By Brandon Tubby
In March 2019, an assortment of politicians, businessmen, and architects gathered in Manhattan’s Far West Side to celebrate the grand opening of Hudson Yards, New York’s newest neighborhood. The city’s mayor, Bill de Blasio, though, was notably absent. Make no mistake – the event was certainly worthy of mayoral attention. With its soaring towers, expertly-engineered 26-acre platform, and $25 billion price tag, the development of Hudson Yards has been dubbed the largest private real estate project in U.S. history. As such, Mayor de Blasio’s decision to forgo the event was peculiar. An aide for de Blasio claimed that the Mayor couldn’t fit the event into his schedule, although other high-profile politicians like Senator Chuck Schumer carved out time to attend and deliver a speech. But in the wake of the Amazon HQ2 fall-out, his absence quietly underscores a growing philosophical predicament for progressives as to what is ‘good’ economic development.
The HQ2 Dilemma
Just one month before the grand opening of Hudson Yards, Mayor de Blasio penned an op-ed in the New York Times scorching Amazon for abruptly pulling out of an agreement to locate its second headquarters (HQ2) in Queens, taking with it promises of over 25,000 jobs. De Blasio attributed local political opposition against HQ2 to growing frustration with flagrant corporate greed and increasing wealth inequality, as the deal with Amazon had included nearly $3 billion in financial assistance from the city and the state.
The endowing of taxpayer money to Amazon raised important questions over how public dollars should be spent. It also ignited a debate among progressives resistant to subsidizing massive corporations but still eager to champion economic development, foster job creation, and bring in cutting-edge industries. So when the news broke that Amazon was quietly bringing over 1,500 jobs to the Hudson Yards neighborhood in December 2019, just months after the HQ2 fall-out, progressives opposed to the original deal felt validated.
Behind the Curtain
The real story of Amazon’s new New York office, though, is not so simple. The sleek neighborhood would itself not exist without lenient tax policies and significant financial assistance from the city and state of New York. The Hudson Yards project caught momentum post-9/11, as the administration of Mayor Michael Bloomberg sought to create a state-of-the-art mixed-use district to increase the city’s supply of both high-end office space and housing. The Bloomberg administration also felt that connecting the development to public transit was a necessity for the neighborhood’s vitality. However, the Far West Side had no subway or train station at the time; thus, building an extension of the number 7 subway line became imperative. One problem: the subway extension came with $2 billion price tag. Anyone familiar with the state of the Metropolitan Transit Authority’s financials knew that the subway project would take years of capital planning and lobbying before ever receiving the green light.
So, in an unusual maneuver in New York City economic policy, the Bloomberg administration proposed paying for the entire subway project through tax increment financing (TIF), a public financing method which calls upon future tax revenue generated by a development to fund associated development costs. In 2007, the city authorized the issuance of $2 billion in bonds to raise capital for the subway extension, wagering that future tax revenue captured from Hudson Yards would generate enough money to pay back their debts. Essentially, the Bloomberg administration put the city on the line for Hudson Yards in an unprecedented fashion.
For the funding scheme to succeed, the city needed Hudson Yards properties to quickly generate tax revenue. The Hudson Yards Financing District (HYFD) was mapped out along the Far West Side to designate which sites would have their property tax revenue directed towards fulfilling the city’s bond obligations. Crucially, property tax discounts – 25% for 15 years compared to the average Midtown tax bill per square foot – were also offered to developers to swiftly attract tenants. Amazon’s new office, along with new offices for JPMorgan, Blackrock, and L’Oreal, all opened within the boundaries of the HYFD and are, thus, eligible for a substantial tax discount.
Despite these tax incentives, an analysis done by The New School showed that revenue gains fell gravely short of projections, partially due to the economic uncertainty posed by the Great Recession. The city expected to contribute $7.4 million from 2007 to 2015 to make up for the potential revenue mismatch between property tax revenue and debt payments, but ended up spending 40 times more – a whopping total of $359 million. Many see TIF as a “self-financing” funding mechanism, but it proved to be anything but for New York taxpayers. In terms of job creation and economic development, many of the commercial tenants in Hudson Yards simply relocated from other parts of the city due to the generous tax breaks made available. Clearly, the full story of Amazon’s move to Hudson Yards and the financing scheme that made the move possible, reflects the complex, sometimes shady, relationship between government and the world’s wealthiest corporations.
