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Long Island City Amazon property tax deal questioned by locals, fiscal watchdog

About $650 million of anticipated property-related revenue will be used to upgrade nearby infrastructure.

Amazon's deal with the city prioritizes putting tax

Amazon's deal with the city prioritizes putting tax revenue in the Long Island City area due to the development opportunity presented by the tech giant. Photo Credit: AllCityAerial.com/Kevin P. Coughlin

Does no good tax deed go unpunished? 

Anticipating a spree of development and foot traffic accompanying Amazon's headquarters in Long Island City, officials have structured their agreement with the company to guarantee that some $650 million of anticipated property-related revenue goes toward upgrading nearby infrastructure, such as the sewage system and streetscape.

But local leaders and economic development experts have questioned the move, in which Amazon will make payments in lieu of property taxes on the public land leased for its campus, and the city will start transferring half of the $1.3 billion this is expected to generate into a designated infrastructure fund 11 years into the 40-year arrangement.

City budget experts said the deal opts to put city tax revenue into the area because of the opportunity Amazon presents, rather than doing so through the city's general fund, where elected leaders distribute it based on need and other priorities. 

"It's an open question whether it's a good or a bad thing," said George Sweeting, of the city's Independent Budget Office. "There's a risk in tying particular investments just to revenues that come off a particular area; it can create sort of a Balkanized [situation]."

Similar arrangements in the Hudson Yards, where Sweeting said payments in lieu of taxes have supported extending the No. 7 train and parks, and Brooklyn Bridge Park, where similar public compensation has financed green space, have concentrated tax revenue in relatively affluent areas, according to Nicole Gelinas, senior fellow at the Manhattan Institute, a think tank promoting the free market.

"It's not good for democracy. Tax revenues are supposed to be used for the good of the whole city," said Gelinas, noting that the city, through its traditional budgeting process, could still opt to spend a significant amount on capital projects in Long Island City. "It sets a bad precedent that if your neighborhood wants a park or better infrastructure or better upkeep, then you have to consent to development that really can be very out of scale for the neighborhood. We're supposed to be one city, not just you have to generate your own tax revenue."

In western Queens, leaders have heard concerns about whether the fund will finance enough mitigation work to meaningfully alleviate growing pains in neighboring communities. And some worry the agreement may allow projects concentrated close to Amazon's campus to cut into money meant for the larger neighborhood.

"You hear big numbers like millions and billions, and it always sounds pretty," said Catalina Cruz, who was elected to represent Jackson Heights, Elmhurst and Corona in the State Assembly beginning in 2019. "We're actually going to be causing so much burden on the transit system, on the small businesses, on the renters in the community . . . What are we giving up in order to get any of that money, to get any of that tax break? I think that's where the community has shared a lot of concerns."

Lena Afridi, who grew up in Queens and works as the director of economic development policy at the Association for Neighborhood and Housing Development, said the fund did not seem like it would contain enough to counter the cost of living increases for residents and businesses.

"Because it doesn't go through the City Council, they can kind of just put it where they want to put it . . . for example, if it's going right onto Vernon Boulevard, that's not necessarily the place that needs the most infrastructure improvement," Afridi said, naming a street bordering the forthcoming Amazon headquarters.

In overseeing the infrastructure fund, the city's Economic Development Corporation will consider recommendations from an advisory board appointed by governmental parties once enough has accumulated to finance capital projects, according to a memorandum of understanding between Amazon and city and state economic development agencies.

Under that agreement, there is no formal mechanism for funneling money into the account for a decade. The city will not tax the value the property accumulates because of the headquarters' development for a decade, which is customary under an as-of-right benefit available in the city. At that point, half of the compensation the city receives will be routed to the infrastructure fund.

Long Island City, however, is slated to benefit from some $180 million in investments announced by the city a few weeks ago.

When announcing Amazon's arrival, city officials described earmarking funding for local infrastructure work as an important aspect of their negotiations with the company.

"We’re going to convene community stakeholders to determine what the most critical investments are for the neighborhood — not for the company, there’s no secret agreement with the company about this. This is fundamentally about us investing in this community so the community has the infrastructure that they need to be successful in the long run," James Patchett, head of the city's EDC, said at the announcement.

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