Today, Explained - HQ2-1

Episode Date: February 20, 2019

Amazon decided on two headquarters: one in New York and the other in Arlington, Virginia. One deal fell apart, the other just might work out perfectly. Today, Explained’s Noam Hassenfeld finds out why. ************** Clarification: We noted that New York offered $3 billion in subsidies to Amazon. We have clarified that this was a mix of both cash grants and tax incentives. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hello, person listening to this podcast. You know the drill. Right here, there's usually an ad, and that ad precedes the podcast and also pays for it, and then you get the podcast for free. Now, today we're doing something a little different. The people who get us ads for the show would love to know a little bit more about you,

not in a creepy way, in a totally normal, anonymous way. And the whole reason is the more they know about who's listening to the show, the easier it is for them to go get advertisers for the show. So if you'll do us a huge solid, go to podsurvey.com slash explained and take a super quick anonymous survey. There's even a chance to enter to win a $100 gift card at the end. It's podsurvey.com slash explained. Podsurvey.com slash e-x-p-l-a-i-n-e-d. Thanks for your help. I'm glad to welcome you here. As part of the agreement, Amazon is going to go through a brief training program to adopt a New York accent, which is part of the MOU. It was unexpected, I think, for all of us because that was not something that was in any headlines. initiative that has ever been done by the city or the state or the city and the state together, believe it or not. The announcement that the governor and the mayor did in November came with this goodie

bag of $3 billion. Average salary of over $150,000. It was really concerning to many people when we were told that there is not enough money for us to be able to address the needs of our communities right now. We're looking at up to an 8 million square foot campus on Long Island City's waterfront. And immediately we just reached out to the communities in the neighborhood in Long Island City to hear where they are at and how they felt about this announcement. Either you are creating jobs or you are losing jobs. Either you are part of the economy of tomorrow or you're part of the economy of yesterday.

And clearly folks who were in that neighborhood were really afraid and concerned what this big corporation will do to their neighborhood. This is a competition. New York's Governor Andrew Cuomo was right. This whole thing was a competition. Governor Cuomo had his eyes on other states. And activists had their eyes on him. Noam Hassenfeld, you've been reporting on Amazon's HQ2, its second major headquarters for Today Explained. It ended up being split between New York City and Arlington, Virginia. And of course, New York had to go steal the show. What happened there?

So last November, New York City won the rights to half of Amazon's HQ2. It came with a promise of 25,000 new jobs for the city. And it also came with a promise of almost $3 billion in subsidies to Amazon. Now, before we get any further, a quick note about these subsidies. If you go online, you see a lot of people getting these subsidies wrong. Some of it's cash, but the overwhelming majority is tax breaks. Plus, it's not as if New York has $3 billion just lying around right now to hand over to Amazon. Here's how it works. Amazon would build a headquarters in Long Island City, hire 25,000 people. That would bring lots of money in tax

revenue to New York. So most of these subsidies are Amazon getting a piece of their own revenue back in the future. Still, though, this is public money. This is subsidizing a company that just paid $0 of taxes on $11 billion of profit in 2018. So you can see why some people might get mad about that. Anyway, this HQ2 deal was a huge win for Governor Andrew Cuomo and Mayor Bill de Blasio. But the multi-billion dollar deal was made without going through city council's land use review process, leaving council members and the people of New York out of the decision. Activists were pissed.

They said, fix the subways, build cheap housing. Plus, most of these jobs probably won't even go to New Yorkers. I mean, Amazon really had an opportunity here to sit down with the community, hear what the community has to say from the start. But no, they decided to go close doors. Maritza Silva-Ferrell is a labor organizer in New York. Where we are a very progressive union city. And Maritza was not into these Amazon subsidies. Plus, she was worried about displacement in her community.

So when she looked at that closed door deal, she saw an opportunity. City council members were already outraged about the way in which this deal was done. So she started talking to every single city council member. When city council members saw that they were actually not even invited to have conversations with Amazon, they agreed with us and decided to set up three hearings. The speaker of the council, Corish Johnson, asked the question of the executives of Amazon. There are 5,000 employees that are currently working here in New York City for Amazon. Is that correct? Yes.

