Amazon has confirmed that it will open two massive new offices in New York City and Crystal City, Va., to complement its already massive headquarters in Seattle. And the verdict on the company’s decision is disgust.
Amazon played everyone involved in the process: the governments that pandered to it and the media that covered it (including us). Now it looks like the residents of these communities that will have to live with their new corporate neighbor are going to be left to pay for it.
In its search for a new office location or two, Amazon perverted the standard request-for-proposal process designed to provide transparency into how governments spend money on big projects. Either by design or happenstance, Amazon shat all over the process and the inherent transparency by which civic decisions are made.
That Amazon felt comfortable enough to flip the script and instead have cities bid for the largesse of a corporation was galling enough. The fact that cities across America actually did the company’s bidding was proof of just how feckless, toothless and seemingly powerless government at every level in this country has become.
There couldn’t be a more perfect analogy for the return of the corporation as the central organizing principle in American life. And there couldn’t be a more perfect corporation to embody this than Amazon. City governments swooned, falling over themselves to offer even larger and more absurd concessions to Jeff Bezos’s behemoth.
The city of Stonecrest, Ga., offered to rename the town and make Jeff Bezos its permanent mayor should the company select it as the site for
the new office “HQ2.” Birmingham, Ala., plastered fake Amazon boxes across the city and created a marketing campaign called “Bring A to B” to woo the “everything store.” Albany, N.Y.’s take was so pathos-inducing that it was eviscerated by The Onion.
There was some hope, early in the process, that Amazon would indeed settle on some location in the American heartland and serve as another catalyst for growth for regions that are beginning to climb out of the economic holes dug in the financial crisis of a decade ago.
Perhaps one of the Midwestern metropolises that are already seeing a resurgence would enjoy an even bigger jolt from Amazon bestowing 50,000 new jobs on a region that could use it.
Columbus, Ohio has a burgeoning technology scene and is enjoying incredible growth. Denver and Boulder, Colo. are also reaping the fruit of a technology and startup renaissance in the state. Indeed, across the country hope sprung eternal that Bezos and Amazon would bring a torrent of job opportunities and investment to places that could be rejuvenated to make America great again.
Unfortunately it was all just a year of wishful, wistful, magical thinking.
There’s no doubt that Amazon, with its $797.6 billion market capitalization, is the unnecessary winner in all of this. Cities opened their books to the company to prove their viability as a second home for the retailing giant. In return, Amazon got reams of data on urban and exurban centers that it could use to develop the next wave of its white-collar office space, and more than $2 billion worth of tax breaks from the cities that it would eventually call home for its new offices.
The big swindle?
New York City, which is offering up the bulk of the new tax incentives to Amazon, will be spending roughly $1.5 billion for the privilege of having Amazon strain its already overtaxed infrastructure with 25,000 new employees. Those tax breaks will cover things like the construction of a helipad for the new offices so executives won’t have to worry about the failing city subway system.
The city is giving Amazon its refundable tax credit through New York State’s Excelsior Program. That up-to-$1.2 billion grant was calculated as a percentage of the salaries Amazon expects to pay employees over the next 10 years and amounts to $48,000 per employee Amazon brings in.
New York also gave an additional cash grant from the Empire State Development Corp. of $325 million based on the square footage of buildings occupied over the next decade. The incentives are set to roll out over the 10-year time frame based on the incremental jobs Amazon creates each year and as it reaches building occupancy targets.
The carrot that Amazon has dangled in front of New York (and Long Island City, more specifically) is more than 25,000 full-time jobs and $2.5 billion in investment from Amazon in 4 million square feet of office space (which could expand up to 8 million). Amazon estimates that tax revenue will bring in $10 billion over the next 20 years through investment and job creation, with the jobs expected to pay out an average wage of $150,000.
With all of this, the devil is in the details. The company says New York is spending $48,000 in incentives for employees that will make $150,000 on average, while the median salary for an Amazon employee in 2017 was $28,446 (excluding Jeff Bezos who took in $1,681,840).
Advocates who follow the commercial development space aren’t so sure. “We are suspicious of the way the whole incentives news has been issued today,” said Greg LeRoy, executive director of the development subsidy watchdog group, GoodJobsFirst. “It’s very odd that the company itself put in the information itself. It looks to us that Amazon is trying to cook the cost-benefit books.”
LeRoy says that by checking the numbers that Amazon says New York will be spending, the total is closer to $61,000 per job, not $48,000. Then Amazon rushes out with the $150,000 average salary, but the numbers aren’t comparable. The tax bill on a $150,000 salary for the state of New York is roughly 31 percent. “They’re going to pay whatever the state rate is, which won’t begin to offset the $61,000,” says LeRoy. “If the deal succeeds, there’s going to be new public sector costs. And if Amazon isn’t paying its fair share then everyone else gets stuck with paying higher taxes or getting lousier services or a little bit of both.”
