Amazon’s belt-tightening affects towns across the country
Posted By: The Detroit News on March 7, 2023. For more information, please click here to read the source article.
Last year, Amazon planned to open a new warehouse in Florida’s state capital, creating 1,000 jobs. The company bought up so much concrete and acquired so many sprinter vans in anticipation of the project that local business owners say the city temporarily ran out.
But the Tallahassee project still hasn’t opened.
“The big dog’s gonna eat first and the puppies get the crumbs. That seems to be the thought,” said local county commissioner Bill Proctor, who’s concerned that local government promised $2 million in tax breaks in exchange for little progress. “I just don’t want my community to get played.”
For years, Amazon has been in super growth mode, expanding its workforce by tens of thousands of employees each year and opening dozens of warehouses, delivery centers, corporate offices, data centers and other facilities that allow it to get packages to customers’ doors in just a day or two.
As part of that growth, communities across the country lined up to offer incentives to attract the jobs, which can be a boon particularly in areas where traditional industries have dried up or moved abroad.
Perhaps most famously, Amazon spent more than a year running a beauty contest to attract the best economic incentives for its second headquarters, drawing hundreds of applications from cities around the country before landing on the rather obvious choices of New York City and the D.C. area. (New York later bowed out after a community uproar.)
But now some projects — including the HQ2, as it is known, in Arlington, Va. — are facing delays and some communities worry the projects may never materialize.
“Unless the contract includes a clawback, places like that may be out of luck,” said Good Jobs First executive director Greg LeRoy. “They may have to wait and hope Amazon delivers eventually — if it ever does.”
Amazon’s pullback is part of a broader trend among tech giants, who are cutting jobs and tightening belts after over hiring during the pandemic. Facebook parent Meta is planning a second round of layoffs after letting go 10,000 workers in November. Google is cutting 12,000 roles, and Microsoft is laying off 10,000.
Amazon may have been the most affected of the group, having scaled up its operations to meet the surge in demand as people sheltered in place and turned to online ordering en masse. In spring 2022, as it reported its first quarterly loss in seven years, CEO Andy Jassy said the company had over-hired and would scale back. Last summer, Amazon announced it would have to scale back the growth of its logistics network and make cuts to consumer-facing divisions like retail. A few months later, the company said it would lay off 18,000 corporate employees.
Marc Wulfraat, a consultant who independently tracks Amazon’s supply chain, said between 2020 and 2022 the company grew its logistics footprint more than twice as fast as usual.
“When COVID struck, it was like a one time bonanza, and they went ballistic,” Wulfraat said. “They overshot the mark.”
According to the data independently compiled by Wulfraat, while Amazon is still expanding its logistics network overall, it has so far announced the closure, cancellation or delay of 100 planed facilities in the United States, where he says the company operates 1,285 sites in total. Communities in states including Illinois, Michigan, Tennessee and Florida have been affected.
Amazon spokesman Steve Kelly said Wulfraat’s figures were not accurate, but declined to say how many projects it had closed, canceled or delayed. He did not immediately have further comment. (Amazon founder Jeff Bezos owns the Washington Post.)
On Friday, Amazon confirmed that cutbacks would include planned construction in Virginia, the planned site for its second headquarters. Critics said the process of searching for another major location for white-collar workers provided Amazon with a wealth of free public data while wasting time and public tax dollars.
Municipalities don’t typically pay companies up front for development deals. Instead, the tax breaks are usually tied to a goal, like hiring a certain number of people. Though the company isn’t completing planned construction in Arlington, for example, it said it has hired more than 8,000 people, which meets the terms of the original deal.
But whether they offered Amazon big incentive packages or not, small towns around the country that were counting on an Amazon boost are nonetheless disappointed when those projects don’t come to fruition.
In February 2022, Amazon, still racing to add capacity, planned to open two separate delivery stations in Michigan just 10 miles apart. One in Ypsilanti would displace 1,500 trees but create 577 jobs; the other in Pittsfield would bring hundreds of jobs for delivery drivers and hundreds more for workers inside the warehouse, according to Michigan Live. But the Pittsfield project has been delayed, and Amazon canceled the Ypsilanti project altogether.
”The pullback was based on an overestimation of earning growth that was based on pandemic e-commerce sales,” township planner Jason Iacoangeli told MLive in August.
The Ypsilanti Township planning office did not immediately respond to a request for comment.
The northwest Chicago neighborhood of Humboldt Park was likewise promised 500 new Amazon jobs by 2022, but community activists and union organizers say the 140,000-square-foot building there still hasn’t opened.
“Anything short of giving an opportunity to working people is unacceptable,” said Brandon Johnson, one of the leading candidates for Chicago mayor, at a news conference held outside the empty Chicago warehouse in January, according to Block Club Chicago.
A spokesperson for Johnson’s campaign did not immediately respond to a request for comment.
In Nashville, meanwhile, Amazon said in a 2021 press release that it would create 5,000 high-paying jobs for corporate employees who would work out of a brand new office building with cafes, a rooftop patio and a 4,000-square-foot dog park. The city’s Metro Council said it would grant $15 million in tax breaks if the company reached its goal by 2029. But in February, The Tennessean reported that construction on the downtown towers has been paused.
The deal in Nashville, as in Arlington, requires Amazon to create a certain number of jobs by a certain deadline before they can take advantage of tax breaks. But up against a company as powerful as Amazon, small towns and cities typically have little leverage to negotiate.
“Attaching yourself to Amazon and using public funds to persuade Amazon to locate in your community is very risky, and it has a lot of downsides,” said Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance. “A lot of places don’t have provisions in terms of what happens if the company doesn’t do what it says.”
In Tallahassee, Commissioner Proctor said Amazon’s secrecy put pressure on county officials to offer a hefty $2 million tax incentive package and made negotiating difficult. “They were very careful not to put any promises in writing,” he added.
But even though Amazon wouldn’t commit on paper to things like diversity hiring quotas, the county still promised a record-setting tax break.
Amazon told Proctor the center will open by the end of the year. “There were no agreement that we relied upon, there was nothing where we could say this was a breach,” Proctor said.
“That’s how hungry these little communities are,” he continued. “You say Amazon and everybody just rolls over.”
« Back to Insights