constraints in the Kuhn-Tucker conditions for optimality), measurable (of COURSE he wants measurable which is so general that it takes considerable cleverness, the usual example uses the axiom of choice, to find a function not measurable)? I got excused from the econ course! GOOD — I got some more sleep and didn’t upchuck my breakfast each morning for a semester. Each of those mathematical assumptions is important in some part of pure/applied math. To be at all mathematical, the economists need some of those assumptions but, as in the video clip, commonly ignore them.For more on Pareto optimality, non-inferiority, among several people, at Quanta Magazine in 2016 there washttps://www.quantamagazine….and currently at Hacker News athttps://news.ycombinator.co…For doing economics, just mentioning Pareto optimality is a bit sneaky: We should have an argument, which would likely become political, on just WHY we want public policies that pursue Pareto optimality?This stuff seems to be an example of some of what economists do: (A) Apparently any large, real economy is too difficult to understand in any mathematical or scientific way. (B) So, economists come up with simplistic models, etc. (C) Then, for a real economy, the economists call for regulations, etc. that will force the real economy to be like the optimal solutions to their simplistic models. Bummer. Can kill lots of people doing that.Thus the economists illustrate that, sadly, one role for higher education is not so much to find better tools to use but to understand enough about tools to detect and reject the bad ones!!!
The emphasis with the Amazon deal is more on the tax “give ups” than on the accruing benefits, more explanation of these benefits can counter the argument that this is merely a corporate give-away.
Trump built his empire mainly on tax exemptions. What was the ROI for the state?A President?………… maybe? 🙂
There’s no question that Amazon’s decision will benefit the city’s economic development and create a lot of value, in aggregate. The question/suspicion is, how will that value be distributed, and will there be disproportionate capturing of that value? The haves and property owners come to mind. For everybody who won’t be an employee or contractor or other beneficiary of Amazon, it’s not necessarily clear that their net worth will improve as a result of Amazon’s move… but it may… we don’t know.
The city lives through cycles where budget crisis results, unless it is constantly growing and adding to tax rolls. The leaders recognize that unless they keep adding buildings, residents and businesses, they will end up in another budget crisis. The value ends up in the city’s ‘coffers’. Currently they need to pay to overhaul the subway, fix roads, etc. Basically pay bills.
This deal with AMZN really increases the value and importance of the Cornell Tech Center on Roosevelt Island. It’s a great win for NYC.
I suspect Cornell Tech Center was part of the attraction for Amazon. And also: NYU Polytech, Stevens Institute of Tech, even NJIT, among others. It’s about getting talent.
I am going to disagree. Lots of other great places have tech centers and tech talent. Amazon chose DC because of politics and government contracts. They chose NYC for a far different reason-network. Amazon opens itself up to a lot of randomness in NYC. Outsize gains are made from opening yourself up to randomness. I blogged about it today.
All of what you say is true however it doesn’t explain why they needed to put as many people as they are going to have in NYC vs. some other place but also with a smaller presence in NYC.And I don’t think incentives entirely explains what is going on either.After all the idea is not to be a major player in NYC in any way, right? It is not like they are looking to be a big fish in a big pond because of real estate or something where it’s important to have a big presence.Ditto for Washington DC. How does having 25k jobs in DC vastly improve their chances vs., say just having 5000 people?It’s a big like driving a car. You are pretty good at 1 year, better at 10 years, but not drastically better at 25 years.
Also I would add that everyone knows who Amazon is. So a counter example might be ‘unknown Chinese company wants to open in US and nobody has heard of them’. In that case putting 25k jobs puts you on the map (especially when it’s first a contest for 50k jobs). Because you are unknown so now you are recognized by everyone and anyone. If you wan hire someone’s aunt says ‘yeah I’ve heard of Shangsui Tech Co’.
They could have had the benefit of all of that w/o having a huge presence though.
nashville is where it is today because of city, state and tva economic development efforts made in coordination with the community’s financial commitments to renovating and building some of the leading cultural destinations in the country. we will happily embrace the 5000 jobs and traffic that AMZN brings to downtown Nashville. can’t think of any better motivation to address our city’s pressing infrastructure needs. don’t think more pedal taverns is the answer but i’ve been wrong before.
Yup–you know I am in on this one.
There are such large differences between the two situations that the benefits of one cannot be assumed to apply to the other. The Highline development was a direct improvement to the local environment. The Amazon subsidies just help Amazon do whatever it wants to do, good or bad, and no doubt there will be some of each.
There is a way to capture some of that property appreciation as a way to recoup the outlay by governments, called Tax Increment Financing. We do it in Chicago all the time, and while it’s contentious, it has encouraged development projects. https://en.wikipedia.org/wi…
Couldn’t agree more. To draw a comparison to my home country of Ireland which has developed significant expertise in drawing in foreign direct investment (especially from US firms) though IDA Ireland:Of the 1.98m directly employed in Ireland, companies that Directly invest in Ireland employ 174k people (an additional 122k indirectly) contribute €22.4bn in direct expenditure (- €11.3bn on Irish services, € 2.6bn on Irish materials, € 8.5bn on payroll.
.Isn’t most of the Celtic Tiger driven by international tax implications?JLMwww.themusingsofthebigredca…
That was and is definitely a key factor as well as a relevative young and educated workforce plus access to the eu market. Ireland is also professionally and cohesivly sold as a package by the IDA in the US and elsewhere.The spin off and multiplier effect from that initial TAX hook has been massive and on reflection well worth the risk
There is another massive area of opportunity for NYC – working with Europe (and other global regions) as a whole in encouraging Direct Foreign Investment into the city – Taking the EU as an example, the member countries currently approach the job of starting a helping a business in NYC through a myriad of foreign trade boards, consulates as well as private accelerators like Ventureout NY – never getting the Europe-wide critical mass to work with the city at scale. At the same time, the city dropped their dedicated Direct Foreign Investment group through the NYCEDC a few years back- it is now diluted across a few of their programs. Amazon may be making the headlines but as they do so, a few foreign Unicorns are probably looking elsewhere in the US because they weren’t approached by the city in a cohesive manner…..And to give an indication of the importance of this without Government assistance….Foreign HQd firms represent 11% of NYC’s GDP of $761bn & employ 298,000 NYCresidents!● Technology FDI in NYC is growing at 25% year on year.● 78% of NYC’s Foreign Direct Investment comes from Europe
I’d guess that, like most other economic development around the country, including the Highline and what’s been happening in here in SF, quaint, inexpensive and socially diverse “coffee shops” get driven out of these areas.
