Tech looks for lessons from Amazon HQ2 fight

Amazon’s decision to scrap its plans for a second headquarters in New York City, dubbed HQ2, stunned both the tech world and its critics this week, raising new questions about the industry’s ambitious expansion plans and their dealings with state and local governments.

Experts say Amazon’s plans for New York were disrupted by the public backlash against large tax breaks for corporate America. And they say the company’s case could draw new fault lines for other tech companies over the deals they strike and how they handle the publicity over their growth and wealth.

Other prominent companies, including Google and Apple, have also received millions in tax breaks as they expand across the U.S.

{mosads}“Companies are going to be more cautious in how they go about negotiating these subsidy deals [after Amazon],” Carl Davis, research director of the Institute on Taxation and Economic Policy, told The Hill. 

“I think it’s unrealistic to think they’re going to start turning down subsidies entirely,” Davis added. “But I think they’re going to know that if they push too hard and ask for too much and word gets out, the public may not view that favorably.”

Activists in New York City pushed against Amazon for a number of reasons. They took issue with the tech company’s business ties to Immigration and Customs Enforcement, which they said was an affront to Queens’ significant immigrant population. They said Amazon’s new offices would drive up rents and displace poor residents. The labor-friendly city also balked when an Amazon executive said the company would not remain neutral if workers tried to unionize.

But local lawmakers and advocates expressed the most outrage over the public nature of Amazon’s search for a second headquarters, which prompted New York City to offer $3 billion in state and city tax breaks to woo Amazon.

“We’ve got a subway system that is breaking down, schools that lack seats and books, social services are getting cut back,” Angeles Solis, an organizer with Amazon-critical advocacy group Make the Road New York, told The Hill. “But somehow $3 billion can be found to give to the richest man in the world and the largest corporation on the planet?”

Amazon’s months-long search for a city for its planned HQ2 attracted immense attention from the start, with cities and towns across the company putting in bids to land the project. The frenzied wooing of Amazon, with towns offering to change their name, and cities touting their strengths, was matched by secrecy on the company’s part over the process. Amazon eventually released a list of 20 finalists before announcing the winners, New York City and Northern Virginia, with a smaller office in Nashville, in November 2018.

Stacy Mitchell of the Institute for Local Self-Reliance, a research group that advocates for local businesses and tracks Amazon’s movements in government, called the HQ2 search a “ruse.” 

“As rumors start to filter out that they were going to choose D.C. and New York, it started to become very clear that this whole thing was a ruse,” Mitchell said.

{mossecondads}”The prospect of having dangled this out to places like Gary, Ind., and all these places that are truly desperate … they dangled this out when the conclusion was foregone,” she continued. “They used the search to maximize how much data they could get out of cities, maximize the dollars they could get out.”

Amazon’s fiercest critics cheered the company’s decision to drop its New York City plans, most notably freshman Rep. Alexandria Ocasio-Cortez (D-N.Y.).

“Today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world,” she tweeted.

But it is still unclear how much the Amazon fallout will affect other tech companies that are expanding their footprint as well.

Google and Apple, by comparison, have been expanding rapidly across the country with quieter rollouts that stand in sharp contrast to what Apple CEO Tim Cook dismissed as a “beauty pageant.” 

Google on Wednesday announced that it will be investing $13 billion in data centers and offices across 14 states including Ohio, Texas, Nebraska and Nevada. That expansion will leave the company with a presence in 24 U.S. states. Google CEO Sundar Pichai in a blog post noted that the company has hired more than 10,000 people in the U.S. over the past year and made $9 billion in investments.

Meanwhile, Apple at the end of last year announced that it would be expanding its offices to cities including Seattle, San Diego and Culver City, Calif., with expansions planned for Pittsburgh, New York and Boulder, Colo., over the next three years. The company says it is on track to create 20,000 jobs in the country by 2023.  

“They’re running their own play and it’s a very different play than ours,” William Floyd, the head of external affairs for Google in New York, told The New York Times in December, about Amazon’s handling of HQ2. “We’ve been growing steadily for the past 18 years without heralding trumpets, or asking for support from the government. We’ve done it by the dint of our own work.” 

Still, other companies are likely to face tougher scrutiny over the tax breaks they receive.

The Washington Post on Friday reported that Google has received millions in tax breaks over the years, often quietly, with local residents unaware. Last May, a Texas town approved more than $10 million in tax breaks for a Google data center. 

Google and Apple are also not immune to criticism from progressives that tech firms in cities bring rising rents and displace poor residents. Amazon’s decision to withdraw from New York City could embolden local critics in cities across the country and intensify what some call a “tech backlash.”

Google did not respond to The Hill’s request for comment and Apple pointed to its previous press releases on its expansion. 

For Amazon, the HQ2 decision came as the company was already caught up in a firestorm of anti-corporate sentiment stirred in part by Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), both of whom blast the company as a greedy behemoth that mistreats its lowest-paid workers.

Experts who spoke to The Hill said they believe the size of the tax incentives package in New York City played an important role in killing the Amazon deal. 

“What was so clumsy in the Amazon deal was the greed, the naked greed,” Barry Lynn, the executive director of anti-monopoly group Open Markets Institute, told The Hill. 

Amazon is now proposing a strategy that is more in line with Apple and Google’s. 

Amazon told The Hill that it plans to grow 25,000 new jobs in the 17 cities where it already has corporate offices, while continuing to build its headquarters in Arlington, Va., and offices in Nashville, Tenn.

In the Amazon blog post announcing the decision to cancel the office in Queens, N.Y., the company also said that it plans to expand its 5,000-person workforce in New York.

For some, that was a sign that the landscape for the tech industry may not have changed all that much.

“Amazon said in its own statement that it’s going to continue to grow in New York and that it isn’t going to be looking for an HQ2,” Mitchell told The Hill. “They talked about these 25,000 jobs coming in over a 10-year timeline. 

“I wouldn’t be that surprised to find in 10 years that they had 25,000 jobs in New York,” Mitchell added.