New York Isn’t the Only City Waging a Fight Against Amazon

The corporate giant is still milking Nashville and other runners-up for further subsidies

David Dayen February 19, 2019

New Yorkers gather inside an Amazon bookstore Nov. 26, 2018, to express their displeasure at the use of their tax dollars to lure Amazon’s HQ2. (Stephanie Keith/Getty Images)

After this sto­ry went to press in the March issue of In These Times, Ama­zon backed out of its com­mit­ment to locate one of its two HQ2” head­quar­ters in New York City, cit­ing oppo­si­tion from local law­mak­ers and res­i­dents. The sto­ry has been updat­ed to reflect. 

HQ2 alerted the public to the long-running economic development subsidy scam, which nets corporations some $45 billion to $90 billion a year.

Nashville, Tenn. — Coun­ty employ­ee Richard Tip­pit approached the podi­um at a Jan­u­ary Metro Coun­cil meet­ing. Behind him, work­ers from local pub­lic-sec­tor unions held aloft a poster­board stamped PAST DUE.” Tip­pit began, We’re here tonight to deliv­er you an invoice for ser­vices per­formed by the employ­ees of Nashville Metro government.”

He and his fel­low work­ers had come to col­lect $38 mil­lion in promised cost-of-liv­ing increas­es for 9,300 pub­lic employ­ees that the city had reneged on. You paid every oth­er bill — you even added more bills,” Tip­pit said, but you didn’t pay one of the most important.”

More bills” referred to a sore point: $15 mil­lion in sub­si­dies that Ama­zon extract­ed from the city in Novem­ber 2018 for a new logis­tics facil­i­ty. Ama­zon had effec­tive­ly jumped the line for pub­lic dol­lars ahead of Nashville’s city workers.

Amazon’s pro­posed 5,000-employee Oper­a­tions Cen­ter of Excel­lence,” which received an addi­tion­al $87 mil­lion in state sub­si­dies, was announced the same day as Amazon’s new HQ2” head­quar­ters in New York City and north­ern Vir­ginia. Nashville had been one of 20 final­ists for HQ2, the sub­ject of an unusu­al pub­lic auc­tion process.

Though eclipsed by the HQ2 announce­ment, the Nashville news sig­naled that Amazon’s secre­tive pub­lic auc­tion, the HQ2 sweep­stakes, is not over. Through volu­mi­nous data col­lec­tion and skill­ful exploita­tion of short-term polit­i­cal dynam­ics, Ama­zon has turned the nor­mal­ly per­func­to­ry process of choos­ing a new office loca­tion into a les­son in how to raid munic­i­pal trea­suries. Now, it’s hit­ting up the HQ2 also-rans for more pub­lic dol­lars to build out its empire. Even though the com­pa­ny has said it will not seek to relo­cate the New York HQ2 facil­i­ty after with­draw­ing its offer on Feb­ru­ary 14, it could still use the can­cel­la­tion as bait by mov­ing employ­ees intend­ed for HQ2 to oth­er cities.

In 2018, as the HQ2 der­by raged, Ama­zon qui­et­ly col­lect­ed $58.1 mil­lion from cities that bid for HQ2. That doesn’t include the $102 mil­lion for the logis­tics cen­ter in Nashville or the rough­ly $1.8 bil­lion promised for the head­quar­ters in Vir­ginia. All told, in 2018, Ama­zon raked in near­ly $2 bil­lion from these deals. Four of the 20 final­ists — north­ern Vir­ginia, Nashville, Boston and Raleigh, N. C. — have received, in exchange for sub­si­dies, an Ama­zon facil­i­ty in or around their cities. More cities can expect to receive con­so­la­tion prizes like Nashville’s, if they pony up.

The HQ2 race was more than a PR stunt. Ama­zon has a fan­tas­tic data set of what com­mu­ni­ties are will­ing to pro­vide for the project, the process of obtain­ing these incen­tives, and risk asso­ci­at­ed with them,” says Nathan Jensen, a pro­fes­sor of gov­ern­ment at the Uni­ver­si­ty of Texas at Austin. Ama­zon sim­ply knows how high gov­ern­ments will jump.”

