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Google Wants $15 Million in Tax Breaks to Build a Data Center in Minnesota

The tech giant is asking Becker, Minnesota, to waive 20 years' worth of city and county taxes.

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Bennymarty | Dreamstime.com

Google recently announced plans to build a $600 million data center in Becker, Minnesota. The project will come at a cost, though, as the tech behemoth is seeking $15 million in tax breaks.

"This will generate a lot of local economic activity that will benefit not only the city and the county, but also the state and the region," Sherburne County Administrator Steve Taylor tells Minnesota Public Radio.

The development drew a chorus of cheers from sustainable energy advocates and from local politicians, as Google would rely on renewable sources of power and create jobs. The latter feels especially urgent in the area, since two generating units at Xcel Energy's Sherburne County Generating Plant are slated to shut down within the next seven years. Affectionately known as Sherco, the power plant has been a driving force in the community's economic success.

Sherco currently produces 75 percent of the town's tax revenue. Its successor, by contrast, will potentially pay nothing in city or county taxes for two decades.

Google is promising to bring 50 full-time positions to the area. The company also projects that it will create 2,300 jobs during the 18–24 month construction window—a far shorter period than the 20 years of tax relief they're requesting. After construction wraps, with 18 remaining years of tax abatement, there will be a $270,000 tax shortfall for every full-time position created.

And the deal might not be limited to tax breaks. 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.

Google certainly isn't the first to leverage its star power this way. Most recently, Amazon made headlines for landing a jaw-dropping $2 billion in tax credits and other inducements for promising to set up shop in New York and Virginia. They've since pulled their location in Queens after facing opposition from local politicians, but they're still poised to receive $573 million in tax breaks from the Commonwealth.

Such incentives are typically justified by politicians as a crucial way to stimulate the economy. But do they even have the intended effect? Not so, according to a recent study by Timothy Bartik from the W.E. Upjohn Institute for Employment Research.

"Incentives do not have a large correlation with a state's current or past unemployment or income levels or with future economic growth," Bartik writes. He notes that governments often fail to evaluate a company's impact—how many jobs it creates, how many investments it draws, etc.—but instead give the money uncritically. That can actually have a counterintuitive effect on productivity: Some businesses that receive incentives end up creating jobs at a slower rate than those without, because the subsidized companies are very rarely held to account.

Such businesses consider a multitude of reasons when picking a location, none of which usually pertain to promised incentives. As Richard Florida writes at CityLab, "companies typically select locations based on factors such as workforce, proximity to markets, and access to qualified suppliers"—and then a request for tax breaks follows.

That certainly seems to have been the case with Amazon, who received higher incentive offers from New Jersey (a total of $7 billion) and Maryland (a staggering $8.5 billion) but opted for Queens and Northern Virginia instead. A smaller payoff, yes—but perhaps those two areas offered more of what they needed. They're both parts of thriving metroplexes that have the infrastructure and the highly educated workers the company requires.

Google has much in common with Amazon in that regard. While Becker is no budding metropolis, the town's access to renewable energy suits the tech giant well. As Xcel shifts away from coal, it has offered to supply Google with dedicated wind energy—an alluring offer, as the company will need to power the 375,000 square foot data center for 24 hours, 365 days a year.

When Sherco shuts down its two generators, Google's presence could certainly help turn things around. But 20 years of tax favoritism will only serve to make a poor community even poorer.

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  1. Funny how leftists love everyone else to pay taxes but never do themselves.

  2. Referendum?

  3. Crony capitalism is the best!

    1. If it moves tax it, if it keeps moving regulate it, if it stops moving subsidize it.

      1. If it hasn’t moved in yet subsidize it.

  4. Other than initial construction, data centers don’t employ that many people. Robotics will probably trim that down even less in the future. Not sure what their government cost structure is (although I would bet money it’s higher than it needs be by close to 100%). What are they getting from the proposed property now and what’s its future potential without the center?

    1. That is the dirty secret of the entire tech industry. While it creates enormous profits for the people at the very top, it doesn’t really create that many jobs. Google is valued in the tens of billions of dollars and I would be surprised if it employes more than a few thousand people and a few thousand more contractors on top of that.

      1. That’s not a ‘dirty secret’. That’s how its supposed to work. Capital increasing a worker’s efficiency. Do you complain that construction workers use cranes and forklifts? That deliveries are done in vehicles instead of by foot? That ditches are dug with backhoes instead of shovels? Same thing.

        1. I don’t see how it is “supposed to work” period. It is how it does work. Whather that is how it is supposed to work is a question of what you value. So, I don’t begrudge Google their money. There is nothing wrong with lawfully earning whatever the market will pay you. At the same time, if I were the mayor of a city, I couldn’t give a shit less if Google moved to my town since nearly all of the value it created there would go somewhere else. From my perspective, I would rather have a business that employed more people and left more money in the local community than Google.