How many of those employees are unionized? None, sir. None. Would you agree to neutrality if workers at Amazon wanted to unionize? No, sir. We respect... You wouldn't agree to that? Correct, sir. We would not. And there is a lot of examples in which Amazon has already shown

that they basically do not allow workers to try any unionization progress. And they, as a matter of fact, show videos to their workers about why they shouldn't unionize. In this section, you will learn about the warning signs most commonly associated with early union organizing, as well as other warning signs that could indicate associate disengagement, vulnerability to organizing, or early organizing activity.

So those values, we decided to just hone in on that. Council members really heard us. So there were hearings. So again, I asked this is the first hearing, why do you need our money? There were protests at the hearings. P-T-F-O! Amazon is not to vote! P-T-F-O! And then, an opportunity. When we heard that the majority leader in the Senate, Andreas Stuart Cousins, appointed Senator Gennaris, who is a representative of that area, to the agency that was going to be deciding the future of the subsidies and the future of Amazon, Gennaris being the biggest opponent of the deal, we knew that we had a chance.

No, that's Mike Gennaris. Gennaris is a state senator representing Long Island City. As of last week, a majority of New Yorkers still supported the deal for HQ2. But Gennaris does not. He's quick to note that Even just in the span of a month, from one poll to the next, the opposition grew by 10%. And what I've found is the more people are learning about this, the more the problem arises.

He's actually one of the people who changed their mind. Back in 2017, he signed on to a letter with many other New York officials that invited Amazon to the city. But he started having second thoughts once the subsidies were announced without any input from the city council. The city council or the state legislature, for that matter, this was something that was agreed to with the governor and the mayor, and no other entities were involved. In fact, they went to great lengths to avoid the normal approval processes and hearings that would be required. Gennaris wanted to be a part of these negotiations,

but once the deal was announced, he drew a hard line. I attempted numerous times to communicate with the head of our economic development agency here in New York, and I could not get a phone call returned. Then when the deal was done and announced and presented as a fait accompli, at that point there was an outreach to have a meeting merely to explain to me what they'd already agreed to. The agency asked him to help work on the project and even serve on a community advisory committee, but he declined. At that point, staff was engaged with them

and representing my interests in those conversations. I reached out to the development agency, and they said they had no record of Gennaris calling since Amazon's HQ2 competition was announced back in September 2017. I went back to Gennaris, and his rep said he definitely reached out to them. This might just be a simple missed connection,

but it also seems like this relationship might be just a little dysfunctional. Anyway, as of two weeks ago, the deal was still very much on track. Then, Senate leader Andrea Stewart-Cousins made a bold call. The process was very, very flawed, and unfortunately important stakeholders weren't brought in early enough.

She wanted Gennaris' voice to be heard, so she appointed him to something called the Public Authorities Control Board. Pretty much every economic development project runs through the Economic Development Authority of the state. It's an obscure but pretty powerful board, and Gennaris getting nominated meant the positions of activists had gotten a step closer to power. It is a way to provide a check and balance on the executive, and that is exactly how it's being used right now. If you think a tiny board with three voting members couldn't possibly hold up the biggest economic deal in New York history,

I've got a certain football coach you should meet. What the hell are we waiting on? Do you understand there's a price to pay? Let's go to eat a goddamn snack. Back in 2005, when the Jets were trying to build a brand new stadium on the west side of Manhattan, they asked for $600 million in public money. The mayor and the governor get together, hold a huge press conference, and release this $4.6 billion plan.

And the discussion sounded a whole lot like the current one. People were pumped about it. The proposed west side stadium for the New York Jets has been called, quote, a revolutionary facility, a first-class sports facility in the world's greatest setting. And people were not. There's no economist I know of who says that these kinds of developments do anything that in terms of job creation or economic impact. The stadium deal was announced.

The stadium deal had momentum. And then the stadium deal was announced, the stadium deal had momentum, and then the stadium deal was killed by this tiny little board. And it's funny because the histrionics from the other side were very similar. This is going to destroy New York's economy and it's going to be the worst thing that happens to us. Our reputation will be ruined. Everybody knows what's happened in New York since then. Since that West Side Stadium fell through, New York has been booming. There was a lot of fanfare this morning as Mayor Bloomberg cut the ribbon to open the Barclays Center. The Google Hudson Square campus. You're looking live at one World

