Amazon HQ2: A post-mortem
Amazon HQ2: A post-mortem
One year ago on Friday, Amazon pulled out of plans to build a new headquarters in Long Island City, and the move sent small shockwaves through New York, bringing an end – if not answers – to a raucous debate over whether welcoming a Big Tech giant to set up shop in Queens would bring prosperity for all or the kind of gentrification that has accompanied tech booms in Silicon Valley and Seattle.
For the three months between the announcement that Amazon had picked New York as the site to build a new headquarters and Amazon’s sudden withdrawal, that debate raged. Gov. Andrew Cuomo, New York City Mayor Bill de Blasio and business-oriented stakeholders praised the deal New York had worked out with the e-commerce and cloud computing giant, which amounted to roughly $3 billion in tax incentives. Meanwhile, progressive advocacy groups, left-wing politicians and many labor unions raised hell about those incentives and Amazon’s impending arrival, arguing that the city and state shouldn’t incentivize a trillion-dollar company like Amazon – especially a company with a history of anti-unionization efforts – regardless of the 25,000-plus jobs and economic activity the company promised to bring.
When Amazon called off the planned New York City HQ2, citing the vehement pushback of local politicians like state Sen. Michael Gianaris, few observers let the fact that Amazon’s surprising split occurred on Valentine’s Day go unnoticed, with some calling it a breakup for the ages.
But like with many breakups, Amazon hasn’t been able to quit New York City cold turkey. Like an ex crawling back for more, the company has continued to expand warehouse and office space in New York. Meanwhile, New York has enjoyed other tech growth – none as massive as HQ2 would have been, but growth nonetheless – with companies like Google and Facebook announcing expansions in the city.
The past year has seen numerous instances of both sides relitigating the Amazon HQ2 debate. But with the benefit of a year’s worth of hindsight, City & State reached out to some of the influential stakeholders in the Amazon HQ2 deal to ask how the New York-Amazon relationship got so twisted, and, perhaps more importantly, how New York can continue to grow into a tech hub, without quite so much conflict and heartbreak.
Proponents of the original deal HQ2 weighed in, including Julie Samuels, executive director of the technology industry group Tech:NYC; Kathryn Wylde, president and CEO of the Partnership for New York City; and Jukay Hsu, CEO and founder of the Queens-based tech training program Pursuit. Opponents of the deal also gave their two cents, including Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union; and state Sen. Michael Gianaris, whose appointment to a state panel that could have vetoed the HQ2 deal has been credited with Amazon’s decision to pull out. Responses have been edited for length and clarity.
What went wrong with the Amazon HQ2 deal?
Michael Gianaris: Everything. This deal was the leviathan of bad economic development deals – it was negotiated in secret, would have resulted in large-scale gentrification and displacement, and represented a multibillion-dollar giveaway to the richest company in the world.
Julie Samuels: The simplest answer is that it was a mix of miscommunication, misinformation and bad politics. HQ2 was a complicated deal that was supposed to be fleshed out over time, yet we never had the chance to do that because stakeholders often talked at (rather than with) each other, or didn’t talk at all. The $3 billion incentive figure is a good example. Obviously there are valid reservations about subsidies and development deals, but with HQ2 there was a collective failure to acknowledge even basic facts: that the majority of Amazon’s incentives depended on meeting conditions; that the company’s success doing that – like delivering jobs and local investments – would be closely scrutinized; that the incentives paled in comparison to the taxes Amazon would pay; that incentive dollars aren’t existing appropriations that can be magically put elsewhere, and the list goes on.
Had everyone recognized these facts, we could’ve avoided a lot of headaches. But ultimately that’s not what happened, which is a big reason Amazon backed out. The silver lining is that Amazon’s decision wasn’t about New York or the tech sector here. It was the result of human shortcomings during the political process, which are fortunately things we can fix.
Stuart Appelbaum: People needed to stand up to Amazon. Amazon’s business model is based on paying little or no taxes, feasting on unneeded public subsidies and mistreating and dehumanizing its own workers. Because of its size and domination, it is transforming industry after industry and defining the future of work in a way that should be unacceptable to most New Yorkers.
