Amazon is making the right decision to pull out. Given the political opposition, flip-flopping from politicians who previously supported the deal, and activist fervor, there is just too much risk in committing to NY and NYC. The losers will be residents of NY and NYC. This would have been a huge win for them, with massive job creation and tax revenue increases well in excess of what it costs. That revenue could have helped improve services across the city.
Note that Amazon did not provide projections on economic impact or tax revenues or other aspects here. The city and state made those promises, based on economic analyses they commissioned (and likely used in their negotiations). It includes things like taxes from the additional jobs and businesses that will be created outside of Amazon.
All but $505m of the ~$3b in subsidies here would have come from programs that already existed in NY State and NYC (Excelsior, ICAP, and REAP). Would you give up $3b over 10 years (and just $505m above programs that are broadly available) to attract business that will provide an incremental $28B in new tax revenue and $186B in GSP over 25 years? That is a _tremendous_ ROI, the kind that typically does not exist in the market, and a $505m capital grant (the primary Amazon-specific concession) was a small price to secure it. The 9:1 return they projected on this deal was the best such program NY State and NYC would have ever run, and possibly the best such deal ever across the country. To put it into context, the Film Tax Credit program had a 1.15:1 ROI.
We can argue all day about whether the HQ2 search was a bluff or sham or whatever, but there is no reasonable claim to certainty here - and hence negotiation enters the picture to turn something uncertain (Amazon MAY come to NYC) into certain (Amazon WILL come to NYC).
Here are the quotes from the original HQ2 press release on the economic benefits:
> The construction is expected to create an average of 1300 direct construction jobs annually through 2033. Overall, the project is estimated to create more than 107,000 total direct and indirect jobs, over $14 billion in new tax revenue for the State and a net of $13.5 billion in City tax revenue over the next 25 years. The project provides a 9:1 return on investment.
> According to an economic impact study by REMI, Inc., a world leader in dynamic forecasting and policy analysis, the Amazon project will generate over $186 billion in Gross State Product for the New York State economy over the initial 25 years. REMI also projects over $14 billion in total new tax revenue for the State (in 2019 dollars), with annual revenues growing from $10.8 million in 2019 to nearly $1 billion in 2043. The City forecasts $13.5 billion in total new tax revenue.
The ROI here is well beyond any other conceivable option. It is so large that even if projections of a 9:1 ROI are way off, it would be a big win. Also, most of the subsidy to Amazon is not an up-front lump sum. Rather, most of it takes the form of credits for prior actions. For example, they would get tax credits for job creation in the prior year incrementally, based on what they actually delivered.
Taking all this into account, this would have been a super safe path to greater tax revenues, which would have improved the city/state as a whole. I hope as a next step Amazon considers cities in other parts of the country, away from blue coastal cities. Economic revitalization across a broader slice of the political/ideological/cultural spectrum can only be a good thing.
Note that Amazon did not provide projections on economic impact or tax revenues or other aspects here. The city and state made those promises, based on economic analyses they commissioned (and likely used in their negotiations). It includes things like taxes from the additional jobs and businesses that will be created outside of Amazon.
All but $505m of the ~$3b in subsidies here would have come from programs that already existed in NY State and NYC (Excelsior, ICAP, and REAP). Would you give up $3b over 10 years (and just $505m above programs that are broadly available) to attract business that will provide an incremental $28B in new tax revenue and $186B in GSP over 25 years? That is a _tremendous_ ROI, the kind that typically does not exist in the market, and a $505m capital grant (the primary Amazon-specific concession) was a small price to secure it. The 9:1 return they projected on this deal was the best such program NY State and NYC would have ever run, and possibly the best such deal ever across the country. To put it into context, the Film Tax Credit program had a 1.15:1 ROI.
We can argue all day about whether the HQ2 search was a bluff or sham or whatever, but there is no reasonable claim to certainty here - and hence negotiation enters the picture to turn something uncertain (Amazon MAY come to NYC) into certain (Amazon WILL come to NYC).
Here are the quotes from the original HQ2 press release on the economic benefits:
> The construction is expected to create an average of 1300 direct construction jobs annually through 2033. Overall, the project is estimated to create more than 107,000 total direct and indirect jobs, over $14 billion in new tax revenue for the State and a net of $13.5 billion in City tax revenue over the next 25 years. The project provides a 9:1 return on investment.
> According to an economic impact study by REMI, Inc., a world leader in dynamic forecasting and policy analysis, the Amazon project will generate over $186 billion in Gross State Product for the New York State economy over the initial 25 years. REMI also projects over $14 billion in total new tax revenue for the State (in 2019 dollars), with annual revenues growing from $10.8 million in 2019 to nearly $1 billion in 2043. The City forecasts $13.5 billion in total new tax revenue.
https://www.governor.ny.gov/news/governor-cuomo-and-mayor-de...
The ROI here is well beyond any other conceivable option. It is so large that even if projections of a 9:1 ROI are way off, it would be a big win. Also, most of the subsidy to Amazon is not an up-front lump sum. Rather, most of it takes the form of credits for prior actions. For example, they would get tax credits for job creation in the prior year incrementally, based on what they actually delivered.
Taking all this into account, this would have been a super safe path to greater tax revenues, which would have improved the city/state as a whole. I hope as a next step Amazon considers cities in other parts of the country, away from blue coastal cities. Economic revitalization across a broader slice of the political/ideological/cultural spectrum can only be a good thing.