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Why the Amazon deal collapsed in New York

Why the Amazon deal collapsed in New York

A tech giant stumbles in New York's raucous political arena
Why the Amazon deal collapsed in New York
The Long Island City neighborhood in the Queens borough of New York, Nov. 6, 2018.
Photographer: Joshua Bright/The New York Times

NEW YORK — A senior executive from Amazon, one of the world’s biggest companies, led by the world’s richest person, found himself last weekend in a showdown with a suburban state senator.

The executive, Brian Huseman, who is based in Washington, D.C., was trying to find out whether the New York state senator, Andrea Stewart-Cousins, would exert more control over an obscure state board that had the authority to block Amazon’s ambitious plans to expand in New York City.

It was the second phone call in two days between Huseman and Stewart-Cousins, who had just risen to power as Democratic majority leader.

And once again, Stewart-Cousins told Huseman that state lawmakers would use their power to assess the deal.

“We just need to move on,” Stewart-Cousins said, she recalled in an interview.

It was not the response that Amazon wanted.

For Amazon, long accustomed to highly deferential treatment from localities across the country, the phone call was a further indignity after weeks of relentless criticism from lawmakers, unions and progressive activists that the company feared was staining its reputation.

On Thursday, Amazon abruptly announced that it was canceling the deal, under which the company had promised to create more than 25,000 jobs on a new campus in Long Island City, Queens, in return for nearly $3 billion in government incentives.

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An examination of the deal’s collapse showed that Amazon badly misjudged how it would be received in New York, apparently because the company has rarely ventured into such a raucous political arena as it has pursued a breakneck expansion in recent years.

This account was pieced together from dozens of interviews this week with government officials, Amazon representatives, lobbyists and others. Most spoke on the condition of anonymity to relay closed-door deliberations.

The company’s retreat capped several days of intense behind-the-scenes maneuvering between government officials and Amazon executives, including efforts by Gov. Andrew Cuomo to woo unions and Mayor Bill de Blasio to try to reach Jeff Bezos, the company’s chief executive.

On Monday, Cuomo and de Blasio, bitter rivals who had put aside their differences to mount a bid for an Amazon site, met in Albany to discuss how to pacify unions that had voiced strong objections to the company.

De Blasio then called a top executive in the company, seeking assurances that the deal was still on. The executive did not indicate that it was in trouble.

Public housing residents rallied Monday, when a second poll came out showing broad support around the state for the deal.

“We’re working to make sure that folks from our neighborhood could benefit from those jobs; there’s going to be a lot of jobs,” Bishop Mitchell G. Taylor, a community leader, said Monday. Taylor grew up in the Queensbridge Houses, the large public housing development in Long Island City.

On Tuesday morning, senior aides to the governor and mayor talked by phone with Huseman about next steps, including how to promote the jobs that the company was planning for New York.

On the ground, the efforts appeared to be paying off: More local elected leaders were declaring their support for the deal. “N.Y. loves Amazon” buttons began appearing on lapels in the city.

By Wednesday, a senior Amazon executive in charge of real estate, John Schoettler, arrived from Seattle for a meeting convened by Cuomo in his Manhattan offices between Amazon and unions. By the end, the unions and the executives seemed to be making progress toward a resolution.

That night, the company decided internally to pull the plug.

The choice blindsided Cuomo and de Blasio.

“Out of nowhere, they took their ball and went home,” de Blasio said Thursday night.

He learned of the decision in a phone call from Jay Carney, an Amazon vice president and a former spokesman for President Barack Obama, according to a person briefed on the call.

Amazon can deliver toothpaste in traffic-snarled Manhattan on the same day an order is placed. But when it came to navigating the politics of New York, the company appeared out of step, a giant stumbling onto a political stage that — despite its data-driven success — it never fully understood.

“Amazon underestimated the power of a vocal minority and miscalculated how much it needed to engage with those audiences to make HQ2 a success,” Joseph Parilla, a fellow at the Brookings Institution, said, referring to the second headquarters search.