As someone who a) used to live along the Highline and saw the amazing growth that happened in Hudson Yards, and now someone who b) lives in the new Amazon location, I am truly excited for the city and the transformation ahead.LIC is a very cute community that was up and coming before yesterday. As I agree with Fred, the growth as we saw with the Highline, will be wonderful for LIC. Having said that, I was talking with folks in my building in my lobby and already prices are going up in the area. Not even 12 hours after the announcement. This will force some to move for sure, including me, but it is well worth it in the long run, without a doubt.Very happy for NYC, LIC and everyone in the NYtech community.
Fred – great HBO documentary called “Class Divide” on the Highline, the surrounding boom and its positive and negative effects, and the divide between the “World School” and the public housing projects across the street. https://www.hbo.com/documen…
fred painted one story of what is going to happen, here is another.1. city gives amazon 1.5bn of taxpayer money2. amazon comes in and hires 25000 highly educated, highly salaried employees. many employees are not local but rather imported to work at amazon. 3. new employees plus new ecosystem to cater to these new employees and amazon drive real estate and cost of living prices up.imagine you are a janitor with kids who go to public school and ride mass transit daily. you live in an apartment that you rent. in this situation, your rent goes up. the nicer restaurants and stuff dont impact you since you cannot afford them anyway. and your tax dollars went to subsidize this new way of life.i wanted amazon to come to my city (indianapolis, of course i knew we stood no chance) because as a software developer i benefit from companies like amazon coming. 1 in 5 kids in indianapolis is food insecure (don’t know where next meal is coming from). amazon arriving would have made their situation worse, barring some kind of huge charity effort. huge charity may be something that occurs, but it is better for everyone if the system does not require it, but rather benefits from it if it occurs.the gains from the current system accrue only to the upper middle class and up. this is why we need a reset, why the political divide is so extreme in the USA (and growing), and why candidates like trump and sanders and ocasio-cortez are winning. because they are all focused on breaking the system that views things like amazon coming in to take tax dollars and drive up cost of living as growth as being fundamentally unsustainable, which it is.
4. the tax base of the city increases, driving up tax revenues and the city’s budget, which is mostly spent on programs and services for lower-income people.At least that’s how it’s supposed to work.But I do agree with you that the city should not have given Amazon any incentives, but only because it likely had nothing to do with Amazon’s decision compared to factors like access to talent, and they would have located in NYC with or without the incentives.
i highly doubt amzn would come without the bribe. i think they were clear they wanted a big bribe and an international airport.nyc, like most places, has a municipal debt problem. even if expansion of tax money comes from a larger tax base, an increasingly large portion of it will go to servicing debt. the icing on the cake will be if amazon ends up buying nyc debt 😀 seriously, though, that debt is probably already owned by large funds investing primarily on behalf of a privileged class.
It’s not a bribe. It’s a deal. Nothing wrong with it. It’s business.Newark and NJ $7 billion ‘bribed’ them more according to today’s WSJ.So did Maryland ($5 billion).It’s a business deal. It’s no different than a lease concession when you rent space ie ‘free rent’ or ‘we will renovate’. The idea is you have various choices (or you make them think you do) and you thennegotiate the terms to your satisfaction… https://uploads.disquscdn.c…
sure, you can call it a deal, i’ll call it a bribe. we agree it’s money being exchanged for services.
A bribe is by definition money/wealth being exchanged for favor or no tangible/visible services, isn’t it? You could claim the price is high but if there is service delivered in return for the money, then it is a transaction and not a bribe, yes?
Definition of bribe1 : money or favor given or promised in order to influence the judgment or conduct of a person in a position of trust2 : something that serves to induce or influenceI wouldn’t mind if NYC said for every computer job you create no matter who you are you get $60k. The price paid to Amazon.Think about that number for a moment.
.Of course it’s a bribe, but as you say, everybody is doing it.Here is a real bribe.https://www.ft.com/content/…Now, those are bribes.Our boys at Goldman run a rough form of capitalism in the Far East.JLMwww.themusingsofthebigredca…
one small difference: if I get free rent for a month on a deal/contract from a landlord, that isn’t public money. Why do govt officials get to pick winners and losers? What if they could have spent $100M to get the next Amazon?
Why public money? Because it’s for the public good. Just like you pay for many things with government money. Now you can argue that spending $100m to ‘get the next Amazon’ is better but I could argue that if it were that simple it wouldn’t be ‘VC’ with all the risks that go along with that.And government money is already used in similar ways with abated and practically non existent real estate taxes on certain new construction. Why should the government be doing that? They do it because they have decided (and you can argue they are wrong) that giving those incentives is of greater benefit in some way than not.Point being they are already picking winners and losers. Just at a different scale.Now if someone wanted to build a huge residential project in NYC with $5b in tax abatement’s sure it would get noticed. Because of the big number. On the other hand if the big number were spread out among 1000 different building owners (and therefore not a story dangling for the news media) then you’d have a different outcome it would possibly fly under the radar.Make sense?
I’m not an expert, but it looks like the literature says otherwise (and this is coming from the national review…): https://www.nationalreview….
amazon’s request for proposal states:Capital and Operating Costs – A stable and business-friendly environment and tax structure will be high-priority considerations for the Project. Incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process.Incentives – Identify incentive programs available for the Project at the state/province and local levels. Outline the type of incentive (i.e. land, site preparation, tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions) and the amount. The initial cost and ongoing cost of doing business are critical decision drivers.
Why though is it always about ‘lower income people’. Even in the Kid’s example he talks about lower income people. Always lower income. It’s like paying for college. Always ‘lower income’ that gets special treatment. The guy with a normal $100k job has to pay full load. (Made up numbers and example to make my point which is for sure valid).A city is more than just the rich (those that can afford to pay between $3475 for a studio in that building on the high line in Fred’s photo and $11,495 for a 2 bedroom and den. That is per month.Look:http://507westchelsea.com/a…In any nice suburb (in a good school district I might add) you can buy a 4 or 5 bedroom home for way less money per month.Who are these people that need so little space and can afford to pay that kind of price? What jobs are they doing in NYC to pay that?Aren’t the people in the middle important as well?My two daughters live in NYC and pay roughly $3500 per month for a 1 bedroom. Without my help they’d never be able to afford it. They are both dating. If they get married I don’t think they realize they will not be able to raise a family and both live and work in NYC.
