The rich get richer

By my calculation, the direct payroll from the location of about half of new Amazon headquarters (HQ2) jobs in Long Island City will be much greater than the entire present payroll income of Ulster County. Here’s how I figure it. At 25,000 workers paid an average of $150,000 each, Amazon will add a payroll of $3.75 billion. According to the census, Ulster County’s 86,000 employed workers were paid an average $32,106 apiece in 2017, or a total of $2.67 billion.

Last year Cornell Tech, an innovative engineering school created after a competition from a variety of consortia, opened its doors on Roosevelt Island in the middle of the East River. Cornell Tech’s slogan is “Graduate education and research for the digital age.” An image of the canyons of Midtown Manhattan less than a mile away from the campus reduces the hubris of the ambitious boast, “Integrating technology, business, law and design in service of economic impact and societal good.” 

Only in Gotham.

Roosevelt Island is inaccessible by car except for a roadway from northern Long Island City. The multi-building Amazon campus, a bit south of that roadway, will have an unobstructed view of Manhattan, separated and also connected.

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State money (grants, loans and tax credits) was essential to the attraction effort of the Amazon venture. Large sums of federal and New York City inducement money are also involved in the multi-billion-dollar inducement package.

The primary goal is job creation. Amazon’s New York City plans were too big to ignore. But the quality of the jobs and the likelihood that many other digital-age jobs would follow these were also important considerations.

The title page of the state website announcing this year’s regional economic development funding (REDC) gives equally prominent placement to the federal Opportunity Zone program enacted in late 2017. This legislation created 8700 Opportunity Zones in the nation. 

Under that legislation, investment vehicles are organized to invest in opportunities mostly in designated low-income tracts — but also in areas contiguous to these tracts if specially designated by the governor. For instance, Amazon’s future Long Island City location, next to a qualified Opportunity Zone, has been so designated. 

Opportunity funds allow taxpayers to defer the inclusion in gross income of capital gains that are reinvested in low-income or other designated tracts. Taxpayers can also permanently exclude capital gains from the sale or exchange of an investment in a qualified opportunity fund held for more than ten years. For investors and developers, the benefits of these federal tax credits are generous indeed.

Four of the 8700 Opportunity Zone tracts in the nation are in Ulster County. One is in Ellenville, three in Kingston. (Other zones have been designated in Hudson, Catskill, Poughkeepsie, Newburgh and Middletown.) Two of the ones in Kingston mainly include areas of the city south of Broadway. The third covers much of the Rondout neighborhood, Ponckhockie and the western shore of the Hudson River.

Designated tracts already experiencing gentrification pressure will certainly find it easier to attract certified investors than other tracts will. Properties near the Stockade district in Kingston, for instance, already have a better prospect of price appreciation. Do you think syndicators and investors, who under this legislation will escape not only capital gains but also other income, are unaware of such opportunities?

President Donald Trump’s son-in-law Jared Kushner is reportedly looking for development deals in “a small subset” of Opportunity Zones that are undergoing obvious gentrification or already attracting substantial investment, according to the Associated Press. Cadre, an investment firm in which Kushner has a big stake, is putting up at least a $25-million passive investment stake in Opportunity Zones. Another Trump confidante and short-term chief of staff, Anthony Scaramucci, is reportedly seeking to syndicate a two-billion-dollar investor Opportunity Fund. 

Some Opportunity Zone supporters have suggested that the program will move into poorer areas once the opportunities in the better-off ones are exhausted. That seems to me an unlikely eventuality. Why settle for one income stream when you can have two?

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