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Amazon To NYC: Drop Dead

Gantry Plaza State Park.
Long Island City, Queens, New York. Photo by Kai Brinker.

Breakups on Valentine’s Day are pretty cold, as a local news weathercaster tweeted yesterday – and possibly none was colder than the way Amazon dumped New York City.

Gov. Andrew Cuomo and Mayor Bill de Blasio did not even get dinner at a fancy restaurant, the traditional venue for walking out on a partner when trying to avoid a public spectacle. Instead, Amazon created the spectacle itself with the announcement that it is no longer interested in building a headquarters (really, half of a purported second headquarters) in the Long Island City section of Queens.

Sharing first prize in Amazon’s year-long HQ2 sweepstakes had been considered a major coup for the governor and the mayor. They set aside their chronic feuding to collaborate on an incentive package that was potentially worth nearly $3 billion to Amazon, in return for the company developing a projected 25,000 jobs and occupying up to 8 million square feet of office space across the East River from Manhattan. To do the deal, those two leaders also short-circuited New York’s City Council and its arcane, lengthy and typically costly land-use reviews.

Local politicians were not pleased about being circumvented. Though polls showed most New Yorkers inside and outside the city favored the deal, some neighborhood politicians loudly opposed it – and one of those, state Sen. Michael Gianaris, recently got himself appointed to a state board that could have vetoed the project altogether. Labor union leaders also vowed to resist Amazon’s expansion unless it facilitated the organization of its New York work force. Rounding out the cadre of opponents were the city’s numerous and vocal progressive Democrats, who argued that public incentives ought not to go to one of the world’s most valuable corporations. On that point, at least, the HQ2 opponents share common ground with economists and others of all political stripes.

But thanks to the clever way Amazon manipulated the HQ2 selection process – beginning with the “headquarters” moniker and ending with a split of the expansion between New York, the Virginia suburbs of Washington, D.C., and Nashville, Tennessee – a willingness to place significant local financial skin in the game was the price of admission. For New York, $3 billion turned out to be the price of a partial victory.

Yet with yesterday’s announcement, Amazon simply said “never mind” and walked away from the whole thing. The company said it will not reopen the site selection process “at this time.” I suppose some will say this turns Northern Virginia into the de facto fully fledged HQ2. But since Amazon has already acknowledged it will be hard to find all the skilled labor it needs in a single metropolitan area, the business expansion will instead be diffused between the company’s Seattle home base, the new Virginia location, its planned expansion in Nashville, and more than a dozen other cities around the country.

It looks more than ever as if HQ2 was mainly a marketing device to get cities to ante up as much as possible for business growth that largely would have happened, and been funded by Amazon, anyway. To that extent, the New York deal’s opponents will doubtless take some consolation in the fact that they were right about Amazon’s motivations and goals.

That does not change the fact that thousands, or tens of thousands, of high-paying jobs that would most likely have accrued to the nation’s acknowledged business capital will now, for the most part, happen elsewhere if they happen at all. I wrote when New York was first selected that it benefitted from having a business climate that is better than that of California, which is the only other state that could match or beat New York for availability of tech and business talent. Unfortunately, California sets the bar for being business-friendly too low, and New York does not clear it by a wide enough margin. Amazon ultimately decided what many other business leaders have decided: that the costs of setting up or building a business in New York are excessive compared to the benefits and opportunities available elsewhere. New York is still the nation’s business capital, but its importance relative to everyplace else is shrinking.

The first thing that came to my mind when I heard Amazon’s announcement was a Daily News headline from 1975. New York City was on the verge of bankruptcy, and President Gerald Ford had declared he would veto any federal bailout. “FORD TO CITY: DROP DEAD,” thundered the tabloid.

The city did not drop dead. It was placed under the fiscal supervision of a state financial control board. A couple of years later, it elected a brash young mayor by the name of Edward Koch, who made a point of trying to rein in city spending and make the place friendlier for businesses and jobs as well as residents. Wall Street boomed in the 1980s, along with the publishing, media, accounting and legal fields, joined by technology near the century’s end. These growing service industries carried the city to an economic revival that has continued, mostly, right up until now.

Amazon’s pullout – if indeed it stays pulled out – may not be a calamity, but it is certainly a warning. A political culture has taken root in New York, especially in the city, which treats corporations and commerce as necessary evils, to be accommodated to the smallest extent necessary while the government exploits them to the greatest extent possible.

Any city, even a great one, that treats its own success in a competitive economy as predestined is apt to come up short in the long run. Left unchecked, these municipal tendencies can indeed prove fatal to a community.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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