Facebook To Utah? A Classic Will They Or Won’t They Scenario
“Having the types of companies in our community that can support enterprise-level data centers is thought to enhance the state’s brand value, which assists local companies by enhancing the Silicon Slopes halo effect.”
Last week the public learned of a plan to bring a Facebook data center to West Jordan, and as you might expect, people have questions. Facebook has yet to confirm it’s the company behind what’s being called Project Discus, but sources and documents filed by power companies with state regulators point to the company being behind the project. Project Discus, as it’s been explained by various news outlets, contains some numbers that have more than a few public figures, educators, and citizens concerned. Numbers like five million gallons of water a day; and $240 million in tax rebates. However there are also those who say the reported numbers are inaccurate, and that Project Discus will lead to a bright(er) future for Utah’s workforce.
Let’s say you’re making a movie (omg that’s so great — good luck!) and Michael Fassbender has read the screenplay and agreed to play the starring role (what?! Congrats!). Sure, he wants a tax rebate and a bunch of water, but having Michael Fassbender in your movie means more ticket sales. And, if the movie is good, other big names will probably be willing to sign on to your future film projects, so those rebates and water recourses seem worth it. But wait — some powers at be say, “Actually, I don’t think you should use Michael Fassbender. Why don’t you just wait. Another Michael Fassbender will come along.” And you’re like, “THERE’S ONLY ONE MICHAEL FASSBENDER!”
Facebook (maybe you’ve heard of it?), like Mikey F., is a pretty big deal, and the company setting up shop here lends prestige to Utah’s thriving tech industry. Other companies may take note and follow suit. “Having the types of companies in our community that can support enterprise-level data centers is thought to enhance the state’s brand value, which assists local companies by enhancing the Silicon Slopes halo effect,” says Theresa Foxley, Deputy Director of the Utah Governor’s Office of Economic Development.
Also, Facebook itself may move more operations to our lovely deseret. “If history is any indication, Project Discus may lead to follow-on investment by the company,” Foxley says. “When a data center is wholly owned and operated by a single company, the efficiencies/economies of scale that can be found by co-locating other company operations along-side the data center becomes an extremely attractive option. Utah’s unique geography and talent base make co-locating operations even more attractive and Utah has seen that trend with other data center projects.” Other data center projects such as eBay, which in 2008 announced a data center projecting 50 jobs and $430 million in capital investment. Later eBay announced expansions projecting over $80 million in additional capital investment and 2,200 more jobs. Oracle set a similar precedent by announcing a data center projecting 100 jobs and $260 million in capital investment, then expanding to 351 jobs and an additional $6 million in capital investment.
Project Discus will provide up to 500 construction jobs for local laborers, and while only 30–50 full-time employees will actually work in the completed data center, those positions will be high-paying. And although Facebook will get a huge tax rebate, they will still contribute around $17 million in taxes a year. If Project Discus is voted down, the land could become residential developments, placing a heavy burden on an already strained school system. Or, the land will remain undeveloped and generate only around $100 in taxes a year.
Also, as West Jordan mayor Kim Rolfe explains, the center will likely use less than a million gallons of water a day in the warmer months and far less in winter. The five thousand gallons we’ve seen in various reports is an estimate for six buildings, not one. It is a theoretical maximum for 24 hours, 365 days of peak water usage, on the hottest and most humid day of the year. That’s a tiny fraction of the year in our Utah climate, and most days will use far less water than the theoretical maximum.
“Aside from the brand value, we know other communities that have won enterprise data centers tout the benefits of hosting them,” Foxley says. She explains that Project Discus may lead to an expanded revenue base that can lower tax rates for other property owners, create win-win community partnerships for local schools, and serve as thought leadership on issues like renewable energy deployment.
Okay. But. Let’s also say that you’re in junior high again (my condolences) and sitting with your friends at lunch. Your bestie Becky says, “Hey, I want to be more popular, so I’m going to invite the most popular girl in school, Veronica Smith, to sit with us. We just need to give her $240 million in tax rebates and possibly five million gallons of water for hot days.” Your jaw drops and you can’t find your words. A whole minute goes by while you struggle to pull yourself together. Finally you manage to ask, “What? Why?” Becky explains that Veronica Smith sitting at your table will show all the other popular kids how great your table is and they’ll all want to sit there and it will bring lots of cred to your table in the long term. “Don’t you feel like we’re okay without Veronica?” you ask. “I mean, we’re already friends with Adobe, Oracle, Microsoft, and Ebay.” “No,” Becky responds. “We really need Veronica to like us. I hope you vote to give Veronica the requisite tax rebate and water so she’ll agree to sit here.” “Yeah, I don’t think I’m going to do that,” you say, and then Veronica walks by your table and you yell, “You can’t sit with us!”
Some politicians and citizens feel we’re bending over backward to allow Facebook to build its data center here, just because it’s Facebook. In a Salt Lake Tribune op-ed co-written by state senator Howard Stephenson and Salt Lake County mayor Ben McAdams the two argue, “We should not sell our real estate or our taxpayers short just because a famous name comes calling…The Economic Development Area plan put forth by West Jordan City asks for a tax subsidy — taxes that would come from the school district, the county, the county library, the state, and even city energy taxes for 20 years.”
“If you do the math, we’d be paying between $2 million and $3.4 million per job. That’s far more than has ever been spent by economic development officials to lure businesses such as eBay, Adobe or Boeing,” Stephenson and McAdams state. “We know that the proposed structures, which are essentially very large refrigerated buildings to keep computer servers from overheating, come with a legal contract for delivery of 4.8 million gallons of water per day. They may use less during the winter season, but the water must be available should they need it,” Stephens and McAdams explain. “Utah is the second driest state in the country. In our fast-growing area, water is a finite and a precious commodity and is essential to every current and future resident and business.”
County Councilman Richard Snelgrove has described Project Discus as “corporate welfare” that will ultimately employ only a handful of local employees and fail to benefit the people of Salt Lake county. “A bad deal means less money to fund all the services our residents currently receive, a shortage for our school children, and a worst case scenario of having to raise taxes to make up a deficit,” Stephenson and McAdams write.
West Jordan needs to build new schools soon to educate its booming population, and Project Discus has some educators questioning the state’s priorities. “Education receives funding from property taxes and that $240 million could help education significantly (or even a minor portion of it) but once again, it feels like Utah gives education the short end of the stick,” says a Utah educator who wishes to remain anonymous.
The fate of Project Discus lies in the hands of West Jordan’s Taxing Entity Committee, which is set to vote Monday, August 29. The committee is made up of eight members, and six of the eight must approve Project Discus for the plan to move forward. Two members represent West Jordan, two represent Salt Lake County, two represent the Jordan School Board, one represents the Utah State Board of Education, and one represents all other taxing entities. So far, West Jordan and the Jordan School Board (reluctantly) support Project Discus, while Salt Lake County does not. Meanwhile, New Mexico is willing to volunteer as tribute. That has some saying, “How can this be a bad idea when another state is so willing to adopt it?” and others saying, “Go to New Mexico. See if we care.” (I’m paraphrasing, obvs).
I don’t envy whomever is playing this particular round of Sim City. Luckily, our job here at Beehive is to tell you both sides of the story and make jokes about them, which is precisely what we plan to do as this story continues to unfold.
*Photo Cred: Scott G. Winterton, *Deseret News