How do they pay those rents? Short version: They eat their seed corn, i.e.. they don’t have kids. Darwin has something to say about that.
it’s always lower income because that’s the majority of people now. it may help to understand why income inequality is so exacerbated now; the economy is so dysfunctional now this is the only way it can grow, by exacerbating income inequality. a reset is both necessary and inevitable (and probably painful)
it’s always lower income because that’s the majority of people now. Majority? According to this highly (and probably close enough to) correct document it’s about 15% in the US vs. say close to 30% in Italy.https://www.cia.gov/library…This comes close to proving your point however it is still not ‘majority’. But actually I am surprised that it’s as high as it is.https://www1.nyc.gov/site/o…What’s funny is that using the CIA document you could make a strong point for your point. Just make a comparison between a well know third world country and NYC poverty.But what I would say to that is this.It is a privileged to live in a city, not a right.Many people would love to move to NYC but can’t afford it. Many people in NYC should be given opportunities to relocate to other areas where they can live for less. Yes give them help to move away. That will actually increase wages for those who remain.Not going to happen but nothing in history says that if you can’t afford to live somewhere for whatever reason you can remain. Even if your family is there. Like to bad. There are people with family in NY Metro that would love to move their to be closer. But they can’t afford it. What makes someone already there more special and deserving?Remember those dustbowl pictures? Families moved.Nobody wants to hear this of course. They think everyone should have affordable housing overlooking the high line.
the poverty rate is way too low. that is the measure of people who are seriously f’d in life. savings rate are a far more meaningful measure, and when this number is fixed you will know the economy is headed towards stabilization. https://money.cnn.com/2017/…that would be another way to measure the impact of amazon’s entrance. will median savings go up or down after amazon enters? will the difference between the median and mean savings of new yorkers go up or down after amazon? i would expect median savings to go down, but the difference between the median and mean to increase. which, in sum, would illustrate that the majority of gains are accruing at the top.regardless of what one thinks of this from a moral perspective, it is not sustainable. vibrant middle classes are necessary for a free market economy to function in a healthy manner. alas, we are well beyond that point.
I do not dispute that many parts of NYC are totally out of control with respect to income equality. Also that it’s not sustainable.It’s kind of heading toward what happens in those third world countries. The ratio of haves to have nots is not such to be able to maintain social order.The band aid fix for this is wealthy tech people trying to care about those less fortunate (with liberal policies) to think they are doing their part.It’s similar to if you have a family history of heart problems. So you exercise more thinking that will somehow save you and that way you feel less vulnerable.
This is an important point. It’s also a super uncomfortable conversation to have with your superiors. Nothing makes your co-workers feel better than when someone leaves and says “sorry I just cannot raise a family on what I make here”. Of course the old guard is less worried about this because they already bought their real estate…
Very possible, per my ‘mcdonalds hard seat theory’ that they want someone to leave. Bring in someone else at a lower or same cost and keep wages low. Not in every case but very possible that is part of the plan from the start (as I have even mentioned re: Amazon).
A Bezos scheme.
for every job the tech sector creates, another five service jobs are created. it is NOT a zero sum game. https://twitter.com/mikeonh…
This works for web tech VCs in NYC, but does it work for the average Josephina? How much more money will she need to have in her wallet just to be able to walk down the street in NYC? It’s definitely an inflationary development. This feels uncomfortably like trickle down Reaganomics.Do you think the residents of Kreuzberg are wrong, or is it a cultural difference?
great point, it’s really the same thing as trickle down economics. a nice big glass for those at the top of the pyramid, a couple drops for those at the bottom.
The macro issue is whether monopolistic web tech corporations (Amazon, Facebook, Google) are good for society. Amazon and NYC is the example here, and a case study in why they probably do need to be broken up, and sooner rather than later. If we wait too long they will become so entrenched in the political system that change will not be possible.President Bezos? Imagine the ethics of that election campaign.https://www.theguardian.com…
You’ve already seen it – he has HRC’s personality.The more interesting question is why would Bezos ever do that?If he did, the driver would most likely be NOT a personal one.
Agree.This is the actual report:http://documents.bayareacou…The exact number of ‘5’ is not relevant because common sense wise there is obviously going to be a multiple. And it might be bigger than 5. The issue is not the upside the upside is clear. The issue is the downside honestly. And that is what nobody ever takes into account. [1] You don’t need a spreadsheet or analysis. It’s like the people who want to quantify a Harvard or Ivy Degree. Not needed. It in most cases pays in ways that can’t be measured. I know it has for me.Anyway none of this matters. These companies are hugely profitable. But here is the important thing. All that money they make in profit that is after they have spent (and pissed away) a huge amount of money that goes coursing through the economy with a multiplier effect. Nobody needs a college level course or equations to understand this concept.[1] Your child plays football? Can’t just talk about the upside. Have to also talk about injuries and what else they might be able to do (opportunity cost) with the same time. A 2nd language good to learn? Sure but maybe STEM is better.
.The problem with increases in jobs in an urban environment is that you may not have any room to add jobs in close proximity to the demand generator.This would normally generate more multi-family demand, but if there is no vacant multi-family zoned land available, it will not and gentrification will be fierce.No doubt it will drive demand, but the question is where can the demand actually be filled? This is why mass transit is important.JLMwww.themusingsofthebigredca…
a) Loosening of airbnb beneficial laws.b) Smaller ‘micro’ housing units. I lived in between places in a hotel room for 6 weeks (no way I was going to live at my parents and they didn’t invite either nor did my sister). I actually liked the small space. It was fine for me. Honestly I could have stayed much longer in that one room.c) Boats more exactly used cruise ships, docked offshore or close to shore. Shuttle from ship to shore. Why not? Self contained with everything someone needs. Staff with foreign labor (which is how they operate so cheaply now). Special exceptions granted to allow the labor if not available locally (and it’s probably not). In theory you could have multiple boats and one dock. Different docking times plus shuttles. For that matter barges with manufactured housing on the top of the barge. (Have not thought that one through but no reason it couldn’t be done just not as luxury but ok for short term for sure..) Actually strike that one it deprecates my better idea of cruise ships.Remember one of the things here is that we have what is perceived as an emergent situation. It’s acute, not long standing and slow. Or the perception of solving the problem is. Plus we have government claiming they are all in on this one. So if laws need to be changed that is possible to allow things that wouldn’t (in a different situation) be possible.Look as a business person what do you think you are best at? Coming up with some creative solution to a problem that others have not even thought of or don’t think is possible.
agreed it’s not zero sum. the issue is who is accruing the alpha. it would be interesting to see rise in cost of living relative to distribution of new wages/equity. a simpler metric to observe would be homelessness. will amzn increase, decrease, or no change for homelessness in nyc? i think it will increase.
