New data centers could come online after tax break

Posted on 21. Feb, 2010 by admin in News

By Yvette Davis

Love ‘em or hate ‘em, more data centers could make their way to eastern Washington if the state legislature passes a bill waiving a 7.9 percent sales tax on computer equipment purchases and installation costs for new rurally located data centers before the current session closes on March 11.

House Bill 3147 was passed to the Rules Committee on Feb. 9 and up for consideration on March 3. Its companion bill, Senate Bill 6789 is also making the rounds. Both bills have until the end of the legislative session to pass, unless a special extended session is called.

Either bill would provide a 15-month tax exemption on sales and installation of new server equipment at new eligible data centers that begin construction between March 31, 2010 and July 1, 2011. Eligible data centers as defined by the bill include those located in rural counties that have at least 20,000 square feet dedicated to housing working servers. The equipment must be installed and put into use by April 2, 2018.

Because the tax exemption was not in place, work on new data centers stalled in Washington state in 2008 and 2009. If the bill passes, work may begin again on new centers in Quincy and East Wenatchee.

Jenny Rickel, president of the Greater Wenatchee Area Technology Alliance said the bill does not extend the tax cut to existing server farms nor does it mitigate property taxes.

“The bill isn’t asking for money or a handout. There’s no money coming out of the state’s budget today. This only applies to new data centers we would not otherwise have had,” Rickel said.

Server farms get chilly reception

In Nov. 2007, Washington State Attorney General Rob McKenna issued a ruling that data centers were not eligible for the rural county sales and use tax deferral that the high-tech companies thought they could take advantage of when they moved here.

His ruling effectively brought construction on new server farms for companies like Microsoft and Yahoo to a stand still, and may also have cost the state additional business. Facebook, who had looked at  eastern Washington, found it more economically palatable to locate its new server farm in Prineville, Ore. instead, and broke ground on a new $188 million data center there in January. That money would have translated into new  revenue and new jobs for our area, say proponents. Opponents say the giant facilities use too much power and provide too few jobs.

Rickel said the main issues are power and jobs.

“The big push back that people give about this topic involves two things. One, too much power being consumed by the data centers, and two, they don’t create jobs after the construction is over,” Rickel said.

People are concerned that power is  a limited resource, Rickel said, however the two local Public Utility Districts  set the parameters and pricing on their power, and the data centers have to live within that range.

But most people don’t know that long term power contracts with data centers can benefit the power utilities as well, said Jim Huffman, Douglas County port commissioner. Long term stable income means a higher bond rating and lower financing costs when the utility needs to borrow cash for new equipment and to perform upgrades and improvements. Lower bond rates means lower costs for consumers too, he added.

The power company can also work out a deal wherein it retains control over the sources of power it supplies to the data facility, allowing it to mix outside and locally made power if needed. The Douglas County Public Utility District worked out such a deal with Sabey Corp., Huffman said.

Employment ripple effect?

The other issue opponents bring up is long-term job creation. Opponents say the data centers don’t create long-term jobs because after construction is over; they only employ 25 to 30 people, Rickel said.

The Washington State Rural Technology Development Coalition weighed in on that issue in a letter to the Senate Ways & Means Committee, stating that “data centers in rural areas of Washington State create high-paying, long-term family wage jobs which provide economic diversity and stability to rural communities in Washington State.”

For each full-time data center job created with an annual income of approximately $61,000, another 2.5 jobs are created locally, according to the coalition That’s a big boost, the coalition said, in an area like Quincy where the estimated median household income is 25 percent lower than the overall median income for the state.

East Wenatchee has a similar economic base to Quincy and could also benefit from those types of jobs, said Pat Haley, executive director of the Douglas County Port District. Sabey Corporation, a large nationwide data center developer, completed two buildings in East Wenatchee in 2008, one at 205,000 square feet and another at 188,000 square feet, which added approximately 60 permanent full-time jobs to the area.

Sabey’s Intergate Columbia campus in East Wenatchee currently houses  T-Mobile and VMware. The company has another 80,000 square feet ready to rent, and owns another 30 acres next door where it could build additional facilities if the bill passes.

Jim Kneeland, spokesman for Sabey Corp., said “while the bill has a long ways to go for final approval we are hopeful for its passage. If passed we think it will immediately provide needed jobs for skilled workers in Central Washington.”

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