An “Unexplained” Absence?
Some politicians like Representative Alexandria Ocasio-Cortez celebrated how Amazon, in the aftermath of the HQ2 fall-out, quietly moved to New York, seemingly without public financing and tax-breaks. But, as the overseer of the city’s debt obligations, Mayor de Blasio better grasped the full story. He sees how the city’s financials are now intricately tied to the success of the luxury Hudson Yards neighborhood. He was aware of the complex subsidy schemes, financial loopholes, and tax incentives that made Hudson Yards, including Amazon’s new offices there, possible. So he understood well the optics of celebrating the project’s opening. Hudson Yards is, in fact, the antithesis of what progressives like de Blasio believe urban development should look like: exclusive, gaudy, and subsidy-heavy. But the realization of the project under his administration (though the vision for Hudson Yards is unmistakably a product of the Bloomberg era) reflects the challenges facing the city today as it strives to balance economic development with what is best for residents, economically, socially, and culturally. It epitomizes New York’s ongoing tilt towards private gain over inclusive urban design and underscores how cities are increasingly boxed-in by superagency hegemonies and corporations like Amazon.
In light of these challenges, what de Blasio and future mayoral administrations can, and must, do is sit out of bidding (and building) wars and instead focus on investments in affordable housing, green-collar job creation, education, and infrastructure. In the short-run, there may be no star-studded ribbon cutting ceremonies or sleek new skyscrapers on the skyline. But, in the long-run, they will help create a more resilient, economically just, and inclusive New York for the benefit of all. Hopefully de Blasio understood this when he missed the Hudson Yards grand opening. Perhaps, in fact, the Mayor’s absence was not so peculiar at all.
Feature Image: Hudson Yards New York Press Images
AP Archive. 15 March 2019. $25 billion NYC Hudson Yards development opens. YouTube. https://www.youtube.com/watch?v=jW1rUjgiWE8
Barro, Josh. 13 November 2018. Here’s Why New York Is Resorting to Paying Amazon $3 Billion for What Google Will Do for Free. NY Mag. http://nymag.com/intelligencer/2018/11/why-new-york-is-paying-amazon-usd3-billion.html
de Blasio, Bill. 16 February 2019. The Path Amazon Rejected. The New York Times. https://www.nytimes.com/2019/02/16/opinion/amazon-new-york-bill-de-blasio.html?smtyp=cur&smid=tw-nytimes
Feiner, Lauren. 9 December 2019. Amazon will open a new office in New York, less than a year after dropping plans for HQ2. CNBC. https://www.cnbc.com/2019/12/09/amazon-to-lease-space-in-manhattan-less-than-a-year-after-hq2-fallout.html
Fisher, Bridget and Flávia Leite. 2018. The Cost of New York City’s Hudson Yards Redevelopment Project. The New School. https://www.economicpolicyresearch.org/images/docs/research/political_economy/Cost_of_Hudson_Yards_WP_11.5.18.pdf
Ghaffary, Shirin. 30 January 2019. Amazon’s HQ2 was supposed to be a win for New York City. Instead it has become a huge political battle. VOX. https://www.vox.com/2019/1/30/18202825/amazon-hq2-new-york-city-political-battle-de-blasio-queens
Urban, Rob; Levitt, David; and Christopher Cannon 14 May 2018. Wall Street Is Moving, and It’s Reshaping New York. Bloomberg. https://www.bloomberg.com/graphics/2018-manhattan-office-migrations/?srnd=real-estate-and-home
About the Author: Brandon Tubby is a senior undergraduate at UNC-Chapel Hill majoring in public policy with a minor in urban studies and planning. Brandon competes for the Tar Heels as a distance runner on the varsity cross country and track teams, specializing in the mile.