Sep 2
2022
Inside Amazon’s massive subsidy in Niagara
- Share on
Robert Taylor, a lifelong Niagara County resident, is thinking about moving south. Probably Florida.
But Taylor isn’t chasing the warm weather and low property taxes that have drawn tens of thousands of other Northerners to the South.
Rather, he’s running away from something.
Amazon.
The online retail giant plans to open a 3-million-square-foot warehouse less than a mile from his Packard Road home in the Town of Niagara. Amazon plans to employ 1,000 people at the warehouse and hundreds of cars and trucks will travel to and from the facility daily.
The warehouse will be a “first mile” distribution center where bulk shipments of goods will arrive and be sorted and packed for shipment to other Amazon facilities. The goods will make their way to customers from those other facilities.
The Niagara County warehouse will be Amazon’s fourth in Western New York, joining warehouses in Tonawanda, Lancaster and Hamburg. The Niagara County facility comes after Amazon pulled plans to build a similar facility on Grand Island two years ago.
Local officials have rolled out the red carpet, offering Amazon tax breaks totaling $124 million. That works out to $124,000 per job, most of which will pay $15 an hour, not much above the minimum wage of $13.20.
That’s in addition to subsidies from the state. Company and state officials refused to discuss possible assistance, but at a minimum, Amazon appears eligible for an estimated $22.4 million in tax credits over 10 years. Other tax credits, and possibly grants, could push that figure higher.
“This will probably go on record as one of the worst decisions that’s ever been made in this town in the end,” Taylor, 59, said. “And why? Why would a county and a town bring in a multi-billion company that wants $124 million in tax breaks. That is just absurd.”
Our reporter discusses the story in a podcast
The Niagara County Industrial Development Agency, on Aug. 10, approved — without discussion — Amazon’s ask for $124 million in tax breaks. IDA and town officials said those subsidies are worthwhile, providing the area both jobs and tax revenue.
“By Amazon coming to the Town of Niagara alone we’ll generate somewhere between $800,000 and $1 million in additional property tax revenue. That is about a 30 to 35 percent increase in what we currently have,” Town of Niagara Supervisor Lee Wallace said in July. “We can’t raise that kind of money anywhere else.”
Experts who study development and tax subsidies, though, say officials here have bent the rules to lure Amazon. In its application, Amazon claimed it could not afford to build the warehouse without the subsidies.
John Kaehny, the executive director of Reinvent Albany, a good government group, called the subsidies “absurd and crazy.”
“This is money that’s not going to go to schools, fire protection, parks, clean water, etc. in Niagara County,” he said. “And the fact the county is so blithe about handing such gigantic amounts of money out is pretty appalling.”
Besides the subsidies, officials opted not to subject the project to a full environmental review. That means the project will not be fully scrutinized for its potential impact on roads and traffic, air quality, stormwater infrastructure and wetlands.
Another concern: research suggests Amazon’s growing presence in Western New York may harm the local retail sector. In the case of Niagara County, that could include Factory Outlet Mall, currently the county’s largest taxpayer.
Bending the rules
The standard for providing tax subsidies in New York is what’s called the “but for clause.” In other words, a company’s project must be deemed not be viable “but for” the tax incentives it requests.
Experts say it’s highly unlikely Amazon would be unable to build the Niagara warehouse without the tax breaks. Amazon is currently valued at more than $1.2 trillion. Last year it earned $197 billion in profits. The company’s founder, Jeff Bezos, is ranked by Forbes as the world’s second-richest person, with a net worth of $171 billion.
“If ever there was a glaring example of a company that doesn’t need to be subsidized because it already has rapidly growing market share and has been profitable for many years [and] is wreaking havoc among its competitors, it’s Amazon,” said Greg LeRoy, the executive director of Good Jobs First, a subsidy watchdog organization based in Washington, D.C.