          1. So, I don’t begrudge Google their money.

            Well, there is a bit of capitalism at work in begrudging Google their money. We certainly don’t want to pay them to flush it down the toilets, paying one group of workers to dig a hole only to pay the next group of workers to fill it in isn’t explicitly anti-capitalist, but can certainly lean that way.

        2. Well I did complain about digging groundworks by shovel but then they replaced me with a machine. Then I complained about delivering water heaters up 4 flights of stairs but then then they replaced me with a machine Yup lots of jobs I have done in my life now are not around anymore and I am sure that the one I am now doing will eventually be done by machine.

          Favorite job I did that is now replaced by machine: Trash compactor. I used to jump in a dumpster on some boards to pack it down.

      2. I would be surprised if it employes more than a few thousand people

        Get surprised then. It employs just shy of 100 thousand people (98,900).

        Having been in the Datacenter business for years, it is true that they don’t bring in a lot of full time workers. However they do generate a decent amount of business, generally without a ton of infrastructure cost. (Think about the costs on roads/plumbing when you build a massive office complex).

        Plus in our company, one of our datacenters was a perfect choice when turning to increase our presence in the state. You already have a lot of stuff you need in place, just need a building to house the people, which we added onto the side of the datacenter. Now a days, with so many IT services rendered down to IP, it makes phones and other services cheaper when your backbone is already next door.

        This is not to say that the Google deal was a positive for MN. If anything, it is more marketing- “Bring your Tech business to our frozen wasteland! Companies like Google have chosen it, and how can you disagree with them”.

      3. Google doesn’t even have a help center.

        1. Yes they do. Not for the search engine, per se (though they do have support for SEO work). But they do have varying levels of support for advertisers, users of YouTube and Android, to name a few.

      4. “While it creates enormous profits for the people at the very top, it doesn’t really create that many jobs.”

        Those people who risked their capital or time in ‘sweat equity’? Good; that’s what starts companies.

  5. I always wonder about these people who keep getting excited over ‘job creation’ – they wouldn’t be happy if they were told the project would use a lot of water, or wood, or steel. Labor is a cost, an input, like all the others. *Jobs are a cost, not a benefit*.

    And its a data center. Once the things up and running how many people will be working there? Three? One for each shift. Oh, and to have one of the local retirees come in nightly to empty the trash and restock the toilet paper.

    1. *Jobs are a cost, not a benefit*.

      That is absurd. If I have people who live in a place and are employed producing something of value and getting paid for that, everyone in the community benefits from the money they then spend to live here. If there are no jobs, then people either leave or go on welfare and become a drag on the community.

      There is a reason why Palo Alto is richer and a nicer place than Gary. And it is not because jobs are a cost.

      1. They are a cost to the employer, like any other input, even while it bolsters the local economy. I agree though that tax breaks to bring in employers is a net gain over having no businesses around to employ people.

      2. *Jobs are a cost, not a benefit*.

        Assuming that the economy exists for something other than human beings, I guess.

        1. Depends on which humans to whom you’re referring. The next time you hire someone to provide a service, hire three times as many to perform the same service. Then tell me whether jobs are a benefit.

          1. Indeed, and that’s a good microcosm of labor theory of value. It’s silly and ignores a ton of pertinent data.

        2. Jobs are both a benefit and a cost, just to different people. A business owner does not hire people to provide a benefit, and labor doesn’t take a job to be a cost.

          1. If only the people who chant, “jobs are a cost not a benefit”, could understand what you posted.

            1. Not everyone took economics for their degree, and of those who did not everyone understands.

              1. Throwing a little shade at a freshmen Representative?

                1. I still can’t believe that woman took economics. And passed with a degree. I assume you mean occasional-cortex.

      3. It depends on how much value those jobs create versus the costs to the community of having those workers there. Fresno has a lot more workers than Palo Alto.

      4. Then why is material usage not a benefit? Why is energy usage not a benefit?

        *Someone’s* getting paid to provide that stuff – so why is using as little of it as possible to produce your product a benefit *but using less labor* is not?

    2. they wouldn’t be happy if they were told the project would use a lot of water, or wood, or steel.

      They would be if they have a lot of wood, water or steel to sell.

    3. Jobs – like wood, water, steel, oil – are a resource.
      .
      .
      .
      Damn it – lost train of thought.

      To be continued…

  6. Good God, fucking Becker.

    Those towns are strung along Hi. 10 like anal beads.

  7. Separation of commerce and state. Obviously, that’s got be than more a pithy phrase, but something like that is needed.

  8. Uhh…am I the only person who realizes that those power plant workers aren’t going to be the people working in a Google center? Something tells me this will be Visa workers not locals.

    1. Also, is building in an area that has none of the labor type you need a consideration for HB1 on Google’s part? I reckon it is.

      1. You would have to try really, really hard to avoid finding 500 US citizens in the Minneapolis/St. Paul/St. Cloud area competent to work in a data center, let alone 50. But, being free to change jobs, these folks can’t be treated as indentured servants in the way that H1b imports can.

