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December 21, 2013
Viewpoints: State's Amazon war yielded jobs, millions in tax revenue

Amazon.JPG(Dec. 21 - By Shawn Hubler, Special to The Bee)

The Patterson warehouse doesn't look like the spoils of battle.

"Amazon Fulfillment," the sign on the building says. Like a beacon, it beams over this Central Valley farm town, illuminating the dark at the end of the Christmas rush day shift. Under the light, Jesse Flores crosses the parking lot, heading home to Modesto.

"Full-time with benefits," boasts the 33-year-old forklift driver, opening his car door. "I was laid off anjd out of work for two years before this."

Had the state not picked a fight, Flores might still be jobless. In the summer of 2011, California had the second-highest unemployment rate in the nation and the Amazon warehouse was just a field an hour and a half south of Sacramento off of Interstate 5.

Few fought with Amazon if they could help it. The behemoth company did things its own way, that way being not to collect any sales tax. Because it was online, Amazon argued, it technically had no storefront, so customers should remit the extra 6 or 7 or 8 percent in sales taxes directly to their own states. Since almost nobody bothered, the practice gave Amazon a price edge that put many brick-and-mortar retailers out of business.

Meanwhile, state and local governments did without billions of tax dollars and, thanks to congressional gridlock, calls for a national solution went nowhere. So, in 2011, amid deepening recession, Gov. Jerry Brown signed a bill requiring e-retailers to fork over.

Challenged, Amazon declared war.

States don't go to war much anymore with corporations. In fact, it's hard to think of a moment in recent memory in which governments and business have been on cozier terms.

California's reputation as a supposed "job killer" notwithstanding, companies tend to get plenty of what they want here. Just two years before Brown signed the "Amazon tax," for instance, Gov. Arnold Schwarzenegger sided with the corporation, vetoing a similar measure. Brown's hard line was such a departure that it was national news.

But the decision to force the issue had some interesting fallout. True, at first Amazon called the law "unconstitutional" and began gathering signatures for an anti-tax ballot initiative. But then the company reconsidered. California is a massive market and was far from the only state that was tiring of making exceptions.

By summer's end, the state and Amazon had a deal: One year's grace period on the tax, and the company would create 10,000 full-time jobs with benefits in California, expanding toward faster delivery as a way to recoup its lost margins.

Since then, Amazon has been on a tear, throwing up distribution centers of a million square feet or more in San Bernardino, Patterson and Tracy, with a fourth underway in Moreno Valley near Riverside.

So far, about 2,100 full-time employees have been hired, along with several thousand seasonal workers. Flores is among more than 300 full-timers in the 3-month-old Patterson "Fulfillment Center," with much more hiring expected.

Now to watch the day shift file out of that Star Wars-like warehouse is to see a future that seemed unimaginable back in 2011 -- and to wonder why it took so long to stand up and bring it here.

In the parking lot on a recent night, worker after worker said they had leaped at the Amazon jobs after not months, but years of unemployment.

One "fulfillment associate," left behind after the 2010 NUMMI auto plant shutdown, said he had lost two homes and a marriage during the three years he spent trying in vain to find work.

Another had starved for a year before settling for a gig at a Target an hour and a half from his home in Turlock.

This job, he said, was more than a paycheck; it was a low-tech back door to the high-tech future. "Working at Amazon," he joked, "makes me feel smart."

"Don't say nothing bad about this place," said Osvaldo Padilla, 36, of Ceres, who spent two years borrowing from his brothers, grasping at odd jobs and applying for welfare after being laid off from his last full-time gig as a $16-an-hour machine operator.

Yes, he said, his $13.50-an-hour paycheck was small compared to his last one, but here he got straight shifts and sick time and stock awards and health insurance. And, most importantly, "the company has nowhere to go but up and up."

"Our economy was so dependent for so long on one thing - agriculture," Patterson City Manager Rod Butler told me, noting that periods of seasonal double-digit percentage unemployment have dogged the community of 21,000 for decades. When the housing bust struck, matters just worsened. In 2008, foreclosures were 87 percent of the town's home sales.

"This place was ghostly," recalled real estate broker Rhonda Wheeland. "A lot of vacancy, a lot of damaged homes, a lot of squatters. A lot of theft. People stealing air conditioners; people stealing copper pipe. I remember one house that we had sold for $415,000 going on the market for $85,000. People were desperate."

Like Amazon, Patterson discovered new strength under pressure. The trauma forced the town to try a strategy the Central Valley has historically resisted: It diversified. Patterson had a local industrial park off of I-5, which it began to develop in earnest. A handful of good-sized tenants - CVS, Kohl's, Grainger - opened warehouses, and when Amazon came calling, Patterson had both a track record and hundreds of acres of shovel-ready ex-farmland.

"A lot of people think logistics is just a couple of low-wage guys on lift trucks," says Mike Ammann, CEO of the San Joaquin Partnership, a public-private economic development organization that helped land the Amazon Fulfillment Center in Tracy.

But the holy grail of same-day delivery has created a boom in supersized warehouses and distribution systems, and Amazon isn't the only competitor in the market for million-square-foot warehouses or workers with experience in them.

This month, Patterson announced one of the largest annexations in recent history in Stanislaus County, 1,119 acres of farmland aimed at attracting e-commerce titans, among others. Officials at the Stanislaus Economic Development and Workforce Alliance say they know of at least four brokers scouting the area for 100-acre parcels, and Butler wants them to look at Patterson.

So in the community, too, the state's challenge to Amazon paid off. October employment figures showed Patterson's unemployment rate in the mid-teens, as opposed to the 20 percent range, and Stanislaus County's is down from 15.6 percent in January to 11.7 percent. Home prices are rising and Patterson has a shortage of rental housing. Traffic, retail, even local fast food sales are said to be rebounding. Amazon's night shift has reportedly even created an after-hours rush at the local Jack-In-The-Box.

Meanwhile, at last count, the "Amazon tax" had reaped more than $260 million for Californians. Company executives who once talked about the state's "counterproductive" attitude toward business now use words like "excited" and "partnership."

Details remain - it's still unclear whether communities like Patterson will share the tax, or whether the revenue will go straight to the counties. And there has been talk of "rebating" some revenue to Amazon, as has happened in other places.

But all told, it's not a bad haul, and it comes with a lesson: Some wars are worth it. This recovery has left many behind, struggling and waiting. For their sake, Amazon shouldn't be the last good fight we pick.

Shawn Hubler is a former Los Angeles Times staff writer and columnist.



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