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Amazon Comes to Queens

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Amazon Comes to Queens

10 Blocks podcast November 14, 2018
Economy, finance, and budgets
New York
Technology and Innovation

Nicole Gelinas joins Howard Husock to discuss the resolution of Amazon’s year-long “HQ2” competition. This week, the Internet giant announced that it would open new offices in Crystal City, Virginia—near Washington, D.C.—and New York’s own Long Island City, Queens.

Located just across the East River from midtown Manhattan, Long Island City had struggled for years as a post-industrial neighborhood until the early 2000s, when rezoning allowed the construction of dozens of luxury residential buildings and modern office towers. The neighborhood still faces challenges, however: it’s home to some of the city’s largest public housing projects, and its schools are poorly run.

New York State is offering Amazon more than $1.5 billion in tax breaks and grants to create 25,000 jobs in Long Island City. That comes out to about $48,000 per job. Since the announcement, community leaders and elected officials are already making demands on Amazon. They want to see funding for transit fixes, employment for local residents, unionization, and more. As more details emerge on the terms of the city and state’s agreement with the company (one example: Amazon’s private helipad will be limited to 120 landings a year), many New Yorkers are skeptical.

Audio Transcript

Brian Anderson: Welcome back to the 10 Blocks podcast. This is your host, Brian Anderson, editor of City Journal.

As you may have heard, Amazon has officially announced the results of their notorious “HQ2” competition.

The tech giant will be opening new offices (with roughly 25,000 employees each) in two locations: Crystal City, Virginia and New York’s own Long Island City, which is just a quick ride on the 7 train to Queens, when it’s working, from our offices near Grand Central.

Amazon’s selection is drawing many critics: some say wealthy metro-areas, areas like New York and Washington, D.C. hardly need the investment compared to others cities. At the same time, left-wing groups in New York are already making demands on Amazon.

Coming up on the show today, two of my colleagues, Nicole Gelinas and Howard Husock, both contributing editors at City Journal, will talk about Amazon’s decision to move to Long Island City, and what kind of impact it will have on the city.

But one more announcement before we get started: If you are a listener in the New York area and you like following policy developments in city & state of New York, I encourage you subscribe to our newsletter, “The Beat.” It’s an e-newsletter, you’ll get insight on housing, education, homelessness, infrastructure, and more delivered right to your inbox three times a week. You can find it at www.thebeatmi.com.

That it’s it for me. The conversation between Nicole and Howard begins after this. We hope you enjoy.

Howard Husock: Hello, I’m Howard Husock, vice president for research and publications at the Manhattan Institute. And I’m here with Nicole Gelinas, a contributing editor at City Journal. Hello, Nicole.

Nicole Gelinas: Good afternoon, Howard. Thank you for having me back.

Howard Husock: So we’re going to talk about something that all of America is talking about today, and that is Amazon’s decision to locate one of its two new headquarters in New York City in the Long Island City district of New York, as well as its other new HQ2 in Crystal City near Washington, D.C. So, Nicole, and I should stress that Nicole writes about transit and infrastructure for City Journal and she’s also a chartered financial analyst so she knows how to think about corporate decision making as well. Nicole, you know the whole country basically was vying for this Amazon headquarters, but now that it’s been announced that New York is going to get a piece of it, we’re seeing protests. “We’re going to mobilize and protest and claim that democracy is still alive in Queens and New York City,” said a councilman whose district includes Long Island City. “It’s unacceptable and we are going to fight.” Does he have a point?

Nicole Gelinas: Well, he’s going too far with the rhetoric about whether this is a social justice issue. But in terms of the whole country fighting for this and New York getting it, it’s understandable that people have a skepticism of what these jobs mean for New York in terms of its ability to absorb people on transit, and schools, and so on and so forth, because these jobs come when New York is in the middle or at the end of a record boom in private sector job creation. If you look back over the last ten years since the recession, New York has added 700,000 private sector jobs. And just for perspective, that’s more jobs than a lot of cities that competed for the Amazon headquarters even have in the first place. So in terms of, does New York need these jobs, of course, all cities need job growth and New York should be very happy to be welcoming 25,000 new workers at Amazon, particularly since these are good paying jobs. But in terms of offering these huge incentives to get these jobs, the reality is we really didn’t have to offer these incentives to add 25,000 jobs. I mean this is only 4% of the total of jobs that we’ve added in the past decade.

