Amazon suspends construction in Seattle while the city considers a new tax on its biggest businesses

A rendering of Amazon’s Block 18 project. (Graphite Design Group Rendering)

Amazon is pausing construction on a new office tower at its Seattle headquarters and may put one of its biggest future office spaces back on the market in response to a proposed tax on the city’s top-grossing businesses Wednesday. The Seattle e-commerce giant confirmed its plans to GeekWire Wednesday after The Seattle Times first reported on the construction halt.

Amazon informed builders working on the 17-story Block 18 project to halt construction until the Seattle City Council votes on the tax. Amazon is also considering sub-leasing its massive Rainier Square office project to another company, rather than occupying it itself, pending the city’s decision. The combined projects would house more than 7,000 new Amazon employees. The vote is expected May 14.

The council is considering a 26 cent tax per employee for each hour worked at companies with at least $20 million or more in revenue. Revenue from the tax would go toward homeless services and affordable housing.

“I can confirm 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 Rainer Square building,” Amazon VP Drew Herdener said in a statement provided to GeekWire.

Amazon did not respond to questions about whether it will permanently stop construction on the projects or resume them after the City Council’s May vote. It isn’t clear whether the pause signals Amazon’s intention to slow its growth in Seattle or if it is a political move designed to influence the Council’s decision.

Amazon would be on the hook for about $20 million a year under the tax. For a company that made $177.9 billion in revenue and $3 billion in profits last year, that may seem like a drop in the bucket. But the new tax is just one example of growing tension between Amazon and its hometown.  While Seattle is seeking additional tax revenue from Amazon to address its growing homelessness crisis, other cities around the country are offering billions in tax incentives to lure the company’s second headquarters.

Many have speculated that Amazon’s HQ2 search is motivated by the political climate in its hometown. The company has grown aggressively in Seattle’s urban core over the past decade and become emblematic of the city’s growing pains.

Richard Florida, an urbanist scholar who started a petition to press HQ2 cities not to offer tax incentives, called Amazon’s decision to pause construction in Seattle “disgusting and disgraceful.”

In addition to HQ2, Amazon is expanding its operations in other outposts around the world. This week, the company announced plans to add 2,000 tech workers in Boston, another 3,000 in Vancouver, and 200 in Minneapolis.

Rainier Square and Block 18 are not Amazon’s only office projects in Seattle. The tech giant recently agreed to lease office space above the downtown Seattle Macy’s location. Amazon is also building two other blocks near Block 18, and is set to take several additional buildings in its original home base of South Lake Union. Amazon has not said what will happen to those projects.

In a statement provided to GeekWire, Seattle Mayor Jenny Durkan said she is “deeply concerned about the impact this decision will have on a large range of jobs.”

“At the same time, our city must urgently address our homelessness and affordability crisis and lift up those who have been left behind,” she said.

Durkan plans to convene councilmembers and business and labor leaders in the next few days to “forge common ground in dealing with our challenges while keeping jobs.”

The Seattle City Council estimates that the proposed tax will generate about $75 million per year, with the majority of revenue going toward “deeply affordable” housing units.

The Seattle Metropolitan Chamber of Commerce has been campaigning against the proposed tax and mobilizing its members to fight it.

“It feels as though every time they turn around, there is a discussion about another tax on businesses in Seattle,” Chamber CEO Marilyn Strickland told GeekWire in March. “The concern on this one is that they want to use this to try and address the homelessness situation and instead of developing a plan, instead of taking the massive amount of resources they’re already putting toward it and demonstrating that progress is being made, their default response is, ‘let’s tax jobs.'”

Nat Levy contributed to this story.