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NYCEDC President James Patchett Testimony - NYC Council Finance Committee Hearing



Good morning, Speaker Johnson, Chair Dromm, and members of the Finance Committee.
 
I am James Patchett, president and CEO of the New York City Economic Development Corporation, known as EDC. We are responsible for driving and shaping economic growth across the five boroughs. EDC, in conjunction with our state counterpart, Empire State Development, is proud to have spearheaded the bid to bring Amazon’s new headquarters to our city.
 
I am here today to discuss why Amazon coming to New York is a victory for every one of the city’s 8.6 million residents.
 
Even though New York City did not give Amazon a single discretionary dollar to move here—not one. Discretionary incentives are offered to businesses on a case-by-case basis when a company is expected to have an outsize impact on the local economy. Most cities would have seen it as totally reasonable to offer them—and did. But we chose not to. We held firm on our stance and yet still secured the largest economic development opportunity in New York State history. This opportunity will put tens of thousands of New Yorkers to work and dramatically increase our annual tax revenue, which can help shore up our schools, libraries, transit, and infrastructure.    
 
Cities work best when everyone is working. And that’s exactly what Amazon promises New Yorkers today. By further diversifying the economy and providing a reliable financial anchor, the new headquarters will help safeguard New York against future recessions and secure the resources we need to keep spearheading progressive change.
 
All told, Amazon’s new headquarters is expected to deliver nearly $30 billion in tax revenue to the city and state, including more than $13.5 billion to the city alone. For New Yorkers, the exponential return on investment—putting in zero discretionary benefits and getting over $13.5 billion in return—will have a profound ripple effect. Whether they live in Hunts Point or New Brighton, Laurelton, Sunset Park, or East Harlem, New Yorkers will benefit from this opportunity. This project is a model of what responsible and effective governments do: take the long view and make decisions that do the most good for the greatest number of people.
 
I appreciate the chance to discuss the incredible return New York City will get from Amazon and how the company will help protect our economic future. I will also speak to how this opportunity will create new job and workforce development programs, as well as spark unprecedented infrastructure investments in Long Island City.
 
Following my testimony, I will be happy to answer questions. 
 
Financial Security:
In November 2018, Amazon announced it had selected Long Island City for its new headquarters. As mentioned, this is the single biggest job creation opportunity in New York State history, one that will create up to 40,000 jobs over the next 15 years.
 
While I will discuss the extraordinary fiscal impact of the agreement later this morning, the most important benefit Amazon brings New Yorkers is economic security.
 
Today, there is no question that the city’s economy is thriving. Unemployment is at a record low and job creation is at a record high. If New York were a country, we would be among the 20 largest national economies in the world, just below Spain’s and Canada’s.
 
This success is remarkable, and we are proud of it. We, as a city, have worked hard for it for years. But we know it won’t last forever. In recent decades, the city has managed to weather a number of downturns and recessions. Some have been short, some have been long, but all have adversely impacted New Yorkers.
 
I am sure many in this room remember tough times, like in 1992, when unemployment hovered close to 12 percent. Or in 2003, when the War in Iraq was looming and the city was losing jobs, all while we struggled to regain footing after the most catastrophic event in our city’s history. Certainly, everyone here remembers the 2008 recession, when the collapse of Lehman Brothers, a Wall Street anchor and major city employer, catalyzed the worst economic crisis since the Great Depression. Let me be clear - despite our current economic health, today there are many New Yorkers that still feel the effects of the Financial Crisis. In fact, we still feel the effects of the 1970s Fiscal Crisis, the aftermath of which devastated our public hospitals and schools. 
 
We know the best time to protect a city against future recessions is before one happens. And that time is now.
By strengthening our tech sector and diversifying the economy, we are cushioning the city against slumps we know will come.
 
Tax Revenue:
In addition to diversifying the economy, Amazon is the jobs and income generator New York needs to remain a model 21st century city.
 
From a jobs perspective, the Amazon opportunity will help real people in concrete ways. From the small business owner who will see an increase in foot traffic at her bodega, to the construction worker who will help build the headquarters, to the CUNY computer science student who will land a life-changing internship at the company, it is clear this deal is about New Yorkers, front and center.
 
From this vantage point, it’s virtually impossible to conceptualize the impact of these tens of thousands of new jobs. But in the not-so-distant future, tens of thousands of real New Yorkers will be working in these roles. They could be your constituents, their children, their grandchildren.
 
Moreover, the billions in tax revenue will pay tremendous dividends to our public institutions; with this windfall, the city will be able to hire more police officers, build more schools and improve social services like medical care and disability assistance.
 
What can more than $13.5 billion of additional tax revenue support here in our city? To put this figure in perspective, this could pay for every single three-year-old in the city to attend 3-K for All for the next 16 years.
 
Or that revenue could support 289,000 units of affordable housing. What about if we used that revenue to hire 5,600 new public-school teachers with a bachelor’s degree to work for the next 25 years? Or to employ 6,300 firefighters for the next quarter century?
 
Think for a moment about the magnitude of that. With this additional revenue, some of our boldest, most progressive ideals can become policies and our greatest needs are more likely to be met. We are looking forward and planning ahead—just like governments are supposed to do.
 
