Real-estate development in New York City involves a lot of political back-scratching. Or, put more favorably, you could say it involves a consultative process between the public and private sectors.
Politicians make asks on behalf of constituencies and interest groups: please build a playground here, use labor from this union, agree to put the apartments you’ve built under rent stabilization. In return, politicians offer things of value to developers. The city can create that value out of thin air by changing the zoning on a piece of land, but sometimes, the value comes from tax abatements not terribly different from the ones Amazon was controversially offered to build a 4 million square-foot campus in Queens. Just ask Donald Trump, who started his real-estate development career with the tax-abated renovation of the Grand Hyatt in Midtown.
Crucially, the more value the city creates for developers, the more it can ask for in return. This has been one of the de Blasio administration’s policy strong-suits: maximizing the amount of affordable housing it claws back in exchange for the development permissions it has handed out for projects like the Domino Sugar redevelopment in Williamsburg.
A key objection to the now-scuttled $3 billion subsidy deal to bring Amazon to Queens was that the quid pro quo was imbalanced: Andrew Cuomo and Bill de Blasio had not negotiated well on behalf of the city, and we were giving Amazon too much for the 25,000 jobs they promised to create. But Amazon proved unwilling to enter into the sort of wide-ranging, permanent negotiation that real estate developers accustomed to dealing with New York politics and politicians routinely do. Instead, the company withdrew; it will continue to lease additional space in the city, as it needs more room for staff here, but it won’t put 25,000 new employees into a new headquarters.
The Amazon deal’s opponents won the fight, but their public comments have tended toward a mix of celebration and surprise and irritation that Jeff Bezos wouldn’t keep haggling.
“To simply give up and say, ‘We’re going to take our marbles and go home,’ I’m really surprised,” said Jimmy Van Bramer, the New York City councilman who represents the district where Amazon would have built its new headquarters, at a press conference last week, according to The Wall Street Journal. “I look forward to working with companies that understand that if you’re willing to engage with New Yorkers and work through challenging issues, New York City is the world’s best place to do business,” said Council Speaker Corey Johnson, a strong opponent of the deal, pushing the consultative model for other firms.
The question for Amazon’s opponents is: what was their goal? If it was to block corporate giveaways — a perfectly respectable goal — they have succeeded. But if it was to expand New York’s consultative model to larger, national firms — to use their policy leverage not just to get schools and playgrounds and affordable housing built, but to pressure companies like Amazon to adopt progressive priorities on matters from unionization to its dealings with Immigration and Customs Enforcement — they have not succeeded.
And if they had succeeded at the second goal, they would have failed at the first.
The thing about a quid pro quo is you need the quid to get the quo. New York’s consultative approach is effective at pushing businesses to provide public benefits. But it’s also built on special deals for special businesses which agree to provide those public benefits.
Of course, one could argue: Just demand what we want from the company, and say they can’t do business here if they don’t comply, instead of paying them off. Obviously a lot of public policy already works like this: The minimum wage is an obligation, not something a company agrees to in exchange for a subsidy. But you can only get so much by demanding and requiring, because a company can decide, as Amazon did, that it will avoid your demands by going elsewhere.
I think we got to the right outcome on Amazon: New York and Amazon didn’t need each other; it was right for elected officials to fight the huge subsidy grant, and it was right for Amazon to decide not to come if they didn’t think they could get it. New York is very important, but it’s not important enough to force a large, international company like Amazon into a permanent consultation it wasn’t going to enjoy.
Politicians who opposed this deal should be glad they won, but they shouldn’t be surprised Jeff Bezos walked away with his marbles. They weren’t New York’s marbles to begin with.
