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.
The number I've heard so far for project cost is 600 million dollars. You can figure roughly 300-350 million dollars going into the pockets of the local workers directly (2 years of labor [4160 hours] for 2300 people @ 35/hr), which is a rough average of MN prevailing wage determinations for trade workers if you account for the 20 -30 trades that will work on a project like this.
The state benefits by bringing a highly-visible employer to an exurban area, even if it is only 50 full time jobs. They get an anchor tenant of sorts that may attract other real estate development and business in the area.
There are plenty of benefits to be gained on a 20 million investment. Note, most of the labor will be local union tradespeople who pay state taxes and spend their money in the state.
Disclaimer: My company will be bidding one (or multiple) part(s) of the construction part of this project.
It says 2,300 jobs created over 18-24 months but not the duration of those jobs so we have to be careful assuming that’s 4160 hours per job.
The bulk of data center jobs are for 50 trade skill type people but all of the brogrammers and developers will be in major cities working remotely since no one these days gets or needs access to any facilities and it won't be long before those 50 people are replaced by robots. This is google after all.
yes, i could have said programmers and most people will read it as programmers but truth be told, to the good people of this town - they're going to see these programmers as elites making money off their taxes when it comes to the time to those tax revenues matter... you know, when these companies inevitably ask for more because they got it to begin with
Look, the incentives are reductions in property taxes for building a $600 million data center powered by carbon-free electricity. That's 2.5% of the total investment into the property. The city and state will still pull in tax revenue from Google in the form of property taxes over the 20+ years it will run for.
Besides that and more to your point, coming from a small town myself, they're going to see these data center employees as peers and neighbors that spend money at their restaurants, retail, and other businesses supporting the local economy.
Economics is not a zero sum game.
growth is good, opportunity is good - not a single one of us disputes that. Google doesn't need taxpayer incentives to grow or remain competitive.
They're getting a discount on driving up the value of land and cost of living for local people when the real winners won't be anywhere near the datacenter and the company will cary an asset on their books worth much more money than what it cost them to build on the backs of tax payers who won't have the same experience of abated property values.
at least google is honest about school taxes... so yay, they're not screwing that over but meh.. the whole policy of tax payers funding winners and losers with games only big corporations are allowed to play BLOWS.
1. Brand name corporation in your community, leading to new businesses propping up
2. Increase land-value in the area, leading to higher city taxes
3. Income, corporate and other taxes associated with the company's project & continuous operation
4. Long-term certainty. Most companies wont build a data center only to scrap the project in 2 years.
5. Economic multiplier. If we assume that each job is tied to $100,000 in income, taxes, benefits, etc and there are 2,300 jobs for 24months, we are looking at $345M-460M in 2 years. Run an economic multiplier and you may be reaching the billion mark
6. Plenty of city,state,federal projects run at a negative or neutral economic value. Having a business such as Google offering to bring business to your hometown will certainly make you listen to them and consider their offer.
It becomes a matter of cost/benefit analysis and ensuring that the community accepting this transaction understands and has the option to complain about it.
I agree that if everyone plays this game, we may reach a point where governments are fully subsidizing every business (there are already plenty of businesses subsidized by governments). It is a matter of finding the right balance.
2. Why would a datacenter increase land value? This isn't a corporate headquarters, it's a datacenter.
3. Taxes on what? That's what this package is, tax exemtpion.
4. Again, the datacenter employs "20 people" which is really like 4 FTEs and a bunch of cleaning staff. And likely part-time Security guards.
5. There won't be 2,000 jobs to build a datacenter, that's wildly exaggerated. And there's no way in hell that the average construction worker is making even half of the number you just stated.
6. If they were bringing actual jobs, and not a borderline-unmanned datacenter, sure. This isn't that.
1. Data centers are a symbol to a much larger economic schema that impacts quality of service to the area, economic prosperity, among other areas. Minnesota can literally come to prospect business and say "Look, Google, X, Y and Z companies gave us a seal of approval that our state is tech driven, come join them in the future of technology in America" You would be surprised how 1 transaction with a big brand can help future business opportunities.
2. One data center alone does not increase land value, the combination of all the variables I list ++++ do.
3. Every employee that is paid is taxed, every equipment they purchase is taxed, every goods or services they need is taxed, land is taxed. Taxation is not just what income tax and corporate tax.
4. You shouldn't be comparing a data center to a headquarter, they are two distinct parts of a business and the economy. You will have 20 people + the contractors needed from time to time + folks that need to fly to the data center 70% of their time + other marketing, sales jobs to sell the data center services to the state economy. Is it on the same degree as a headquarter? Never, nor should it be seeing as such
5. You could divide the number of jobs by 30 and you could still break-even as a city/state without accounting for the other benefits I list (and the ones I didn't). You are also forgetting that there are other costs associated with the job that are not construction work and even within construction work, there are specialists that make more money. Always remember, just because your paycheck says you make $15 an hour, it doesn't mean that your cost is a lot higher.
