
Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota - protomyth
https://reason.com/blog/2019/03/04/google-wants-15-million-in-tax-breaks-to
======
kartan
> Google is promising to bring 50 full-time positions to the area. The company
> also projects that it will create 2,300 jobs during the 18–24 month
> construction window.

Is this a joke?

> State Sen. Andrew Mathews (R–Milaca) and state Rep. Shane Mekeland (R–Clear
> Lake) recently introduced a bill to provide an additional $20.1 million in
> state bonds to give the Becker Business Park—where the data center would be
> built—a facelift.

So, invest 1 million in politicians get tens of millions from the public
treasury.

> Such incentives are typically justified by politicians as a crucial way to
> stimulate the economy.

Probably their own personal economies.

There are reasons to give corporations tax breaks. Like for example to expand
green energy or to give jobs to people in risk of exclusion, or another
hundred reasons. But, it looks like now it is used for everything without any
real justification beyond "the company will bring business to the town". That
can be covered by any kind of business willing to pay for lobbying and that
does not present any social benefit. And it is a zero-sum game where another
town loses the possibility for you to gain it. It is hardly a justifiable
situation.

~~~
moorhosj
==And it is a zero-sum game where another town loses the possibility for you
to gain it. It is hardly a justifiable situation.==

This is the most critical piece. What would legislation to address this at the
national level even look like?

~~~
alehul
The only way seems to be to either to completely outlaw these negotiations, or
create a standard rate (i.e. if the project will bring 100 jobs, the cities
have the option but not the obligation to offer $10m in various forms of tax
breaks— or maybe capped at $10m).

The trouble is that, at a higher level, this unwillingness to play ball may
just result in the companies fleeing to other countries rather than other
states. This involves a higher switching cost for most companies, and would
require more incentives than that for intra-nation migration, but it's still
possible.

~~~
jamiequint
You can't outlaw them without modifying the US Constitution due to the 10th
Amendment as it concerns states rights. Individual states could outlaw it, but
they would just be putting themselves at a disadvantage relative to other
states that did not.

~~~
gwright
I'd like to understand why the 14th Amendments provisions for due process and
equality under the law aren't applicable. Seems to me that whatever taxing
regime a state designs should be applicable equally to all legal entities
(people/corporations/llc/etc). No favorites.

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profmonocle
From the linked MPR article ([https://www.mprnews.org/story/2019/02/25/wind-
energy-tax-bre...](https://www.mprnews.org/story/2019/02/25/wind-energy-tax-
breaks-sought-to-bring-google-to-becker-minnesota))

> A Google data center often attracts other major technology-based companies
> to invest in the same area, Bertram said.

I'm confused why this would be. What economic benefit would proximity to a
Google data center bring, besides lower latency to some of Google's services?
I can't imagine 15ms lower latency to a Google service being the deciding
factor for where to locate your company.

~~~
reaperducer
_I can 't imagine 15ms lower latency to a Google service being the deciding
factor for where to locate your company._

It can be, depending on your industry. Financial firms are like this. I don't
know if Minneapolis still has a commodities exchange, but if it does it would
be attractive to those kinds of people. Probably others I've never thought
about.

But overall, I think $15M for a data center is too much. Data centers don't
make a dent on employment or property tax in most places they're located.

It may also be worth noting that Cray supercomputers has a big presence in the
area.

~~~
mruts
Why would a financial firm care about 15ms latency to a google service? It's
not like they would be using the cloud in the first place.

~~~
maxxxxx
True. They go straight to the exchange.

~~~
mruts
Colocation costs have gone down in recent years and any firm who cares about
latency (which, honestly, is only a small minority), already has it. No one,
and I mean no one, gives a shit about Google’s latency in Minnesota.

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JohnJamesRambo
[https://www.statista.com/statistics/267606/quarterly-
revenue...](https://www.statista.com/statistics/267606/quarterly-revenue-of-
google/)

[https://www.theverge.com/2018/1/2/16842876/google-double-
iri...](https://www.theverge.com/2018/1/2/16842876/google-double-irish-tax-
loopholes-european-billions-ad-revenue)

This company doesn't need tax breaks, it actually needs to pay more taxes. We
have to stop this idiotic behavior. There's a word for what the tax breaks
are- bribery.

~~~
smallgovt
I don't think corporations should be allowed to negotiate tax breaks like
this, but I think labeling this as bribery is disingenuous because it is
neither illegal nor dishonest.

~~~
supernovae
You're right, it's not illegal. However, I would say its dishonest. Let's be
real. Corporations exist solely to make money. Why should taxpayers fund the
winners? Who gets to choose that Google deserves taxpayer dollars and for what
reason?