The deal was doomed by Amazon itself – there was no transparency or involvement of or accountability to impacted communities, workers or the environment. The result was a terrible deal. And when questioned about it, Amazon in a fit of pique chose to walk away rather than answer its critics.
Kathryn Wylde: The politics went wrong, starting with Amazon’s decision to set up a competition among cities and states for the privilege of hosting HQ2. This reversed government’s appropriate role of setting the terms for businesses to compete for sites and subsidies. Bids were confidential, so communities were blindsided when the winners were announced. Finally, everyone underestimated the power of social media to galvanize opposition based largely on false narratives about the project and the company.
Jukay Hsu: Traditional economic development is broken. As advocates for an inclusive tech community and partners on the HQ2, we believed that the 25,000 jobs created by the project would bring prosperity to underserved communities. Technology is creating more wealth, companies and jobs than ever before. But not everyone is reaping these rewards. When this new prosperity isn’t shared, especially with local communities, it breeds mistrust. This created national anxiety about the role of technology and who it benefits.
We should not merely hope that new jobs benefit locals. Oftentimes, it is new, already skilled arrivals who get these jobs, which brings gentrification to our neighborhoods. Instead, we need to focus on training our neighbors for those jobs. Put simply, economic development should not merely mean that new jobs are created, but that people living where developments are built are given new skills to fill those jobs.
We believe in a new model for economic development with local job training for the most high-need audiences at its core. Pursuit sees this every day in our work training these audiences.
For economic development projects to be successful in New York, we need to bridge the divide between low-income communities and the tech industry and credibly demonstrate how the growth in the tech industry benefits everyone.
Is New York better or worse off for not having Amazon HQ2, and why?
Kathryn Wylde: A headquarters operation for a global business the size of Amazon would have significantly accelerated the growth of the city’s tech sector. Most big tech companies have operations in the city, but none have an executive office where business decisions are being made. Those are still on the West Coast. Amazon HQ2 would have been a game changer for us.
Michael Gianaris: Certainly better for not having the Amazon HQ2 deal that would have destroyed a community and given the biggest company in America $3 billion in incentives that it doesn’t need.
Julie Samuels: It’s ultimately impossible to know, because we can’t compare counterfactuals to realities (though to be clear it’s a shame HQ2 never became reality). It’s nonetheless true that New York is still humming along, and that our tech sector remains as vibrant as ever. The city boasts over 330,000 tech jobs, continues to see record investment, is on pace to teach over a million students computer science, and is benefiting from massive job commitments by companies including Google and Apple. These are all major victories, and again proof that Amazon’s concerns had nothing to do with the state of our ecosystem.
Two things can often be true at the same time. On one hand there’s no question that HQ2 would’ve been a game changer for New York, and that 40,000 jobs, a tidal wave of multiplier effects, plus the birth of a major tech hub in the outer boroughs would’ve altered New York’s history. But it’s equally true that investment, jobs and development continue to come in at a record clip. The difference is in the details (existing growth in Manhattan versus potential growth in Queens, for instance), and in many cases we’ll have to wait and see.
Stuart Appelbaum: The new jobs that would have been in Long Island City would have brought in people from all over the country and driven up housing costs throughout northwest Queens as we’ve seen in Seattle. The fact is Amazon is continuing to open up newer facilities in different locations in New York City – without public subsidies – just as other tech companies continue to do. Amazon needed and continues to need New York more than we need Amazon. The failed deal was less about Amazon’s needs than about its greed.
