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West Jordan • In an apparent bid to lure Facebook, West Jordan officials pitched $240 million in tax breaks for a giant data center they say would turn low-value agricultural land into a tech-sector hotbed.
Salt Lake County Mayor Ben McAdams, meanwhile, says the city and state are selling the farm to build what amounts to a "warehouse."
Facebook's interest in erecting a Utah data center first was reported in early July after Rocky Mountain Power asked the Public Service Commission for expedited approval of a renewable-energy contract with the social-media giant. Little more than a week later, Gov. Gary Herbert signed a bill that allows sales-tax exemptions for companies building such facilities. But while Utah's competition for Facebook's data center is known to be the New Mexico village of Los Lunas, officials here had played Utah's proposed location closer to the vest.
West Jordan finally tipped its hand Monday.
Representatives of the city's Redevelopment Agency told its Tax Entity Committee that they believe 250 acres near the intersection of New Bingham Highway and State Route 111 are an unspecified tech company's first choice for a data center that would bring 130 jobs and star power to an area that produces negligible property taxes.
"If you're going to build a shopping center, you want to have an anchor tenant," said RDA attorney J. Craig Smith, referring to the negotiations and the company as "Project Discus." A Facebook representative did not return a request for comment.
McAdams said by phone that Smith's analogy is flawed. Neighboring tech companies don't benefit from proximity in the same way as neighboring retailers, and a data center is unlikely to employ the corporate executives or high-level engineers who might foster tech growth elsewhere in the community.
"This is a warehouse," he said. "It's a warehouse that may have an impressive name ... but it will not have a multiplier effect."
The RDA seeks approval for an estimated $185 million in tax increment incentives over 20 years, increasing from 75 percent to a full rebate as the company builds through six phases that would make it one of the world's largest data centers, at 550,000 square feet.
McAdams said the company would benefit from an additional $53 million in energy and sales tax exemptions.
Though no representatives of the Governor's Office of Economic Development were present at the Monday meeting and a spokeswoman declined to comment, Economic Development Corporation of Utah representative Erin Laney said the state would provide the company with a further albeit smaller incentive.
Sen. Jim Dabakis, D-Salt Lake City, said Herbert and other state Republicans have been "hypnotized" by the Facebook brand, and that incentives would result in hikes for other Utahns.
"They're just bamboozled by the name Facebook," he said, "and the taxpayers are going to be crying all the way to the poorhouse."
Data centers store photos, videos and status updates shared by Facebook's 1.65 billion users. Other centers are located in North Carolina, Texas, Iowa, Pennsylvania and Sweden.
West Jordan Mayor Kim Rolfe said by phone Monday that negotiations with the company began about a year and a half ago, and that the company has said it hopes to break ground on a facility by the end of August.
McAdams worries about the large quantity of water needed to cool so many servers. West Jordan City Manager Mark Palesh said reports that the data center would use 5.3 million gallons of water per day were based on the company's worst-case scenario that it had built all six phases, was operating at full capacity on the hottest day of the year and needed to fight a fire. But McAdams said the city would need to commit that volume whether it's all used or not. That's 5.3 million gallons that can't be used elsewhere, he said.
"Our most precious commodity in the Salt Lake Valley is water," he said. "Our second-most-precious commodity is land."
The data center would be built at the corner of a 1,650-acre area the RDA has branded the Pioneer Technology District, which constitutes nearly a tenth of West Jordan's total acreage.
West Jordan Councilman Chad Nichols acknowledged that the proposed incentives constitute "a really good deal" for the company, but he said the city wouldn't be constrained to those terms in negotiations with other companies.
Likewise, Palesh said that while at least two other companies have shown interest in building in the Pioneer Technology District, "this is the last time we are going to give something so lucrative."
Sen. Curt Bramble, R-Provo, who wrote the bill allowing sales tax exemptions for data centers, said by phone Monday that he favors the West Jordan proposal "conceptually" and that it might "jump-start" the surrounding area.
Local officials who are more familiar with the details will have to weigh the potential benefits against staying put, he said.
An estimated $34 million in property tax revenues would be recouped over the 20-year life of the agreement, RDA reps said, with most going to the Jordan School District ($17 million), Salt Lake County ($7 million) and the city ($6 million). That's a 14,000-fold increase over the status quo, they said. McAdams said those numbers present a "false choice," and that data center or no, the land won't remain agricultural for long.
Dave Delquadro, a financial manager for the county, said the "anchor" analogy also was used when Adobe and eBay built in Lehi and Draper, respectively, and he doesn't believe those developments have borne out the "multiplier" theory.
"If history is prologue, then not yet," he said.
The commission will meet again Aug. 22. Rocky Mountain Power has a meeting with the Public Service Commission on Aug. 18.