6. Refer to the other points and try to think of the ones I didn't list (improved disaster readiness in the region, energy consumption cost and taxes/jobs associated with it, promises to set-up green initiatives, etc)
I hope this has helped you see a different side of the equation.
The current unemployment rate in Minnesota is 2.8%. The current unemployment rate among tech workers is less than 1%. This will not generate anywhere near the pie-in-the-sky numbers presented in any findings. At best it will ever-so-slightly increase the tax base by giving a small raise to a tiny handful of individuals. The workers building the actual datacenter will almost assuredly be in-state construction workers whose salaries will not change as a result of the project, this is just one more project to add to the list.
Furthermore, once again, Minnesota already has a glut of datacenters both public and private. none of the "other benefits" even apply. They aren't putting this up in the middle of nowhere Montana. While it is admittedly presumptuous of me, I'm going to assume you have absolutely no idea what the tech industry in Minnesota looks like.
Those justifications you lay out are real, but if you pay google for them in the form of a tax break it all balances out. It doesn't create value from nothing.
Only under the assumption that $15M is the exact maximum amount that the city would pay for the listed benefits (i.e. the exact break even number). Probably it is worth more than that to the city (or else they probably wouldn't do the deal), so the reality is that Google is capturing some of the surplus value, and the city is capturing some.
I read that paragraph from the article to read that after the 20 year term google is looking for this tax relief, the town will be net negative 270K for each of the 50 employees Google creates. If that is not what that paragraph means, then I agree with you, but, my interpretation is that for the state to break even, google has to generate an additional 270K of economic return to the state per each person at the google data center. I find that number to be unlikely.
that seems to be a much better article, but still doesn't elaborate on that "shortfall". The Taxnotes article makes this seem like a much better deal for the down, and a much more reasonable ask from google. They are effectively asking that they be granted a reduced increase in taxes on the proposed vast increase in property value from the value of their development"
>The county assessor valued the land at $1.76 million, and the city estimated that the property's market value upon completion would be $41.6 million. Local real estate taxes on the property are around $16,476 and are estimated to jump to $328,726 after the facility is built. Jet Stream requested property tax breaks for 20 years for the data center, but not school district tax abatements.
If they're looking to build a data centre in one place its because it fits their huge list of criteria. Tax breaks are just icing on the cake. They want a data centre here regardless.
I can only surmise that their list of criteria was limited to "minimize dollars per square foot in rent per month" and "vaguely somewhat near a metro area."
I'm sure there's others, latency to customers and real estate cost like you mentioned. Connectivity, construction costs, political stability.
Or, as AOC would say: saves $15m.
Data Centers: Jobs and Opportunities in Communities Nationwide
It covers: Initial capital and operational expenditure, economic impact, spillover benefits, etc
Most union tradespeople make at least $35/hr in MN, a handful make over $40. My company pays the union about $75/hr for a journeyman electrician, which is their full rate with benefits included. Most (or all?) the labor on this project will be union labor, a GC isn't going to take a chance on a non-union sub with 600 million on the line.
Data centers require backbones to provide their services. Becker sits outside the range of most ISP's, in addition to no fiber connection; Monticello being the closest with fiber. I suspect there will be a substantial contract for laying fiber here, thus further increasing value of the land.
There could be, they probably didn't pull that number completely out of nowhere. But there certainly won't be 2000 jobs for the duration of the construction. or 2000 new jobs.
I'm guessing it just creative counting, like if a crew of four people comes out to plant a couple trees by the front door, works for 4 hours total, and has no other involvement in the project, that's 4 jobs.
This is the most critical piece. What would legislation to address this at the national level even look like?
Establish a federal minimum for local taxes. No sweetheart deal in the country entice the business more than the minimum allowable by law.
Might as well go ahead and also ban cities from building stadiums at taxpayer expense, but for some sports team owner's near-exclusive benefit. It's the same kind of extortion: give us what we want, or we go to another city.
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.
If they could they will do it. But it is not possible as you need data locality. If your data center is in China, it cannot compete in speed with a local data center. And this is true in different ways for a lot of businesses. That is one of the many reasons why all business are not already in India even that everything is way cheaper there.
And how a small company can compete with this kind of deals? Google is already having a scale advantage add to that tax breaks and it's impossible to compete with them. These tax breaks have a very bad impact on any capitalist economy.
Any tax breaks offered to and accepted by a corporation reduce federal dollars provided to the state where the tax breaks were provided. Let the state deal with the accounting internally if you want to penalize locals directly for their actions.
