4 ms·

This is a very good discussion, back and forth. I think it is worth asking who should be capturing the economic benefit here. A tax break for google in this cas

This is a very good discussion, back and forth. I think it is worth asking who should be capturing the economic benefit here. A tax break for google in this case is allowing google to capture the economic benefit it creates for the public. Not giving it a tax break allows the public to capture that economic output. While I very much agree that this project will add value to the economy, if google is given a $15m tax incentive to create this property, it means that the public doesn't get it. 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.

hayd 8y ago
Maybe, it could also mean that Google go to another state who will offer a tax incentive, and the state loses out. Or, as AOC would say: saves $15m.
- hexane360 8y ago
  "the state loses out" assumes that the public makes money off the deal. If not, just spend the $15m on programs that actually benefit them.
asdfasgasdgasdg 8y ago
> 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.
- abakker 8y ago
  >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. 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.
  - tptacek 8y ago
    I read that too and don't understand it at all. Do you? By "shortfall", do they simply mean "if we charged full property taxes to Google, the revenue we'd get would be much more than the taxes we'd get from the 50 FTEs at the data center"? "Shortfall" suggests money the city and county would essentially be "spending" to have the data center, but that's not what's happening, right?
    - abakker 8y ago
      https://www.taxnotes.com/editors-pick/google-seeks-20-years-minnesota-tax-breaks-data-center https://www.taxnotes.com/editors-pick/google-seeks-20-years-... 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.
      - tptacek 8y ago
        What a great find. Thank you!
  - asdfasgasdgasdg 8y ago
    I'm sorry, I can't comment on the specifics of the deal. I'm only trying to point out that the exact total amount of surplus is not necessarily equal to the amount of tax abatement Google is requesting (it could be more or less).
tptacek 8y ago
it's 15MM over 20 years, right? $750k/year? Against the economic activity from building a huge data center, that seems like a drop in the bucket?
chrisco255 8y ago
You presume they don't have other options. If they don't give any incentive, then they just go somewhere that does offer incentives. Wisconsin or North Dakota or whoever else will take them.
- admax88q 8y ago
  Data centre placement is driven by a heck of a lot more than tax incentives. 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.
  - WkndTriathlete 8y ago
    I'm really curious what you think the other criteria are, because I can tell you that Becker, MN, is around 90 minutes from the Minneapolis-St. Paul metro area and solidly in the middle of farm country. 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."
    - admax88q 8y ago
      Power is the biggest expense of a data center. So either access to cheap power, or access to cheap cooling to offset power are probably the top criteria. I'm sure there's others, latency to customers and real estate cost like you mentioned. Connectivity, construction costs, political stability.

hayd 8y ago

Maybe, it could also mean that Google go to another state who will offer a tax incentive, and the state loses out. Or, as AOC would say: saves $15m.

hexane360 8y ago
"the state loses out" assumes that the public makes money off the deal. If not, just spend the $15m on programs that actually benefit them.

asdfasgasdgasdg 8y ago

> 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.

abakker 8y ago
>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. 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.
- tptacek 8y ago
  I read that too and don't understand it at all. Do you? By "shortfall", do they simply mean "if we charged full property taxes to Google, the revenue we'd get would be much more than the taxes we'd get from the 50 FTEs at the data center"? "Shortfall" suggests money the city and county would essentially be "spending" to have the data center, but that's not what's happening, right?
  - abakker 8y ago
    https://www.taxnotes.com/editors-pick/google-seeks-20-years-minnesota-tax-breaks-data-center https://www.taxnotes.com/editors-pick/google-seeks-20-years-... 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.
    - tptacek 8y ago
      What a great find. Thank you!
- asdfasgasdgasdg 8y ago
  I'm sorry, I can't comment on the specifics of the deal. I'm only trying to point out that the exact total amount of surplus is not necessarily equal to the amount of tax abatement Google is requesting (it could be more or less).

tptacek 8y ago

it's 15MM over 20 years, right? $750k/year? Against the economic activity from building a huge data center, that seems like a drop in the bucket?

chrisco255 8y ago

You presume they don't have other options. If they don't give any incentive, then they just go somewhere that does offer incentives. Wisconsin or North Dakota or whoever else will take them.

admax88q 8y ago
Data centre placement is driven by a heck of a lot more than tax incentives. 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.
- WkndTriathlete 8y ago
  I'm really curious what you think the other criteria are, because I can tell you that Becker, MN, is around 90 minutes from the Minneapolis-St. Paul metro area and solidly in the middle of farm country. 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."
  - admax88q 8y ago
    Power is the biggest expense of a data center. So either access to cheap power, or access to cheap cooling to offset power are probably the top criteria. I'm sure there's others, latency to customers and real estate cost like you mentioned. Connectivity, construction costs, political stability.