Alpha is the question Kid.The mistake in focusing on the left behind folks is that America is built on the idea that the individual American’s job is to chase Alpha.
.That would probably be true in a green field growth scenario, but when dealing with a situation in which the infrastructure is in place, the multiplier is much less.No doubt that there will be a multiplier impact, but it won’t be as dramatic because much of the support mechanism — food service, drug stores, grocery stores, dry cleaners — is in place.What will happen is that where there is more buying power (higher individual levels of income x number of people), the product mix will change and the price points will move upward.Rents (commercial and residential) will immediately go up.Economic development is an exercise in people density (people per square mile) and buying power (gross income per square mile).If everyone’s income goes up, the buying power per square mile will go up and the demand for services will also rise. But, you are not starting from zero (green field scenario).JLMwww.themusingsofthebigredca…
I agree 100% thatThere will me more jobs made outside AmazonNew York had to provide incentives. They had no choice. Grow or DieAmazon had to get those incentives or not be responsible to shareholdersOverall the government will get that incentive money back in taxesWhere I disagree 100%Allowed to happen. Government can treat one company so differently.People other than land owners and top earners will benefitFrom where I sit:I have hired dozens of programmers from LA, SC, NJ, MD etc but because I do it slowly and organically I don’t get the benefits Bloom or SevOne got.Amazon gets a lower cost per hire because of subsidy.That $1.5B could be used to help those that will be displaced.That doorman, waiter, dishwasher, etc, that come into Manhattan has to live somewhere, it’s not Manhattan and now not LIC.I do not believe in equality of outcomes I believe in equality of opportunity.My point is that if NY won this without the “ref” allowing them OR any other city from bribing Amazon I would be happy.
Not necessarily. There is plenty of research on the downside of this type of thing; https://www.theguardian.com…
Focusing on just the tax implications for a minute:Why is everyone acting like the city will take $1.5B in cash, paid by current taxpayers, and hand it over to Amazon? That’s not what is happening. Amazon will be shielded from having to pay $1.5B in *future* taxes that they otherwise would incur from living in the city. But if Amazon never came to the city, those taxes would have never been incurred.Cities benefit from having big companies move in and pay taxes. The city I live in (suburb of boston) has high property taxes because it has no big companies to tax, so the residents have to foot the entire bill. The next town over has a larger commercial base, which contributes a lot to the city taxes, and the residents get to pay lower property taxes.NY is saying, “we’ll give you a break on taxes the first few years” knowing that when the grace period ends, Amazon will begin paying lots of taxes to the city, and the city’s tax coffers will be better off than if Amazon had never come.
tax breaks and grants. amazon will get between $300 million and $500 million in grants.but whether or not it is a tax grant or a break is not the issue here. the issue is top down stimulus vs bottom up stimulus. top down is giving all of this to amazon. bottom up would be debt cancellation, free housing, basic income, etc. after all, if you reduce the debt burden people have, they can more easily afford a home, which in theory will bid up house prices, which will generate more tax revenue…..
.Excellent comment.Well played.JLMwww.themusingsofthebigredca…
I agree with you on preference for bottom up vs. top down. Just wanted to set the record straight on tax breaks. (thanks for catching that it is mostly tax break, but not entirely tax breaks)In the abstract, I am philosophically opposed to the government doing deals with companies like this (like I am opposed to taxpayer funded stadiums and anything related).That said, in this case I expect the long term net impact of this deal to NYC tax coffers will positive, not negative.
This is progressive.New Dems in Congress need your help. Their version of progressive policies will get smoked in 2020.
No problem, give $60k in tax breaks for each employee any company that brings in a high tech job. Think about that number for a second.
tax breaks only kick in to the extent that the company incurs those taxes (or what *would be* those taxes if not for the tax breaks). So how long will it take to use up $60k per employee, after you factor in real estate taxes, business taxes, whatever other taxes the city imposes on businesses? You are suggesting it will take a long time, and I agree. 5 years? 10 years? 15 years? I can’t say. In the meantime the city is collecting income taxes on the employees, and once the deal expires, the full tax amount.Did the city get played? Probably. I’m guessing Amazon would have gone to NYC anyway, even for half that amount. So the city was bidding against itself.
I am not arguing about the tax break. I have said countless times before give me a tax break for the new employees I hire. If I don’t offshore my development and do here, give me credit.All for it 100%That is my point. Great do it!!!Do it for everyone. Across the board. For each net employee you hire after 5 years you get to deduct the next 5 years of the average tax they pay.GREAT!!!!(I’d have several jets at this point)
Haha, love it.First off, they should get rid of employment taxes. I can’t understand why you would ever want to tax employment. Dumbest policy ever. Whatever you tax, you get less of. So instead of taxing employment and income, we should replace all current taxes with a consumption tax. As a byproduct it will encourage people to save for their retirement. not a bad thing.
Think about this. I the employer pays FICA, FUDA, SUTA, for each employee. Let’s say they make the small amount of $60k per year.That is about $6k per year. Then insurance and hopefully 401kLet’s say I’m in a tough industry like I used GoreTex. Double that for OSHA compliance and then add in EPA.Then they personally pay tax (not really for $60k) so they actually don’t really pay tax. They look forward to a refund.Now let’s say I am a “citizen of the world” outsource that to Mexico, India, China……cost zero, zip, nada. For thousands of employees!Now amp that up and say I am an Amazon employee.I benefit from getting stuff that I know is selling outsourced to China and selling direct (they make their own brands) and they definitely make it easier to buy things made offshore.WIN for me! (and yes I as person that deploys capital owns technology businesses am right there as a me!)
Yup, good points.
I hope this brings these issues up, but it won’t because it’s too hard of a story. I share Fred’s happiness and agree NYC will be better for this in the long run. I just wish the reason they won was because the smart investments they made in infrastructure, not just a corporate gift to Amazon.