        1. …and it’s not that hard to travel from the metro core to Becker. Thousands of people make the opposite trip for work every day.

          1. Maybe so, but I doubt residents of Becker will be filling those jobs if the lions share of current residents work in power generation.

            1. Of course they won’t fill them all. I know some very capable IT and control systems people associated with that plant who would do a very good job in anybody’s data center.

              1. So would perhaps half a billion Indians, I’d guess, and they have a good deal less power in negotiating salary. Globalism is quickly pricing American labor out of the market. That said, I don’t know what gimmicks there are to force an eligibilty for HB1 but moving operations out of metropolitan West Coast area’s seems like one possibility. It could easily be a dozen other reasons too, but ‘big tech’ has been saying there aren’t enough American I.T. people for a while if I recall. Seems improbable based on American graduation rates.

                1. H1-Bs are a tiny fraction of the overall work force- tech, medical or otherwise. The US creates more new tech jobs than H1-B and new graduates combined will create each year.

                  I sure agree that the H1-B program has pitfalls, but the idea that it is driving America’s labor out of the market is fantasy. I would happily pay any qualified individual for several of my tech positions. And believe me, this notion that H1-B is somehow preferable when the mountains of red tape delay filling the job and when I risk every few years losing that person back to their country- that notion is absurd.

                  1. Fair points, although the supply of HB 1 is also artificially limited so it remains to be seen how much demand there really is in my view. Either way it’s difficult to say with any accuracy if American wages could survive in a free market. Personally, I very much doubt they could.

  9. “But 20 years of tax favoritism will only serve to make a poor community even poorer.”

    So lower everybody’s taxes. More of this equating tax breaks to money out the door.

    1. My question is this: if Google doesn’t open something there, what happens when the plant closes? If the deal doesn’t happen, I’d guess the same result since you can’t tax non-existing businesses either.

      1. But TBF, there is a cost for Google being there. As they pointed out in the article, they are spending good money to renovate the location to attract Google. If the big G’s move wasn’t a factor, they may not have spent that money.

        1. This is true, but that seems like idiocy on the part of local politicians since there is a difference between there being less revenue for the government and actually spending money. That being said, it also amounts to local infrastructre not being billed to those who use it I suppose.

          1. My company benefits from one of these sweetheart deals. Except in our case, we get our power at a reduced rate. In return, we have to keep a certain number of full time jobs in the county.

            In our case, it is definitely a net positive for the state. The power we get cheap is power that would not have been used otherwise- it is excess capacity. And on top of that, they get some 300+ employee paychecks to loot for taxes.

            Not all deals are suck winners for the State. But likewise, not all deals are losers that benefit only the corporation (as in our case).

  10. Bribes are bribes; paid to the politicians or by the politician, a bribe is a bribe.
    Lock them all up.

  11. Sure, we’ll give you tax breaks on the shoulders of the taxpayer, but before we ink this deal, let’s have a sit-down on the first amendment.

  12. No problem.
    Let Google have their tax breaks for a year and then sock them hard with the Minnesota corporate taxes later.
    By then, it might be to expensive for Google to leave the land of such political wonders as Humphrey, Mondale and Franken.

  13. I mean, I get that crony capitalism generally sucks, and appreciate the value in pointing out that any project sold on the premise of “it will benefit the local economy” is almost certainly a huge lie.

    But has Reason really reached the point where they want to vigorously defend the virtues of taxation? Get out of here with that noise and go write for Salon or something…

  14. “The project will come at a cost, though, as the tech behemoth is seeking $15 million in tax breaks.”

    To whom? The State? From a libertarian perspective, that cannot be a “cost,” at least not a negative one.

    1. Google isn’t going to take over the maintenance of local infrastructure.

      1. Why wasn’t the local infrastructure scaled for what the inhabitants could pay?

        No place else I know of does a single entity pay 75% of the municipality’s income.

        So, either taxes need to rise – the rest of the town needs to ‘pay its fair share’ – or the town government wasted money on bullshit and frippery and needs to stop doing that.

  15. ?Google pay 95$ consistently my last pay check was $8200 working 10 hours out of every week on the web. My more young kin buddy has been averaging 15k all through ongoing months and he works around 24 hours consistently. I can’t confide in how straightforward it was once I endeavored it out.This is my primary concern…GOOD LUCK .

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  16. As for the “renewable energy” claim, the wind does not blow 365 days a year. I don’t think there are any good sites for water power near Minnesota, so Google promised to pay extra for electricity that mostly comes from conventional power plants and fast turn-on gas turbines, in exchange for the power company sometimes shipping power from wind turbines to all it’s customers. And if the power company gets more than 20% of it’s power from wind and solar on the average, it’s system will become unstable, and Google will have to install fossil-fuel backup power on-site, IF they weren’t planning on that from the beginning.

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