Despite protests, Delaware to give Amazon $4.5 million for its largest-ever warehouse

The Philadelphia Inquirer | by Joseph N. DiStefano

Delaware officials approved plans Monday to aid Amazon’s largest-ever “fulfillment center” on the site of a demolished General Motors plant west of Wilmington.

The state Council on Development Finance unanimously approved $4.5 million in taxpayer subsidies for the 5½-story warehouse over objections from a few state legislators, plus union workers and neighbors.

Site owner Dermody Properties plans to spend $200 million building the warehouse, and Amazon would spend another $50 million outfitting the site with robotics and other equipment, pending final negotiations.

The 3.7 million-square-foot Amazon.com Services LLC facility would occupy the site of the old Boxwood Road auto assembly plant — one of the Delaware auto plants where immigrants including future Jamaican reggae musician Bob Marley labored to build cars, from the 1940s to the late 2000s.

The planned center will be “more robust” than older Amazon centers, using more robotics to line up boxes for workers to process, said Holly Sullivan, an Amazon global economic development team leader.

“This is one of our new designs,” she added. “We will go up in height, rather than out.”

The 1,000 full-time workers Amazon estimates it will need at the site is less than the number working at some of the facilities Amazon has developed in central and northeastern Pennsylvania and other states since the 1990s — which cover one-quarter to one-third the floor space of the planned, 90-foot-high center.

Delaware expects to collect 100 times the subsidy in wages, in real estate and other taxes, thanks to the new center, over the next several years, said Damian DeStefano, the state official who conducted the hearing. (His office later clarified that this would include “direct and indirect” economic benefits.)

But why should Amazon, which is run by Jeff Bezos, the richest man in America, and which earned $12 billion in after-tax profits last year, need any money from taxpayers, asked State Rep. John Kowalko (D., Newark).

“Enough is enough,” Kowalko said. “Stop these gifts to these obscenely wealthy companies.”

He also objected to the way state officials released details of the plan only after it was approved. Bottom line: “The American people are funding Amazon’s pursuit of an e-commerce monopoly.”

The company’s annual financial report, which took up most of the 103-page grant application, acknowledges that Amazon’s North American “fulfillment center” profits fell last year, despite higher sales, amid relentless cost-cutting.

Kowalko was joined at the meeting by State Rep. Kim Williams (D., Wilmington) and other opponents of subsidies for Amazon, including activists from Local 74 of the plumbers’ and pipefitters’ union, who pointed out that site demolition contractors have used out-of-town labor from Virginia and other states.

While Kowalko, a Port Richmond native and longtime oil refinery worker, criticized his fellow Democrats for giving big employers tax breaks and grants while cutting social spending, the subsidy also raised objections from conservatives, including Jake Smith, host of the Delmarva Live radio program on WGMD-FM, which devoted a segment to questioning the giveaway last week.

Sue Laushey, who lives near the plant, said Amazon would employ fewer people in a larger facility than at other sites. She asked for “noise, traffic, air pollution studies.”

Todd Ruckle, a real estate agent and Newark councilman and son of a Boxwood Road GM worker, said former workers who stayed in the neighborhood have had a tough time finding comparable jobs. He added that home values have risen in Middletown since Amazon built there and called the state aid “a pinprick” compared with the benefits Delaware will gain.

But Amazon pay projections released by state officials after the proposal was approved shows the jobs created don’t replace the high-end manufacturing jobs lost when the plant shut in the late 2000s.

According to an application filed with state officials, Amazon expects to pay 900 of the 1,000 workers on the site an average $31,200 a year, or $15 an hour. And 50 more-skilled workers would earn $33,000, while the remaining 50, area and operations managers, would average $60,000, plus benefits. The current median household income for the Philadelphia-Camden-Wilmington metro area is now more than $70,000, according to U.S. Census data

GM’s base pay the year before the plant closed was $26 an hour, plus benefits, or around $54,000, close to the then-median household income in the region.

The financial incentives Amazon requested included a $3 million “performance grant” for adding to the 2,500 full-time Delaware-based workers Amazon already employs at centers in New Castle and Middletown, plus a $1.5 million capital spending grant, said Kirk Foreman, chief executive of the Delaware Prosperity Partnership, which presented the request to the council.

Both are matching grants that can be “clawed back” if Amazon didn’t make good on its promises.

Builder Dermody has contracted general contractor Clayco Inc., of St. Louis, Mo., and Corrado Construction Co., Wilmington, to help complete demolition at the site, said Jeff Zygler, a New Jersey-based Dermody official.

State Sen. Anthony Del Collo (R., Elsmere) said he “would like to see states move away” from subsidies to profitable companies such as Amazon.

But development council member Nancy Cook, a former Democratic state senator, said Delaware, as one of the smallest states, has little alternative but to court wealthy employers such as Bezos’ Amazon.

“We have to have incentives,” she concluded, “or we cannot compete with other states.”

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