Blame unions for New York’s pricey giveaway to Amazon
Gov. Cuomo and Mayor de Blasio have crafted a massive taxpayer subsidy to entice Amazon into creating 25,000 to 40,000 high-paying jobs in New York.
The purported cost-benefit ratio, described by Cuomo as the most lopsided in the history of economic development deals, is probably skewed by the assumption that a prime swath of Long Island City would otherwise remain underdeveloped.
Still, the state-city deal to bring one of Amazon’s two new headquarters to Long Island City might at least have provided New York City with another big benefit — a much-needed model of advanced, efficient building practices. After all, Amazon isn’t just a big corporation: It’s widely admired as a global leader in technological innovation.
Instead, it appears the deal will ensure that Amazon is saddled with the same arcane and outmoded construction-union work rules and compensation levels that have saddled New York City with the nation’s highest urban construction costs.
Amazon is promising to invest $2.5 billion in Long Island City in the coming decade, and up to $3.6 billion when ancillary community projects are counted over 15 years.
At the same time, the company is investing $2.5 billion in Crystal City, Va., the second of its new headquarters sites. Yet Virginia was able to land its project for a reported total incentive package of around just $800 million, while New York state alone is offering the company $1.2 billion in tax credits, plus capital grants of up to $502 million.
Why the difference? After all, as any house- or apartment-hunter can tell you, the Washington area isn’t exactly cheap. However, Queens project enhancements and New York taxes aside, it’s a lot less expensive to build a big commercial project in the DC area than in New York City.
There’s no specific mention of unions or union labor preferences in the written agreement between the state, city and Amazon, but de Blasio promised “you’re going to see union jobs in construction [and] building services,” and Cuomo could be expected to insist on it.
As if to confirm as much, the governor’s follow-up press release on the agreement included a quote from Gary Labarbera, president of the Building and Construction Trades Council: “We look forward to working closely with Amazon and the community to ensure that the project includes good middle-class construction jobs with benefits and high quality permanent jobs.”
Translation: The unions expect a piece of the pie.
There’s no telling how much of a union-labor premium is buried in the half-billion dollars of state capital grants Cuomo is willing to hand the company.
Nor has Cuomo disclosed where up to $502 million in capital grants will come from — although he doesn’t lack for discretionary pots of cash. The governor is now sitting on $411 million in still-unallocated fines and penalty payments collected from various financial institutions for violations of state banking or securities laws.
He can also draw from huge stashes of “state and community facilities” pork-barrel funds that state lawmakers (including the soon-to-vanish Republican Senate majority) have obligingly expanded for him over the past eight years.
Union pay rates and work rules can add 25 percent to construction-labor costs in New York City, according to past analysis of the state’s “prevailing wage” law covering public-works projects.
So all else being equal, assuming labor makes up roughly half of construction costs at the Long Island City complex, Cuomo would have to offer Amazon an extra $50 million to hire union-only contractors for construction work that might be completed for $400 million by “open shop” competitors — which is presumably what the company would use if it was funding a project this big fully on its own dime.
Beyond all the other questions it raises, the Amazon incentive package looks like a classic New York deal, rigged to grease all the right special-interest groups.
This isn’t just an insult to countless thousands of brick-and-mortar Main Street businesses across New York, whose tax money will now subsidize the global behemoth that is eating their lunch.
It’s also the ultimate in political self-dealing by the governor and Mayor de Blasio, who will use Amazon as a funnel to deliver hundreds of millions in work to union allies.
Kind of gives new meaning to the phrase “Amazon Prime.”
E.J. McMahon is research director at the Empire Center for Public Policy and an adjunct fellow at the Manhattan Institute.
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