And to effectively plan ahead, the city needed a sound methodology to calculate the additional tax revenue Amazon will generate.
 
To create this, we first looked at the benefits associated with building Amazon’s new headquarters from the ground-up:

  • Amazon is expected to invest a total of $3.6 billion into Long Island City from 2020 through 2029.
  • We estimated that the combined fiscal impact associated with the buildout will be $263 million.

Second, we looked at the benefits associated with Amazon’s permanent operations in Long Island City:

  • The estimated 40,000 jobs Amazon is projected to create in Long Island City are expected to bring in $9.2 billion in tax revenue to New York City. This includes business and personal income and sales and use taxes, as well as non-commercial property taxes and other miscellaneous non-property taxes.
  • And these jobs will have a multiplier effect throughout NYC’s economy, resulting in an estimated $5.1 billion in indirect and induced impacts.

And finally, we looked at the property tax Amazon will have to pay annually:

  • Amazon will make payments in lieu of taxes as part of the development of the headquarters. The PILOT value will be equal to the company’s estimated real property tax value reduced by the estimated value of the state's ICAP abatement.
  • Property taxes for the future headquarters were estimated using the Department of Finance’s (DOF) real property assessment guidelines for fiscal year 2019. Real property taxes that New York City currently collects on the development sites were also estimated from DOF’s publicly available data.
  • The future PILOT revenue on redeveloped sites was discounted for current property tax collections in order to reflect incremental revenue to New York City. This is estimated to be $963 million.

The fact that the city will generate more than $13.5 billion without offering a single discretionary dollar is truly unprecedented.
 
Workforce Training:
With Amazon in Long Island City, our economic forecast looks far brighter. And so too do the futures of New Yorkers who will be trained for the jobs of tomorrow.   
 
In addition to ensuring our financial house is in order, workforce development is pivotal to ensuring the city’s economic foundation is solid.
 
Right now, we are working to ensure people of all backgrounds have an entry point into the high-wage, high growth tech sector. And we are making an especially targeted effort to reach communities that have been previously excluded from economic booms and the tech sector as a whole.
 
During the bidding process, we connected Amazon to some of the city’s most inclusive workforce development providers. Amazon also met with representatives from CUNY and SUNY to learn how talent pipelines can be built from college campuses to the Long Island City headquarters. It’s important to remember that our CUNY and SUNY schools are the best ladders to the middle-class we have, especially for immigrants and first-generation college students. For these kids, a job at Amazon doesn’t just impact their own future—it impacts the future of their whole family.
 
And we are not waiting for Amazon to put shovels in the ground to start working on our workforce development commitments. Just this week we released a public proposal to provide grants to qualified workforce organizations interested in creating proven, innovative ideas in training and career readiness programs that will help inform the city’s future workforce investments. With these programs, New Yorkers of all backgrounds will be prepared for the in-demand jobs that companies like Amazon and Google will need to fill.
 
This builds upon the millions of dollars the City, State and Amazon will invest into new training programs specifically designed to give underrepresented New Yorkers the tools they need to thrive.
 
We are also launching new initiatives at Queensbridge Houses, starting with expanding the city’s successful JobsPlus program. Queensbridge residents will be Amazon’s next-door neighbors. We know it’s imperative that they directly benefit from this incredible opportunity. 
 
But Queensbridge isn’t the only NYCHA development that will be getting new investments. The city will also invest millions to launch a new program to train NYCHA residents across the boroughs for careers in IT, cybersecurity, and web development.
 
As the head of the economic development corporation, I have a responsibility to make sure the city inherited by the next generation is even more secure and resilient than it is today. We have an obligation to set them up for success, which is exactly what the Amazon deal does. This agreement makes it all but certain that our financial bedrock will be stronger tomorrow than it is today.
 
And a stronger economic bedrock means a better quality of life for New Yorkers like Manohill Gohar, an 11th grader at the Business Technology Early College High School in Queens Village. She is a first-generation American and will be the first person in her family to go to college.
 
Manohill wants to be a mechanical engineer. For her, Amazon coming to Queens opens up a world of new engineering opportunities. 
 
“Amazon is one of the most successful companies in the world, with some of the smartest employees,” she wrote in a Daily News op-ed. “And with its incredible resources, it can make the road for other ‘firsts’ like me much easier to travel.”
 
I have no doubt that the Amazon project will open new doors that lead to better futures for 8.6M New Yorkers. It will pay boundless dividends that will help people like Manohill and countless other New Yorkers go farther, reach higher, and succeed in a 21st Century economy.
 
Thank you, and I look forward to taking questions.  

About NYCEDC

New York City Economic Development Corporation is the City's primary vehicle for promoting economic growth in each of the five boroughs. NYCEDC's mission is to stimulate growth through expansion and redevelopment programs that encourage investment, generate prosperity and strengthen the City's competitive position. NYCEDC serves as an advocate to the business community by building relationships with companies that allow them to take advantage of New York City's many opportunities. Find us on Facebook or follow us on Twitter, or visit our blog to learn more about NYCEDC projects and initiatives.

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