Trade Center, the tallest and most expensive building in the Western Hemisphere. Overall, between 2009 and 2017, New York had its longest economic expansion in over 70 years. It was the type of city that could win the Amazon HQ2 bid. But Amazon took notice when Gennaris was appointed to the Public Authority's control board. And just one week later, before Gennaris even had a chance to do anything... Amazon says it will not be building a second headquarters in New York City. The decision comes after the retail and tech giant

faced backlash from local leaders and residents. I was really disappointed to hear the news that Amazon wouldn't be coming to Long Island City. I think it's a real missed opportunity for New York and the broader economy here as well, quite frankly. Julie Samuels is the head of TechNYC. It's a nonprofit that advocates for tech companies in New York. Right out the gate, you're talking about tens of thousands fewer jobs immediately. And that's not to mention the multiplier effect, which many economists agree that every high tech job comes with an additional

five jobs in the neighborhood. For Julie, Amazon leaving New York is bad for three reasons. First up, the 25,000 jobs. That strikes me as just so crazy. I feel like the kind of opportunity that we missed here would have been a game changer when you think about the next generation of tech companies, the next generation of founders and engineers that are going to power the 21st century economy. And it's really unfortunate because those jobs will be hired for somewhere. Second, a company like Amazon would set up New York to weather any changes to the economy. It seems crazy to think about because New York has been booming for so long, but there have been times where the financial sector hits a tough patch, and that's really bad for the city. Every city wants to diversify its economy, and Amazon's

HQ2 in Long Island City would have really solidified New York's standing as an international tech hub. And third, other companies might not feel so great about how this all went down. That next company that wants to take that kind of big bet that really requires working with government and politicians is going to be scared off. State Senator Mike Gennaris is not so scared. Not even a little bit. While we're having this conversation, Google is growing 20,000 jobs just across the river in Manhattan. Facebook is growing here. Uber is growing here. Tech is already very vibrant in New York. In fact, I've seen some analysis that there are more tech jobs than people here to fill them already. So what would end up happening is if Amazon came here, they would import a lot of people to hold these jobs, or they'd end up

competing with the Googles and the Facebooks for the talent in New York and fighting amongst themselves. Even though there are multiple groups in New York that blame Gennaris for this deal falling through, he stands by his opposition. It didn't seem to me that the community was doing anything other than asking reasonable questions about their future. And rather than engage in a substantive dialogue about what that would mean for Long Island City, Amazon went with the my way or the highway approach and they left. I can't help but wonder, though, whether Amazon is just following the Gennaris playbook. Gennaris didn't want to negotiate, so he refused to meet with Amazon after the deal was announced. I wonder whether, to quote Cool Hand Luke,

What we've got here is failure to communicate. I reached out to Amazon for comment, and a representative pointed me to a statement that says, While polls show that 70% of New Yorkers support our plans and investment, a number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project we and many others envisioned in Long Island City. It goes on to say, We do not intend to reopen the HQ2 search at this time.

We will proceed as planned in Northern Virginia. Northern Virginia's deal with Amazon has a lot of the same features as New York's. The deal was made behind closed doors, it involved a bunch of tax incentives, and it situates the company across the river from a whole lot of action. Noam crosses that river to find out why things are going a lot smoother in Northern Virginia after the break. Thank you. from the CBC, and it's a Canadian daily news podcast designed for your morning commute, which is, you know, hours before our show comes out.

It's perfect. Every weekday morning at 6 a.m., the host of FrontBurner, Jamie Poisson, takes a look at a single news story, sound familiar, that affects Canada or the world. And, you know, it's a real polite, respectful tone. You can find FrontBurner where you find Today Explained. Just, you know, don't replace us, okay?

Today. Today Explained. It's Today Explained. I'm Katie Crystal. I'm a member of the Arlington County Board. Can I actually ask you to you that one more time. We are in too transit-rich of an environment. We're going to have buses the whole time. That's such a very subtle, humble brag. And you were also the board chair at the time this deal was approved, correct?

I was. So I was board chair in 2018 when Amazon made its announcement. I took a car out to northern Virginia to see what Amazon's HQ2 might look like here. So right now we are in an area kind of bridging between Crystal City and Pentagon City. We are walking past the future site of the final phases of Met Park, which Amazon intends to make part of their campus. From my vantage point here, it sort of looks like a lot of big apartment buildings and kind of sort of empty spaces. Definitely room for construction here. You're seeing a fair bit of hotel, which is actually a huge driver of our economy here in Crystal City and Pentagon City. Empty office buildings, kind of 1970s era, untenanted office buildings. And that's been one of our biggest challenges in Arlington.

