Editorial: Time for Amazon deal for brick-and-mortar stores

The Island Now

The incentives showered on Amazon to locate in Long Island City will probably not be the worst business deal recently struck by New York State and New York City.

Gov. Andrew Cuomo’s “Buffalo Billion” initiative appears to have clinched that title with the conviction of four people for conspiring to rig the bids on $855 million in state contracts for the project.

But the Amazon deal, made after the company spent a year looking at 237 other locations, does raise some significant questions as well as some significant opportunities.

In a deal that excluded any say-so from the pesky New York City Council, Cuomo and Mayor Bill de Blasio agreed to give Amazon $1.525 billion, including $1.2 billion from its Excelsior program, to attract Amazon to Long Island City.

Another state agency, Empire State Development, will offer $325 million to Amazon tied to real estate projects.

And Amazon can also apply to New York City for tax credits that could be worth north of $1 billion.

We are not even counting the fact that the campus is in a federal redevelopment area that qualifies for corporate tax breaks, letting the company’s major stockholder, the world’s richest man, keep more of his wealth.

Cuomo, de Blasio and others have touted the benefits of the project, which are considerable.

Amazon will build four million square feet of commercial space on Long Island City’s waterfront over the next 10 years, with expansion opportunities for up to eight million square feet over the next 15 years.

Through a $3.6 billion total investment, New York City’s website says, “Amazon will draw from the diverse and talented workforce in New York State to fill at least 25,000 new jobs by 2029 and up to 40,000 jobs by 2034 with an average salary of $150,000. The construction is expected to create an average of 1,300 direct construction jobs annually through 2033.

The New York City website continues, “Overall, the project is estimated to create more than 107,000 total direct and indirect jobs and over $14 billion in new tax revenue for the state and a net of $13.5 billion in city tax revenue.  The project provides a 9:1 return on investment.”

These are not insignificant benefits and New York City and New York State had plenty of company in throwing out the red carpet when Amazon announced that it planned to open a second headquarters a year ago.

Let’s leave aside the fact that Google announced Monday its plan to spend $1 billion on a new campus in New York City over the next 10 years and hire 7,000 workers without all the hoopla and free money showered on Amazon.

But the deal raises real concerns with the state of the free market in this country.

Where, for instance, is the fairness in a company recently valued at $1 trillion receiving $3 billion in tax breaks for opening a new corporate headquarters? In New York City with its vast pool of tech talent which by itself would have been a good reason for Amazon to open a new headquarters.

At least, Cuomo’s Buffalo’s Billions project was aimed at upstate New York where residents and jobs have been fleeing for years.

The riches bestowed upon Amazon are an excellent case study of how giant companies use their financial muscle and political clout to get benefits that smaller businesses cannot. So much for an even playing field.

It also explains a worrying trend of the biggest companies in industry after industry gaining a larger and larger share of the market. This is too big to fail on steroids.

Also missed in the talk about all the benefits thrown at Amazon is what Amazon actually does to win all this affection.

Investopedia defines Amazon as “an e-commerce and cloud computing company” that is known “as the largest internet retail company in the world.”

In fact, Amazon is the company most frequently cited as the reason for the demise of brick-and-mortar stores across the country – including Nassau County.

The local businesses owned by people who live in your community, who pay their fair share of property taxes and probably then some. The people who coach Little League baseball teams and join the Rotary and frequent the churches and synagogues around town.

We understand that companies like Amazon have a right to compete. The technology they have developed has created a standard of service for retailers across the country while saving consumers time and money.

For that, they deserve credit.  And have earned lots of money.

But should government add to that advantage by tilting the field in Amazon’s favor with tax breaks and incentives the average business owner can only dream of?

Elected officials like to extol local businesses as the backbone of the country and the great driver of jobs in this country.

If they are serious and the Amazon project actually does generate the money promised by Cuomo and de Blasio – neither of which is a sure thing – how about spending some of the city and state’s windfall on ways that even the playing field.

The officials can start with property tax relief for small businesses and equal treatment of out-of-state companies that are part of Amazon’s online marketplace.

That means either making the out-of-state companies pay New York’s sale tax. Or cutting the sales tax for small businesses here.

They can also fund improvements to main streets that make them more convenient and more attractive to shoppers.

Otherwise, they should stop pretending to like the little guy.

 

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