Amazon’s second headquarters project hit behind Waterloo: bid

In 2014, Tesla CEO Elon Musk secured a $1.3 billion government incentive subsidy from Nevada to build a large battery plant in the state that could create thousands of manufacturing jobs, according tomedia reports, and Amazon CEO Jeff Bezos was already concerned about the matter.

Amazon's second headquarters project hit behind Waterloo: bid

At the company’s internal meeting, Bezos said Musk’s success in driving the five states to participate in the bid for the battery plant project, which ended up being heavily subsidized by the Nevada state government, was a source of frustration that Amazon’s management often accepted very modest government subsidies. According to people familiar with the matter, this has become a lingering problem that often lingers in Bezos’s mind. Then, in 2017, an Amazon executive boasted to Bezos in an e-mail that his team had received $40 million in government subsidies for a $1.5 billion Cincinnati aviation hub. This paltry government subsidy has infuriated Bezos even more and further strengthened his resolve to make a new attempt to obtain government subsidies.

So when Amazon launched its second hQ2 tender in September 2017, the company made it clear that it would bid for the project to seek local government funding, while Amazon pledged to bring $5 billion in investment and 50,000 jobs to the second headquarters. The reality-tv-style site-selection bid was a hit, attracting a lot of media coverage and 238 North American cities. Eventually, Amazon decided to split the so-called second headquarters, split it between New York and Virginia. But then Bezos had to cancel plans to build a second headquarters in New York after local politicians attacked the government’s $3 billion project subsidy.

All in all, Amazon was widely ridiculed for failing to win the support of New York politicians on the second headquarters project. In order to find out why things are going to develop like this, the media interviewed some people familiar with the situation. From these people’s accounts, the media has for the first time obtained first-hand information on how Amazon’s work team has gradually become a victim of its own arrogance. Because Bezos was disappointed with what he saw as a meager government subsidy, it prompted executives to abandon years of experience in the area and, unrepentantly, to move on to another path of seeking tax cuts and government subsidies.

Some employees with extensive experience in this area had foreseen the problem, but their views were ignored by those eager to please Bezos with the new script in order to win big. According to people familiar with the situation, the second headquarters project team members act in secret and are estranged from the rest of the company, immersed in the noise of the headlines and the unrealistic illusion of “amazon being welcomed everywhere.”

Amazon’s blind optimism and hustings are still being felt today, especially among city officials who feel as if they have been manipulated by Amazon, according to people familiar with the matter. Meanwhile, a bipartisan group of state lawmakers is considering a non-aggression deal to end a bidding war over tax cuts and subsidies that have emerged in the bidding process for Amazon’s second headquarters project.

Amazon's second headquarters project hit behind Waterloo: bid

Amazon said at the time that it had invested $270 billion in 40 states, creating more than half a million jobs with good benefits and business training. “We work with hundreds of communities across the country to bring new jobs and investmentto them. Like many other companies, we are eligible for incentive sgrants created by cities and states to attract new investors who know that these investments will bring long-term returns and benefits to the region, such as jobs, new economic opportunities, and taxes. “

For years, when Amazon built cargo warehouses across the United States, its project planning department followed a routine procedure that was dubbed the “welcome carriage” internally. The process aims to allay concerns that Amazon warehouse construction could have a negative impact on the region, such as local transportation, work environments and merchants. Project managers often hold information conferences that invite local residents and stakeholders to meet to answer their questions. Sometimes, Amazon arranges for local officials to travel to other cities to see the built warehouses and talk to warehouse employees and local leaders. Amazon’s PR team has long had good relationships with people who support warehouse construction and are willing to speak to the media.