As high as 20% of our office has been vacant in Crystal City. This is where the situation in Arlington diverges from New York. Arlington's got a lot of government jobs. And 15 years ago, a whole bunch of them were moved out of town because the rent was too high. So now you've got 8 million square feet of vacant office space in Arlington. It's expensive vacant office space, and it's quirky vacant office space. Mostly big, 70s-style government offices. These buildings are kind of unsuited for work being done today.

So I know a lot of the property owners have struggled to lease them up as is, and they need to redevelop the properties in order to get new tenants. And that's a really expensive proposition. And so many of them have just sort of sat. But a bunch of vacant office space isn't the only thing that sets Northern Virginia apart from New York. It's also the subsidies. They came in, you know, way below many other bids.

Greg Leroy is the executive director of Good Jobs First. It's a research group that focuses on job subsidies. We know Pittsburgh's bid was $9.7 billion. We know right next door in Montgomery County, Maryland, $8.5 billion. St. Louis, $7.2 billion. Newark, $7 billion. And this is $8.5 billion. St. Louis, $7.2 billion. Newark, $7 billion. And this is $0.75. $0.75 billion.

As in $750 million. Compare that to the $3 billion in subsidies New York offered up. Virginia could offer less because they had all these advantages in addition to the vacant space. Arlington and Virginia were always in the catbird seat. Bezos is rehabilitating a lavish mansion here. I think they wanted to be in the political power center of Washington, D.C. Most of the company's profits have come from Amazon Web Services.

And among its most profitable clients are the Department of Defense and the Central Intelligence Agency. And so literally, they're going to be a stone's throw from the Pentagon and a short drive to Langley. Virginia has the space. It's got the perks. They were able to keep their incentive offer pretty low. Win, win, win, right? Wrong. You know that phrase, a rising tide raises all ships? Well, that only matters if you're already above water. And there are plenty of people in Arlington who aren't. Roshan Abraham is a member of Our Revolution Arlington. It's a political organization that came out of the 2016 Bernie Sanders campaign.

There's not just one Arlington. There is the Arlington that's going to benefit from Amazon. These are the people who are already doing well. But there's another Arlington, the people from Spanish-speaking communities, immigrant communities, Black and Brown communities, and working-class communities. These are the people that the county board have done no outreach to. We do tend to reach people who are more privileged. They're more likely to be homeowners. They're more likely to be white. They're more likely to be older. And we have to keep working,

and we're not doing a good enough job. The conversations we have overwhelmingly indicate that people don't support the HQ2 plan because they know what it means for them. It means displacement. We have to have strategies to add more committed affordable housing. Arlington and Alexandria are both committing to $15 million a year in money that will support the development of affordable housing. And one of the ways we know we could create more affordable units is to loan out more money from our affordable housing investment fund. That has been hard when we have had a budget deficit three years running. And so for Amazon to come in, to me, is much better than having one in five of our office buildings in Crystal City

vacant, dragging down our tax base, or continuing to have this residential housing affordability problem and not having the resources to help tackle it. I mean, that's several steps away. But there will be people who are going to be impacted before any of those things can even start to happen. Roshan is worried that this housing process is too slow. But up in New York, some housing activists would have loved this idea. After Amazon's New York deal fell through, a number of public housing tenants associations

in Queens got together and released a statement that said, The city and state will now lose tens of billions in revenue that could have been invested in and released a statement that said, Regardless of what you think about the subsidies, New York has now missed out on a chance to have 25,000 new high-tech jobs, as well as the massive tax revenue those jobs would bring. At the same time, many activists, politicians, and members of the public are celebrating the news out of New York as a David over Goliath victory. But maybe we don't need to think about it that way at all. There is a way of viewing the world, which is that in every exchange, there is a loser and a winner. There's somebody who comes out ahead and there's a chump.

And so if somebody is benefiting from a transaction or a policy, then that means you are losing. I really don't think that's right. But I do still believe there's such things as win-wins. We have 8 million square feet of vacant commercial office building in Arlington. I think Amazon coming and locating jobs and filling 4 million of them and helping restore our tax base so that we can spend it on good, progressive values, I don't think there's a loser or a chump in that situation. I think it's possible that both Amazon and Arlington County can win.

Noam Hassenfeld is the resident Amazon reporter around these parts. I'm Sean Ramos for him. This is Today Explained.