More cold water thrown on Facebook data center as economic development

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New Mexico’s economic development community is desperate. We get it. With the state mired in high unemployment, facing massive deficits, and few “easy” opportunities for economic growth, the idea of having a marquee company like Facebook place a data center in Los Lunas is very attractive. It certainly makes for some much-needed good press.

Unfortunately, according to a New York Times piece which analyzed these data centers, massive data center projects to rural areas, receiving millions of dollars in tax cuts and rebates but only bringing a few dozen new jobs — and most are not even local hires.

Also on the subject of Facebook’s data center, the Salt Lake Tribune quoted Iowa State University economic development expert Robert Swenson as saying, “You’re not just overbidding, you’re just outrageously overbidding. I don’t know how to say it any other way other than: What’s wrong with you folks?.”

Swenson also is said it’s not uncommon for a company like Facebook to get two cities to fight over each other to get a sweeter deal.

The incentives being offered to Facebook to come to Los Lunas are nothing short of astonishing and (again) call into question the necessity and economic impact of economic development subsidy programs. A Local Economic Development Act (LEDA) grant of up to $10 million is being offered. That’s in addition to a sales-and-use tax rebate worth up to $1.6 million annually along with billions of dollars in industrial revenue bonds which essentially eliminate property tax payments although Facebook has offered to make some direct payments in lieu of taxes of $50,000 to $100,000.

And this doesn’t even include the water being used or the unsteady “renewable” electricity being put on the power grid in exchange for Facebook having steady electricity service from traditional sources.

The fact is that as nice as it would be to have Facebook located in our community, New Mexico policymakers are desperate for good news. That is a dangerous position to be in whenever you’re negotiating.

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2 Replies to “More cold water thrown on Facebook data center as economic development”

  1. From the Salt Lake City Tribune article…

    Dave Swenson, who teaches planning and economic development at Iowa State University, said the size of the incentive packages that New Mexico and Utah are offering are jaw-dropping. Each state is offering more money to Facebook than Iowa offered combined to land eight data centers — six that are operating and two that are under construction.

    ”You’re not just overbidding, you’re just outrageously overbidding. I don’t know how to say it any other way other than: What’s wrong with you folks?” Swenson said.

    But it’s common, he said, for a company — particularly a large company like Facebook — looking to build a large capital project to find two competing cities or pretend there are competing cities and try to leverage them against each other in what he called a ”race to the bottom.”

    ”In this case, you actually do have active bidding” between New Mexico and Utah, he said.

  2. The Benefit to Los Lunas and New Mexico won’t happen when the Data Center is completed, its the construction and building jobs. Plus the Tax Credits didn’t cost much to give, since the land was generating almost nothing in taxes as it was anyway

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