HQ2 deal brings new scrutiny on Amazon

The $2 billion in taxpayer subsidies that Amazon is reaping from its new offices in New York and Virginia is bringing new scrutiny on the tech giant from public officials.

Lawmakers and officials whose towns won out in the search are welcoming the company with open arms, predicting that its arrival will bring massive economic investments into their communities.

But others are raising questions about the wisdom of gifting billions in taxpayer dollars to the second most highly valued company in the world when local infrastructures are struggling.

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Amazon has already been in the spotlight over its wage practices and market dominance, attracting criticism from lawmakers in both parties and from President Trump. 

Its bold plans to expand on the East Coast, though, threaten to intensify that criticism and turn it into a punching bag over numerous hot-button issues, from employee benefits to affordable housing to special incentives for corporations.

Amazon announced on Tuesday that it had selected New York City and Arlington, Va., after a yearlong search for its new HQ2 location and that it would be opening a logistics office in Nashville, Tenn. Between the three sites, Amazon will be receiving about $2.4 billion in performance-based tax incentives.

Amazon set off a bidding war among local officials trying to entice the company when it announced last year that it would be opening a second headquarters, a new office that it promised would be a “full equal to our current campus in Seattle.”

Nearly 250 cities across the country, plus some from Canada and Mexico, pitched Amazon, some of them desperate for an economic boost to their small or downtrodden communities. But ultimately, the internet giant, which at one point this year exceeded $1 trillion in value, decided to split HQ2 and its 50,000 new jobs between two of the wealthiest metropolitan areas in the country.

The competition scrambled normal political divisions.

Retiring Sen. Bob Corker (R-Tenn.) called the decision “outstanding news” for his state, while across the aisle, Senate Minority Leader Charles Schumer (D-N.Y.), in a statement released by the New York City Mayor’s Office, praised the move, even as he added that “we must make sure there are commensurate infrastructure and housing improvements to the neighborhoods to which Amazon is moving, and make sure community residents are hired when Amazon lands.”

The prospect of enticing Amazon to come to New York made allies of two fierce political rivals in the state, Gov. Andrew Cuomo (D) and New York City Mayor Bill de Blasio (D), both of whom hailed the announcement Tuesday.

“This is a giant step on our path to building an economy in New York City that leaves no one behind. We are thrilled that Amazon has selected New York City for its new headquarters,” de Blasio said in a statement distributed by Amazon. “New Yorkers will get tens of thousands of new, good-paying jobs, and Amazon will get the best talent anywhere in the world.”

Cuomo added that the news marks one of the “largest, most competitive economic development investments in U.S. history.”

Under the terms of the deal for its New York office, which will be located in the Queens neighborhood of Long Island City, Amazon will receive more than $1.5 billion in performance-based incentives, including one tax break in which the state will pay $48,000 for each of the 25,000 jobs that the office will bring.

But some leaders in the area are angry that New York is willing to fund a project that will speed up gentrification and make the neighborhood and surrounding areas more expensive for residents.

Rep.-elect Alexandria Ocasio-Cortez (D), the progressive sensation who will be representing parts of Queens in the new Congress, said on Twitter that her constituents are outraged.

“Displacement is not community development. Investing in luxury condos is not the same thing as investing in people and families,” she wrote in a post on Tuesday. “Shuffling working class people out of a community does not improve their quality of life.”

Amazon, which declined to comment on this story, estimates that its presence will bring increases in tax revenues to New York and Virginia of $10 billion and $3.2 billion, respectively, over the next 20 years.

Thomas Cooke, a business professor at Georgetown University, supports Amazon coming to the Washington area, but he acknowledges that the higher burden it will place on taxpayers through the subsidies and increased property values may not be popular.

“It’s definitely not a deal that everybody will embrace — no question about that,” Cooke said. “When you are giving a
multibillion-dollar corporation tax breaks and tax deals, on the surface it doesn’t pass the smell test.”

“But the reality is, if I don’t offer them the appropriate deal then they’re going to go somewhere else,” he added.

Other New York Democrats have also spoken out against the deal. New York City Council Speaker Corey Johnson said he’s “very concerned” about the arrangement and the lack of public input it received.

And State Assemblyman Ron Kim is pushing legislation to divert the tax subsidies from Amazon toward canceling residents’ student debt, which he says would create a much larger economic benefit for the state.

In a phone interview with The Hill, Kim, who represents the Flushing neighborhood of Queens, said he’s concerned Amazon will bring what he sees as a record of hurting small businesses to his community. He also raised concerns about Amazon’s market dominance and said that public officials should not be courting corporations with taxpayer money.

“It is completely backwards,” he said. “Imagine for the last couple years if we had united city to city and state to state and held Amazon accountable. Imagine if we actually made it unprofitable for Amazon to get this big.”

The criticism against Amazon hasn’t only come from the left.

On Wednesday, groups backed by billionaire GOP donor Charles Koch blasted the cities and states that gave incentives for Amazon to build in their communities. 

“Americans are fed up with wasteful corporate welfare, yet cities and states are breaking the taxpayer bank to give carveouts to huge corporations,” groups Americans for Prosperity and Freedom Partners Chamber of Commerce said in a statement.

Supporters of Amazon say the company will deliver high-paying jobs and believe that it will be a dynamic force in its new communities.

But the deal is also dragging the company into other hot-button debates. 

Rep. Ro Khanna (D-Calif.), who represents Silicon Valley in Congress, called the move to already booming New York City and Washington, D.C., a “missed opportunity” to address the digital divide.

The expansion plans also come after a year that saw Amazon face public pressure over its working conditions. Sen. Bernie Sanders (I-Vt.) led an effort to pressure Amazon to raise wages for its workers.

The company eventually announced in October that it would raise its minimum wage to $15 an hour.

President Trump has also taken shots at the company, whose CEO and founder, Jeff Bezos, also owns The Washington Post. Trump has criticized the company’s deal with the Postal Service and floated the possibility that regulators may want to take a closer look at Amazon for antitrust violations.

As Amazon moves ahead to implement its plans, there will be even more focus on how it is affecting the communities it is moving into.

Critics are vowing to keep a close eye on the company’s plans and push to address their concerns.