Follow us on Facebook, Twitter, Instagram & YouTube
According to its application for financial assistance, Amazon checked the box saying the company couldn’t afford to build its 3-million-square-foot warehouse unless it received $124 million in subsidies. Those break down into a $94 million property tax break, a $26 million sales tax exemption and a $3.5 million mortgage tax exemption. The subsidies amount to 23 percent of the $550 million construction costs.
An Amazon spokesperson, in an email, declined to answer questions about the subsidy deal. But the company noted that governments across the country hand out subsidies, and many companies, including Amazon, take advantage of them.
Amazon will pay property taxes via a payment-in-lieu-of-taxes agreement, or PILOT. The company will pay 10 percent of its total property tax bill for seven years and then step that amount up by 10 percent each year over the following eight years.
Only after the warehouse has been open 16 years will Amazon pay 100 percent of its property tax bill.
Over the life of the subsidies, Amazon will pay $49 million out of what would otherwise have been a $173 million local tax bill.
Kaehny, of Reinvent Albany, said proving that Amazon violated the “but for” test is difficult, in part because it would take a full accounting of company finances to do so. But, he said, the tax subsidies the Niagara County IDA is providing Amazon are almost certainly unnecessary.
“It's an exploitation by Amazon of the IDA system, which is massively flawed to begin with,” he said. “It would be very hard for the IDA to defend a decision like this in a spreadsheet where you got to see honest accounting numbers.”
Kaehny added that Amazon has made clear, in public statements, that it locates its warehouses based on logistics and infrastructure, not subsidies.
“The subsidies are just a freebie that they get,” he said. “The subsidy is just pure profit they're extorting from the local government.”
Donate to support our nonprofit newsroom
Niagara County IDA Board Chairman Mark Onesi defended the subsidies, arguing that even the steeply discounted property taxes would be a big boost to the area.
“Doing business in New York is expensive and a lot of companies won't come without those inducements,” he told reporters after the board approved the tax break.
While the company will pay reduced property taxes, the $49 million it will pay over 15 years is considerably more than the $24,000 a year the property yields, he said.
“We want [these] 1,000 jobs,” Onesi said.
Those jobs, though, won’t pay much above minimum wage. Of the 1,000 jobs Amazon plans to bring, 950 will pay $31,200 per year, the company said. That’s $15 per hour. An additional 50 management jobs will pay $60,000 per year.
LeRoy’s group, Good Jobs First, tracks subsidies given to Amazon. They total $4.7 billion over the past two decades. Amazon has received subsidies to build 283 of its warehouses, distribution centers and other projects nationally: the Niagara package of tax breaks rank as the sixth richest.
“[Local officials] should be driving a harder bargain, they should be playing a smarter poker hand,” LeRoy said. “They should realize that the company wants to come, that the bargain on the table isn't the jobs, it's the access to market share.”
Onesi said if the town bargained harder with companies like Amazon, they’d walk away.
“Maybe if we held a better hand, maybe they wouldn't come, and that's what we have to look at,” he said. “We have to weigh those factors.”
State subsidies likely
Amazon appears eligible to receive Excelsior corporate tax credits for the 1,000 jobs it intends to create. Investigative Post estimates those tax credits at $22.4 million over 10 years, based on Amazon’s payroll figures and a formula Empire State Development publishes on its website.
The project may also be eligible for an investment tax credit and state grants. Discounted hydropower from the New York Power Authority is apparently not part of the mix, as an authority spokesman said Amazon has not applied for the program.
Pamm Lent, a spokesperson for Empire State Development, refused to comment on any potential subsidies for Amazon.
Wallace, the Niagara Town Supervisor, and Kim Nason, a Phillips Lytle attorney working for Amazon and the developer, Atlanta-based JB2 Partners, did not respond to interview requests.
No environmental study
Amazon is poised to set up shop without a full review of how its warehouse will impact the environment. Large projects are typically subject to review under the State Environmental Quality Review Act, or SEQRA.
The “negative declaration” it received also means the public had no opportunity to weigh in on those issues, said attorney Arthur Giacalone, who specializes in cases related to SEQRA.
