Amazon pausing Seattle construction because of business tax proposal

Amazon has paused construction of a new tower “pending the outcome” of a full Seattle City Council vote on a proposed tax on high-earning businesses. The news was first broken by Seattle Times opinion columnist Brier Dudley.

Amazon Vice President Drew Herdener said in a statement distributed to media that not only is the retail giant halting construction on its 405,000-square-foot “Block 18” development just north of downtown at Seventh and Blanchard, it’s “evaluating options” to sublease its 722,000 square feet office space in the Rainier Tower building, also currently under construction.

An email from Curbed Seattle to City Councilor Mike O’Brien’s office, one of the sponsors of the legislation, was not immediately returned, and a council spokesperson did not a statement.

The news comes as Amazon searches for a location for a second headquarters, which it has claimed will be “equal” to the Seattle campus, and just days after Amazon CEO Jeff Bezos said in a Business Insider interview that “[the] only way that I can see to deploy this much financial resource is by converting my Amazon winnings into space travel.”

The tax, which would only apply to businesses making $20 million a year or more—like, theoretically, Amazon—in taxable income. It would start in 2019 as an hours tax, where businesses affected would pay an additional 26 cents per hour for each employee working in Seattle. Eventually, by 2021, the hours tax would be eliminated and replaced with a 0.7 percent payroll tax, so those businesses would be paying more on higher-salary positions.

Both the hour and the payroll tax are expected to raise around $75 million a year. Around 75 percent of that would go towards building affordable housing, according to city documents. Another 20 percent or so would go to the city’s Housing and Human Services department to support various outreach programs, including tiny houses, emergency shelters, public health response, and workplace stability to reduce turnover in service providers.

Back in December, Amazon responded to an invitation to work collaboratively with the city on public policy, proposing meetings starting earlier this year, It’s unclear whether those conversations have had an influence on today’s news, but we’ve reached out to City Council staff with an inquiry.

While Amazon has had some charitable contributions related to Seattle’s homelessness problem—the company’s much-publicized construction of a permanent home to Mary’s Place, donated space for five Farestart restaurants in the Troy Block development, a place at Mayor Jenny Durkan’s One Table task force—two organizations and a conversation are just part of a much larger ecosystem as Seattle deals with a growing city, skyrocketing housing costs, and one of the worst rates of homelessness in the country.

Meanwhile, Amazon’s growth in Seattle has correlated with a rising population—and rising housing costs. A Zillow study late last year gave some concrete data behind a problem already widely attributed to Amazon: The “South Lake Union jobs boom” led to about a $44 a year increase in a 650-square-foot, one-bedroom apartment, the study found.

It’s not the whole story behind Amazon’s relationship to rising rents and home prices, though. One commonly cited factor in rising housing costs due is demand for housing not being able to keep up with supply as more and more people in the tech and healthcare sectors move to Seattle for jobs. Over the past ten years, home prices have risen more than 50 percent—typically about 13 percent a year—and its population has risen around 20 percent.

As Seattle experiences that job growth, the city’s median income has risen to $80,000 a year—but meanwhile, IRS data from 2014 showed more than half of Seattle filers making less than $50,000 a year.

In the first five years of the tax, the goal is to have built more than 2,000 affordable housing units for people making 0 to 30 percent or 30 to 60 percent area median income (AMI), in addition to 2,600 units of affordable housing under construction right now from other funding sources.

While this report would seem to be the strongest public stance Amazon as a company has taken against the tax, the Seattle Metropolitan Chamber of Commerce—which counts Amazon as a member—has been coming out swinging against an employee hours tax since an initial proposal last year.

The revised hours tax proposal is scheduled for a full council vote on May 14.

This article has been updated with confirmation and additional information from Amazon.

• Amazon pauses plans for Seattle office towers while City Council considers business tax [Seattle Times]
• Amazon’s pique over head tax pauses construction, could spook developers [Seattle Times]
• Revised business tax for housing and homeless services heads to City Council [CS]