Local politicians run off Amazon - Economics

[Riggerjack]

@ID

I think Queens will be fine, it doesn't have the same problems as the rust belt. Though I think a rust belt city could host a HQ2 with far fewer problems, the whole point of HQ2 is to gain prestige, and I don't think they can get it there. Too bad, limited corporate thinking.

But Amazon opens warehouses all over, using this same technique, so I was try to compare and contrast the project differences.

[IlliniDave]

Rj, I hope you're right--I bear no ill will towards the folks there. I agree that the issues are somewhat different than the Rust Belt, but we're 40-50 years further down the road from the onset of that era and a lot has changed.

This isn't really related to anything you said. In thinking about this I came across some interesting data. NY top personal income tax rates are higher than the top corporate state income tax rates. City corporate taxes are actually higher than state corporate taxes and they combine to over 15% (higher than I first thought). Amazon really only wanted enough of a "deal" to offset the estimated ~$3B in startup costs. Both the NY governor and NYC mayor have been signalling recently for higher taxes to come. I wonder now if this had nothing to do with some disgruntled local politicians and more to do with simply reassessing the numbers.

[Jason]

There is a proven template for this type of development that anyone in Queens can empirically observe at least five times over within one moderately thorough morning ass scratch. It's not like they are the guinea pigs or Amazon are some type of pioneers. Newark NJ was willing to blow Jeff Bezos like it was his new girlfriend for this deal, and believe me, they would have had no compunction going BBBJ for him.

And its not just the real estate developers who were upset. It was the small businesses on the street, the people who actually have skin in the Queens economic game who are devastated by the pull-out. You know, the ones who aren't racing to Manhattan every morning to put on a Civil War uniform and hold the door open for some Wall Street douchebags. It would have given the community a centerpiece of immeasurable value.

I guess they can wait for something more "organic" to grow. I mean they've been waking up every Sunday morning for the past fifty years rooting for the Jets to be good again. If anything, they've proven that they are a patient bunch of fucking idiots.

[Seppia]

Wait Jason are you comparing Long Islad City with Newark NJ?
LIC is basically an extension of Manhattan in the same way as Exchange Place NJ is, Newark is a place where you hear gunshots at night.

In 2012 I looked into moving from battery park city to LIC to save some money and elected to stay in battery park when I saw prices were basically the same for comparable buildings.

Amazon wasn’t exactly looking to settle in a struggling neighborhood

[Jason]

Newark is experiencing a revitalization. That is why they were a part of Amazon's dog and pony show in which they were one of the cities that lost to Queens. The very fact that they were in the running attests to your misconception of the city.

The NJ Devils now play in Newark. The Newark Performing Arts center has been established. Land value in Newark is now up to $2 million an acre for warehouse use. If Al Queda wanted to create real destruction, and not just symbolic destruction, they would have attacked the NJ Turnpike corridor in which Newark resides, shutting down transportation into the Manhattan, and disabling the Newark Airport, the Newark seaport and the Newark oil refinery. Without Newark, the East Coast of the USA is inoperable. Most foreign automobiles arrive into the Newark seaport.

Is there some truth to your assessment to Newark? Yes, but it is becoming anachronistic. The DeBartolos, the owners of the San Fransisco 49's, just paid over $60 million dollars for an old industrial property in the Iron Bound Section (unfortunately my customer only offered $50 million). Facebook donated $100 million into charter schools that hasn't been going too well, admittedly. Corey Booker, the NJ Congressmen, a former Mayor of Newark, has announced his nomination as Democratic Presidential candidate. He couldn't do that if he hadn't brought a change to both the reality and perception of the area. Although, personally, I hope he loses worse than Queens.

[Seppia]

I’m not sure the fact that Newark was in the completely fake “competition” proved anything.
What I was trying to say since the beginning (I’m sorry if I wasn’t very clear) was that amazon wanted to be in NYC (one subway stop from Manhattan counts as NYC for me) and or WDC from the start and all other contestants were just there for show

[Jason]

The one subway stop is erroneous. With the creation of the light rail and East coast transportation hubs (Secaucus), residential landlords are able to achieve Brooklynesque rents in any Northern NJ town with direct light rail access. White collar, Manhattan based workers have proven that they will utilize the rail service, as opposed to buses, which they will not use. This creates a phenomenon in which some residential development projects that are physically closer to Manhattan achieve less in rental income due to the fact they are not located on the light rail line.