If you read the sales marketing pitch for new data centers they talk about
billions in economic viability - if that were indeed true to the extent that
the marketing material wants you to believe then corporations would fill that
datacenter void and compete with one another to do so.

Because they're asking for incentives seems to suggest that the viability
isn't there or that the corporations have so much control that they not only
impose their will upon employees but not the governments and municipalities
they operate in because there is potential for some long tail tax
opportunities that Google doesn't take a risk on but the towns do. That's what
ticks me off. Nothing in life is guaranteed but here we are guaranteeing
google that they will win.

There was a time when a big city in NJ could do no wrong building HUGE telco
buildings with no windows and huge tax incentives. It ended up building a
downtown no one wanted to live or work in and the city has no money because
the corporations exist tax-free and the city actually has to carry their
liability even those services are being shut down, abandoned or aren't worth
the promise they sold to the city to begin with.

Mostly because companies realized its cheaper to quit city and move to another
if there is free money on the table

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tptacek
I'm a little confused here; 15MM over 20 years doesn't sound like a huge
amount of money, and if the data center is being built on the grounds of a
coal power facility that is being decommissioned, it's not clear how Sherburne
County was going to see that money anyways. Becker is a very small town 45
minutes away from MSP; what negotiating leverage do they have? Even with the
tax package, how is this a net negative for Becker?

Google is apparently getting a bigger break from New Albany, which is on the
outskirts of Columbus OH.

~~~
bilbo0s
I think the negative reaction has something to do with the ROI for the tax
money forgone?

From the article:

> After construction wraps, with 18 remaining years of tax abatement, there
> will be a $270,000 tax shortfall for every full-time position created.

It's not as bad as Wisconsin's Foxconn cluster-F, but for a rural area, 15k a
year per person is not peanuts. Difficult to make that up someplace else.

(Well, not "difficult" from a technical perspective, you can just raise taxes
on people in the rest of the state. But politically speaking, what if the
people in the rest of the state figure out what you're up to? That's what
happened in Wisconsin.)

~~~
tptacek
Thanks! I feel like I'm still not understanding. The tax breaks Google is
asking for are city and county property taxes. If Google doesn't move in, the
county isn't getting that money anyways. What's the "shortfall" here?

~~~
bilbo0s
The shortfall represents the money not present assuming that Google _DOES_
move in.

If Google moves in, and they maintain the current tax rates on people
currently living in that municipality, then the shortfall is about 15k per
Google head. If Google _DOES NOT_ move in, there is no shortfall at all.

Of course, they can just increase the taxes on people already there in
residence. But again, rural area. Not a lot of money. So I expect it'd be more
likely for them to try to get money from the state coffers to cover the
shortfall. Not really sure what the plan is to cover the shortfall in the
event that Google moves in using the subsidies outlined.

~~~
tptacek
Help me understand.

If Google moves in and pays property taxes, the county will see an additional
$15MM (over 20 years).

If they move in and don't pay property taxes, the county will not see that
money.

If they _don 't move in at all_, the county will still not see that money.

Game-theoretically, how is the county better off if Google doesn't move in?

~~~
bilbo0s
No no no no.

I'm not speaking game theoretically here, because there are a good many more
factors that go into determining a "win" than the financials.

Now from a money perspective, they won't get money from Google if Google DOES
NOT move in, and they won't get too much money from Google if Google _DOES_
move in. This is because the expenses on the infrastructure improvements to
support a 600 million dollar data center for 18 of those 20 years is higher
than the $15 million bucks they're gonna get from Google. Those expenses are,
obviously, not there if Google does not site a data center in that
municipality.

So if you want a, sort of, game theoretical optimum, then the question people
on both sides of the issue should be answering are:

1 "What are the benefits to this municipality, or to the state, of Google
moving in?"

and

2 "What is the value of those benefits in tax dollars?"

If the answer to 2 is greater than or equal to 15K per Google head, then you
break even or profit. If it's not, then you lose.

~~~
tptacek
I'm sorry, I'm lost. What are the expenses Becker (and the county) will incur
if Google sites here? All we've identified so far is a 20MM bond for a waste
pipe extension from the site, which doesn't appear to be part of Google's
demand.

Wisconsin coughed up (IIRC) over a billion dollars in direct infrastructure
spending to support Foxconn. Nothing like that appears to be happening here;
it looks like here we're just talking about property tax money, which
Minnesota was not already expecting to receive, that they'll forgo in order to
get Google to site here and not in Ohio.

You refer to the expenses in infrastructure Becker will incur if Google sites
here. What expenses are those? Becker isn't building the data center or even
clearing the land: the land is owned by Excel Energy, which is selling it to
Google, and Excel is also providing the power for the data center itself. What
is the county spending to make this happen?