HQ2 kicked off in Sep­tem­ber 2017 as a cross between an expan­sion project and a real­i­ty game show. Ama­zon announced it would solic­it bids across North Amer­i­ca for a sec­ond head­quar­ters, which would house 50,000 well-paid employ­ees and con­tribute $5 bil­lion in local investment.

It’s not like Ama­zon need­ed to pass the hat for a new office. Ama­zon is the world’s most high­ly val­ued com­pa­ny. It cap­tures rough­ly half of all e‑commerce sales and earned $56.6 bil­lion in the third quar­ter of 2018. As more Amer­i­cans use the inter­net for shop­ping, brick-and-mor­tar retail­ers have felt the pinch. Brands like Toys R” Us, Gym­boree, Brook­stone and Nine West have gone bank­rupt, and retail­ers like Sears, Ann Tay­lor and The Gap have shut­tered hun­dreds of stores, leav­ing emp­ty husks in malls across the nation.

Local gov­ern­ments, most of which are reliant on prop­er­ty tax­es, have paid the price for this retail apoc­a­lypse. That hasn’t stopped cities from cozy­ing up to Ama­zon, the destroy­er of their tax base. In the Unit­ed States, Cana­da and Mex­i­co, 238 cities applied for HQ2.

A year and a half lat­er, we still don’t know all their names. Ama­zon only released the num­ber of bids, not where they came from. Prac­ti­cal­ly every­thing the House of Bezos does is secret. It’s clear that Ama­zon had a lot of require­ments to keep things con­fi­den­tial,” says Pax­tyn Merten, who worked for pro-trans­paren­cy orga­ni­za­tion Muck­Rock on a project to col­lect every city’s HQ2 bid. At last count, Muck­Rock has only acquired 82 of the 238 bids, and many of those are redacted.

Some of the more out­landish offers — a 21-foot saguaro cac­tus gift­ed by Tuc­son, Ariz., and a pro­posed renam­ing of 345 acres of Stonecrest, Ga., as Ama­zon, Geor­gia” — have been made pub­lic. But like WWE, this game was rigged.

The even­tu­al win­ners of the HQ2 sweep­stakes, New York City and north­ern Vir­ginia, were almost cer­tain­ly Bezos’ choic­es all along. Ama­zon already had large offices there, as New York and D.C. con­tain the tech-savvy work­forces, trans­porta­tion hubs, and edu­ca­tion­al facil­i­ties the com­pa­ny needs. CEO Jeff Bezos owns a home in New York and recent­ly bought a giant man­sion in D.C., along with the local news­pa­per. Amazon’s most aggres­sive push­es recent­ly have been in enter­tain­ment (New York), adver­tis­ing (New York), and gov­ern­ment pro­cure­ment (D.C.), includ­ing a lucra­tive cloud con­tract with the Pen­ta­gon (lit­er­al­ly blocks from the new HQ loca­tion in Crys­tal City, Virginia).

In addi­tion to PR, the ersatz com­pe­ti­tion served sev­er­al pur­pos­es. It like­ly bid up the incen­tives from New York and North­ern Vir­ginia. Most impor­tant, it cre­at­ed a com­pre­hen­sive data­base of North Amer­i­can city planning.

Ama­zon won’t just build head­quar­ters over the next sev­er­al years, but also logis­tics hubs, data farms, tech­nol­o­gy incu­ba­tors, dis­tri­b­u­tion cen­ters and home offices for its spate of affil­i­at­ed com­pa­nies, from Audi­ble to Twitch. Plus, it’s adding phys­i­cal retail out­lets nation­wide. Thanks to HQ2, it knows avail­able site loca­tions for retail and com­mer­cial space in hun­dreds of cities, as well as what those cities are will­ing to fork over in subsidies.

