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 https://www.uschamber.com/sites/default/files/ctec_datacente...
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.
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.