Amazon defaults on county contract: where is protection?

Sometimes the shiny prize of an economic development deal with a big-name company can get a little tarnished. All is not gold that glitters.

In 2017 three South Florida counties united with countless hours, energy and money to win Amazon’s vast second headquarters and 50,000 highly paid executives. We lost – as did more than 100 areas that also struggled for the prize by offering Amazon larger and larger incentives.

But the end of the competition brought no prize. There was no 50,000-worker executive complex. Amazon in 2018 announced instead two 25,000-job sites, in Queens, NY, and Arlington, VA. Arlington got its first phase this May, but the Queens hub never opened either.

In 2018 Miami-Dade did get a consolation prize: a fulfillment center in disadvantaged Opa-locka with 1,000 lower-paid workers shipping out Amazon purchases. At least it’s jobs.

So in 2020 when Amazon asked to buy vacant land near Homestead Air Reserve Base for another fulfillment center in a depressed area, the county bought in, selling Amazon 77 acres at below top appraised value even though the county had reserved the site for a regional economic engine, not a vast warehouse.

That warehouse in Naranja was to be running with at least 325 employees paid at an average rate of $32,000 by next Monday. That also won’t happen.

A county committee is considering this week Amazon’s request to delay opening for a year. The legislation provides no penalty for Amazon failing to meet its contract. The penalty instead is being paid by 325 people who didn’t get their jobs at the still-closed warehouse.

Amazon did build the building, required by contract to be at least 1 million square feet, and got its certificate allowing occupancy more than a year ago, on June 21, 2022. But it never equipped the site. Amazon told the county that the delay was due to “various macroeconomic issues such as industry-wide supply chain challenges and inflationary pressures that have impacted not only this site but Amazon’s entire network of facilities.”

The corporation that was seeking billions in incentives to come here six years ago won’t pay the higher cost of equipment to open a fulfillment center and hire 325 workers at fast-food wages today.

Amazon is being treated as poor: a county that spent millions to lure Amazon is not asking for a penny or concessions for giving the company another full year to meet its hiring commitments.

Either poor or too big to penalize: the legislation says amendment of the original contract to keep Amazon from defaulting on its deal is being recommended to commissioners “as being in the best interest of the county, particularly in light of the substantial investment which has already been made by Amazon.”

That investment, as best we can tell, is building an Opa-locka warehouse and another in Naranja for $129 million that has not opened. We wonder if every business that builds two buildings gets to default on a county contract with no penalty.

Why do they need another year? According to the memo signed by Mayor Daniella Levine Cava, “A 12-month extension is requested to avoid future amendments in the event of unanticipated changes in the economy.”

Are they timing use in Naranja to need because e-commerce growth slowed after covid? They planned the Naranja operation for covid-speed growth and don’t have it now. Are they waiting for demand to boom again?

Amazon will open at some point in South Dade, because $129 million is a lot to pay for an empty building. So jobs at an average of $32,000 will eventually appear – but for people who can’t get them for another year that’s a tiny consolation prize.

County land set aside for economic development is also idle another year. That’s pivotal because the county got the land free from the Air Force in 2004 specifically to spur economic development nearby. Indeed, three-fourths of the county’s proceeds from the land go to the Homestead Air Reserve Base Trust Fund for that development (the rest goes to the Affordable Housing Trust Fund).

Whether an Amazon warehouse is the sort of economic engine that the Air Force land gift envisioned is something the county should have debated three years ago when it sold the land at $3 million less than top appraised value. After all, how will a consumer goods warehouse develop an area?

We don’t want to compare this deal to the county selling naming rights to its basketball arena to now-toppled FTX. We expect Amazon to open someday and stay open long enough to meet its 17-year operating contract.

But as the county looks at selling land below market value for an Office Depot hub in South Dade and at other future deals, it must look at whether those are the best uses of vital county assets. If so, Miami-Dade must plug safeguards into contracts in the event the glittering names it deals with get economically tarnished.

Only government signs a contract where it is not protected in a default.