AMZN Amazon.com Inc

By Jimmy Vielkind, Laura Stevens and Katie Honan 

Jeff Bezos and other top Amazon executives gathered in Seattle on Wednesday to decide whether to go ahead with its planned headquarters in New York City.

Brian Huseman, vice president for public policy, was on the phone, and the news was not good.

He had met with Andrea Stewart-Cousins, the majority leader in the restive New York Senate, and separately with three union leaders in the office of Gov. Andrew Cuomo, a champion of the project who brokered a discussion to allay labor's concerns.

Nothing in Mr. Huseman's call allayed growing fears at the company that the fiercer-than-expected backlash against the $2.5 billion development in Long Island City, Queens, was generating negative publicity and political uncertainty.

Mr. Bezos had signed off on the previous decisions in Amazon.com Inc.'s lengthy public contest to locate its so-called HQ2, and on Wednesday he and his team decided it was time to pull the plug, according to people familiar with the matter. It was worth the embarrassment and negative publicity in the short term, they reasoned, to avoid a yearslong problem in New York.

Amazon made the news of the pullout public on Thursday, leaving Mr. Cuomo and the deal's other biggest supporter, New York City Mayor Bill de Blasio, stunned and chagrined. The final decision followed dozens of meetings with New York lawmakers and communities. Even after months of talking, Amazon's team and vocal New York critics failed to allay the other side's concerns, convincing company executives that compromises would be too hard to achieve.

After a yearlong nationwide search for a site of a second headquarters, Amazon announced in November that New York City and Northern Virginia were the winners, splitting the prize with each location promised at least 25,000 new jobs.

In return for Amazon's job creation and investment in New York, city and state officials agreed to provide up to $3 billion in tax incentives. Mr. Cuomo had warned executives that the deal might spark a minor backlash, but that it would go through.

After the announcement, a group of state and local leaders seized on the incentive package and questioned why one of the richest companies in the world was getting subsidies at all. Cries of corporate welfare and vulture capitalism became refrains among progressive Democrats, including the state's newest political star, U.S. Rep. Alexandria Ocasio-Cortez, as well as from within the newly Democratic state senate.

Those politicians, together with union leaders, also beat a drum about Amazon's stance against organized labor. Members of the New York City Council joined in, grilling company executives at hearings in December and January over their record with unions and about the closed-door negotiations with state and city officials that had produced the biggest project-based incentive package in state history.

"This was a secretive process intentionally structured to avoid a substantive public review in advance of any commitments being made," City Council Speaker Corey Johnson said at a Jan. 30 hearing.

Amazon executives were completely unprepared for the backlash, according to the people familiar with the matter. Polls showed a majority of New Yorkers supported the new campus, but Amazon grew more wary when state Sen. Mike Gianaris, who represents the project site in Queens, was nominated on Feb. 4 to the Public Authorities Board. The seat meant Mr. Gianaris, an outspoken critic of the deal, could potentially veto the proposed campus.

A day later, his leader, Ms. Stewart-Cousins, met with several Amazon lobbyists in her office at the State Capitol. It was a cordial exchange that lasted 20 minutes, according to people briefed on the meeting.

By Friday, Feb. 8, the first indications that the Amazon deal was fraying surfaced with reports that company executives were reconsidering the New York campus.

Ms. Stewart-Cousins, a Democrat from Yonkers, said Mr. Huseman -- who was not in the earlier Capitol meeting with her -- called her on Feb. 8 and Feb. 9. They spoke generally about the project, and Mr. Huseman asked about Mr. Gianaris's nomination.

She said she told Mr. Huseman that Mr. Gianaris's perspective was important because he represented the area where Amazon had proposed to locate. She also said she conveyed to Mr. Huseman that she would work with Amazon but that she had criticisms about the way the deal was being processed.

"Because there has been no real legislative input, it was important that I at least give an opportunity to a person who's in the district," Ms. Stewart-Cousins said, referring to Sen. Gianaris. "There would certainly be questions asked. But that's it: he wasn't representing himself, he's representing us."

Ms. Stewart-Cousins said Mr. Huseman didn't have any specific reaction.

Days later, Mr. Cuomo called Mr. Huseman as well as several other Amazon executives to meet Wednesday morning with leaders of the state's AFL-CIO, Teamsters and Retail, Wholesale and Department Store Union.

Unionizing Amazon's workers had become a bigger issue. Mr. de Blasio had come out strongly in support of allowing unionization, despite Amazon saying it wouldn't budge on the issue. While Amazon's official position is that it respects employees' rights to unionize, Mr. Huseman had been grilled at a three-hour City Council hearing at the end of January on the issue. He said the company wouldn't remain neutral if workers attempted to organize.

In a conference room near his 39th floor office, Mr. Cuomo opened a discussion about fair practices for workers organizing at Amazon's warehouse on Staten Island, people familiar with the meeting said. The union leaders asked about rights of access for organizers and a commitment that Amazon wouldn't treat them with hostility or retaliate against workers who spoke to them.

After an hour, the meeting broke with cordial handshakes. RWDSU President Stuart Appelbaum said he planned to draft a written framework.

"We left there with the understanding we were going to continue conversations. It was a good meeting," he said.

Mr. Huseman's report to Amazon's top brass Wednesday didn't bring any comfort.

Company officials are sensitive to being wanted, some of the people familiar with the matter said. They developed their HQ2 campaign in part to draw attention to its ability to create jobs and investments -- points they had stumbled at making previously, in part due to Amazon's slow, steady build-out across the nation.

At first the executives thought they could stick it out and probably win the battle, but the meetings with the union and Ms. Stewart-Cousins served to push Amazon out of the deal.

Now the 25,000 jobs destined for Long Island City will be spread out among the company's nearly 20 corporate offices and tech hubs. The company has already initiated expansion plans in many of those places. New York will continue to grow too, according to some of the people. The company had already planned to add jobs slowly and had plenty of space in its existing office space in the city.

Still, the decision stung.

Amazon spokesman Jay Carney, a former White House press secretary, called both Messrs. de Blasio and Cuomo on Thursday morning with the bad news -- just minutes after their top aides attended a community meeting in Queens about the Amazon project.

"There wasn't a shred of dialogue. Out of nowhere they just took their ball and went home," Mr. de Blasio said Thursday evening at Harvard University.

Write to Jimmy Vielkind at Jimmy.Vielkind@wsj.com, Laura Stevens at laura.stevens@wsj.com and Katie Honan at Katie.Honan@wsj.com

(END) Dow Jones Newswires

February 15, 2019 19:37 ET (00:37 GMT)

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