There’s another problem with the deal that Amazon struck in New York, according to LeRoy. Through the agreement, Amazon has said it will build some new infrastructure around Long Island City through something called a Payment In Lieu Of Tax program. That’s when a portion of Amazon’s property taxes are funneled directly into projects that are located in the Long Island City community. In its announcement, the company said that it would donate space on its campus for a tech startup incubator and for use by artists and industrial businesses, and that it will donate a site for a new primary or intermediary public school. The company will also invest in infrastructure improvements and new green spaces — all paid for by the PILOT program.
LeRoy calls it another subsidy.
As housing prices climb in Queens for rentals, cooperatives and condominiums, the neighborhood’s existing residents will likely be unable to afford the higher property prices. They’ll be moved out and essentially Amazon will be paying for infrastructure upgrades likely to be enjoyed solely by the company’s employees — again, at the expense of the broader tax base.
“Instead of going to development fund of the city instead it will go back to the PILOT district, diverting money to a small part of the city,” says LeRoy. “[Amazon is] getting more than $2 billion of subsidies for white-collar workers to be part of the 2 percent.”
However, Amazon’s new offices will undoubtedly create new wealth for the cities that they settle in. An article in The Denver Post described how Seattle’s coffers had been enriched by becoming the epicenter of all things Amazon:
Amazon estimates its direct spending boosted Seattle’s economy by $38 billion from 2010 to 2016. Hotels are thriving thanks to visits by friends and family of Amazon workers, as well as by Amazon employees from elsewhere. The Downtown Seattle Association estimates $5 billion in construction activity was underway during the summer, with more than 30,000 residential units in the works.
If Amazon’s figures are correct, then New York City, and the Washington metropolitan area, are set to receive a windfall (with Nashville, Tenn., also looking to make out pretty well in the deal).
It’s all about transparency
The question is less about whether Amazon’s decision to site its satellite offices in certain cities will be a boon to those cities. Instead, it’s whether the residents who already live there should be able to have a say in whether or not Amazon can come in and reshape their cities in radical ways.
It’s this lack of transparency, as much as anything else, that had commentators concerned, and local residents up in arms.
In fact, legislators in New York are already trying to find ways to have some say in the decision-making process, even, apparently after the fact.
In its defense, Amazon and the officials who approved its deal have said there would be no way to manage the process effectively if it went through normal channels. That’s the argument of autocrats and executives who want to move fast and break things, but the results of those policies are clear. When human lives and livelihood is at stake, perhaps it’s not the time to try to break things — especially in New York, where everyone can tell you that everything is almost always already broken.
The tragedy for many citizens (who didn’t get a voice in the process) is that they understand something it seems their local politicians did not: Amazon would have likely come anyway.
Perhaps not in the same numbers, but certainly there would be no way for a company whose ambitions exceed almost every possible limit, to not have a significant presence in America’s media and political capitols.
There’s no better, or more succinct expression of Jeff Bezos’ goals with Amazon than this description of the company’s ambitions from The Nation:
To think of Amazon as a retailer, though, is to profoundly misjudge the scope of what its founder and chief executive, Jeff Bezos, has set out to do. It’s not simply that Amazon does so much more than sell stuff—that it also produces hit television shows and movies; publishes books; designs digital devices; underwrites loans; delivers restaurant orders; sells a growing share of the Web’s advertising; manages the data of US intelligence agencies; operates the world’s largest streaming video-game platform; manufactures a growing array of products, from blouses to batteries; and is even venturing into health care.
Instead, it’s that Bezos has designed his company for a far more radical goal than merely dominating markets; he’s built Amazon to replace them. His vision is for Amazon to become the underlying infrastructure that commerce runs on.
Indeed, Amazon is pretty transparent about what its aims are. And its business units are beginning to rival those of its Chinese counterparts — although they’re far more beholden to the state.
What might have been
There’s an Earth 2 version of this current situation where Amazon actually didn’t engage in a cynical inversion of normal government practices. One where the company actually scoured the country and looked for places to put a slew of reasonably sized offices staffed with some of the best and the brightest. Or chose two or three (or four) locations around the country from which to consolidate its position as America’s engine of commercial activity.
The results may have been still more power and influence for Bezos. But it could have been done with the input of the community that it would be impacting. And the choice could have been made publicly, with comment and input from all corners in an openly transparent process. Typically, that’s how government requests for proposal work.