For amazon hq2 hopefuls, seattle serves as cautionary tale – ktvz electricity and magnetism purcell


The dispute in Seattle has arisen from the rapid escalation in housing prices and a resulting surge in homelessness, due in no small part to the influx of highly paid workers employed by Amazon and other area tech companies. To help alleviate its shortage of affordable housing, several city council members proposed a 26-cent tax for each working hour at companies with more than $20 million in annual revenue — the largest impact of which would fall on Amazon, with its 45,000 local employees.

Although Amazon has taken some steps to help ease the city’s homelessness problem, such as donating space to shelter 200 homeless people in one of its new buildings and additional $40 million to a city-managed fund for affordable housing, the measure’s backers took Amazon’s move as an ominous sign.

"Obviously Amazon can afford to pay the 26 cents," says Seattle Councilmember Mike O’Brien, who supports the tax. "It’s really a question of, do they feel loved? And they’re offended. They’re like, ‘you don’t recognize all the good stuff we do in the community and we get blamed for all the bad stuff. We want to go somewhere that’s more generous to us, and we’re pissed.’"

In the shortlisted city of Dallas, for example, a 50,000-person outpost would make Amazon by far the city’s largest private-sector employer. The metro area is already expanding fast, having added 86,000 jobs in 2017, led by the energy and financial services industries. Housing prices have already been escalating rapidly, as builders struggle to keep up with a hot job market, and city council member Phil Kingston worries that pouring on more growth without proper planning could make life difficult for current residents.

To head off an even worse housing crunch, Kingston would like to see Amazon build a campus with space for both retail and housing, and invest its own money in affordable housing in other parts of the city. The company has been meeting with nonprofits in its potential HQ2 host cities to discuss how it could help avoid displacing longtime residents.

Barry Bluestone, a professor specializing in urban economic development at Northeastern University in Boston, cautions against imposing per-employee taxes like Seattle is proposing. Instead, he says, cities should rely on personal income and property taxes, which are less likely to repel businesses or keep them from growing.

"Seattle and Boston share a lot in common because we’ve been able to take advantage of new industries," Bluestone says. "The downside is, if you don’t build more housing, prices go through the roof. The answer is not to constrain demand, but increase the supply of housing."

In Boston, another Amazon HQ2 contender, Bluestone is pitching high-density developments aimed at millennials and empty-nesters who are downsizing. Large employers and educational institutions, he says, would then jointly hold the master lease to these buildings with the developers and sublease the units to employees or students. Absorbing those newer residents into apartment or condo buildings could take the pressure off the city’s older housing stock that’s more suitable for families.

But still, building low-income housing may never be profitable without subsidies, and extra tax revenue to finance it can be hard to find. Many cities, including Seattle and HQ2 hopefuls Dallas, Austin and Miami, are forbidden by state law from imposing any income taxes. Others have capped property or sales taxes.

That’s why some groups have taken the position that their cities shouldn’t be pursuing Amazon at all, whether it asks for tax breaks or not. Monica Kamen, co-director of the 60-organization Fair Budget Coalition in Washington, D.C., thinks the city should prioritize smaller businesses and community-based entrepreneurship instead.

That’s why some backers of the Seattle measure say it might not be a bad thing if Amazon sent some of its jobs elsewhere, as it’s already been doing. To Mike O’Brien, Seattle could slow down a bit and still have an incredibly healthy economy — maybe even one that allows other businesses to grow faster, if Amazon weren’t sucking up all the available tech talent and downtown office space.