I believe Newark made at least one of the cuts. But from any standpoint, aesthetic, cultural, etc. Queens does not overtly exceed Newark, and in some areas, I may go out on a limb, lags behind. Saying you live in Queens does not provide more cache, or social capital than saying you live in Newark. When someone tells me they live in Queens, my first thought is whether their wife is one of those women who get drunk on Sunday Morning in Giant Stadium parking lot and then instigate brawls once the Jets start choking.

[Riggerjack]

And its not just the real estate developers who were upset. It was the small businesses on the street, the people who actually have skin in the Queens economic game who are devastated by the pull-out.

I am sure that is true. But telling me that the people who were going to benefit from the deal are upset isn't really news.

I think where we disagree, is that you think 2 million an acre for warehouse space is a good thing, and I see it as a problem. But it's your area, not mine. HQ2 would have made things more the way you want them.

And I am sorry you won't get a higher class of jets fan, as quickly as you would prefer.

[Jason]

Market value is a problem? Really? Private, individual land owners being allowed to maximize the value of their property due to the most rudimentary understanding of the basic laws of supply and demand theory is now a problem? What, the the old "location location location" adage is now not to be utilized? The old "There not making anymore land" comment can't be uttered? I guess you want them to treat these owners like the original Indians squatting by the Hudson River and give them a fucking dollar and tell them to take a dump elsewhere?

And as an FYI - a higher class of Jets fan is referred to as a Giants fan.

[Riggerjack]

No. Markets aren't the problem.

But using government force to manipulate markets; to ensure those who have more, get more, and those who don't, need to get outta town, most certainly is.

But it's not my problem. I am not there. You are, and it seems to be your idea of a solution, and it seems to work for you. Best of luck with that.

[Seppia]

Long Island City, median asking price for renting a one bedroom: $3088 per month
https://streeteasy.com/for-rent/long-island-city

Newark: https://www.trulia.com/for_rent/Newark,NJ/1p_beds/

Same

[Campitor]

No. Markets aren't the problem.

But using government force to manipulate markets; to ensure those who have more, get more, and those who don't, need to get outta town, most certainly is.

• https://www.aei.org/publication/best-se ... d-today-2/
  https://www.aei.org/publication/whod-a- ... staurants/

That horse has already left the barn in NYC and the rest of the country. Whether its minimum wage hikes, a Green New Deal, Or Trump protectionist tariffs that increase the cost of goods and services for americans in order to subsidize a non-competitive business, every single citizen, poor and rich, is sucking off the teat of government force if they support any of these programs.

And Gentrification is a natural byproduct of the density of infrastructure and people coupled with excessive government regulation that makes housing and business overly expensive. NYC is the most costly place to build at $534 per square foot and the 2nd most expensive city in the US to live in. It's highly unlikely to keep any sizeable low income population in an area with that much density and wealth - the city can't afford it because they need the revenue to maintain all their socialist programs and public infrastructure.

And whenever you have depreciating housing (a byproduct of renting to low income families and/or rent control) but high land value, it makes the site more valuable to developers - buildings can be purchased below cost and renovated and sold for profit or the rents increased. And also the children of low income families , as a result of the multitude of opportunities in a business dense area, typically get better education and jobs which increases their purchasing power. This increase in pay allows them to up bid on housing or businesses which gentrifies the very neighborhood they live in. So the children of the poor today become the gentrifiers of tomorrow.

You cannot raise the standard of living for low income people and avoid gentrification; it's a natural byproduct of their increased economic potential. It may look quaint, righteous, and folksy to wave that anti-gentrification flag but it comes at a cost - you're basically saying that you want to keep the economic status quo for low income people. Voting against gentrification is voting against your future economic viability. This is what NYC did when it sent Amazon packing. It said "NO" to raising the standard of living and it said "NO" to tax revenue that is needed to maintain such a massive and aging infrastructure. And did anyone look at the site via the Google map pic I posted? The place looked horrible - old buildings, a massive parking lot, and roughly 40% of the lot was flooded. What small business or even a group of small businesses could afford to improve the conditions of that lot? There is no "smaller and organic" means of improving that site - it has to be a big corporation with deep pockets. If there was a small and organic means to do it, it would have been done by now.

