NYC's Amazon Deal Could Cost $1B More Than City Thought

NEW YORK CITY HALL — The price tag of the deal to bring Amazon to Long Island City could be nearly $1 billion more than the city previously claimed, officials revealed Wednesday.

The online retail behemoth was expected to get about $1.28 billion in tax credits and abatements through to city programs for its sprawling new campus along the East River, according to a press release announcing the deal.

But the real number could be as much as $987 million larger as that estimate only accounts for the minimum invesment that Amazon is expected to make, according to a Wednesday report from the City Council's Finance Committee.

"Yes, the jobs are coming, but there is so much more that needs to be evaluated and considered, including whether the jobs would have come without such a hefty incentive package," Councilman Daniel Dromm (D-Queens), the committee chairman, said Wednesday.

The report was made available just before Council members grilled Amazon executives and Mayor Bill de Blasio's economic development chief about the record-setting deal.

Amazon's campus is expected to cover 4 million square feet over 10 years and could expand to 8 million square feet in 15 years, de Blasio's office has said. The company will also fill at least 25,000 jobs by 2029, a number that could grow to 40,000 by 2034, officials say.

The Industrial Commercial Abatement Program, a city tax break program also known as ICAP, could be worth up to $836 million if its campus grows to the maximum size, the Council's report says. That's more than double the $386 million figure the city has previously touted.

Additionally, the city's Relocation and Employment Assistance Program, or REAP, would be worth $897 million to Amazon if it creates 25,000 jobs, officials have said. But the benefit could balloon to $1.44 billion if the number hits 40,000, according to the Council report.

Those benefits are on top of the roughly $1.7 billion in tax breaks and grants Amazon has been offered by Empire State Development, the state's economic development arm.

The project's boosters, including de Blasio and Gov. Andrew Cuomo, argue it will generate more than $27 billion in tax revenue for the city and state over 25 years for a nine-to-one return on a roughly $3 billion incentive package.

But Council Speaker Corey Johnson slammed the city and state for failing to examine all the costs of the project, such as the opportunity cost of letting Amazon use the massive site and how the city will accommodate the thouands of new residents the project will bring.

"We announced a deal and we're celebrating a deal before the city looked at the costs of the deal," Johnson said during Wednesday's hearing.

James Patchett, the president and CEO of the city's Economic Development Corporation, acknowledged the tax breaks could get bigger if Amazon hires more people, but he disputed the Council's numbers.

The city assumed the REAP program, which gives tax credits based on the number of employees relocated, would continue in its current form for another 10 years, in which time Amazon would bring about 25,000 jobs, Patchett said. The original $897 million estimate is based on that assumption, he said.

The EDC projects the ICAP figure would hit $618 million if the firm's campus expands to 6.4 million square feet, which is equivalent to 40,000 jobs, he said.

Amazon maintained that the incentives played an important role in its decision to move to Long Island City, though Patchett stressed that the city didn't give Amazon a single dollar of "discretionary" benefits.

"We gave them nothing. We did not give them, promise them any incentives," Patchett said. "What we worked with them on was to identify real estate opportunities, and then we insisted that they pay fair market value for them."

Patchett and Amazon executives pushed back against the Council's latest onslaught of criticism. The jobs will shore up the city's economy against future economic downturns and the resulting revenue can be invested in housing, health care and transportation, they argued.

"These jobs are good for Long Island City, good for Queens and good for New York," said Brian Huseman, the vice president of public policy at Amazon. "We were invited to come to New York and we want to invest in a community that wants us."

Huseman revealed that Amazon plans to hire public housing residents for customer service jobs and will start taking applications next quarter. The company is also working to establish a "cloud computing certificate" program at LaGuardia Community College to prepare students for entry-level tech jobs at Amazon or elsewhere, he said.

In another apparent effort to sweeten the deal, Amazon announced Tuesday that it would fund computer science classes at more than 130 high schools in the city. The company has also reportedly sent mailers to Queens residents to convince them of the deal's benefits.

But Amazon executives' refusal to remain neutral when it comes to their employees unionizing rankled Council members including Jimmy Van Bramer, a Democrat who represents Long Island City. He told the company to stop sending the flyers around because "they are not working" and "opposition is growing."

"There is so much that you are getting and there is so little that you are giving," Van Bramer said.

(Lead image: James Patchett, the president and CEO of the city's Economic Development Corporation, testifies at a City Council committee hearing on Wednesday. Photo by Emil Cohen/New York City Council)