Howard Husock: Well didn’t have to offer the incentives because New York was already generating lots of new jobs, or might Amazon have located in New York anyway? Amazon stated as its reason for choosing the locations that it did—it didn’t say tax incentives. It said talent. Do you take them at their word?

Nicole Gelinas: Yeah and it’s not so much because I believe them, but because it points to why other companies have created jobs here. If you look at Google they’ve already hired 10,000 people in New York—in Manhattan, which is more expensive than Queens—without having to go through this process of getting all of these incentives from the state and city. Same with Twitter, same with Facebook, and the same thing with a lot of much smaller companies that you’ve never heard of that just have a few people either providing services to these companies or doing their own tech startups. So why do these companies want to be in New York? Because we’ve got a base of highly educated, highly skilled people who themselves want to be in New York and also competition between companies for workers. If you want to go hire tech workers with experience, go to a place where there already are tech workers with experience where you can hire from some of these companies. These tech companies thrive on density, they thrive on having lots of competition, collaboration, cooperation among themselves and it would be strange for them to go somewhere that didn’t have such a base for these activities.

Howard Husock: So maybe Columbus, Indianapolis, Boise—they didn’t have a chance from the beginning?

Nicole Gelinas: I have no idea how close the race was. I mean obviously it wasn’t close over the past few weeks because we’ve been hearing leaks that New York and northern Virginia would get these jobs. But—and these places are fine places and have been doing well themselves. But the reality is we’ve seen more movements of the highest paying jobs out to the coasts, which is both good and bad. Amazon is already on the other coast obviously, and even without the incentives, it would be very difficult to see how they would continue to grow without having some base in New York, whether they call it a headquarters or not. Remember, they’re operating in Europe; they’re trying to build up in London and Paris, Ireland, all over the world. And so they’ve got to have a big east coast presence somehow.

Howard Husock: For those who don’t know New York City, talk about Long Island City because Amazon is not coming to Times Square. It’s not coming even to Herald Square. It’s coming to Long Island City, which is not on the map for a lot of people who may be listening to this podcast. Describe Long Island City, and why that poses some, shall we say infrastructure complications that could result from the decision.

Nicole Gelinas: Right, well Long Island City, first of all it’s not on Long Island. This is part of Queens, which is part of the five boroughs of New York City. The good thing about Long Island City from a company perspective is, it is a transit hub of sorts where eight subway lines converge in the area; they have the Long Island Railroad. So when you’re situating a place for housing, it doesn’t have to be a hub because people who live in the house, they go from their one subway line to a hub, which is where they work. But in situating an office building, people have to come from all over, so you need more than one subway station and hopefully more than a few subway stations. And so that’s the case in Long Island City, just as it’s been the case in Downtown Brooklyn, which has been pretty successful, too, over the past 30 years. Now before Amazon made its decision, it was mixed success in getting Long Island to be a hub for office jobs. City Group has a big tower there, although it did not work out the way the city would have liked in terms of people wanting to leave Manhattan and wanting to go work for City Group in Queens. And it has become a hub for housing. They’ve had more apartment buildings built there than anywhere else in the city over the past decade, you know 41 apartment buildings just in the past few years. And so that has created a strain on the transit system anyway. I mean you’ve gone from 23 million annual subway riders to closer to 33 million just in the past 20 years. And so these subway stations, they can’t even handle today’s level of traffic, let alone handling more people. Again, that’s not a bad thing. It’s just that rather than give away tax dollars to a company that needs to be in a dense city anyway, the city and state should be using these tax dollars to improve the subway system, and even long term, even bringing New Jersey Transit trains out there so they really are a bigger hub.

Howard Husock: You would think that Amazon would actually want the transit connections to be better, wouldn’t you?

Nicole Gelinas: Yeah and maybe they do. It would be smart of them to take what they can get in tax breaks and then once they’re here, start to lobby and be part of the community advocating for better transit.

Howard Husock: What are the specifics—Governor Cuomo is in charge of the subway system, too, through Metropolitan Transit Authority. What are some of the specifics of what need to be done to make the subway system work in a way that can accommodate 25,000 new jobs for Amazon and lots of other thousands of new jobs?