[Jason]

Manipulation of markets? Oh fucking please. 65% of the government incentives were already on the books.

https://www.cnbc.com/2019/02/21/develop ... omers.html

So what does this mean? Amazon did what you anticipate in any real estate negotiation irregardless of the magnitude, they flexed in an attempt to get more benefits. Oh my, I mean that's a new one. Because of course, no one ever does that. I mean everyone just agrees to what is initially offered. And instead of engaging in basic 101 Real Estate negotiation and finding out exactly where the deal was, Queens took to the streets, the world took to the internet and Jeff Bezos pulled out of Queens like it was his soon to be ex-wife because he saw the ignorance written on the subway walls.

[Riggerjack]

@ Campitor

And Gentrification is a natural byproduct of the density of infrastructure and people coupled with excessive government regulation that makes housing and business overly expensive.

I agree with you, but I wish it were that simple. It's not.
If it were, the rust belt would still be expensive. HCOL still requires businesses to bring in the money from the world, and local employees and owners to disperse the money locally. In this case, it matters how much money Amazon would disperse in local employees, and how their income compares to local income. The impact would be much much lower on Queens if they were paying median wages for Queens. Adding 25k outsiders (plus dependents) to a fully populated city would still be problematic, but all that extra money would be a double whammy.

And whenever you have depreciating housing (a byproduct of renting to low income families and/or rent control) but high land value, it makes the site more valuable to developers - buildings can be purchased below cost and renovated and sold for profit or the rents increased.

This has been addressed in all HCOL cities with rent control and other planning regulations. This doesn't stop development, it ensures that developers pay for political connections. That's what this deal was. Amazon just knew that in this case, the governor was cheaper. In most big developments, this is the case.

When Verizon was rolling out FiOS, it required a new fiber optic overlay of the areas to be served. It also meant that VZ was going to need a video franchise (right to compete in providing video service to customers).

Most video franchises are local, but local government is... Difficult to deal with at scale. It's not more expensive, just more difficult, which is more expensive when you are paying lawyers and political consultants to do the negotiations.

As an example, VZ worked out a statewide franchise in California with the Governator. 6% across the board, no need to negotiate with localities, overlay where it makes sense. I don't remember if the tax goes to the state or locality.

Here in Wa, Gregoire wasn't so cooperative, so VZ negotiated with localities. The price was still 6%, but lots of little BS requirements were added. Broadcasting the city's local access stations was the biggest hurdle, and that was a bitch. Once it was done, it doesn't cost anything more, just a few tens of millions in development and compliance. But that's why if you live in unincorporated king county, FiOS is unavailable, but across the street in the city, it is. My boss's boss was on the negotiations team (gotta have someone from engineering around to stop the negotiations professionals from promising a free pony to anyone who listens) and had great stories about how messed up that was.

Each negotiation had to go through a public review process, meaning every tin foil hat gets a say. I can understand Amazon try to avoid that. Anyone sane would.

. And also the children of low income families , as a result of the multitude of opportunities in a business dense area, typically get better education and jobs which increases their purchasing power.

if I remember correctly, this is very similar to your own personal history. How many of those kids making your life difficult followed that path? Going back to the old neighborhood you see the same people, just richer and happier, right? That reputation inner city schools have is a figment of Hollywood imagineering, is it?

This increase in pay allows them to up bid on housing or businesses which gentrifies the very neighborhood they live in. So the children of the poor today become the gentrifiers of tomorrow.

This was true in my case, but strangely, none of my fellow renovators and gentrifiers seems to share anything like my history. Mostly, the ones I know came from middle class families, with middle class or above values and problems.

You cannot raise the standard of living for low income people and avoid gentrification; it's a natural byproduct of their increased economic potential.

This isn't either/or, it's a spectrum. One certainly could not change that one variable alone and avoid gentrification, but nobody has the ability to change only one variable in a city. Every change causes change. But your description is simple and fits a narrative easily.

It may look quaint, righteous, and folksy to wave that anti-gentrification flag but it comes at a cost - you're basically saying that you want to keep the economic status quo for low income people. Voting against gentrification is voting against your future economic viability. This is what NYC did when it sent Amazon packing. It said "NO" to raising the standard of living and it said "NO" to tax revenue that is needed to maintain such a massive and aging infrastructure.

It does, and they did. Where we disagree, is that I think Queens has so much more going on that adding Amazon would be too much of a good thing. All of the above could be true if we were talking about the rust belt, but overstimulation happens at the local scale, too. I was describing the overstimulation when I described the problems in my first post in the thread.

And did anyone look at the site via the Google map pic I posted? The place looked horrible - old buildings, a massive parking lot, and roughly 40% of the lot was flooded. What small business or even a group of small businesses could afford to improve the conditions of that lot? There is no "smaller and organic" means of improving that site - it has to be a big corporation with deep pockets. If there was a small and organic means to do it, it would have been done by now.