The 20 final­ists deliv­ered even more gran­u­lar infor­ma­tion: race and eth­nic­i­ty demo­graph­ics, health and fit­ness oppor­tu­ni­ties, city­wide K‑12 per­for­mance, STEM degrees at near­by uni­ver­si­ties, zon­ing des­ig­na­tions through­out the metro region, even the price of milk, bread and an avo­ca­do at Whole Foods (an Ama­zon sub­sidiary). New York’s response filled 253 pages.

All of that res­i­den­tial and con­sumer data is valu­able to an e‑sales com­pa­ny. If I’m sell­ing stuff, I now have infor­ma­tion that my com­peti­tors do not have,” says Mark Funkhouser, the for­mer may­or of Kansas City and cur­rent pub­lish­er of Gov­ern­ing mag­a­zine. Where is the sales tax gen­er­at­ed? The prop­er­ty tax? Where are the sew­er lines?”

Some of the 20 final­ists began receiv­ing con­so­la­tion prizes even before the HQ2 deci­sion was announced. In May 2018, Ama­zon announced a region­al head­quar­ters for 2,000 machine learn­ing and robot­ics employ­ees in Boston. The com­pa­ny took home $30 mil­lion in incentives.

An HQ2 appli­ca­tion from Raleigh that pro­ject­ed 63 per­cent pop­u­la­tion growth in the next 30 years may have got Ama­zon think­ing. Last August, the city of Gar­ner, a 32,000-resident com­muter sub­urb of Raleigh, com­mit­ted to a giant Ama­zon ful­fill­ment cen­ter at a for­mer ConA­gra plant where a fatal explo­sion occurred in 2009. Ama­zon expects to pro­vide 1,500 ware­house jobs at the site.

For its part, Gar­ner is con­tribut­ing $600,000, about 2 per­cent of its 2019 bud­get, to a $5.1 mil­lion project to improve a state road lead­ing past the facil­i­ty. This is not a sub­sidy but an invest­ment in pub­lic infra­struc­ture,” says Joseph Stallings, eco­nom­ic devel­op­ment direc­tor for the city. North Carolina’s Depart­ment of Trans­porta­tion will pro­duce up to $4.5 million.

To ful­fill its promis­es of two-day ship­ping, Ama­zon needs ware­house loca­tions every­where. So why did Gar­ner have to pony up pub­lic mon­ey to rebuild a road for an Ama­zon warehouse?

Stallings implies that cities must offer sub­si­dies to com­pete with oth­er offers. If every­one is play­ing with a corked bat and you’re not, you won’t get far.”

(The Nashville Yards com­plex was already under con­struc­tion when Ama­zon agreed to rent space there— and col­lect­ed $102 mil­lion in incen­tives for the priv­i­lege. Pho­to cour­tesy of David Dayen.)

It’s hard to even take in all of Nashville Yards. It sits on 16 acres bisect­ed by a freight rail line, a few blocks from a neon-lit tourist trap of live music stages and bar­be­cue joints. The site plan includes a lux­u­ry hotel, a 4,500-seat the­ater, a movie mul­ti­plex, a con­do tow­er, restau­rants, green space and 1.5 mil­lion square feet of high-rise offices. In Novem­ber 2018, months after con­struc­tion began, Nashville learned it would include Ama­zon offices, too.

Accord­ing to Metro Coun­cil mem­ber Bob Mendes, the office tow­er Ama­zon will occu­py was already in site plans before the com­pa­ny got involved. Pre­sum­ably, the Nashville Yards devel­op­ers weren’t plan­ning a large office tow­er to leave it emp­ty; they would have found a renter. Yet Ama­zon man­aged to extract $102 mil­lion for the priv­i­lege. Of that amount, $80 mil­lion comes in the form of cash grants: $500 per job for sev­en years from Nashville, and a $65 mil­lion grant from the state for cap­i­tal expen­di­tures. Ten­nessee is also pro­vid­ing $21.7 mil­lion in cred­its to off­set busi­ness tax­es. And if the com­pa­ny relo­cates employ­ees intend­ed for the New York City head­quar­ters to Nashville, the per-job cash grants the city and state have bestowed would grow.