Jukay Hsu: Creating jobs for locals where they live matters. But with Amazon HQ2 in Queens, local residents would have benefitted. This would have been catalytic to creating a more inclusive tech community. Over the last 10 years, government leaders, entrepreneurs and venture capitalists have done an amazing job transforming New York City into a tech hub. But this growth has largely been centered around Union Square, Manhattan, and certain parts of Brooklyn. This is concentrated in already affluent communities and also accelerates gentrified neighborhoods, exacerbating mistrust and inequality. This concentration of companies and jobs are not tied to the neighborhoods where the vast majority of New Yorkers live. Those jobs are often limited to those with elite educational backgrounds, or already skilled transplants from elsewhere. But 65% of New Yorkers don’t have a college degree. We believe the city’s diversity is its strength. Over the next 10 years, we need to demonstrate that blue-collar workers and the most marginalized New Yorkers in every part of the city can gain the skills and employment to equally participate in this tech growth. We believe there is still an opportunity to work with tech companies, civic leaders, and other stakeholders to make sure all New Yorkers benefit.
If New York is to continue growing into a tech hub, what should be happening now to set it apart from hubs like Silicon Valley and Seattle? How can New York avoid some of the negative consequences (gentrification, lack of diversity in tech, housing crises) that have accompanied tech booms in those cities?
Michael Gianaris: We have to rethink our approach to economic development by prioritizing communities through investments in affordable housing, education and mass transit. Ultimately, Big Tech needs New York because of our talent pool and other advantages. I visited Seattle and San Francisco and saw firsthand the problems the tech footprint created in those cities. I talked to corporate leaders and elected officials in those places so we can ensure New York avoids the negative consequences experienced by others and ensure we remain a city and state for all.
Julie Samuels: In terms of distinguishing ourselves, the truth is we’re already unique. New York has several advantages over other cities, including being the American capital of finance, media, consulting and food (plus having a robust public transit system). This gives companies unique access to funding here, but also opportunities to tap into an array of lucrative industries and recruit talent from anywhere in the world. Some cities score well on wages, while others have size, transportation or education. New York has all of these and more, which gives us an untapped edge over our West Coast friends.
Regarding negative consequences, the key is stakeholder engagement. It might sound simplistic, but if everyone – from lawmakers and companies to advocacy groups and individuals – comes together and bargains in good faith, we can create a city where tech growth also means community strength. There’s no rule that tech has to perpetuate gentrification, housing crises or other problems. A lot of these issues are the result of a relatively new industry disrupting policies and norms that we’ve been used to for ages. But if stakeholders can agree on a system that balances private companies’ interests with public needs, there’s no reason tech booms can’t benefit all.
Kathryn Wylde: New York’s tech talent pool is far more diverse than Silicon Valley because it emerged from the city’s creative media and advertising industries. The New York tech scene is also far more engaged with the communities of the city, as opposed to the isolated campus environment of the West Coast. New York is home to global industry leaders in finance, design, health, retail and other sectors that are the first adapters and largest markets for the new apps that constitute the next generation of tech. While issues of rising cost of living and gentrification are real in New York, we have deep and successful experience in dealing with them that Silicon Valley lacks.
Jukay Hsu: The tech industry is creating new jobs. But they exist in new developments in affluent neighborhoods. They’re not being created where most marginalized New Yorkers live. But economic development shouldn’t only be about creating new jobs. It should be about creating jobs where most New Yorkers live and giving them the training they need to fill them. We know this is ambitious given the current state of the tech community, which benefits the elite few while leaving behind many who are marginalized. But we have seen every day that it is possible. Our fellows train to become software developers, raise their salaries from $18K to $85K on average, and work at leading tech companies such as Pinterest, LinkedIn, BlackRock and Uber. Our cohorts are 50% women, 70% black or Latinx, 40% immigrant, 60% non-bachelor’s degree holders, and more than 50% public assistance recipients. Let’s create a future where all New Yorkers, regardless of background or neighborhood, have access to life-changing jobs in the tech industry.
Stuart Appelbaum: Tech companies need and want to be in New York. They will continue coming here. We need to make sure we don’t allow them to remake us in Amazon’s awful image. And the best way to do that is to make sure that communities and workers have real power in the economic development process. We need community input to ensure that projects reflect the interests of local neighborhoods as well; and we need a commitment that subsidized employers will treat their workers with dignity and respect.
The fight over Amazon’s HQ2 transcended this one company – it was about the future of work and the future of our communities.