Amazon Strikes Back

Amazon Strikes Back

There is a lot of discussion about the recent Amazon news. The selection of two communities for the second headquarters was a bit of a shock. Rumors of a two city deal trickled out for a few days before the big announcement. And when the winners were announced, there was massive joy and a significant amount of cursing.

How could this announcement create such an uproar?

Foremost, the locations made sense from an economic perspective and a political standpoint but not from a national consensus. The Northeast corridor is the most populated section of the country. Washington, D.C. and New York City are two of the nation's most important and powerful cities and they compliment the location of the original Amazon headquarters in Seattle. Unfortunately, the selection of the east coast is a predictable location but one that ignores Middle America where the need for jobs is great. The selection of the east coast further promotes the view of a bias against the Heartland. It equally pits urban America against rural America in ways that many may not consider.

The locations for the new campuses are in metropolitan New York and Washington. They are not in the heart of either city, but on its outer ring. There is a suggestion that open space was needed, but not a space that was open to conflict. This idea would have clearly eliminated lots of Rust-Belt cities where open space could be contested by issues of poverty, urban deterioration or racial conflict. Amazon could be a player in urban renewal and gentrification, but not an urban pioneer. That philosophy makes suburban Virginia a better choice than downtown Detroit and Long Island City a better choice than the South Bronx.

The decision also stresses that Amazon was not a cheap date. Communities with money had to court the company and offer significant deals to close the transaction. That too, eliminated a large number of potential suitors.

Months ago, I advocated Newark for the new headquarters. I spoke of Newark's needed resources, especially jobs. Amazon would have been a great fit for the dozens of colleges and universities that surround Newark. Students could have benefited from a pipeline of Amazon employment from internships to executive posts. It would have been the greatest thing for so many students and colleges to collaborate with Amazon in the Newark renaissance. Plus, Newark has under-developed spaces in its immediate center city.

So, I must admit that I was very disappointed that Newark's bid to become Amazon's HQ2 failed. After all, Newark recently welcomed Whole Foods and Audible to its redeveloping downtown. Given that Amazon is playing a part in the city's emergence, it seemed that Newark had a chance and that the state might be able to put together an attractive package.

However, the local backlash facing New York's governor and New York City's mayor can be used as an explanation why Newark never had a chance. In winning, in the minds' of the average citizen, the city and state probably lost. The concessions made to Amazon were roughly $5 billion in incentives and untold millions in related development costs. On paper this expense seems extreme for just 25,000 jobs. As a struggling city, Newark would have been burdened with years of debt to accommodate Amazon. It would be reminiscent of the protests against the building of the stadium for the Newark Bears or NJPac or the Prudential Center where expenses were pitted against a deteriorating tax base, failing infrastructure and lowly rated schools. Would the city truly benefit from the presence of Amazon? Would Amazon truly be happy in Newark? Such a gamble was not in the best interests of Newark or Amazon.

In contrast, while all New Yorkers might not be happy, this is the type of challenge that a great city cannot refuse. This is not a get rich scheme but part of a long term urban strategy. While it may not produce the vision that Mayor De Blasio and Governor Cuomo imagine, there is little doubt that it will spur various types of development. The location is the prime reason. There is a need to move corporate organizations out of Manhattan. Combined, Queens and Brooklyn have a population larger than any other city on the east coast. Manhattan real estate is much more expensive than that of Queens, and Long Island City is minutes away from Manhattan by ferry and subway. Additionally, Long Island City has been a target for urban renewal as far back as the 1980s. Teamed with the recent development of the Technology Campus on Roosevelt Island, Long Island City could be envisioned as New York's version of Silicon Valley.  The hope is to encourage other companies to follow Amazon's lead and relocate in the area.

Unlike Manhattan, Queens has never been a choice for business. Amazon will change that perception. And long after this generation of politicians is out of office, the Amazon gamble will still produce dividends from future tax revenues, new infrastructure development, population distribution, and the construction of new residential and commercial spaces.

No, everything will not be rosy! There will be massive gentrification. There will be neighborhood conflicts where old-timers will feel deceived by politicians and developers. There will be residential and commercial displacement. And there are tremendous hidden costs. But, this is part of the legacy of American cities. For a city to grow and renew, change is necessary. In the final analysis, many more will benefit than will be harmed in the transaction. However, what is unfortunate is that the greatest beneficiary of this transformational process will be Amazon, whose profits will emerge long before the city sees its initial rewards.