Nashville had plen­ty to offer before the first dol­lar of incen­tives. Its down­town has expe­ri­enced explo­sive busi­ness growth. Sev­er­al col­leges, led by Van­der­bilt Uni­ver­si­ty, could serve as a tal­ent pipeline. But not only does Ama­zon jump into a turnkey office with­out pay­ing any con­struc­tion fees; it gets a logis­tics cen­ter in the most strate­gic set­ting for logis­tics in the country.

Three major inter­state high­ways and two rail yards con­verge in Nashville, and 75 per­cent of the U.S. pop­u­la­tion is reach­able with­in a two-hour flight. Logis­tics is close to half the econ­o­my in this part of the South­east, known as Freight Alley.” Over a dozen large logis­tics busi­ness­es call Nashville home; FedEx’s head­quar­ters is in Mem­phis; and UPS sits four hours down the road in Atlanta. And we know Ama­zon is build­ing a ship­ping ser­vice to com­pete with FedEx and UPS.

Giv­en all these attrac­tions, were cash grants for Ama­zon nec­es­sary? That’s the $15 mil­lion ques­tion,” says Mendes. He adds that the city grants were on the low side rel­a­tive to oth­er recent eco­nom­ic devel­op­ment deals in Nashville, and prob­a­bly weren’t the deci­sive fac­tor for Ama­zon. But if that’s the case, Why did you have to give them the mon­ey?” asks Mark Nac­cara­to of SEIU Local 205, which rep­re­sents city workers.

Because the city of Nashville released its HQ2 pitch, we can see sim­i­lar­i­ties in the oper­a­tions cen­ter grant. Nashville Yards was offered as a poten­tial HQ2 loca­tion. The grant’s offer of $500 per job for sev­en years echoes the HQ2 pro­pos­al of $500 a job for 15 years. Nashville also offered a prop­er­ty tax cut, but Amazon’s rent­ing: They won’t be pay­ing prop­er­ty tax.

The $87 mil­lion in state grants to Ama­zon are near­ly six times what Nashville is kick­ing in. But we know less about them and their ori­gins. The Ten­nessee Depart­ment of Eco­nom­ic and Com­mu­ni­ty Devel­op­ment decid­ed to keep the state’s pitch for HQ2 secret for five years. Spokes­woman Jen­nifer McEach­ern told In These Times , Pub­li­ca­tion of that mate­r­i­al would hin­der the state’s future abil­i­ty to com­pete for eco­nom­ic devel­op­ment projects.” Such con­ceal­ment ren­ders impos­si­ble pub­lic scruti­ny of what Ten­nessee asks of cor­po­ra­tions in exchange for tax­pay­er dollars.

There’s no guar­an­tee the Ama­zon jobs will go to city res­i­dents rather than com­muters or nation­al recruits. Where those work­ers will live, and how they will get to the office, is an acute prob­lem for a city strug­gling with afford­abil­i­tyis­sues. Traf­fic snarls the Nashville area on a dai­ly basis, and a recent ref­er­en­dum to expand mass tran­sit failed. Hous­ing costs have spi­raled, with one-quar­ter of renters pay­ing over half their income in rent. 

Despite run­away busi­ness growth, Nashville finds itself in a bud­get cri­sis. In the most recent assess­ment in 2017, Nashville’s city gov­ern­ment decid­ed to keep prop­er­ty tax rev­enue con­stant, even though prop­er­ty val­ues had soared and pop­u­la­tion jumped. This cre­at­ed the low­est prop­er­ty tax rate in the city’s his­to­ry, some­thing Nashville tout­ed in its pitch to Ama­zon. But it also cre­at­ed a mas­sive short­fall, as Nashville sud­den­ly couldn’t afford pay increas­es for city work­ers or to fill a $40 mil­lion hole in the edu­ca­tion bud­get. The city backed out of the promised raises.

The Ama­zon project will do lit­tle to help. The prop­er­ty tax rev­enue won’t come from Ama­zon, and the project is set in a devel­op­ment dis­trict where a por­tion of sales tax­es is ear­marked to pay down debt on a down­town con­ven­tion center.

