The Washington PostDemocracy Dies in Darkness

As Amazon pursues a second headquarters, it battles hometown Seattle over tax to stem homelessness

Adilson Correia, an ironworker who was helping to build the Amazon Block 20 office building, holds a sign that reads "Don't vote our jobs away" during a rally this week in front of City Hall in Seattle. (Ted S. Warren/AP)

A showdown is looming in Seattle, where the city council plans to take an initial vote Friday on a tax on big businesses that would address an escalating crisis in homelessness but has widened fissures between the city and its largest employer:

Amazon halted construction plans on a development site in the northern end of the city and vowed that it would forgo additional space it recently leased if the council approves the tax, which is intended to raise $75 million a year.

Hundreds of other companies in Seattle, including Starbucks and Expedia, have also expressed opposition to the proposal. But it is Amazon’s hardball tactics that have caught the attention of city council members and the national media covering the debate.

Amazon is in the midst of a high-profile search for a second headquarters in one of 20 other cities. And the dispute playing out in Seattle is being closely followed by elected officials who would have to wrestle with Amazon’s growth if the retailing giant landed in their back yard.

Since Amazon last fall began seeking a location for its second headquarters, which could create as many as 50,000 jobs, it has narrowed the field to 20 locations. Governors and mayors from the final group have been trying to impress the company and are reveling in having been named to the shortlist. Several of them said they are watching the tension build between the $780 billion company and Seattle’s elected leaders over how to address a homelessness epidemic that has vexed the city.

Seattle and surrounding King County declared a state of emergency over homelessness in 2015, but since then, cost-of-living pressures have worsened. The number of homeless students in the city’s public schools has tripled, to nearly 4,300 last school year, and an estimated 23,000 Seattle households are at risk because more than half of their incomes go toward housing costs.

For the past year and a half, home prices have risen faster there than anywhere else in the country. The median price for a house is now $777,000.

How much to attribute the problem to the growth of Amazon, Microsoft, Google and other tech firms that have transformed the city from a sleepy Northwest outpost to a booming extension of Silicon Valley is a matter of sharp disagreement.

“We are reeling under skyrocketing rents and an acute crisis in the availability of affordable housing,” said Seattle council member Kshama Sawant, who supports the measure.

Sawant said she does not solely blame Amazon or its founder, Jeffrey P. Bezos, for the city’s homelessness problem but said the company’s “extraordinary threat” in response to the proposal should serve as a caution to leaders of others cities that are courting the company. (Bezos also owns The Washington Post.) Beyond hiring as many as 50,000 workers, Amazon estimates it will make $5 billion in capital investments and fill 8 million square feet of office space with its second headquarters.

“This is a message to the working people of America from Amazon saying that if you dare to fight us, we will threaten you with taking away jobs,” she said. “It’s really about billionaires like Bezos making sure people understand the balance of power. People need to know that Jeff Bezos is a bully and people need to fight back against this attempted extortion.”

What would happen if Amazon brought 50,000 workers to your city? Ask Seattle.

Bezos, through an Amazon spokesman, declined to respond to Sawant’s remarks.

Many of the city’s businesses, while acknowledging the homelessness issue, view the measure as a job killer. Executives from more than 100 companies, among them Alaska Airlines and Expedia, wrote a letter also opposing the proposal, sometimes referred to as an employee hours tax or a head tax. Companies that have more than $20 million a year in revenue would pay about $500 per job annually. Almost 600 companies would qualify, according to city officials.

“We oppose this approach, because of the message it sends to every business: if you are investing in growth, if you create too many jobs in Seattle, you will be punished,” the companies wrote. “Sending this message to entrepreneurs, investors, and job creators will cause far greater damage to Seattle’s growth prospects than the direct impact on the businesses being taxed.”

Starbucks also came out against the proposal this week, saying the city should first overhaul homeless services. “We join most other Seattle employers in sharing our concerns about the impact this additional tax will have on jobs in Seattle,” the company said in a statement.

About 300 small-business leaders, among them coffee shop owners and jewelers, wrote an additional letter saying that “continuing tax increases and regulations will only hurt the small business community and will vastly change our city.”

Amazon’s shutdown in Seattle affects two sites meant for 7,000 additional workers: a 405,000-square-foot development referred to as Block 18 and 722,000 square feet in another project, Rainier Square.

Over the years in Seattle, Amazon says it has invested $3.7 billion in its facilities and paid more than $25 billion in salaries. For the past three years, it also has housed more than 65 families at a time in two former hotels it owns in South Lake Union, the neighborhood where its headquarters is located.

Amazon issued a statement from Vice President Drew Herdener saying that “pending the outcome of the head tax vote by City Council, Amazon has paused all construction planning on our Block 18 project in downtown Seattle and is evaluating options to sub-lease all space in our recently leased Rainier Square building.”

With about 45,000 employees, Amazon would pay an estimated $20 million to $25 million in the first year of the tax. That figure could quickly rise in the future when the funding mechanism would transition to a payroll tax. The company made about 80 times that, $1.6 billion, in net first-quarter profits.

Seattle is far from the only big city to have wrestled with increasing populations of homeless people as housing costs rose in recent years. Two areas considered favorites by analysts for the second Amazon headquarters, Boston and Washington, D.C., have experienced their own surges.

So far, mayors in other cities competing for HQ2, as the project is sometimes called, are taking a wait-and-see approach. D.C. Mayor Muriel E. Bowser (D) and Philadelphia Mayor Jim Kenney (D) were still studying the situation and declined to comment, according to their spokesmen. Boston Mayor Marty Walsh (D) declined to comment. Austin Mayor Steve Adler (D), who proposed in a pitch letter to the company a “collaborative future” between Amazon and Austin, was unavailable to comment, according to his staff.

There are few examples of cities creating dedicated taxes to address homelessness, said Maria Foscarinis, executive director of the National Law Center on Homelessness and Poverty. She said inactivity by Congress in the face of growing gaps in wealth and income has put city leaders in a difficult place.

“Cities are eager to attract businesses, but they also have an obligation to all of the city’s residents, and that means distributing resources fairly,” she said. “We are talking about really extreme inequality. But that means employers like Amazon can say, ‘Well, I don’t like this, I am going to go somewhere else.’ ”

Residents spoke before the Seattle council Wednesday, some carrying orange signs saying, “Don’t Vote Our Jobs Away,” and others carrying red pro-tax signs saying, “No More Empty Promises.”

Construction workers arrived in hard hats and safety vests to ask the council to reconsider.

“The city needs different policies on homelessness and addiction before it asks for more money because these policies don’t seem to be working,” said Chris McClain, business manager for the local Iron Workers union. “We ask you right now not to tax our jobs away.”

Jimmy Hahn, of the Northwest Regional Council of Carpenters, told the council that by slowing construction work, “the City of Seattle misses out on opportunities to get people out from under the very issues that you are trying to fix.”

Five members of the nine-member Seattle city council have publicly voiced support for the measure. The other four either oppose the proposal or have not made clear how they will vote. Discussions of possible changes to the measure will happen Friday, but a final vote is expected Monday.

Seattle Mayor Jenny A. Durkan (D), who entered office in November, has signaled she is unhappy with the legislation. Six votes would be needed to overturn her veto should she issue one.

Durkan declined an interview request through her staff but issued a statement saying that she is “deeply concerned” about how the measure would affect the city’s economy and that the city has an urgent need to address homelessness.

“In the upcoming days, I will be bringing together Council members as well as business, labor and our community leaders to work together to see how we might forge common ground in dealing with our challenges while keeping jobs,” she said.