Tuesday, October 13, 2015

Tech companies like Facebook grabbing up land in rural areas for the tax breaks

Major corporations like Facebook are thriving in rural towns where "server farms are supplanting scrub brush and cornfields, underwritten by small-town tax breaks," Mike Rogoway reports for The Oregonian. "Those tax deals, collectively worth hundreds of millions of dollars a year, quietly helped finance a new industry that formed from an unlikely pairing of rural America and Silicon Valley." (Best Places map: Prineville, Ore., is home to a Facebook data center.)

"It's the story of big tech companies that have the world at their disposal and can put their computers almost anywhere," Rogoway writes. "And it's the story of fading rural America, which has few other options and leaps at the chance to bring even a few dozen jobs to town. No one else wants to move their businesses out among the junipers and sage, so small towns and rural states are content to cut a deal with the world's wealthiest companies for whatever they'll bring to town, on whatever terms they'll bring it."

"Nearly half of the states have tax exemptions carved out specifically for data centers, an industry that may spend $1 billion on computers to run a facility that employs fewer than 200," Rogoway writes. "At least eight states, including Oregon and Washington, have enacted or expanded incentives for the industry this year alone. It's state versus state and sometimes town versus town," like the battle in Oregon to secure the Facebook data center, won by Prineville, where Facebook "has spent nearly $800 million since 2010 to build and equip two giant data warehouses on the hill above" the town. The company, which saved $30 million over the past two years on tax breaks, has fewer than 150 employees in Prineville. Computers are managed from company headquarters in California.

"Oregon tax incentives saved data centers more than $30 million last year alone," Rogoway writes. "Those tax breaks and the absence of a state sales tax make this an especially attractive destination for data centers. But it's not alone. Server farms have to be distributed geographically so they're close to the people using the data. Even electrons take time to travel, and over large enough distances that time would become noticeable to Internet users. Since Facebook built its first data center in Oregon, it's put similar facilities in Iowa, North Carolina and Sweden, and it's planning one in Texas."

"Really, data centers just want three things from a site: cheap power, cheap land and, above all, no taxes," Rogoway writes. "Power rates and land prices are largely beyond the purview of local governments. Taxes are another story. States or local governments could, of course, refuse to offer tax breaks. But virtually all big data center projects follow the money."

Small towns love the economic impact, with Facebook leading to new jobs in Prineville—unemployment has fallen to 8.7 percent—and higher-skilled, higher-paying jobs—Facebook jobs average $225,000 in a county where the mean is $42,000, Rogoway writes. Also, the high cost Facebook spends on electricity has helped, with the company spending $12 million last year, generating $600,000 in franchise fees. (Read more)

No comments: