The Amazon Effect: How taxpayers are funding the disruption of the U.S. economy

Amazon founder Jeff Bezos has built a net worth of roughly $85 billion with the sort of discipline and scale refined by corporate titans before him — Rockefeller, Ford and Gates among them — though no one has so efficiently tapped America’s collective impatience and love for a bargain. What Albuquerque’s favorite son is accomplishing, and the ruthless speed at which he is accomplishing it, is unprecedented. He's had lots of help along the way.

Americans have supported the Bezos surge in two distinct ways: by buying everything from dog food to diamonds on Amazon.com and by kicking in at least $1.24 billion in taxpayer-funded subsidies and incentives that have fueled the company’s growth across the country. That figure does not include hundreds-of-millions of dollars in additional breaks from deals to phase in state sales taxes, nor does it include dozens of hard-to-quantify tax abatements and land arrangements struck with a mosaic of towns, counties and school districts along the way.

Those subsidies, aggregated in a Business Journals analysis of public records and financial filings from across the United States, have helped support the expansion of Amazon’s sprawling network of more than 257 sorting and distribution centers, a 141 million-square-foot portfolio of facilities that house hundreds-of-thousands of workers in 33 states. The company has millions more square feet in Class A office space as well as a rapidly expanding portfolio of data centers managed by Amazon Web Services Inc., arguably its fastest-growing division and a beneficiary of more than $229 million in known taxpayer subsidies.

RELATED: Click here to see the states that have pledged the most taxpayer subsidies in support of Amazon. 

Competition – and a degree of desperation – have been key to Amazon’s well-honed strategy for maximizing taxpayer support. For example, the company has proven shrewd at pitting states and communities against one another by leveraging the allure of new jobs and the cachet that comes with landing a major technology company.

What Amazon delivers is usually something more mundane.

Cities throughout the country’s wilting industrial hubs have been particularly eager to step up to Amazon’s demands, even though the company’s quick-turn delivery model requires proximity to the one asset they all possess: customers. But the incentives keep coming, totaling around $100 million in South Carolina, more than $127 million in Ohio, and millions more in the neighboring Rust Belt and Coal Country states of Pennsylvania, Michigan, Kentucky and Illinois.

Never mind that Amazon’s massive fulfillment centers are accelerating the company’s disruption of retail markets. Or that what it often provides in return for taxpayer subsidies are low-wage warehouse “functions” that, by the company’s own admission, are likely to be replaced by robots someday.

It’s all happening with the full-throated – and in some cases high-fiving – support of local officials.

Interviews by The Business Journals with dozens of public officials and reviews of documents received through public records requests have turned up little in the form of skepticism or concerns voiced by community leaders when Amazon comes to town. Few have asked whether subsidizing Amazon’s expansion is worth the cost, or how a company with around $30 billion in cash can possibly have a “need for funding,” as it was phrased in a recent subsidy application in Michigan.

Instead, The Business Journals found examples in which elected officials waived wage requirements to enable Amazon to qualify for a particular subsidy or incentive plan. Their rationale, repeated by local officials interviewed by The Business Journals: Any job is better than no job. 

RELATED: The Business Journals have been speaking to experts on the ground to get a local take on why their city was best situated to land HQ2. 

Those dynamics will be on full display in the weeks ahead, as the Seattle-based company seeks bids from U.S. cities to house “HQ2,” a proposed second North American headquarters expected to host up to 50,000 workers. Analysts suggest the winning bid will require billions of dollars in pledges of taxpayer support. Cities are lining up to throw a hat in the ring.

Few would wager that HQ2 represents an end game for the 53-year-old Bezos, or that his charges into e-commerce, rocket ships, groceries, publishing and political lobbying in Washington, D.C., will satisfy what appears to be an insatiable appetite for growth. The Bezos juggernaut has always been something of a work in progress, where the possibilities for new products and customers are endless. 

It is a mastery for disruption that has spread to all corners of the U.S. economy and sent a shot across the bow of entire industries and regulators alike. What comes next could very well affirm, or suffocate, the notion of the American Dream.  

HOW AMAZON IS PERCEIVED IN DIFFERENT CITIES

A tale of two companies: Amazon often is credited for supporting high-paying jobs in some of the most modern — and expensive— real estate spaces in the country. Less heralded is its other tendency, often in nearby locations, to offer low-paying warehouse jobs as it aggressively pursues taxpayer subsidies.

The savior: Amazon's expansion throughout the United States has resulted in the creation of hundreds of thousands of jobs and the revitalization of dormant industrial spaces and land parcels. It's no wonder that economic development officials in cities from Jacksonville to Santa Cruz have put the company on notice: We're open for business.

The one that got away: Expansive logistics hubs. Great infrastructure. Strategic locations. And yet no Amazon. As the company grows, so too does the list of U.S. cities left scratching their heads over a simple question: Why has Amazon forsaken us? The answer, more often than not, has nothing to do with a willingness to play ball.

The disruptor: In just over 30 years, Amazon has evolved from an online bookstore into an e-commerce giant capable of shipping everything from car tires to baby diapers. Entire industries — groceries, broadcasting, consumer staples and furniture, to name a few — can attest to the company's strategic disruption, as can many of the nation's once-dominant employers, who now rest in Amazon's wake.

MORE CONTENT: THE AMAZON EFFECT

INTERACTIVE U.S. MAP: Tracking Amazon's rapidly expanding footprint across the country.

NORTH TEXAS MAP: Here are the top sites in DFW for Amazon’s proposed HQ2.

DFW PROS AND CONS BY CATEGORY: Ranking North Texas by Amazon’s preferences. 

AROUND THE COUNTRY: From Miami to Seattle, here’s how Amazon is impacting other cities.

ABOUT THIS PROJECT

For the past nine months, The Business Journals and its 40 newsrooms, including the Dallas Business Journal, have made a concerted effort to document the systematic expansion of Amazon.com Inc., from Class A office spaces in the nation's largest cities to former cornfields and barren industrial spaces long abandoned by industries of old. 

The company's growth, while massive in scope, as hinged on negotiations with local officials, deals with local real estate developers and tax breaks blessed by local municipalities. In short, it's all local. 

This project is both near term and forward looking in scope, and sets off to identify where this Seattle-based company's unrelenting expansion might be headed. It's as much about Amazon's end game as a business entity as it is about the long-lasting effect it is likely to have on America for decades to come.

The Dallas Business Journal is a content partner with WFAA, which also is working to document Amazon’s search for its proposed second headquarters. Watch WFAA’s 10 p.m. broadcast for Jason Wheeler’s report.

© 2017 WFAA-TV


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