A Tale of Two Amazon Warehouses
Remember, Amazon's choices are about expanding its power.
|Pat Garofalo||Jun 29, 2020||1|
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This is a story about two warehouses in Connecticut. It shows why subsidizing the expansion of Amazon’s fulfillment and distribution system is folly for policymakers.
Amazon is opening two new facilities in the Nutmeg State: One in Windsor and another in Danbury. The first is receiving $8.8 million in property tax breaks. The second, according to local officials, is receiving no incentives or subsidies of any kind.
New Amazon warehouses are constantly popping up all over the country and are key to Amazon’s growing monopoly power, as it uses distribution services not just to speed up its own package delivery capabilities, but as a key way to extract money from those who want to sell on its platform. It accomplishes this by giving Prime Eligibility to sellers who pay for Amazon to handle their distribution. (Buyers are much, much more likely to purchase items that are Prime eligible.)
Because these facilities are so key to Amazon’s growth, the company places them very strategically, as Good Jobs First noted on these maps. Warehouses go where there is a concentration of disposable income, Amazon Prime subscribers, and easy access to highways and airports — all of which makes sense, as the whole point of expanding the warehouse network is to get stuff to people who are likely to buy things from Amazon faster.
Which brings us to Danbury and Windsor: Both are located in areas with high disposable income, a concentration of Prime subscribers, and with highway access. Windsor has more major airport access, being not far from Bradley International Airport. Windsor has a higher median income, by about $10,000 dollars, and about half the poverty rate that Danbury has, according to the Census Bureau. Windsor is also already home to some Amazon infrastructure, another seeming advantage to further investment there.
So why is Windsor providing Amazon with millions of dollars in tax breaks, and Danbury providing nothing?
Well, Windsor is a lot smaller than Danbury — but it’s also not far from Hartford, so that would seem to come out in the wash. Danbury’s mayor was a, shall we say, very enthusiastic seeker of Amazon’s HQ2, so maybe that helped. The planned Windsor facility is also much bigger.
It’s also possible that more details will come out about hidden subsidies for Danbury’s facility — but the mayor on a radio show mocked people who thought that was the case, so for now let’s assume good faith and that Amazon is paying full freight.
The likeliest explanation, then, is also the simplest one: Amazon wanted to be in both places and took money that was offered, but that wasn’t a dealbreaker.
While Amazon will certainly accept incentives and subsidies, it doesn’t need them to keep expanding its empire. It’s proven time and again that it will happily pay for warehouses and other facilities that meet its strategic plans — it also recently announced an incentive-free Texas facility, for instance.
And remember: Research has shown that Amazon warehouses aren’t a boon for local jobs. According to the Economic Policy Institute, new warehouses don’t bring wider employment growth, meaning they either blunt other economic activity or have too small of an impact to even measure.
Amazon initially asked for a bigger subsidy from Windsor, but settled for the $8.8 million. I’d bet it would have accepted even less than that too. Local officials just got starstruck and paid Amazon for something it was likely going to do no matter what.
One more thing: This made me chuckle.
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— Pat Garofalo