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Amazon questions its Seattle future after head tax passes

Starbucks joined Amazon in blaming city leaders for how they spend money following a unanimous passage of a per-employee tax.
Credit: Drew Angerer
Jeff Bezos, chief executive officer of Amazon, December 14, 2016. (Photo by Drew Angerer/Getty Images)

Amazon was the main target of the campaign for establishing an employee head tax in Seattle. Now the company hints the passage is causing it to question its future in the city.

The Seattle City Council unanimously passed the plan Monday which aims to help the city's affordable housing and homeless crisis. The tax will be $275 per employee per year with a sunset clause of January 1, 2024.

It would only impact businesses with over $20 million a year in gross revenue. The head tax is the largest in U.S. history.

"Tax Amazon" was the battle cry for supporters of the measure, claiming the Seattle-based behemoth that employs thousands in the city is not paying its fair share.

“We are disappointed by today’s City Council decision to introduce a tax on jobs," Amazon Vice President Drew Herdener said in a statement.

WATCH: Is head tax the right solution?

Herdener said Amazon, which had paused planning on two downtown Seattle office towers pending the outcome of the vote, would resume construction planning on one of them -- Block 18. The 17-story building, which will have 1 million square feet of office space, is meant to house between 7,000 and 8,000 new employees.

But he said Herdener then went on to suggest Amazon's expansion in the city may be curtailed.

"While we have resumed construction planning for Block 18, we remain very apprehensive about the future created by the council’s hostile approach and rhetoric toward larger businesses, which forces us to question our growth here."

Herdener then turned the tables, suggesting the people holding the city's purse strings are the problem.

"City of Seattle revenues have grown dramatically from $2.8B in 2010 to $4.2B in 2017, and they will be even higher in 2018. This revenue increase far outpaces the Seattle population increase over the same time period. The city does not have a revenue problem – it has a spending efficiency problem. We are highly uncertain whether the city council’s anti-business positions or its spending inefficiency will change for the better," Herdener said.

Seattle-based coffee giant Starbucks was also not pleased, pointing to an alleged spending problem by the city.

"This City continues to spend without reforming and fail without accountability, while ignoring the plight of hundreds of children sleeping outside," read a statement from Starbucks' senior vice president of global public affairs and social impact, John Kelly. "If they cannot provide a warm meal and safe bed to a five-year-old child, no one believes they will be able to make housing affordable or address opiate addiction. This City pays more attention to the desires of the owners of illegally parked RVs than families seeking emergency shelter."

WATCH: Former Seattle mayor's thoughts on head tax

The tax that was passed Monday was actually a compromise negotiated between Councilmember Lorena Gonzalez and Mayor Jenny Durkan over the weekend. It was previously $500 per employee, but that was expected to pass without a veto-proof majority, and Durkan was expected to veto it.

The Downtown Seattle Association said in a statement it appreciated Durkan's efforts to modify the original head tax proposal. However, it still does not support the compromise.

"A tax on jobs at any level is bad economic policy and will negatively impact Seattle’s economy and city tax revenues," Downtown Seattle Association spokesperson James Sido wrote in a statement.

The tax affects some 600 businesses. Those on the smaller end of that scale say they fear they will feel the brunt of it.

The spending plan for the new proposal allots about 62 percent of revenue to go towards construction of affordable housing inventory and services.

It also includes $2.3 million in revenue to go towards a five-year goal of picking up 950,000 pounds of garbage.

Amazon has grown at a remarkable clip since it was first founded in the Seattle area in 1994. Today, it has workers in more than 40 buildings and occupies one-fifth of Seattle’s first-class office space, totaling more than 10 million square feet. It is estimated to have about 45,000 employees in Seattle currently.

While the city has been adding about 10,000 new apartments a year, a high number compared to Silicon Valley, it is still not enough to house all the new employees coming there to work at Amazon or work in businesses that service the company and its workers.

This has been one cause of the city's rapidly increasing rental and purchase prices for housing, gentrification and homelessness.

The battle between Amazon and head tax supporters may also be watched closely by cities in North America that have been courting the company for its second headquarters.

WATCH: Dick's Drive-In slams head tax

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