Agree 100%
A major investment in the physical presence of your city is a categorically different type of investment than favoring a specific private entity for largess, no matter what the side benefits (to proximate condo owners.) The benefits of the latter are available to everyone, the benefits of the former are _principally_ for one favored actor.Harm is less obvious: if Virginia is willing to name new cities for Amazon on top of billions from both new satellite office states, doesn’t that give USV second thoughts about other online retail or cloud investments?Building transportation infrastructure is a key function of city planning – including walkable greenways like the High Line. NYC should stick to that. Part of the plot of Dos Passo’s Manhattan Transfer (1925) was excitement over the East River bridge: when it was built Long Island City lots would double in value, and Queens as valuable as Manhattan. What happens when transportation infrastructure collapses? Not everyone is going to get to use the Bezos helipad. If the NYC subway keeps falling apart Long Island City is going to look a lot more like HQ9 than HQ3 when a new position is needed at Amazon.
Only one question. Anyone who travels in the city subway, even by foot. Or car. Where will the extra load be handled for the added commuters and residents? The leaders have not thought of that. Will they commute by ‘Segway’?
Ferry.
You’re telling half the story here. A vital part, but one that is missing the part about gentrification and displacement. Very real and very painful points for a lot of folks. It was something we dealt with daily at the High Line. And something that is nearly impossible to fix AFTER development occurs. Though kudos for the High Line for making strides here as well in the community.What should happen in LIC and Amazon should be an active part of is ensuring the community can preserve land/resources/affordability/equity for existing community members and weave them into the development not just displace them. I hope they can. I have low expectations Amazon or the city will though (probably a few small PR token moves).I’m absolutely for this type of development. It’s good for the city — an ever-changing city at that (which is one of the things I love most about NYC). It’s just super important to consider all sides when even planning for something this big.*This can and should apply to ANY development project and a great example of that is the 11th street bridge project in DC.
You are right about ‘PR token moves’ in other words what I would call ‘we care theater’. Impossible for the implied thing to happen here and everyone knows it. What do you do if you rent? (If you own you are in good shape. The value of what you have just went up.) But if you rent the landlord can now (with the increased demand) get more rent. There simply isn’t a way to right that market effect. And why shouldn’t they get more rent? It’s business. I would. So would Fred and anyone reading this blog.Not an expert on this (but hey I read the NY Times and I’m smart) but it’s like those ‘poor door’ buildings. Someone gets the city to agree to allow them to build a big expensive luxury building in exchange for throwing in a few bones of affordable housing which is divvy’d up in a lottery with impossible odds. The extra units mean zip compared to the demand. And everybody knows that.Separately one of the ways this type of thing happens is exactly because corporations and individuals donate money to things like the high line. Not the high line specifically let’s say but that concept. You want something from city officials so in order to curry favor (as a corporation) you donate money to some cause in exchange (but not directly for) something that you either want or will want. That gets you access and consideration for your projects going forward.
I would love to see the Amazon pitch deck, as they have been pitching cities around North America. (Especially the financial part) And I’m sure there was a counter pitch from the shortlisted cities back to Amazon.
Highline isn’t a trillion dollar company.
.As it relates to financing public/private venture like the High Line, there is a very well recognized and utilized financing approach called a “Tax Increment Financing District.”New York State has the legislation in place to do it and it has been used in several places, notably Buffalo.A District is formed subject to an election.The District sets a floor on property values and the amount of tax revenue generated by those properties.The District gets some portion of the incremental tax revenue after the improvements are completed.The District issues bonds — often with a municipal endorsement making them tax exempt bonds — and repays the bonds with the TIF funds.Pretty simple stuff.JLMwww.themusingsofthebigredca…
One day a French, Japanese or Chinese company will build a high speed train along the east coast. Boston, NYC, New Jersey, Philadelphia, Delaware, Baltimore… 250+ mph. All financed by the increase in property value and increased productivity.ancient stuff:https://www.youtube.com/wat…
.In the fledgling American version of socialism, I admit to liking the innocent, guileless, clueless optimism of the lefties like Bernie Sanders and Alexandria Ocasio-Cortez.I love how AOC’s personal rental challenges become the problem of the American gov’t, the American people.There is such a pure naivete to the idea that personal problems have an entitled public solution.Luckily, she has a degree in economics, so she has this stuff really, really well thought out.JLMwww.themusingsofthebigredca…
That just means she is a hopeless academic.
.Nah, she’s a college grad and that’s her only connection to academia.She is, however, a former bartender and taqueria worker, a Bernie Sanders for Prez 2016 organizer.After the election she took a ride out to Flint Michigan and was pontificating about the Flint H2O and the Dakota Access Pipeline Project.She started a publishing company “Brook Ave Press” which published children’s books while trying to show a positive image for the Bronx. Company didn’t make it.Announced her candidacy for Congress on 16 May 2017.So, academic? No.Lefty? Yes. Far left.JLMwww.themusingsofthebigredca…
We can joke all we want (and joke we will) but the truth is she will be able to get some things done. Why?Because she will be able to get meetings and that is 1/2 of the battle.All three of us are much smarter and worldly but we’d have to break a sweat to get a meeting that she could get in a heartbeat.She will also get a great deal of press as long as she doesn’t screw things up. The press loves a photogenic politician. I think more than a last name like Kennedy actually.Let’s just put ‘tuchas on tisch’ here (ass on table). She may very well rise to the Ocasio…
.Not a chance. DC has its pecking order and she is nothing to them. She is one vote, nothing more.The Dems do not need her.She has no seniority and will be lucky to get a single meaningful committee seat.Nancy Pelosi will crush her like a grape. Nancy is really quite old school — trading favors for favors. She is not a great idea person.DC is run by the lobbyists and the lobbyists work with those who drive legislation, not new pretty faces.Tell me all about the legislation that Patrick Kennedy and Joe Kennedy III got passed. Huge name recognition. Enormous pedigree. Nothing accomplished.Big names. Nobodies in the Congress.JLMwww.themusingsofthebigredca…
All good points but I never mentioned a time frame!’You can name the price if I can name the terms’.In college I had a professor that was in the Kennedy administration. I remember him saying “Kennedy actually didn’t accomplish that much”.Of course I don’t remember that professors name nor does anyone else probably but everyone knows the name Kennedy.Also wasn’t the last surviving drunk Kennedy the liberal lion somewhat powerful?Anyone I double down on my point. I say she gets attention and is able to parlay that attention to drive some agenda in some way, vs. the baseline typically ignored newly minted politician. I say time frame of 5 years is reasonable.
.She doesn’t get a single bill through the Congress. Ever.If she survives Mount Nancy, the Senate will cube her legislation and feed it to the rats in the Capitol basement.She is great media fodder for a couple of months and then she disappears.Kennedy was a Senator with seniority, in addition to being a very bad drunk driver.JLMwww.themusingsofthebigredca…
If I owned property in DC I would have been in touch with her in a heartbeat. I believe in what she is doing that much? You?
