Amazon fallout: Should New York keep spending $10 billion a year on subsidies?

ALBANY – In Buffalo, $750 million in taxpayer money to build a solar-panel plant connected to Tesla has so far produced about 700 jobs.

“So $1 million a job?” Sen. Liz Krueger, D-Manhattan, asked New York's economic development head Howard Zemsky at a recent budget hearing.

“Yeah,” Zemsky responded, but stressed that 1,400 jobs or more are planned.

The so-called Buffalo Billion and public-subsidized deals like it in New York have drawn a new round of scrutiny after Amazon pulled out of New York City this month amid outcry over $3 billion in state and city incentives offered for the project.

Offering one of the world's wealthiest companies and its founder Jeff Bezos billions of dollars was a rallying point for the deal's critics, who also worried about the impact of 25,000 new jobs on services and home values in Queens' Long Island City area.

"We know that corporate welfare does not work for taxpaying New Yorkers, for working class New Yorkers and for small-business owners," said Sen. Julia Salazar, D-Queens, at a news conference Wednesday on the issue of public subsidies.

The debate over public subsidies for private companies has galvanized unlikely allies: progressive Democrats and conservatives who have both railed against giving out big bucks to lure companies to the state.

"It’s time to replace the gimmicks with sustained, comprehensive policies that lower taxes, improve affordability and create an environment that eliminates the need to offer subsidies in the first place," Assembly Minority Leader Brian Kolb, R-Canandaigua, Ontario County, said in a statement.

Efforts for change

Salazar, who first took office in January, is pushing for a new law that would ban municipal and state governments from offering corporate subsidies across the country.

The goal of the bill, which is also sponsored by Assemblyman Ronald Kim, D-Queens, would be to establish a coalition of states to pass it and end what she called "a costly race to the bottom" — where states compete with each other for jobs by offering tax breaks and other incentives.

The Amazon deal was the perfect example, critics said, of a system where states battle for jobs by seeing who can offer the best publicly-funded deal.

Amazon started a national competition over its second headquarters, offering the promise of 25,000 to 40,000 jobs as enticement for states and cities. More than 200 regions applied; New York City and Virginia were the winners.

"When giant corporations are dictating to cities and to states how much of their money they want to take because they are forcing them to compete, that is a flawed system," Sen. Michael Gianaris, D-Queens, who helped lead the opposition to Amazon in New York, said alongside Salazar.

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Big breaks for business

The amount of money New York doles out to subsidy jobs has long faced criticism.

An investigation by the USA Today Network in New York in 2017 found New York spent more than $8 billion a year on economic-development programs, but they often produced lackluster results and had limited oversight.

The spending has grown since then, according to the Citizens Budget Commission, a business-backed think tank.

The group said spending on state and local economic-development efforts last year reached $10 billion, a 17 percent increase from 2016.

"Between 2016 and 2018 state and local economic development costs continued to increase, state spending shifted toward discretionary grants and away from as-of-right tax breaks, and transparency has not meaningfully improved," the group said.

Salazar is right to want to limit public subsidies for private businesses, but it should start simply with a ban in New York and not require other states' involvement, said E.J. McMahon, founder of the fiscally conservative Empire Center for New York Policy,

"You’ve got to hand it to her: the freshman legislator has brought a genuinely fresh approach to an issue area that badly needs it," he wrote.

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Tax breaks defended

Gov. Andrew Cuomo has supported the tax breaks for Amazon and other companies, saying the state is in a national and global competition for jobs.

"Businesses shop states," Cuomo said Friday on WAMC, a public radio station in Albany.

"They do it to us all day long. Existing businesses will call up and say I got an offer from Virginia so I’ll leave. We bid like the other states did for Amazon. It was a very open competition."

Cuomo said New York's bid of $3 billion in state and city incentives was less than some other states and provided only 10 percent back on the $30 billion that Amazon was expected to add in tax revenue over 20 years.

The incentives were largely tied to job creation: If Amazon created the jobs, they would get the tax breaks. About $500 million were grants.

Moody’s Investors Service, a credit-rating agency, said Amazon's decision was negative for New York City, pointing out that it "highlights how politics and anti-business sentiment can combine to derail economic development despite competitive strengths."

But it also noted that the city remains a strong draw for companies because of its educated workforce and transportation system, saying the city is growing regardless of the incentives.

"Companies such as Google and Facebook have expanded significantly in New York City without direct state or city support because they want access to its creative workforce," Moody's said in a report.

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Reforms planned

The incentives for companies have been tied to corruption scandals in New York, including those involving the Buffalo Billion development and projects associated with the SUNY Polytechnic Institute in Albany.

Cuomo's former top aide Joseph Percoco is headed to federal prison in a kickback scheme, as is former SUNY Poly president Alain Kaloyeros for bid rigging.

The scandals have prompted calls greater oversight of New York's development deals.

In response, Cuomo last month proposed a long-sought measure to create a "database of deals” so the public can more easily see what incentives are going to projects.

Cuomo and Comptroller Thomas DiNapoli also agreed to give the Comptroller's Office greater oversight of contracts for SUNY and CUNY construction projects, a responsibility that was largely stripped soon after Cuomo took office in 2011.

"We will never stop venial, greedy, ignorant, behavior by people," Cuomo said in his State of the State address Jan. 15. 

"And we shouldn't be expected to do that, but we should be expected to do everything we can to have a system in place that safeguards against fraud or theft."

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