There are two ways to read Amazon’s surprise announcement that it will pause construction on one big Seattle office tower and reconsider moving into another until the City Council votes on a new tax on the city’s top-grossing businesses.
In one scenario, Amazon is deciding whether it should slow or stop its rapid growth in Seattle, where left-leaning lawmakers are demanding big business shoulder more of the burden for the challenges associated with the boom. It’s a climate that tech leaders have called “unpredictable” at best and “hostile” at worst.
Seattle Councilmember Teresa Mosqueda, a sponsor of the new tax, challenges that notion. “This is not a city or state that’s unfriendly to business,” she said in an interview with GeekWire.
The City Council is considering a so-called “head tax” that would charge businesses with more than $20 million in annual revenue 26 cents per employee for every hour worked. Seattle estimates the tax would generate about $75 million per year. It would eventually be phased out and replaced with a payroll tax. The majority of the funds would go toward deeply affordable housing and the remaining toward homeless services. Amazon would be on the hook for approximately $20 million annually if the tax passed.
Contrast that with the billion-dollar incentives packages that other cities are offering to Amazon as part of their bids for the company’s second headquarters and it’s not hard to see why Amazon may no longer feel motivated to grow in its hometown.
Heather Redman, a venture capitalist and vocal Seattle tech industry advocate, strongly believes in the first scenario. Here’s what she told GeekWire in the wake of Amazon’s announcement Wednesday:
I think [Amazon] will definitely stop or slow its growth in Seattle if the tax passes. I think there’s no question about that. They don’t ever telegraph what they’re going to do in advance. This is the first time that they’ve come out on something like this. They don’t forecast products or anything else. They’re not a saber-rattling, big-talking company and never have been. They tend to say what they’re going to do and then do it. So I do not think this is a maneuver.
In the second scenario, Amazon is pausing just two of several construction projects underway to pressure the City Council in advance of its May 14 vote on the head tax. Starting Tuesday evening, Amazon informed builders working on the 17-story Block 18 project to halt construction until the Seattle City Council votes on the tax. Amazon also said it is considering sub-leasing its massive Rainier Square office project to another company, rather than occupying it itself, pending the city’s decision.
Amazon officials won’t say whether they plan to permanently stop construction on the projects or resume them after the City Council’s vote. They have not commented on the matter beyond their initial statement.
In an interview following Amazon’s announcement Seattle Tech 4 Housing founder Ethan Phelps-Goodman wondered, “would they actually change a business decision based on this tax?”
“The building that they’re talking about is way more than $20 million … they’re talking about leasing out another building instead of occupying it,” he said. “Those decisions are worth way more than the tax is worth if they eventually go through with it.”
There is also a third possibility: Amazon genuinely doesn’t know what its future in Seattle looks like. Amazon could be pausing construction on a few of its projects to simply wait and see what happens, while building up its outposts in cities like Vancouver and Boston and deciding where to plant HQ2.
Setting Amazon’s motivations aside, Mosqueda and Redman both expressed concern that the situation between Seattle and its largest private employer is past the point of no return.
“We wanted businesses to be at the table from the get-go and many of these largest businesses that are now complaining boycotted,” Mosqueda said. “If you want to have an impact on policy, it’s important to show up.”
It is possible that Amazon’s announcement and its ripple effects in other industries, like construction, will delay the City Council vote. Councilmember Sally Bagshaw told city blog SCC Insight, “we’re going to need more time” to discuss these issues and suggested that the May 14 vote could be pushed out.
“This is an existential moment for Seattle,” Redman said. “We’ve got to get this right and right now we’re heading for a collision course.”