I looked at the addresses given in one of the links. The site doesn't seem to be a flooded parking lot, though that is part of it. It also seems to include the the local police building and a bunch of other small lots. The flooded lot, and every other lot HAS been developed. It's capable of further development. The future is unwritten. For this area to be developed, an owner needs a plausibly profitable plan, permits, and funding. That it hasn't been done yet simply means it hasn't been done yet.

I agree with the principal behind all of your statements. But reality is far more interesting than narrative. The map isn't the territory. This territory seems to be on a different map than the one you are referring to.

[Campitor]

if I remember correctly, this is very similar to your own personal history. How many of those kids making your life difficult followed that path? Going back to the old neighborhood you see the same people, just richer and happier, right? That reputation inner city schools have is a figment of Hollywood imagineering, is it?

1 of them committed suicide - he was a victim of a local priest molestation and he couldn't get past it. Some became policeman, businessmen, local politicians, and few went into medicine. Yesterday's douchebag is today's outstanding citizen. Only one that I know of went to jail for assault and battery. The rest moved out to the suburbs during the "white flight" era. I actually live in the "old" neighborhood now but it's mostly condos, yuppies, and local restaurants and boutique stores - none of them are cheap. The median price for a modest 2 bedroom condo is $600k. A 3-apartment house used to cost $30k in the mid 70s - they now go for 1.5 mil - and those are fixer-uppers. The totally remodeled ones can't be purchased for less than 1.8 mil.

All my local boyhood friends are either engineers, working for high tech, teachers, or work in government - 1 is a homicide detective and another trains police cadets. So ya - living in a concrete jungle surrounded by banks, hospital, colleges, and high tech tends to lift the boats adrift in those tides. There are no more blue collar neighborhoods in my area - it's all mixed now. Even the blue collar jobs (plumbers, carpenters, electricians) cashed in their skills for the property churn businesses. 2 that I knew personally (they were brothers) purchased distressed multi unit properties, renovated them, and sold them as condos. I bumped into them years later and they were driving Mercedes and BMWs and managing their own rental units - both were immigrants from bangladesh - one was a plumber and the other was an electrician. Another former coworker who was an illegal (we worked together when I was in my teens) purchased 2 buildings with 6 apartments in each, renovated them (I helped remodel one of the kitchens) and converted all the units into section-8 housing for the guaranteed monthly check.

Every change causes change. But your description is simple and fits a narrative easily.

That's because it's the only narrative that has a consistent result. Having money elevates the standard of living. This elevated standard of living has a cost which must be paid. Name one area, in a dense economic hub, with a high population density, that was modernized and the incomes increased but the cost of living stayed the same? Success is a weed that creeps up on people's way of life - there is no avoiding it.

And the land where Amazon was going to build was off of Vernon Blvd and spanned between 44th rd and 45th ave - I was mistaken - the flooded part was between 44 rd and 44th ave and not part of the Amazon site - its adjacent. Here is what the back of the proposed Amazon site looks like: https://www.google.com/maps/@40.7502006 ... 312!8i6656
Here is a sky view: https://www.google.com/maps/@40.7492857 ... a=!3m1!1e3

That area looks underdeveloped and miserable.

[Riggerjack]

@jason
I don't know if you aren't reading what I'm writing, or if I'm really that unclear. You honestly seem to be arguing with some progressive activist that you assume anyone objecting to HQ2 to be. Or I am simply misunderstanding you. Either way, we'll see how it turns out in WDC or wherever.


@ Campitor

Wow. That's a lot of success stories. Not the story I was expecting. Congratulations.

I think I have said all I have to say on this one. I will try to get this out more clearly in another format, I think. I don't seem to be able to make this clear today.

[Jason]

Riggerjack, honestly, I have no idea what the fuck you are talking about. If I had to guess, it seems, as usual, that you are requesting everyone on the board to view a very complex and variegated and interesting discussion with global repercussions through the heuristic of the fact that you apparently lay cable for a fucking living. And this is despite the fact that you have repeatedly demonstrated a gross unfamiliarity with the situation not to mention stating explicitly "its not your problem."

I only view you as someone who overextends their existential reality to the broader of the issues of the world, a trait that I find amongst the provincial. How this thread moved from Jeff Bezos in Queens to Riggerjack in buttfuck is beyond me but ultimately not surprising based upon my experience of contributing to threads with you on them.

[jacob]

http://www.albion.com/netiquette/rule7.html

[Campitor]

Wow. That's a lot of success stories. Not the story I was expecting. Congratulations.

This is why I believe that people can always rise beyond their expectations if they live in an area with so much diversity of opportunities and wealth. I do understand not everyone has the same opportunity. I doubt I'd be in my current income group if I lived in the backwoods of Appalachia. However, if the rungs of success created by economic opportunity are all around, and you don't avail yourself of them, or you spend time lamenting the loss of a neighborhood culture that was a consequence of economic disability, I have very little sympathy.

Humans will human. Cronyism and political chicanery will always exist regardless the economic structure. We all have to make peace with it and figure out how we can better our economic opportunities ethically. Part of the amazon deal was training any local with technical aptitude in cloud technology and getting them cloud certified. Amazon would have been a rung of opportunity for so many. In the world of disappearing jobs caused by creative destruction, why would anyone torpedo opportunities in the false hope of keeping prices stagnant in a place of vibrant change? This is why this Amazon broken deal, for me, is a giant case study in illogic.

I'm sure some other deep pocket firms will want the site and NYC and Queens will be fine, but the locals living there now, who will be forgotten by the next generation of residents, will pay for their economic obtuseness while complaining about an unfair economic system. This upsets me because I truly want everyone to do better. Watching someone who is struggling pass up an economic opportunity, to me, is like watching an alcoholic ordering another beer.

[Riggerjack]

I think I have said all I have to say on this one. I will try to get this out more clearly in another format, I think. I don't seem to be able to make this clear today.

Well, that didn't last long, did it?

I thought of another way to try to explain, bear with me, analogies are not my strong suit.

I consider the economic package development style we have been talking about, as a tool. It is neither good nor bad, but how it is applied can have good or bad outcomes for different people.

A hammer is not good or bad, but the outcomes of it's use can be broken down as good or bad for both the user and the environment it is used in. If I use a hammer to pound nails, to build a house, results are good for me, and good for the user of said house. Pound nails, build house, and smash my thumb; bad for me, good user of the house. Skip nails and house, use hammer on someone's skull; just bad for everyone.

But it's the same hammer.

By the same token, adding HQ2 to a city can be good for the company, and the city as a whole. Or it could be good for only a small segment of the population of that city. I was trying to make this case. That Queens is not the right kind of city to use that tool, right now.

By contrast, Detroit is exactly the sort of city that could use that tool right now, but I don't think Detroit will work for Amazon's purposes. (Which is really sad, because if Amazon wanted to, it could serve very well, but probably not in the time frame they seem to have in mind.)

Cities are indepedndet microeconomies. Just as QE temporarily juiced the national economy at the end of the last decade, slamming down an HQ2 project can juice the local economy.

However, only a fool would suggest that since QE adds a temporary economic boost, we should have started to adopt QE in 2005.

Stop and think about how that would have worked out.

It's that level of thinking I see repeated over and over throughout this thread. It's that level of thinking about development that leads to HCOL cities, and the problems they can't build out of.

Remember, infrastructure costs go up expotentially, as population density goes up linearly. NYC is a demonstration of this. 2 million an acre for warehouse space in the outskirts, ridiculous tax rates, and they can't maintain their infrastructure or budget. I am confused about how someone can think more of the same can possibly improve this.

Watching someone who is struggling pass up an economic opportunity, to me, is like watching an alcoholic ordering another beer.

I can see that. But not everyone is struggling, as Jason was describing the area, struggling wasn't the image I saw.

In reality, someone can be using the right tool, in the right place, on the right object, and still make a mess because it wasn't well executed.

This thread went from "what do you think about this project that didn't happen" to "hammers are awesome". Entirely skipping the step of determining whether the hammer was the right tool for the job, and whether the job should even happen in that spot, at that time.

Riggerjack, honestly, I have no idea what the fuck you are talking about. If I had to guess, it seems, as usual, that you are requesting everyone on the board to view a very complex and variegated and interesting discussion with global repercussions through the heuristic of the fact that you apparently lay cable for a fucking living. And this is despite the fact that you have repeatedly demonstrated a gross unfamiliarity with the situation not to mention stating explicitly "its not your problem."

Yeah, that seems fair. I would have used your experience, but I don't have it. I use what I know. And since my experience is pretty extreme on nearly every spectrum, I try to explain why I think as I do. I do hope to get better at it.