She might be the first real socialist of this epoch in american politics. I followed her through the campaign, she is a top level and effective campaigner like Trump and, most of all, she is so young. Definitely an asset and a positive contribution to the mix. She represents an underrepresented segment of the states population.I like her too and think that her best will happen in the future, when me and probably also you and Nancy will be feeding the poppies.Live long and prosper, señor Jeff. 🙂
I have been saying this for years. If you just improved tracks and switching, AND most importantly coordination or control with the other local lines VA Transit, MARC, SPETA, NJT, Metro North, and Boston. You could make it seamless to go anywhere from Richmond, VA to Nashua, NH.And PRICE. Right now $200 one way from Wilmington to New York.If you could take a local from Newark, DE or Elkton, MD connect in Wilmington or Baltimore and get to NY or DC for the right price it would be huge.Right now people take BOLT and MegaBus. Yup Buses.Doesn’t have to be rocket fast. It’s only 500 miles. But I have never taken the trip (hundreds of times) and not literally been stopped on the tracks or slowed down to 30mph.If you had 1 hr for stops and the train was sub 200mph. You still are talking a roughly three hour trip. City center to city center or add another hr for country station to city center.
I’m sure Amazon benefits tremendously getting a location next to the regulators they need to grease and the financial industry power houses in Manhattan, but there was a big opportunity missed here lifting other locations in the US.They could put that HQ anywhere in the country and people would follow. They could build the infrastructure and hire people for fraction of the cost in less expensive parts of the country while benefiting those regions in much greater way than the regions they chose. They could’ve singlehandedly built a tech hub anywhere in the country with those 25,000 workers. Other companies would’ve followed. A whole ecosystem would’ve been created.What a goddamn shame.
Yeah, but they would not have the talent pool. NYC Metro Area has one of the most condensed talent pools in the USA.
So then offer an incentive to software engineers in Silicon Valley or New York. Amazon could pay a $75K moving bonus to some of the less expensive locations and still come ahead.I would move immediately from New York to a cheaper / less hectic location if there were good tech jobs there. I have several friends who’ve already done that.
i agree, though the one requirement they had which i understand was an international airport within a 45 minute drive. i can see how that would be a non-negotiable requirement, and that eliminates 90%+ of places right there.other than that, amazon was pretty clear that they wanted a big bribe to come to your city. i’m surprised nyc found the money.
Chicago, Denver, Las Vegas, Charlotte, Phoenix, Minneapolis/St. Paul, Portland. There’s one even in Omaha.From a Wikipedia list of international airports in the US. Plenty of choices.
sure, but it eliminates some rnadom patch of land in montana. also, technically indianapolis has an international airport — but it only goes direct to paris or cancun. if you go to the DC airport, that is a true international airport. same with ohare in chicago and the airports in nyc. i haven’t been to the omaha one, but i doubt it’s going to have direct flights to a lot of cities outside of the US — or even inside, for that matter.
.Bit of a micro v macro error of composition at work here.The High Line was a bite sized bit of improvement — very creative using something which might otherwise have been demolished — to trigger some neighboring growth along a continuum.Some of those areas were blighted and if not in a death spiral were at least getting some outpatient acute care.The AMZN deal is a massive, gargantuan public subsidy of a “private” one off for profit company. Feels like the “mordida” or the “baksheesh”, no?One is a tidal improvement while another is a lightning bolt,, big lightning bolt.I have no problem with the AMZN deal — bit of envy actually — but people need to see it for what it truly is — a massive, taxpayer subsidy for a single well-heeled for profit company whose growth was going to go somewhere.it will drive out the current residents and raise property values to a magnitude which will price out a lot of commercial uses and residents.If you are OK with that, then BRAVO!You will not go to Hell for doing it, but you will get an invite.This is a matter of the rich feathering the beds of the richer. All with taxpayer money.It is interesting to see a leftist company like Amazon suckling at the public teet while crowing and bellowing about “corporate welfare.” Irony is a heartless bitch.Small point — this is a prosperity problem, something which comes because of our vibrant economy and the near term prospects for more of the same.Thanks, Trump.JLMwww.themusingsofthebigredca…
You don’t know “left” in the USA yet, señor Jeff. 😉
The AMZN deal is a massive, gargantuan public subsidy of a “private” one off for profit company. Feels like the “mordida” or the “baksheesh”, no?Nobodies arm was twisted. It’s the old you can only be as honest as the competition at work. Also ‘it’s hard to be a (saint) city when you are just a boy out on the street’. How do you compete with the other town throwing millions to win the prize?The best that the beautiful Ocasio-Cortez could do before the fact if she was in office would be to just get a few door prizes or toasters for the impacted group. Nothing stops this type of thing or even comes close.It is interesting to see a leftist company like Amazon suckling at the public teetI thing they are way less leftist than average though.
.Huh? Fortune magazine runs an annual survey to determine the “Top Ten” companies favored by liberals/conservatives.Who is #1 for liberals?AMAZING AMAZONhttp://fortune.com/2016/06/…One has only to look to Jeff Bezos’ private investments to see they trend a little left (WashPo).The fact that the incentive package — the magnitude of which is still not known — was crafted in private says all one needs to know.It is not the Governor’s money.JLMwww.themusingsofthebigredca…
You almost had me there but I have dug up the article and loaded my gun. It appears that Amazon is on the list of both liberals and conservatives. So what is the value of this ‘survey money’ poll then? Did you ever see the surveys they put out in advertising supplements in the print WSJ for companies college students admire? Hint you won’t see Phil Sugar’s company on the list. You won’t even see any of Fred’s investments on the list (well maybe twitter is there). It’s all the usual suspects that people have heard of but know little about. Who are they even surveying that Survey Monkey company?You wouldn’t find in a true poll that Hillary was favored by both liberals and conservatives would you?More to my point Amazon totally abuses workers (especially in the warehouse). Ever see those who deliver for them? In my area they are pretty beat. Not UPS or Fedex grade. They run them raged. (Lot’s of unverifiable anecdotes on hacker news btw..)One other thing. Surveys like this always suck. We know Amazon is #1 of liberals (to your point) but we don’t have any idea how far off they are from #2 or #10 or the methodology etc…. https://uploads.disquscdn.c…
.Hillary was favored by the establishment — both the liberal establishment and the GOPe.Case in point — neither Geo HW Bush nor Geo W Bush voted for Donald J Trump.Everybody sees what they want to see.Liberals see a left leaning company in Amazon and extrapolate Bezos ownership of the WashPo to support that.Conservatives see this big powerful free market monster.They are both right and both wrong.it is what is happening in the USA today.Those who praise Amazon coming to LIC don’t really want them to crush the fledgling startups which will now have to compete with this massive talent sponge for talent.Everybody has their own lens.JLMwww.themusingsofthebigredca…
Everybody sees what they want to see….and disregards the rest…Best example of that was two days ago the ‘nazi salute’ picture at bugabook high school story. Perhaps the absolute best example of how bad the news has gotten. Just hearing what was said and looking at the picture you knew everyone got this wrong. Chance of hired photographer saying ‘now salute like a nazi’ was 0 percent.Next day Nightly News updates the story. Oh it actually wasn’t a Nazi salute.A real disgrace and pox on NBC and Lester Holt.