This doesn't outlaw the tax breaks, but it does force states to feel the pain of doing it by making it net out. No different than when the federal government requires states to raise the drinking age to 21 by withholding highway funds.
If we can cap SALT deductions, this isn't much of a stretch beyond that.
Note that 15M means very little for Google any ways.But those jobs can have massive impact on the local economy creating millions more for the locals and as well as state.
Small corporations can't negotiate such deals, which will make them unable to efficiently compete against these larger companies.
i think you seriously overestimate how much it costs to purchase a state senator.
> 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.
My guess on the economic effects? Not much.
I'm also skeptical that the other tech companies would invest just because there's a google data center there.
I'm not against tax breaks (in fact, I think there should be lower taxes for just about everything), but google's argument doesn't seem particularly compelling.
As jobs appear and wages go up those people spend a great deal of their money in the area and more jobs show up and as those employees look for a new job other businesses can compete for those higher skilled employees.
fifty datacenter jobs? These are probably not the folks raking in the big comp and RSUs.
...it's a race to the bottom, legislators see a simple equation that converts public money into tallies in their win column, to be used while jockeying for more power or re-election.
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.
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.
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
Google is apparently getting a bigger break from New Albany, which is on the outskirts of Columbus OH.
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.)
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.
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?
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?"
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.
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?
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.
It's not at all clear to me how or why taxes on everyone else will likely rise.
Google has to spend the money on the data center regardless if it gets the tax incentive or not. Whether the city gives them $15M in a free ride until then is what is in question.
It's basically spitting in the face of your new neighbors. The $15M is not important to the success of this data center and it will be a drain on the town for the first two decades.
This isn't money the county is paying Google, or that Google is somehow taking from the town. It's a data center built on an empty field in the middle of nowhere, connected directly to a wind farm run by an otherwise struggling power company that owns the land Google is using.
Many things in a small city are supported solely by property taxes, to which Google would not contribute at all for at least two decades yet gain all of the benefits from. This is not fair to anyone else in the city who is paying those taxes for those benefits. It's better to just not have them exploiting the city's resources for free.
You can just drive around it in Google Maps to get a sense of it, and where it is. I stand by my assessment of the value of this land.
It's maybe a boon for the town as a corporate entity, or as a statistical aggregate, but it's not likely a boon for the existing constituents of the town if it comes with a significant tax abatement.
And the deal might not be limited to tax breaks. 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.
Is Google actually demanding that? Do the benefits of that investment accrue solely to Google?
The sponsor of the bill claims to be supporting it whether or not Google selects Becker.
> The sponsor of the bill claims to be supporting it whether or not Google selects Becker.
Well yeah, why wouldn't he? He has plenty of political capital since Minnesota's recently elected governor, a Democrat, is pushing for lots of ambitious legislation. And what's not to like about spending other people's money in your own community?
The argument against the property tax break is less clear to me. Like, all things being equal, I'd rather Google pay more tax than less tax. But it's not at all clear to me what Minnesota's BATNA is here. They can demand the property taxes, and Google can site elsewhere. Google will be fine, and Minnesota will be out a data center. I don't think a data center is an economic miracle or anything, but it's hard to believe it could possibly be a net negative for rural Minnesota.
I don't have a strong opinion about this story, I just want to understand the outrage a little better.
I live in Minneapolis and hadn't heard about the proposal until I saw this thread, so I'm inclined to think the outrage is mostly manufactured. To the extent that it's real, it's probably driven by the fact that Wisconsin seems to have gotten fleeced by Foxconn.
It does when you consider it for 50 people.
Like this, "Give 50 lucky citizens $300,000"
Alternatively, since this is HN, 15mm, could be a healthy Series A for 3-4 companies. If this money is invested in already existing space, do those 4 companies hire more than 50 people over 17 years?
Maybe add a $270k tax to each of those employees to break even? /s
Adding a tax to offset the tax abatement seems to defeat the purpose.
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.
The report  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.)
 "Report Examines Economic Impact of Google Data Centers in N.C. and Across U.S." -- https://edpnc.com/report-examines-economic-impact-google-dat...
( 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
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.
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?
In practical terms, Google (or Amazon, etc.) wants tax breaks but also wants a desirable community to help recruit and retain talented employees. If a community so impoverishes itself via tax breaks that it can’t afford to remain desirable, then nobody wins. Abuse and wildly perverse incentives are of course possible, but absent those scenarios, there’s an equilibrium between private incentives and public investment that certainly exists.
No? Hence the need for regulations. The free market and competition are not inherently good things. They can be very, very bad for your average citizen.
Google doesn't particularly care about how bad the local community gets there's enough single/childless couples in the work force to provide the minimal local employees a data center will need and when a particular employee's lifestyle changes they can just be move internally and replaced. And if it gets bad enough it's simple enough to build another datacenter.
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.