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West Jordan pulled the plug Tuesday on a deal to entice Facebook to build a massive data center in Utah with the promise of a hefty tax-incentive package worth up to $260 million over 20 years.
The deal killer was a vote by the State Board of Education to approve only a scaled-down plan, capped at $100 million in tax breaks.
"Effective immediately, all negotiations between the company known as Discus and the City of West Jordan are hereby terminated. Any and all incentives and inducements preliminarily offered the company to locate in West Jordan are hereby rescinded in whole without prejudice," West Jordan City said in a press release.
West Jordan City's Council unanimously supported the agreement and the Jordan School District had followed suit, albeit with complaints that it was too generous. But Salt Lake County Mayor Ben McAdams and the County Council unanimously opposed the package as giving away too much for far too little return: an estimated 50 to 300 permanent jobs.
Because the offered tax breaks involved several taxing entities, West Jordan needed two-thirds approval of a committee made up of representatives of the different agencies. The State School Board decision on Tuesday assured that supporters would be one vote short of the required majority to move forward with the whole package.
The board instructed its tax representative to demand a series of conditions. Most significant among them: that the incentives apply only to the first third of a proposed six-stage building process, and that they be capped at $100 million. The proposal before the tax entities didn't include a cap and was projected to be worth $195 million in property tax rebates to Facebook at full buildout. Other incentives also were offered, including sales-tax breaks, reduced energy taxes and unspecified incentives from the state.
Stan Lockhart said that Tuesday morning he became one of a half-dozen state school board members to meet with Facebook representatives.
It's not the company's fault that the company was offered unprecedented incentives behind closed doors, without including other tax entities, he said.
"I had to apologize to them," Lockhart said. "... Essentially, they've been used as a political football, as far as I can tell."
West Jordan City Manager Mark Palesh said Facebook had indicated it wasn't going to agree to an incentive cap, nor would it want to return to the tax committee to negotiate additional incentives for stages three through six.
"I knew it wouldn't work," Palesh said, asked why he ended negotiations. "If I was running the company, why would I do that? Invest $500 million in the first two buildings and then come and knock on Mayor McAdams' door and say, 'Oh, by the way, can I have the same deal?' They're stuck [at that point]."
West Jordan City leaders said they had to make a generous offer to meet or beat one dangled in front of Facebook by Los Lunas, N.M.
"The process to recruit top businesses to our state and other states across the country includes incentives. If you want to attract an all-star player, you have to offer a competitive package," the city said in its news release. "Unfortunately, the long courtship of this company has had a negative impact on the working relationships of the several state and local entities involved, which must be repaired for the good of all citizens of Utah."
Though members of the school board had wondered aloud if their conditions might be a deal-breaker for West Jordan or Facebook, the few remaining when the city issued its news release said they'd viewed the company as a potentially valuable addition to the state's economic portfolio.
Lockhart said he was disappointed.
"Someone who thought they had the authority ... made them an offer that is just too rich," he said. "It is just too much in terms of setting a precedent for future deals. I really believe that we've blown it as a state."
McAdams, the county mayor and a vocal opponent of the incentive package, said West Jordan's decision was a good outcome for residents of the city and children in the Jordan School District, who would be giving up the bulk of projected tax revenue as incentives.
"The incentive that was offered was too rich by an order of magnitude, and four other cities in the county looked at it and walked away long before this incentive was ever reached," McAdams said. "It needs to pass a cost-benefit analysis, and this one wasn't even close in my book."
West Valley City passed on the project. The other cities approached were Herriman and Riverton, while South Jordan was believed to be the fourth.
McAdams said he plans to work with West Jordan leaders to plan for "real economic development for this land," but remains troubled that the system seems to pit cities against each other to see which will negotiate the worst deal for the taxpayers.
"This was the largest tax incentive ever offered in Utah history, and the skids were greased, and I felt it was important that the public have a chance to look at it," McAdams said. "It was a bad deal that would set a precedent that would harm our state in the future."
The Utah director of the conservative Americans for Prosperity hailed Tuesday's development as the right conclusion.
"A city giving away hundreds of millions of dollars in tax breaks for minimal job growth is the epitome of corporate welfare," said the group's Evelyn Everton.
West Jordan officials said in a release that New Mexico "has opened its doors" to Facebook and wished it well, though as of Tuesday evening there were no reports that Facebook had chosen to locate in Los Lunas.
However, New Mexico Economic Development Secretary Jon Barela called the news of West Jordan's withdrawal "a good sign" for the Los Lunas proposal, reported the Albuquerque Journal.
The Los Lunas Village Council has approved up to $30 billion in industrial revenue bonds for the project, offering a 100 percent property tax abatement over 30 years, the Journal reported. In exchange, the company would make annual payments beginning at $50,000, eventually increasing to $100,000.
West Jordan Mayor Kim Rolfe said the city had been negotiating with two other high-tech businesses, but that those talks were contingent on landing Facebook's data center campus.
"We're not going to stop trying to negotiate for economic development in our city," Rolfe said. "... How we go about it and how we structure it may be different because we won't let nontruths negatively impact a project that we've worked so hard on."
Specifically, Rolfe said, he was disheartened by the county's focus on Facebook's request for 4.8 million gallons per day of water capacity at full build a number the city said would be much lower in terms of actual use and claim that other residents' property taxes would increase as a result of the incentives.
To court the county's favor, the West Jordan's City Council was due to vote on whether to reduce a 1,700-acre economic development area to the 230 acres required by Facebook.
Rolfe said that will no longer be considered and that the city will retain its power to attract businesses without forming an interlocal agreement or setting aside affordable housing, which is required of new development areas after legislation passed earlier this year.
Val Hale, executive director of the Governor's Office of Economic Development, said, "After a robust debate and public discussion, ultimately local officials could not agree to the terms of a potential deal. Our work on these projects has always been as a facilitator for local government leaders. The Governor's Office of Economic Development will continue working to help local businesses expand and succeed in our state."