Nicole Gelinas: Well more capacity, just running more trains per hour. And the good news is, the number 7 train, which goes through Long Island City, the MTA is very close to having a modern signal system on the number 7 train. They’ll actually be done with this, so they say, this month, after a ten-year process almost. That’s only the second subway line to have modern signals.

Howard Husock: Modern signals means you can run more trains faster.

Nicole Gelinas: Yes, they’re digital signals rather than mechanical signals. And so what do we need to do? Doing more of that, continue to modernize the subway signal systems. And also we shouldn’t forget aboveground improvements—that part of what we should be doing is easing the capacity constraints on the subway by taking people off of the subway. It’s good that Mayor de Blasio has launched—literally launched, in this case—a system of ferries, because the ferries come from Long Island City, other parts of Queens and Brooklyn, into Manhattan, and the reverse obviously for people who might live in Manhattan and work in Queens—those can take some of the burden off the subway system. And also, more bus lanes, the street car trolley project that the city is still considering for the Queens and Brooklyn waterfront. Just moving more people through these dense, finite spaces in any way we can is helped to adding jobs no matter who is creating these jobs.

Howard Husock: Well one thing Amazon did not have to create in Long Island City is parking, which it would have had to create in a lot of these other places, right?

Nicole Gelinas: Yeah that’s true. It would be very strange if most Amazon employees drove to work. However, there are issues with Uber, Lyft, in that we sometimes talk about the sharing economy and the non-ownership economy. But if traffic is not managed right, it doesn’t matter if you own your own car or you hire a car. You’re still creating traffic. And again, that’s on the state and the city to manage these issues rather than get to the crisis situation that they’ve already gotten to, even without these jobs from Amazon.

Howard Husock: So it sounds like your advice to Governor Cuomo and Mayor de Blasio but primarily to Governor Cuomo is, don’t think this is all over just because Amazon has reached its decision.

Nicole Gelinas: Yeah and my advice to them, although it’s too late for them to take this advice today, is rather than focus on these incentives, everyone should pay the same level of tax no matter what kind of company or what industry that they’re in. But use these tax revenues more wisely to create the public infrastructure that we need to support the private sector. I mean supporting one particular company, maybe this comes at the expense of the next startup of the future that will eventually create tens of thousands of jobs, but do it in some other city.

Howard Husock: Amazon, after all was, in the not-so-distant past, a small online bookstore.

Nicole Gelinas: Right, and they have—another thing to remember is, you reminded me saying “not that long ago,” and they’ve been around for 21 years—time goes by fast, I guess. But if you think about the lifespan of companies and what the city’s economy would look like 21 years from now, think about incentives that the city and state gave out back in the ‘80s. A lot of those companies are no longer around or they’re around in much different form. Like the city gave incentives to Philip Morris. That industry has seen huge dislocations as we’ve cracked down, obviously, on smoking, and the city and state gave incentives to Shearson Lehman, banks that no longer exist anymore. Not to say that Amazon won’t exist in another 21 years, but to predict what the economy will look like and offer incentives based on those things has always been a fool’s errand.

Howard Husock: Picking winners and losers—

Nicole Gelinas: Mhm.

Howard Husock: So last question, is this a done deal, is there any chance that opponents will somehow derail it?

Nicole Gelinas: I think it’s a done deal. What people like Senator Gianaris want—

Howard Husock: He’s a Senator from Queens, is he?

Nicole Gelinas: Yes. It could be both good and bad is, making sure that his neighborhood gets the best deal it can out of this. What would be good from that angle is making sure construction is mitigated so people who live there are not injuring noise and dust all night, for example—I mean making sure construction ends at 6 PM if it’s a residential neighborhood; lots of things that big companies sometimes resist and, you know making sure that parks, open space, schools that come along with this will be well-designed and well integrated into the community.

Howard Husock: But for instance a New York City council can’t block it?

Nicole Gelinas: No, they can’t block the state tax incentive programs and I think the council would be highly unlikely to block the city portion. You may hear more complaining, but are there actually enough people to overturn the smaller part of it that comes from the city? Most likely not.

Howard Husock: So New York will not say to Amazon, “forget about it”?

Nicole Gelinas: Probably not.

Howard Husock: Okay I’m Howard Hussock, Manhattan Institute, I’ve been joined by Nicole Gelinas of City Journal. Another 10 Blocks podcast, thanks Nicole.

Nicole Gelinas: Thank you, Howard.

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