Don Trinks, the mayor of Windsor, Connecticut, can still remember how Amazon’s 2016 plan to build a warehouse in his city was soothed anxiety in the Hartford area. At the time, residents were struck by the busy traffic outlook from truck ingress shipping after news of the project was announced. So Amazon held a meeting in town and patiently answered every question the residents asked. “It was a bit of a shock that the public was generally feeling that a big company like Amazon was coming into our town, ” recalls Trinks, who has owned a small restaurant in Windsor for nearly 20 years. But their proactive approach to the problem was impressive, they answered the tough questions that people asked, and they did a great job. “

But this time, on the second headquarters construction issue, Bezos decided to move the project forward in a different way. It’s not just Musk’s huge funding in Nevada that has left him focused on getting more government subsidies. He also saw first-hand how Boeing received $8.7 billion in aid money from Washington state in 2013 to subsidize the cost of reducing the size of its workforce over the next few years. At the same time, while Amazon employs thousands of people, it has not only received any funding from the state, but has also been at odds with the Seattle City Council, which accuses Amazon of making Seattle’s cost of living too expensive. In addition to wanting generous government assistance for the construction of Amazon’s second headquarters, Bezos also asked his team to secure a $1 billion tax break for amazon’s other projects, according to people familiar with the matter, even though Amazon’s economic development division has failed to meet that goal in the past few years.

People familiar with the matter said the idea for Amazon’s second headquarters was based on the recognition that over the years, Amazon has opened many satellite offices across the country and lacked coordination and communication with each other. As a result, Bezos executives believe it would be better to choose a place that can accommodate the number of employees needed over the next decade to set up another corporate headquarters (the “second headquarters”). Amazon has been quietly exploring search cities and has identified 25 candidate cities that can hold about 20,000 employees, the person said. The company could have been able to scale back the list of cities and negotiate with the finalists. But Bezos abandoned the plan and instead launched a tender for the project. With Musk’s successful bid, Bezos also wants to launch a bidding war across North America, including Canada, for its second headquarters project.

The project team, which includes real estate director John Schotler, drafted a tender statement listing the necessary conditions for bidding for the city, such as airports that can fly directly to Seattle, high-level universities, and so on. In the tender, the term “incentive” appeared a total of 21 times. Some team members muttered that, given Bezos’s wealth, they feared that Amazon’s move to win government subsidies would be seen as unrecognizable, not to mention a national debate about income inequality. Team members know that officials are sure to offer tax breaks, whether they ask for tax cuts or not, and that the proposed tax cuts are bound to plunge Amazon into a “big corporate greed” controversy.

But opposition within the team was quickly silenced and people assigned to other projects. The remaining members of the team believe that any negative impact will be temporary and will eventually be overshadowed by Amazon’s investment.

Led by Brian Hussman, Amazon’s head of public policy, and Holly Sullivan, the head of economic development, the second headquarters project team requisitioned a small office in Washington and kept it strictly confidential. According to one of them, the windows were covered, and Hussman warned non-project team members not to enter the office or face punishment. Information is strictly controlled to prevent leakage.

One night in January 2018, team members received an e-mail ordering them to arrive at the office early the next morning for a meeting. It turned out it was time to cut the list of more than 200 bidders. At the meeting, Hussman reminded team members that anyone who leaked information to the media would be found and fired. Then, everyone received a bunch of calls from cities and instructions asking them to euphemistically inform officials in those cities that their city was sorry not to qualify. Officials who received such calls were generally very disappointed. Like job seekers, the disappointed officials thanked Amazon verbally while trying to find clues about the reasons for the defeat, according to one team member on the phone.

According to people familiar with the matter, the 20 finalists largely overlap with the 25 candidates originally chosen. And the shortlists for small cities like Indianapolis and Columbus (which project team members have never really cared about) send a message that all cities have equal competition opportunities. This helps all shortlisted cities maintain their passion for bidding for the project. For project team members, maintaining a competitive mania takes precedence over further narrowing the shortlist of cities. After successfully removing more than 100 cities from the list, it was generally accepted within the project team that the process was difficult, but necessary. So they toasted their Washington office to celebrate their move closer to the project’s victory.

Despite Amazon’s efforts to rein in the company’s internal influence on the bid, the impact has spread to the rest of the company. City and state officials have privately complained to their contacts at Amazon that the bidding campaign was a waste of public resources. The mayors and governors say they also need to deal with many other businesses that are really interested in their cities, and Amazon’s bid takes up too much of their resources and time, people familiar with the matter said.

After amazon’s second headquarters project became international news, frustration among government officials spread beyond North America. Officials in Europe, for example, have expressed concern about when Mr Bezos will ask Amazon to offer them tax breaks.

