Opinion: Amazon retreats from NYC subsidies

John C. Mozena

Companies don’t walk away from billions of dollars in free money very often. Amazon’s willingness to do so by giving up on its proposed “HQ2” facility in New York City is the best example to date of how quickly these deals fall apart when the people who will be bearing the costs start asking hard questions about what they’re getting in return.

In this Nov. 16, 2018, file photo the Queensbridge Houses sit beneath the Ed Koch Queensboro Bridge, upper right, in New York. According to experts analyzing the e-commerce giant's sudden cancellation of plans to build a massive headquarters in New York City, Amazon's decision to walk away could scare off other tech companies considering moving to or expanding in the city.

In broad strokes, Amazon was going to receive up to $3 billion in subsidies and incentives from New York’s city and state governments in return for spending $2.5 billion of its own money on building out its new offices, then hiring up to 25,000 new employees to work there. While the value of the subsidies were notable when compared to most other deals across the country, there was little else about the deal that stood out as unusual. (New York’s commitment to help Amazon get Federal Aviation Administration approval to land helicopters on the new building’s roof was probably the most offbeat part of the agreement.)

But New Yorkers – especially representatives of the low-income Queens community in which Amazon was going to plop down a giant corporate facility – started asking tough questions. Many of them involved something Amazon had admitted when it first announced its plans for New York, Northern Virginia and Nashville, Tenn.: “Economic incentives were one factor in our decision—but attracting top talent was the leading driver.”

That’s reasonable, as subsidies play a secondary role in these sorts of decisions more than 75 percent of the time, according to researchers who study how corporations decide where to build and expand facilities. Government subsidies might matter, but not as much as where customers are located, how many quality employees are available, what the local infrastructure looks like, what natural resources are available and other such fundamental business factors.

What was surprising, though, is that Amazon didn’t keep up the traditional corporate make-believe that the subsidies were critical to its decision, and instead admitted that it was coming to New York City primarily for other reasons.

It’s that admission that sparked a lot of the community-based opposition, since an argument that effectively boiled down to, “Give the world’s biggest company $3 billion to take advantage of your city’s unique, pre-existing advantages!” was unsurprisingly ineffective in mobilizing New Yorkers in favor of the deal.

Faced with simple skepticism and early opposition from New Yorkers, Amazon abandoned a high-profile, multi-billion-dollar project rather than stick around and try to make its case. That’s not the behavior of a company that thinks it truly has convincing, fact-based arguments for how much the community will benefit from its plans. Rather, it’s the behavior of someone who got caught red-handed in the middle of an attempted scam.

Here in Michigan, we can only wonder what would happen if our recipients of massive public subsidies for high-profile development deals admitted the same truths as Amazon and faced the same simple questions in return.

New York’s Amazon experience suggests that maybe they should.

John C. Mozena is the president of the Center for Economic Accountability.