It wasn’t? What was it?
What was it?It was a way for some dirty newsies to get some eyeballs and, then, some ad revenue. It was dirty, slimy, stinky, and smelly, but it got the ad revenue. Then the next day they apologized to get their credibility back but kept and didn’t return the ad revenue.I saw the headline at Drudge Report and in less than a pico second knew it had to be just newsie stinking, fuming, flaming, sticky, oozing, bubbling, toxic hazardous material and did a fast f’get about it.For ABC, CBS, CNN, MSNBC, NBC, NYT, WaPo, I have long since flatly refused to pay any attention to their sewage. When enough other people quit drinking that sewage, the sewage generating plants and the sewage flows will stop.Newsies, the scum of the sewer.
Seattle is like a clinical trial, sans any placebo. A lot of what you mentioned in your post has occurred in Seattle. There’s a lot of ying-yang pulling wrt whether AMZN is good for the city or not. The late Paul Allen, a private citizen, was the Saint and catalyst that revived South Lake Union, AMZN’s home base. Private money created this inertia; somehow that’s often lost in any analysis of Seattle’s downtown growth. Further, the city is at a crossroads. WA. state and the city has no income tax and is at the precipice of being able to adequately fund many neeeded initiatives. Seattle’s story is not yet fully written.
Fred, I appreciate you having this discussion. It isn’t that I don’t see the Win in bringing in 25K jobs to LIC, it is the tax money ($1.5B!) that could have been used elsewhere. It is $60K per employee. And likely those people are now working somewhere else. Will go to Amazon, which will increase salaries for similar workers in the area. That is fine for Dow50 but not for many companies. How do you compete with FB, AMZ, GOOG, Wall St for the best talent? But that’s just one side of a many sided puzzle.At some point, most of the workers in NYC and surrounding will be unable to live in NYC. (Personally I find the hotel rates ridiculous now). Are they going to commute 1.5 hours each way? Probably not.The tax increase on real estate and the income taxes will pay back the city and state but it will cost the average taxpayer too. The average taxpayer is the one who is funding this venture. And I think AMZ would have come to NYC anyway due to the airports and talent pool.It is sad that Bezos was willing to go to another city to build a new tech hub.I have this fight with the local EDC all the time. Buying jobs is kind of bush league. If you have the airport, talent pool, education institutions, and other ingredients necessary for a business to flourish, why do you have to buy them?There are many other things to spend $1.5B on.[added point] Amazon does NOT pay taxes: https://www.seattlepi.com/b…
The Highline is awesome, but a comparison to the LIC proposal is hardly a fair one. With the Highline a big source of funding, as you mentioned, is “private,” as is the case w/ the Central Park Conservancy. There’s no donated money to the LIC proposal, just a lot of special treatment giveaways and incentives. Additionally, before any ground was broken, two existing and parallel subway lines the A/C/E and the1/2/3 already made the Highline easily accessible by train, bus and/or car (Westside Hghy) w/ out added investment. There is very crude infrastructure and transportation in LIC and that will cost a fortune to upgrade.Lastly, have you noticed NYC is not exactly healthy financially? These Pols are kicking the can down the road to the next gen of jerks who will inherit a mess of infrastructure and transportation needs without a revenue source or tax base to fund. The city has far too many pressing needs currently to make these kinds of concessions. (For starters, the subway system is an accident waiting to happen.)AMZN played everyone who was willing to go along w/ their “pay to play” gambit. There are so many better choices in other cities in need of economic growth. This plan is good for AMZN, but not for NYC.
All that could be taken care of with an increase in property taxes.Where I am we pay an outrageous (in comparison) 3.6% of the property value per year.So for example a 1,000,000 property would pay $36,000 per year in property taxes.Compare that with what is paid for a $1,000,000 property in NYC. Easily a third to a fifth of what we pay where I am. In some cases I have seen 1/12th of what we pay.That said part of the reason that property values are suppressed where we are because the taxes are so high. I’ve run the numbers on this. Across the river where taxes are lower the same type of property in the same type of neighborhood and school district would be valued 30 to 40% higher. (Rough and approx numbers for the point I am making).My point is not that NYC taxes should go up drastically. But given the values of some of these places there certainly appears to be money left on the table tax wise. That extra money could pay for plenty of things that are needed.
Fred said an economist should look at this. Richard Florida has been looking at this field for a long time. Florida doesn’t believe there is a payoff for these kinds of government incentives whether they are for sports stadiums or corporate headquarters. He has a thread on twitter this morning with a variety of points around the announcement. https://twitter.com/Richard…
He is just trying to get attention (which I take no issue with btw). And as an academic anything he says can be refuted pretty easily with another data set and assumptions. This is not physics. There is a great deal of play with what you say with numbers. Even the white men in medicine can’t agree on interpretation involving more exact numbers.And ironically Florida also says this:Florida’s theory asserts that metropolitan regions with high concentrations of technology workers, artists, musicians, lesbians and gay men, and a group he describes as “high bohemians”, exhibit a higher level of economic development. Florida refers to these groups collectively as the “creative class.” He posits that the creative class fosters an open, dynamic, personal and professional urban environment.There is no doubt that there will be a positive impact from the Amazon investment even at that dollar level. The only question is what is the downside. The upside can’t be questioned.
I agree w/ everything you wrote – however – as someone who has spent a LOT of time in Queens/Astoria, the particular placement there (out of any other borough area) seems to hit right in the cultural heart for many folks, such that whatever change may come from it (and I realize there is lots of good change), that area almost feels like a quasi-cultural landmark.