At Nashville’s Jan­u­ary 15 Metro Coun­cil meet­ing, city employ­ees spoke about the sting of see­ing their city slip cash to Ama­zon while work­ers got shaft­ed. If the mon­ey for Ama­zon can be found, the mon­ey to pay those who are the back­bone of the city should be just as eas­i­ly iden­ti­fi­able,” said There­sa Wag­n­er, a mid­dle school teacher. It’s time to make our chil­dren at least as valu­able as bil­lion­aire investors.”

But the coun­cil opt­ed to defer a vote on a non­bind­ing res­o­lu­tion to halt any cor­po­rate incen­tive pay­ments until city employ­ees receive their cost-of-liv­ing increase. Mean­while, the coun­cil advanced a par­tic­i­pa­tion agree­ment for Nashville Yards, kick­ing in an addi­tion­al $15 mil­lion for infra­struc­ture improve­ments, over the objec­tions of some coun­cil mem­bers who saw it as an effec­tive dou­bling of Amazon’s incentives.

Despite these defeats, activists have got­ten the atten­tion of the coun­cil and broad­ened eco­nom­ic devel­op­ment con­ver­sa­tions to whether projects ben­e­fit the entire com­mu­ni­ty. Before, the think­ing was that all jobs are good jobs,” says Michael Calla­han-Kapoor, an orga­niz­er with Stand Up Nashville, an SEIU Local 205-backed labor-com­mu­ni­ty coali­tion that has been crit­i­cal of the deal. But that eco­nom­ic mod­el doesn’t work.”

The resis­tance to Amazon’s post-HQ2 boun­ty, not only in Nashville but in New York and D.C., sug­gests that the sweep­stakes may have back­fired. Grass­roots protests, con­tentious city coun­cil meet­ings and even high-pro­file oppo­si­tion from Rep. Alexan­dria Oca­sio-Cortez led Ama­zon to can­cel the New York facil­i­ty. Amazon’s fail­ure in New York offers a mod­el to local orga­niz­ers on how to lim­it or pre­vent cor­po­rate sub­si­dies that don’t ben­e­fit the entire community.

Ama­zon did not respond to requests for com­ment for this story.

(Pro­test­ers with New York Com­mu­ni­ties for Change demon­strate in Man­hat­tan against the bil­lion-dol­lar sub­sidy pack­age for Amazon’s New York head­quar­ters Nov. 26, 2018. Pho­to by Stephanie Keith/​Getty Images)

HQ2 alert­ed the pub­lic to the long-run­ning eco­nom­ic devel­op­ment sub­sidy scam, which nets cor­po­ra­tions some $45 bil­lion to $90 bil­lion a year from local gov­ern­ments. Nev­er­the­less, Ama­zon will be reap­ing the ben­e­fits of the sweep­stakes for years. In places like Nashville, those sub­si­dies feel like a wealth trans­fer, with mon­ey pulled away from ser­vices for society’s most vul­ner­a­ble and put into the hands of America’s biggest winners.

To city lead­ers, eco­nom­ic devel­op­ment is jus­ti­fied because we will see returns on that invest­ment,” says James Fras­er. But the peo­ple reward­ed are not low-income people.”

Funkhouser, the for­mer Kansas City may­or, thinks the only way to stop the bid­ding wars is to cre­ate a fed­er­al law pro­hibit­ing them. It’s ille­gal for an Amer­i­can firm to accept a bribe in Brazil,” he says, refer­ring to the For­eign Cor­rupt Prac­tices Act. But they can accept a bribe in the Unit­ed States. They can accept $102 mil­lion. It is absolute­ly straight-up corrupt.”

David Dayen is an inves­tiga­tive fel­low with In These Times’ Leonard C. Good­man Insti­tute for Inves­tiga­tive Report­ing. His book Chain of Title: How Three Ordi­nary Amer­i­cans Uncov­ered Wall Street’s Great Fore­clo­sure Fraud won the 2015 Studs and Ida Terkel Prize. He lives in Los Ange­les, where pri­or to writ­ing about pol­i­tics he had a 19-year career as a tele­vi­sion pro­duc­er and editor.
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