Help me understand why Becker would turn this down? How do they stand to lose
anything if Google plops a data center down here?

~~~
supernovae
Why should taxpayers have to take the risk for Google if the opportunity and
reason for Google to be there is already there? If it's already win-win for
everyone, why even have the tax abatement?

Google being the extremely profitable company it is, shouldn't need to create
liabilities for a market it's trying to promise jobs too.

a lot changes in 20 years and if its anything like the telco industry it will
mean they will rely on these incentives for everything they do in the future
because people seem willing to give it to them.

~~~
tptacek
What risk are taxpayers taking?

~~~
supernovae
They're taking on growth with an abatement on revenue

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pkaye
> After construction wraps, with 18 remaining years of tax abatement, there
> will be a $270,000 tax shortfall for every full-time position created.

Maybe add a $270k tax to each of those employees to break even? /s

~~~
tantalor
That figure is for 18 years; it's actually $15k per employee per year.

Adding a tax to offset the tax abatement seems to defeat the purpose.

~~~
jonas21
It's also excluding the 2300 people constructing the datacenter for 1.5 to 2
years. Overall, it sounds like they're trading $15M in tax credits for between
4350 and 5500 person-years of jobs over 20 years. So around $2700 to $3500 per
person-year.

~~~
rtkwe
2300 seems way high even if you're counting each different person that comes
through and most of those won't be working the whole time. They'll come
through and do electrical/HVAC/frame construction/etc for a few months then
leave. Only a few will be there the whole construction and those will mostly
be management and supervisor/contractor roles.

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AtlasBarfed
I read some oregon or washington rural county threw incentives at a data
center.

It ended up being so automated it employed 6 people total. Maybe in 100 years
they would recoup the incentives.

... edit: but I can't find the original story. I did see ones where the
automated centers still produce a lot of property tax revenue but the lack of
jobs is good because it doesn't further load municipal resources...

I guess it comes down to smart accounting.

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nwatson
Just for comparison, there's a data center in Lenoir, NC (nearest thing to a
"tech hub" would be considered Charlotte, NC about 1-to-1.5 hours away).

The report [1] claims: "In its analysis for Google, Oxford Economics shows the
data center in North Carolina’s Caldwell County is responsible for 1,024 jobs.
The total includes 250 jobs directly attributable to Google activity, indirect
jobs in the data center’s supply chain, and induced jobs (those generated by
the “multiplier effect” of spending by Google and its vendors in the
community). ... Google has invested $1.2 billion in the data center in Lenoir,
and its 250 direct jobs generate a combined recurring income of approximately
$22.5 million, the report says." (And I assume the "recurring income" is (OLD:
tax-revenue-to-government-entities) actual income for workers, about $90K
average.)

[1] "Report Examines Economic Impact of Google Data Centers in N.C. and Across
U.S." \-- [https://edpnc.com/report-examines-economic-impact-google-
dat...](https://edpnc.com/report-examines-economic-impact-google-data-centers-
lenoir-n-c-across-u-s/)

( My father-in-law worked 40 years ago at this campus location (around when my
wife was born) when it was part of the furniture industry. He himself fared
well enough in the that industry in various companies/locations till he
retired about 5 years ago, working in HR. While the furniture design-side
still lives on, especially around High Point, NC, much manufacturing has moved
overseas. )

EDIT: I revised, now I think the "recurring income" is for workers, not
government entities ... also, added father-in-law's connection

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throw2016
There is a larger issue of a level playing field. These kind of subsidies are
a race to the bottom.

Instead of business growing the overall economy they shrink the economy by the
amount paid out in subsides, since these businesses will be built anyway if
not here somewhere else in the country that is a overall loss to the country.
So you are actually subsidizing business on the national level, which is why
businesses should not be allowed to cynically play off states against another.

Focusing on localized gains by the logic of 'something is better than nothing'
misses the bigger picture and is misleading and disingenuous.

It's like if tax payers could be incentivized to file in different regions by
competitive breaks to grow the local tax filing economy and revenue of various
regions, that is a shrinking of overall tax revenue though it may be a rise
for specific regions.

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patrickg_zill
It's a lights out DC that won't be a hub for Google jobs.

Are they going to give rebates on the taxes paid by the other DC's that have
been built without incentives? If not, why not?

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trumped
Anyone else can say "fuck you google"? They're going to have to build it
anyways. I know that the NSA will profit from it, but still... that is pushing
it.

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internet_user
For 20 years? and close it in 19?

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leakybit
Money must be tight at Google

~~~
sizzzzlerz
Those $100M yachts and Montana ranches aren't going to buy themselves.

------
gesman
Can I get $10k of tax break if i move to XX and hire my wife (and kids)?

On a serious note - taxes are too high and world is too mobile. More people
and more corps will find a greener pastries easy way or hard way.