“The intent of SEQRA is that any project that has even one aspect … that possibly could lead to a significant environmental impact should get not a negative declaration, but a positive declaration,” said Giacalone. “The larger the project, the more sensitive the surroundings, the more important it is to issue a positive declaration.”
Giacalone said Niagara’s “negative declaration” means Amazon and the town don’t have to detail how much traffic the warehouse will add to local roads; how it will affect air quality; and how it will affect the town’s stormwater infrastructure, among other effects.
Such a large project — Amazon will impact 111 acres for its facility — receiving a negative declaration is “stunning,” Giacalone said.
Under state law, all projects larger than 10 acres are supposed to undergo a full review.
“[Amazon’s facility] is more than 30 times the threshold for when there's a presumption that you're going to have a significant adverse impact,” Giacalone said, referencing the facility's total three million square foot size.
The warehouse will have a 650,000-square-foot footprint, and will be 107 feet tall. That means the warehouse will be bigger than 11 football fields put together and stand as tall as a five-story building.
Part of the reasoning for the negative declaration was that Empire State Development completed an environmental impact statement a decade ago and deemed the site “shovel ready.” Nason, the Phillips Lytle attorney for Amazon, told The Buffalo News in April that designation made the site attractive for the company.
Nason wrote a letter to the Town of Niagara earlier this year urging leaders to pass a negative declaration. The town did as she asked.
Change in the offing
Up until World War II, the Town of Niagara was largely a farming community. When the war ended, soldiers taking advantage of the GI Bill found jobs in Niagara Falls or Buffalo and bought homes in the rapidly growing suburbs.
Many worked in factories in nearby Niagara Falls, and once they started shedding jobs, town historian Pete Ames said, the town was left in the lurch.
“Any of these service jobs, government jobs, the air base, those are the only things that keep people around here,” Ames said. “Otherwise, there's really not a lot they can make a career out of or pay the bills.”
And then comes Amazon.
The full impact of the tech giant is yet to be seen, but Ames and others see it as a big deal for the town. Like other residents, Ames isn’t thrilled about the company’s new warehouse but also understands that the town’s budget isn’t big enough to provide all the services — like garbage pickup — that residents want. He sees the town in a tough spot.
“You're playing a big player, so consequently, if you don't play their game, you don't play,” he said. “It's sort of 'between a rock and a hard place.' ”
At its July 19 meeting, Wallace, the town supervisor, explained that the town was balancing its budget by borrowing from fund reserves. He argued that Niagara needed Amazon to boost the budget.
But an Investigative Post review of town budgets showed the deficit was less than $100,000 and shrunk substantially each year. The town has nearly fully recovered.
Still, Wallace said, the town needs a boost because COVID-19 prevented Canadian shoppers from visiting Fashion Outlet Mall.
Studies show that the presence of an Amazon facility impacts sales at nearby stores, however.
Economist Matt Cunningham of Civic Economics, a firm that assesses how Amazon affects retail businesses, said the company generally reduces sales from retail outlets, but that a warehouse in Niagara likely wouldn’t kill the outlet mall.
For mom-and-pop stores, Amazon can be devastating, Cunningham’s research has found.
“Amazon is replacing hundreds of thousands of jobs and storefronts around the country according to our research cited in the study,” Cunningham said in an email.
And as for the jobs Amazon will bring to the county?
Amazon could prove to be a benefit if workers at the warehouse unionize and win higher pay, LeRoy said. The company, however, has waged aggressive campaigns to convince its workers not to join labor unions.
For Taylor, who worked as a union carpenter and built his Packard Road home by hand, Amazon is a slap in the face. The company, in his view, will ruin the place he’s called home, all to bring hundreds of grueling, low-paying jobs.
“My whole life I spent building this home, everything. It’s 28 years of hard work, this entire place, all for naught because of something of this magnitude that's just so out of touch with our town,” he said.