Amazon's second headquarters project hit behind Waterloo: bid

In September 2018, executives decided to split the new headquarters into New York and Virginia. Before the news came out, Amazon realized that local property prices could soar if the media were made aware of it, so it quietly tied up project-related real estate deals with agreements with the two governments. The move to keep the project secret, before building a strong alliance with local officials in New York, turned out to be fatal. Immediately after the news broke, it was opposed by City Councilman Jimmy van Bremer. Senator Bremer initially supported Amazon’s move to New York, but quickly became an opponent when he found out that Amazon, Gov. Andrew Cuomo and Mayor Bill de Blasio had excluded him and other local officials from the process. He asked the governor and mayor to explain the project, which he became more angry about when he learned that the project had not sought city council approval.

“I’m angry because the decision on this important matter was decided without prior consent from local elected officials or other stakeholders, and we were excluded from this process!” said Bremmer. “

Senator Bremer further angered Senator Bremer after learning of the amount of subsidies Amazon would receive, including a $500 million grant. That week, Senator Brammer traveled to Puerto Rico, where he met Senator Michael Janaris of New York. They had a few drinks together, vented their anger at the incident, and made a decision to oppose the project together. The two men have the support of the Retail, Wholesale and Department Stores Union, which has long argued that Amazon’s online shopping business poses a threat to its members. Meanwhile, some workers are also trying to unionize at a new Amazon warehouse on Staten Island in New York, adding to tensions.

An Amazon executive said Amazon later sought to meet with city and state officials, but Janaris refused, and Bremer met with them only once. Amazon initially did not contact the city council because it took years for it to get approval, the person said, adding that other major Amazon projects, such as the Hudson Square redevelopment, had already been approved in the state. In addition, the person said, Amazon representatives in the local visit has been warmly welcomed. As a result, Amazon was not aware of the seriousness of the problem.

It was not until December 2018, when Hussman came to the city council for questioning and was taunted and interrupted by councillors, that he realized the seriousness of the problem. On the Seattle side, Amazon employees watched the live broadcast of the parliamentary inquiry and were so disbelieving that they were sending text messages to each other describing Hussman’s live slur. Mr Hussman also tried to impress the council with the employment and funding data provided by the project, but the city council was unhappy that there had been little talk about the humannature of the project. The defining moment finally came when Hussman told the city council that if employees tried to form a union and the company would not remain neutral, it was all over. Hussman seemed to know nothing about the political climate in New York, and he didn’t know that in New York it was union janitors and the children of workers who were elected to run the city. In this way, by the company’s internal image called “Hey! We’re Amazon! “The arrogant negotiation strategy, this time finally kicked to the iron plate.

Since then, Janaris has been nominated for a seat on the New York State Council for Public Institution Control, which has the power to influence Amazon’s agreement. Of course, Janaris was not eventually approved for the seat, but the nomination would mean a game changer. Janaris said he sought the nomination because “Amazon’s project is in my district, and I think that committee seat is the only tool that can be used to end it.” “

In an effort to bridge the divide, the two sides held several meetings at the last minute, and there were even rumors that Amazon had compromised and agreed to remain neutral on the employee union movement. But in the end, on Valentine’s Day, Amazon brought news of a break-up with New York, saying, “Some state and local politicians have made it clear that they are opposed to our plan and will not work with us to build the kind of relationship we need to move the project forward.” “

Looking back on the negotiations, some Of Amazon employees say they shouldn’t be blindly optimistic that Amazon will be welcomed around the world, which is not necessarily the case. Executives put confidentiality ahead of relationship building, which in turn would in turn bind their hands and feet, employees involved in the negotiations said. “Negotiating measures such as incentives is easy, and it’s hard to win hearts and minds, and Amazon isn’t doing enough in that regard.” “But in negotiations with Virginia (which brought 25,000 jobs) and Nashville, Tennessee (which brought 5,000 jobs), Amazon sees hope for success.

Amazon is only $100million less than Tesla’s $2.4 billion in government subsidies because of Virginia’s willingness to provide $762 million in incentive subsidies, according to good Jobs First, the regulator.