New York flooring contractors lament collapse of Amazon deal

Home Inside FCNews New York flooring contractors lament collapse of Amazon deal

By Reginald Tucker

 

“In a New York minute, everything can change.” Those words—made famous by a classic Don Henley song of the same name—seem appropriate in the recent wake of Amazon’s decision to pull the plug on its highly touted agreement to establish headquarters in the Long Island City section of Queens—a borough of New York City.

It was supposed to bring tens of thousands of jobs to the New York area, generate approximately $27 billion in revenues via state and city sales taxes and reaffirm New York’s reputation as a budding tech center. But all that seemingly evaporated overnight when Amazon announced its Valentine’s Day split with New York on a deal to build a massive headquarters, sales and training complex just across the East River from Manhattan.

The announcement left several New York-based commercial flooring contractors feeling heartbroken. “It’s pretty upsetting news,” said David Meberg, CEO of Consolidated Carpet, which counts Amazon among its customers in Manhattan. “They’ve been a good client, and we were looking forward to potentially being in the running for some of the work for the Long Island City complex. This was going to be an opportunity for our entire industry as well as all the trades. A lot of people stood to benefit from this deal.”

The sentiment was much the same for Soundtone Floors, whose offices are based just a few miles from the site of the proposed Amazon complex on the waterfront of the East River. “The thing we were all looking forward to was the buildout of that facility as well as Amazon’s proposed takeover at 1 Courthouse Square, formerly the site of Citibank,” Brett Morrow, president, told FCNews. “There were definitely going to be opportunities—whether they were specifically for Soundtone Floors or any other union contractor. It was ultimately going to benefit the community and everything around it.”

Morrow admits that the arrival of Amazon most certainly would have impacted nearby properties values, likely resulting in higher taxes down the road—but that’s besides the point. “That wasn’t what it was all about. It was about developing an area that was desolate and could have used an uplift.”

Meberg agrees with that assessment, citing a time when the Long Island City area—a region previously associated with outdated factories, dilapidated buildings, unsightly conditions and, yes, even crime—was not very desirable. “We used to have a warehouse in Long island City for years, but we left due to the condition of the area. But now Long Island City is being revitalized. JetBlue moved its headquarters there a few years ago, and we’re seeing companies previously located in Manhattan move their offices there as well. Then you have all the high-rise residential buildings that have gone up in the area.”

Heart of the matter
The primary reason for Amazon’s pullout, published reports say, was intense scrutiny among local politicians and some community activists. This despite aggressive lobbying and some not-so-transparent deal making on the part of both New York Governor Andrew Cuomo and Mayor Bill de Blasio. Opponents took particular issue with the concessions awarded to Amazon to woo them to New York, namely tax breaks amounting to roughly $3 billion.

In the end, the backlash from some local politicians and protestors was too much to bear. “For Amazon, the commitment to build a new headquarters requires positive, collaborative relationships with state and local elected officials who will be supportive over the long term,” said Amazon in a written statement. “A number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project.”

It was reported that, as part of the deal, Amazon had made several significant pledges, including: $650 million for transportation and infrastructure; workforce development for high school students; construction of a new public school; and technical training for residents of Queensbridge Houses—a low-income area not too far from the proposed complex. This was in addition to the tens of thousands of jobs the project was intended to create.

On the other side of the coin, opponents frowned upon awarding so many tax breaks to a company whose net worth is in the vicinity of $750 billion. Another issue, published reports say, was Amazon’s historic unfriendliness to unions in a heavily unionized city and state.

As part of its expansion plans in Long Island City, N.Y., Amazon was slated to occupy 1 Court Square in addition to a separate complex on a nearby waterfront.

“Part of what I think went down there was Amazon underestimated how strong the community and unions can be, and they got a little antsy,” Soundtone Floors’ Morrow explained. “I don’t know the specifics of any deals regarding the buildout of Amazon offices in the area, but there should have been some type of agreement, in my opinion, where they used a percentage of union labor to build out the sites.”

There are some, however, who viewed Amazon’s pullout as a victory. Among them were Democratic Queens Councilman Jimmy Van Bramer and Queens State Senator Michael Gianaris. Both cited Amazon’s opposition to allowing potential employees to unionize. “For the people who would be working in the Amazon distribution centers—men and women making $18-$20 an hour—Amazon declared that they would fight their rights to organize and form a labor union,” said Bramer during a televised rally near the proposed site. “We insisted that this be a town that supports labor and the rights of workers to organize. But Amazon said it would refuse to do that.”

Gianaris agreed, saying Amazon pulling out proves why they would have been a bad partner for Queens. “We’ve seen a pattern of threatening when Amazon doesn’t get their way,” he stated.

Even Mayor de Blasio, who worked hard alongside Governor Cuomo to broker the deal, felt scorned when Amazon announced it was bailing out. During a press conference the day after the deal was quashed, he lashed out at Amazon: “What I don’t get is we made an agreement with them, they chose New York City, we were keeping the agreement, but guess what—some community activists wanted to see something else. They wanted changes or they had differences. That’s part of life. But instead of an actual dialogue to try to resolve those issues, we get a call saying we’re taking our ball and going home. I’ve never seen anything like it.”

Already gone
Beyond the potential economic loss of the collapsed Amazon deal, observers cite the “chilling effect” on other potential investors in the New York market and surrounding areas. Some experts feel the move was not only going to expand but cement New York’s position as a growing tech hub. As Julie Samuels, executive director of Tech: NYC, a coalition of tech companies, told a local news station: “It’s a real disappointment that Amazon is not coming to New York. We’re talking about tens of thousands of good, 21st century jobs that were going to be right here in New York City and now are not going to be. I also worry that the impact is we’re sending a message to companies that it’s really hard to do business here in New York.”

But some flooring contractors advise against jumping to foregone conclusions. Consolidated Carpet’s Meberg, for example, expects the wave of investment and building in and around New York will continue despite this setback.

“Right in between Manhattan and Long Island City is Roosevelt Island, where Cornell University has invested millions of dollars into building a tech hub—something that was obviously going to be a feeder for Amazon. This city has a lot to offer.”

Meberg also cited Governor Cuomo’s efforts to drive both construction and infrastructure projects across the state of New York, including multi-billion-dollar improvement projects at John F. Kennedy and LaGuardia airports. This on top of $100 billion in capital expenditure improvements for construction projects around the state. He also said Google has made a huge commitment to New York City, spending hundreds of millions of dollars in the ongoing development of the Hudson Yards area. At the same time, he says Facebook and LinkedIn have taken out space as well.

Soundtone Floors’ Morrow believes Long Island City is still a desirable area for developers. “Manhattan has built out of its borders and Long Island City is right across the river,” he explained. “So I don’t believe the Amazon debacle is going to scare off companies. But it does send a message that you have to be tough to operate in this city. It’s still the best city in the world, and this is where everything happens from a cultural, financial, technological and medical standpoint. You just have to have enough foresight to see it happen.”

What Consolidated’s Meberg finds encouraging is Amazon—which already employs roughly 5,000 people in New York City—plans to grow its workforce in that area. He also feels we haven’t heard the last of the Amazon complex deal. “I have a funny feeling it’s not over yet,” he told FCNews. “I don’t know if it’s a negotiating tactic, but I just find it hard to believe Amazon is going to be bullied out of Long Island City by a bunch of community activists and relatively low-level politicians. I’m hoping that some of it can be recovered.”

Amazon said it does not plan to reopen a search for a second headquarters. Rather, the company will continue on with the proposed development site in Arlington, Va., and build out space in Nashville, Tenn.

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