I don’t hold an opinion on this situation, but there’s a lot of response in my Twitter feed that’s in this realm:https://twitter.com/spekula…On a basic gut level, it rings true…
True. The other thing is that this whole idea of job creation is often bogus to begin with. It never takes into effect the jobs that are lost.For example Amazon quite obviously has put people out of jobs.Ditto for Chinese imports even if there are people who work at companies that bring in goods from China.I dealt with China and made a great deal of money from them. I actually brought that money into my community and spent it (in part). As a result my area (and the US) got money that they wouldn’t have gotten at all because that money came from China. Of course the only reason it came from China was that someone prior had lost out. Otherwise where would the trade have come from?But my area won out over another area in the US or possible another area in the World. So it is a net gain of economic activity.On the other hand if I was a local car dealer and managed to build up my operation and put another deal out of business and hired people I could crow about ‘jobs’ gained but the truth is my efficiency actually cost a loss of jobs.
Long before Amazon HQ2 was even an idea, I had Real Estate brokers touting the amazing incentives the city was offering for any company moving to LIC. Looks like the city got the job done…Happy for NYC
What do you think about the fact that Amazon will just be bringing people who already have those high paying jobs to the area, just making it harder for people to afford living there. What about the fact that Amazon would have probably moved their new HQ to this area with no tax benefits, and that money could be going to something that could help improve the lives of people who need it.
You may be right.Then again, you may be wrong.Investments involve risk. This is true for all investments, including investments in urban development.NYC had, and has, a very high demand for the kind of recreation that the Highline provided, making it a safe investment. Building the same thing in, say, Sacramento could yield a very different result.These are micro-discussions, however. At a macro level, NYC is spending a lot more than it is taking in – even with some of the highest taxes in the USA. If the Highline “paid off,” then it would be generating more taxes than it cost. It’s true that you can’t tax the people in the immediate area, but the objective is to create a city that overall pays for itself – and NYC does not.The City is in debt by well over $100B. In a city with about 10M people, that’s pretty bad. It’s about $10,000 per citizen. Not per taxpayer, but per citizen. Every child, every retiree, etc.The Highline might, indeed, be a great investment. Overall, however, NYC is *not* getting net returns from it’s spending. Those aren’t, overall, “investments.”Instead, the children are being handed an ever increasing debt.
For just one company to add 25,000 jobs in one location and another 25,000 in another location, to decide to do this in one stroke, is a LOT of jobs for one stroke, step. Does Amazon really know now just what all those people will be doing? If Amazon needs 50,000 new people soon, then how are they getting by now? If those 50,000 people are for new Amazon activities, then how is Amazon able to be so definite about that many new jobs now?In military terms that’s what, mobilizing five divisions?For the real estate prices to jump up a lot right away sounds like swinging the bat for a grand slam with no men on base and while the ball is still in the glove of the pitcher. It’s in a word, with other uses, premature.Or, the old saying was, “Don’t count the chickens before they hatch.”Also relevant is the one, it takes 9 months to have a baby no matter how many women are assigned to the task, i.e., IMHO, it takes TIME to fill an office building with 25,000 people and have them doing anything productive enough to pay the costs.Uh, let me guess: In one of those buildings, on the rocket ship fast blast off from 0 to 25,000, will encounter more political infighting than seen by Lenin, Stalin, Mao, and Saddam.Since VC is relevant here, if one of those buildings was to be a new company, how many VC or private equity firms would put up the cash now or soon for rapid growth from 0 to 25,000? I.e., it would take one heck of a “pitch deck” to pay for the fuel for that rocket ship ride. Instead, there are to be “milestones” — set a milestone, get some funds, meet the milestone, set another milestone, get some more funds. Also, big engineering projects are done with many relatively independent pieces, “divide and conquer”, with some management at the top trying to get all the pieces ready at about the same time. The individual pieces are supposed to be doable, low risk, on time and on budget.Bezos isn’t into wasting money. If he starts spending too fast and raising his prices to pay for it, then Wal-Mart and Sam’s Club are still in business. E.g., I recently bought two items, shopped carefully at the Amazon Web site, didn’t like the selection, but found just what I wanted at the Wal-Mart Web site. I saved about 75% of what Amazon was going to charge me for the closest they had for what I wanted. So, net, I’m skeptical if Bezos will be hiring 50,000 new, expensive employees soon.E.g., where I live, for groceries, Wal-Mart and especially Sam’s Club totally blow away my local supermarkets, Whole Foods, etc. So, so far Bezos has made not a dent in my grocery shopping preferences. Soooo, like all those women having that baby, even Bezos needs a lot of time.So, Bezos hiring 50,000 new, expensive employees soon? Call me reticent, “Yes, I’m reticent.”.
.It’s 25,000 jobs over TEN YEARS.JLMwww.themusingsofthebigredca…
So, for all that commercial property he is getting now and will take 10 years to fill, maybe for most of that 10 years he has a new line of business, leasing commercial real estate, i.e., office space!! In this case, for some years, his efforts will just lower NYC commercial real estate prices. I.e., he wants the space and will take it now on these good terms, and make money with it, even if he never has any of his people in that space.
Britain had a tax to partially capture the increase in land values on conversion from rural to urban use (‘betterment value’: https://datatoolkits.lincol….There seem to have been various measures to apply this idea in the developing world (https://www.lincolninst.edu…
2 points, both from people/orgs smarter than I am.On Amazon, Ben Thompson nails it: (quotes taken from 2, separate updates on the same topic)i. And so we arrive at the most cynical part of this entire episode: by setting it up as a competition for something that, as it turns out, probably won’t really exist (thus the continued quotes around “HQ2”), Amazon was able to not only get its most favored locations but receive significant incentives to do so. We don’t know the full extent of them yet — the entire process has been shrouded in secrecy — but I think it is safe to say they are extensive. It’s not so much The Amazon Tax as it is the Amazon Tax Break.https://stratechery.com/201…ii. Google is planning to double its New York presence over the next 10 years, and didn’t need government incentives to do so. Amazon probably didn’t either (although Google, and every other tech company, were probably taking notes).https://stratechery.com/201…On taxing land values, The Economist (hardly a socialist organ) said this:The best solution to this is not new: it was well known, and pursued by liberals, in the 19th century. Tax landowners according to the underlying market value of the land that they own. Such a tax would capture for society part of the windfall that accrues to a landowner when his local area thrives. Land taxes capable of replacing all existing property taxes (which are raised on the value of what sits on the land, rather than just the land itself) and then some would greatly sharpen the incentive to develop.https://www.economist.com/e…