The Amazon.com Inc. executives looked battered after more than an hour of questioning last week about their plans to build an office in New York. City Council members thrashed the retailer for its resistance to unions, working conditions at warehouses and its founder’s wealth. The responses drew laughter from the balcony.
So when Jimmy Van Bramer, who represents the Queens neighborhood where Amazon decided to locate its new office, raised the issue of a suite of generous tax breaks the project was eligible for, it was an opportunity to offer a satisfying answer.
“We will not be using the opportunity zone on this project,” Holly Sullivan, Amazon’s head of economic development, said at the Jan. 30 hearing.
For those involved in luring the company to New York, last year’s designation of a relatively prosperous strip of Long Island City as an opportunity zone had become a headache. After Bloomberg reported in November that the project was eligible for incentives designed to spur investment in poor areas, it became a prime example of public policy gone awry. Starwood Capital Group Chairman Barry Sternlicht, who’s raising $500 million to invest in low-income areas, called giving a tax break to Amazon “abhorrent.”
Van Bramer turned to James Patchett, chief executive officer of the New York City Economic Development Corp., which led the city’s efforts to win the Amazon bid. Patchett’s team had expected to be celebrated for bringing 25,000 new jobs to the city, according to two people familiar with the matter. But they misjudged the political climate and have been been defending the deal for months. Van Bramer wanted to know how the zone, picked at the same time the city was negotiating with Amazon, came to be.
“The state were the ones who were responsible for recommending opportunity zones,” Patchett said, explaining that the list wasn’t submitted to the U.S. Treasury Department for approval until April 2018, before any Amazon executives made site visits.
Patchett’s statement was both true and incomplete. While the state recommended the zones to Treasury, Patchett’s chief of staff, James Katz, played a crucial role behind the scenes, proposing city neighborhoods deserving of the tax breaks to the state in early 2018. The suggestions made by Katz included census tracts that contained properties he’d pitched to Amazon months earlier, according to four people familiar with the process. One of them covered the booming Long Island City waterfront.
Katz’s recommendations were incorporated into maps used in the formal review process to pick the zones, the people said. When New York Governor Andrew Cuomo, a supporter of the Amazon bid, submitted the state’s list to Washington, the potential sites were included.
“Together with city and state agencies, we ran a data-driven process to prioritize outer-borough areas with the potential for job creation and affordable housing investment,” said Stephanie Baez, a spokeswoman for Katz and the Economic Development Corp., a nonprofit organization whose board is appointed by the mayor. Kristin Devoe, a spokeswoman for the state agency charged with selecting sites, Empire State Development, said recommendations were based on local input and the ability to attract investment. “This was a data-rich, regionally focused process,” she said, “and all nominated tracts were subject to federal approval.”
This account of how New York, one of the world’s most important real estate markets, picked its opportunity zones, is based on conversations with more than 20 state and city officials, developers and others familiar with the process. Many agreed to speak only on condition of anonymity to talk about decisions that sparked a political firestorm.