[zaroth]

This is what detractors of the deal keep saying. You can speculate on the organic growth rate of the NY economy all you want. But at the end of the day, there are 25,000 - 40,000 jobs which definitely won’t be coming to Long Island City now.

[joshuamorton]

That's not obviously true.

The land is still there. Other companies could use it. Unless everything Amazon might have purchased goes totally undeveloped, the impact is less than the 25k jobs.

And given the time horizons involved, I'd take that bet.

[zaroth]

Anyone else who proposes to develop at the scale that Amazon was proposing, would likely be achieving similar tax incentives as to what Amazon was offered. Particularly since the terms of the deal were made public, that becomes an anchor point for any similar discussions.

There is no question that organic growth will eventually create 25,000-40,000 jobs. But the net present value (NPV) of that future job creation is significantly reduced after applying the discount. So even the same number of jobs is not a comparable economic impact.

[ec109685]

So the state should have been happy to give 26B in subsidies then? They could bank the 1B and have 25k to 40k jobs.

The math isn’t as clear as you are making it out to be. Google or companies like it will change their investment whether amazon is there or not.

[zaroth]

I’m not sure if it was a typo on your part, or you might be misinformed of what the actual deal was that was struck. From TFA;

“Amazon was to build their headquarters with union jobs and pay the city and state $27 billion in revenues. The city, through existing as-of-right tax credits, and the state through Excelsior Tax credits - a program approved by the same legislators railing against it - would provide up to $3 billion in tax relief, IF Amazon created the 25,000-40,000 jobs and thus generated $27 billion in revenue. You don't need to be the State's Budget Director to know that a nine to one return on your investment is a winner.“

The crucial point is that there is no cash to bank! The politicians statements that the “money could have been better spent on xyz” was a lie.

The deal was to reduce taxes on future revenue if and only if Amazon met specific (lofty) investment and job creation requirements.

”Make no mistake, at the end of the day we lost $27 billion, 25,000-40,000 jobs and a blow to our reputation of being 'open for business.'”

[ec109685]

Giving amazon the ability to not pay taxes is a subsidy. My question is whether it would still have been a good detail if NY had removed 26B of their tax burden because of the economic benefit?

Where is the line in your view? How much help is too much for a company?

[zaroth]

The purpose of city government is collection of taxes from one set of people and expenditures of revenue to another set of people, in an effort to serve the greater good of the community.

The economics which determine where the “line” is, is set by the market of people/companies willing to move into and invest in the city, the services and infrastructure and regulation and talent pool they require to be able to function effectively in the city, and the tax burden they are willing and able to shoulder relative to other available tax/service/infra/talent bundles available elsewhere and their own profit margins.

And all that is a calculation companies perform within and between municipalities when selecting where to grow and invest.

And also a similar calculation made by the residents who move into and out of a city based on the services, infrastructure, tax rate, and companies that are present.

Some economicist must have modeled all this and drawn all the supply/demand curves, and the equations which show how certain curves shift in response to taxes or stimulus or investment in any of the various areas.

The short answer is at the bottom of the letter — a 10:1 return on investment would have been a massive win for any development agency.

Maybe there is a way to model the breakeven point accounting for all the various future cash flows. Maybe we can make a list of all the similar projects and their expected ROI and rank them, e.g. as a dollars per job created number, or a ratio of tax dollars forgiven versus tax dollars collected.

But very subjectively a good deal is one that leaves the community better off in the long run. There’s no way to know this a priori, but all the evidence points to this deal being a truly massive loss for this community.

Amazon can do things for a locale that no amount of simple tax revenue can do. Because they can profitably employs tens of thousands of people. It’s actually the most important function of a city, to enable profitable sustainable jobs for its residents. It’s not, in fact, simply all about the Benjamins.

[pas]

NYC tech scene is still booming, Google et al. is still on a hiring spree there.