The company, in particular, failed to develop a robust strategy to address the growing influence of the progressive left in New York, led by Rep. Alexandria Ocasio-Cortez of Queens, who was elected in November and was a fervent skeptic of the deal.

The political winds changed so swiftly that local lawmakers in Queens who had signed a letter in 2017 trying to woo Amazon refashioned themselves as champions of the opposition in recent months.

One of them, state Sen. Michael Gianaris, refused repeatedly to even meet with Amazon representatives despite at least three requests. So, too, did Corey Johnson, the speaker of the City Council; Johnson held hearings instead of the private meetings Amazon requested. (Amazon met with 35 of the 51 council members, and more had been scheduled for this week.)

A spokeswoman for Amazon declined to comment for this article.

But two people involved in internal discussions at Amazon said the company’s concerns were not primarily that the deal would fail to receive government approval. Executives were confident it would cross the finish line.

The company instead felt that, with little sign that the opposition was dissipating, it was staring down a decades’ long commitment to a political climate in which everything the company did would be scrutinized.

“Amazon had to think about what a long-term relationship with New York City would look like, and based on the experiences with local and state politicians to date, concluded it would be difficult at best,” one of the people said.

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Amazon executives involved in the negotiations said they were frustrated that the economic benefits of the project — a winning argument with many business leaders and some community members, including public housing residents — failed to sway some officials.

“What we were hearing from people — small business owners, educators, community leaders — was completely different than what we were getting from the local elected officials,” said one of the people involved with the Amazon side.

Those feelings, and Amazon’s eventual retreat, were foreshadowed by testimony from Huseman last month at the City Council: “We were invited to come to New York,” he said, adding pointedly, “and we want to invest in a community that wants us.”

Instead, the company saw how its plans for Queens had become such a flash point that they turned into an issue in the Feb. 26 special election for public advocate, a citywide position with a big megaphone. Company officials worried that the debate over the project could drag on and become ensnared in the 2021 mayoral election, and beyond.

Amazon grew in Seattle for almost two decades with little civic engagement. Initially, most of its buildings were built by an outside developer. Neither Bezos, nor any Amazon executive, attended the groundbreaking ceremony for its headquarters that the mayor and governor threw.

By about 2015, as Amazon was developing its own buildings, and with roughly 25,000 employees in Washington state, it started engaging more, albeit slowly.

A top real estate executive chaired the local Chamber of Commerce, and it began forging relationships with two local nonprofits, one that works with homeless families and another job training program for the restaurant industry.

Yet even as housing costs soared in the booming city, Amazon did not take public positions in debates over how to alleviate the affordability crunch. It largely saw its role as creating high-paying jobs, and the city’s job to accommodate them.

So last year, when Amazon said it might halt its growth locally if the city approved a tax on large employers to fund homeless services and low-income housing, it sent a shock throughout Seattle. The city was not accustomed to the company playing hardball, let alone commenting on politics.

The trouble in New York City began last year with a hostile City Council hearing in December, and then another last month.

The company endured hours of attacks on its plans to come to New York, and on its business practices — particularly its stance against unions — in general. Protesters heckled. Council members forced an Amazon official to declare the company’s anti-union stance on the record.

The moment resonated for executives: Amazon was not accustomed to being forced to respond publicly on its policies and operations.

A turning point came on Feb. 4, when Stewart-Cousins, the new Democratic leader in the state Senate, selected Gianaris, the state senator and one of Amazon’s most vocal opponents, to the board with the power to block the deal. It was clear the opposition would not go away soon.

Cuomo could refuse to appoint Gianaris, of Queens. But the company wanted to know: What would happen then?

So on Feb. 8 and then again on Feb. 9, Amazon’s representatives spoke on the phone with Stewart-Cousins.

She told the company’s representatives that Cuomo was planning to reject Gianaris. But she could not say precisely what would happen next, the people said. Who would be named in his place?

Amazon wanted certainty that the next person selected would not be a roadblock: The fate of its campus could not hang on the whims of an unnamed state senator on a board — the Public Authorities Control Board — that few could name.

But she did not offer any guarantees. Less than a week later, the deal was dead.

More
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