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

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Re: Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota

#51

Post by AJ007 »

alehul wrote: post #36
moorhosj wrote: post #30

Earlier quoted context omitted.

==And it is a zero-sum game where another town loses the possibility for you to gain it. It is hardly a justifiable situation.== This is the most critical piece. What would legislation to address this at the national level even look like?

The only way seems to be to either to completely outlaw these negotiations, or create a standard rate (i.e. if the project will bring 100 jobs, the cities have the option but not the obligation to offer $10m in various forms of tax breaks— or maybe capped at $10m). 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 stat…

It seems like the federal tax code could be changed so local tax breaks or incentives just count as fully taxed income.

Re: Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota

#52

Post by bilbo0s »

tptacek wrote: post #44
bilbo0s wrote: post #42

Earlier quoted context omitted.

I think the negative reaction has something to do with the ROI for the tax money forgone? From the article: > After construction wraps, with 18 remaining years of tax abatement, there will be a $270,000 tax shortfall for every full-time position created. It's not as bad as Wisconsin's Foxconn cluster-F, but for a rural area, 15k a year per person is not peanuts. Difficult to make that up someplace else. (Well, not "d…

Thanks! I feel like I'm still not understanding. The tax breaks Google is asking for are city and county property taxes. If Google doesn't move in, the county isn't getting that money anyways. What's the "shortfall" here?

The shortfall represents the money not present assuming that Google DOES move in.

If Google moves in, and they maintain the current tax rates on people currently living in that municipality, then the shortfall is about 15k per Google head. If Google DOES NOT move in, there is no shortfall at all.

Of course, they can just increase the taxes on people already there in residence. But again, rural area. Not a lot of money. So I expect it'd be more likely for them to try to get money from the state coffers to cover the shortfall. Not really sure what the plan is to cover the shortfall in the event that Google moves in using the subsidies outlined.

Re: Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota

#53

Post by tptacek »

bilbo0s wrote: post #52
tptacek wrote: post #44

Earlier quoted context omitted.

Thanks! I feel like I'm still not understanding. The tax breaks Google is asking for are city and county property taxes. If Google doesn't move in, the county isn't getting that money anyways. What's the "shortfall" here?

The shortfall represents the money not present assuming that Google DOES move in. If Google moves in, and they maintain the current tax rates on people currently living in that municipality, then the shortfall is about 15k per Google head. If Google DOES NOT move in, there is no shortfall at all. Of course, they can just increase the taxes on people already there in residence. But again, rural area. Not a lot of mone…

Help me understand.

If Google moves in and pays property taxes, the county will see an additional $15MM (over 20 years).

If they move in and don't pay property taxes, the county will not see that money.

If they don't move in at all, the county will still not see that money.

Game-theoretically, how is the county better off if Google doesn't move in?

Re: Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota

#54

Post by [deleted] »

rtkwe wrote: post #22
jonas21 wrote: post #13

Earlier quoted context omitted.

It's also excluding the 2300 people constructing the datacenter for 1.5 to 2 years. Overall, it sounds like they're trading $15M in tax credits for between 4350 and 5500 person-years of jobs over 20 years. So around $2700 to $3500 per person-year.

2300 seems way high even if you're counting each different person that comes through and most of those won't be working the whole time. They'll come through and do electrical/HVAC/frame construction/etc for a few months then leave. Only a few will be there the whole construction and those will mostly be management and supervisor/contractor roles.

[deleted]

Re: Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota

#55

Post by tfehring »

tptacek wrote: post #44
bilbo0s wrote: post #42

Earlier quoted context omitted.

I think the negative reaction has something to do with the ROI for the tax money forgone? From the article: > After construction wraps, with 18 remaining years of tax abatement, there will be a $270,000 tax shortfall for every full-time position created. It's not as bad as Wisconsin's Foxconn cluster-F, but for a rural area, 15k a year per person is not peanuts. Difficult to make that up someplace else. (Well, not "d…

Thanks! I feel like I'm still not understanding. The tax breaks Google is asking for are city and county property taxes. If Google doesn't move in, the county isn't getting that money anyways. What's the "shortfall" here?

The infrastructure improvements needed to support the data center will be paid for by $20.1 million in state bonding - that is, they'll be paid for over time by Minnesota taxpayers at large. So there's no "shortfall" for Becker or Sherburne County, but only because the rest of the state is picking up the tab.

Re: Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota

#57

Post by tptacek »

tfehring wrote: post #55
tptacek wrote: post #44

Earlier quoted context omitted.

Thanks! I feel like I'm still not understanding. The tax breaks Google is asking for are city and county property taxes. If Google doesn't move in, the county isn't getting that money anyways. What's the "shortfall" here?

The infrastructure improvements needed to support the data center will be paid for by $20.1 million in state bonding - that is, they'll be paid for over time by Minnesota taxpayers at large. So there's no "shortfall" for Becker or Sherburne County, but only because the rest of the state is picking up the tab.

That's the answer I'm looking for. Thanks. But that's not necessarily happening, right?

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.

Is Google actually demanding that? Do the benefits of that investment accrue solely to Google?

The sponsor of the bill claims to be supporting it whether or not Google selects Becker.

Re: Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota

#58

Post by raphaelj »

KorematsuFred wrote: post #49
kartan wrote: post #28

> 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. 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…

This is in general a good thing if all companies can negotiate such deals. This leads to different administrative areas competing for different kid of projects and also lower the tax rate. All this results into more efficient government. 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.

That is only true if it also works for smaller companies.

Small corporations can't negotiate such deals, which will make them unable to efficiently compete against these larger companies.

Re: Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota

#59

Post by openloop »

kartan wrote: post #28

> 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. 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…

Seems legit. Union contract? Nah...

Re: Google Wants $15M in Tax Breaks to Build a Data Center in Minnesota

#60

Post by bilbo0s »

tptacek wrote: post #53
bilbo0s wrote: post #52

Earlier quoted context omitted.

The shortfall represents the money not present assuming that Google DOES move in. If Google moves in, and they maintain the current tax rates on people currently living in that municipality, then the shortfall is about 15k per Google head. If Google DOES NOT move in, there is no shortfall at all. Of course, they can just increase the taxes on people already there in residence. But again, rural area. Not a lot of mone…

Help me understand. If Google moves in and pays property taxes, the county will see an additional $15MM (over 20 years). If they move in and don't pay property taxes, the county will not see that money. If they don't move in at all , the county will still not see that money. Game-theoretically, how is the county better off if Google doesn't move in?

No no no no.

I'm not speaking game theoretically here, because there are a good many more factors that go into determining a "win" than the financials.

Now from a money perspective, they won't get money from Google if Google DOES NOT move in, and they won't get too much money from Google if Google DOES move in. This is because the expenses on the infrastructure improvements to support a 600 million dollar data center for 18 of those 20 years is higher than the $15 million bucks they're gonna get from Google. Those expenses are, obviously, not there if Google does not site a data center in that municipality.

So if you want a, sort of, game theoretical optimum, then the question people on both sides of the issue should be answering are:

1 "What are the benefits to this municipality, or to the state, of Google moving in?"

and

2 "What is the value of those benefits in tax dollars?"

If the answer to 2 is greater than or equal to 15K per Google head, then you break even or profit. If it's not, then you lose.

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