A spat between Utah lawmakers during the January legislative session may have derailed an effort to entice Facebook to build a data center in Utah. But, they’re going to take another crack at it during this week’s special session.
SB178, sponsored by Sen. Curt Bramble, R-Provo, was a relatively innocuous looking bill that seemed poised to sail through the legislative process. What it did, however, could have had a lasting impact on the economy and technological future of the state.
UtahPolicy.com can now reveal that the bill was a vital part of a package of incentives designed to lure Facebook to build a dedicated data center in Utah. It didn’t pass, but will have another opportunity to become law at a special session on Wednesday.
The proposal included a tax credit incentive for any “enterprise data center” constructed in the state that covered more than 150,000 square feet on a parcel of land that was 50 acres or more. That’s a massive data center for just one company. For comparison purposes, Apple’s data center in North Carolina covers an estimated 505,000 square feet, while Microsoft has a 700,000 square foot center in Chicago. The largest data center in America is Digital Reality-Lakeside, also in Chicago, which covers 1.1 million square feet. Digital Reality-Lakeside is the 9th-largest data center in the world, and hosts more than 150 major websites.
The estimated size of Facebook’s proposed data center in Utah would be somewhere around 450,000 square feet. The expansion would bring between 80 and 100 jobs in Utah, but the prestige afforded Utah’s high-tech environment would be immeasurable. Having Facebook as an anchor tenant would naturally bring other high-tech businesses to Utah as well as other companies would want to part of the same complex.
Facebook’s impact on the online ecosystem cannot be understated. An estimated one out of every four people in the world has an account on Facebook.
Given Utah’s focus on STEM education and the emerging high-tech economy, approving the tax credit seems like a no-brainer. So, why did the bill quietly die at the end of the 2016 session?
First of all, Facebook wanted to keep a low-profile during the session. They were negotiating the purchase or lease of land for the data center and did not want word to leak that Facebook was the company seeking such a large parcel, which would likely drive up the price. That’s part of the reason Facebook never got a mention during any debate. In fact, UtahPolicy.com discovered the connection between SB178 and Facebook on February 29 but was urged not to publish any stories because that could have jeopardized the potential deal. At the same time, UtahPolicy.com also confirmed ongoing negotiations between Facebook and the Governor’s Office of Economic Development.
Facebook’s involvement was so low-key that most lawmakers had no idea what company the bill was intended to help, nor did they even see fit to ask questions about the proposed legislation. It also went almost completely unnoticed by the media.
The bill was on a fast-track for approval until the final weeks. It sailed through the Senate, passing the Business and Labor Committee unanimously and then cruising through floor debate on the Consent Calendar with less than two minutes of consideration.
SB178 also seemed to be headed toward similarly easy passage in the House. It cruised through the House Business and Labor Committee, also unanimously, and was also placed on the Consent Calendar for final passage. Then, three days later, and with only three days left in the session, it was inexplicably pulled from Consent and placed on the House Third Reading Calendar, where it languished until the end of the session and died a quiet death.
Why did the House kill legislation that would have helped to lure one of the highest-profile technology companies to the state?
Legislative sources tell UtahPolicy.com that members of House leadership were upset they were not clued into the Facebook connection beforehand. In fact, the only indication that Facebook was involved at all was the quiet hiring of Will Castleberry and Jeff Rogers as lobbyists.
The reaction by members of House leadership to being left out of the informational loop has been described to UtahPolicy.com as “bruised egos.” As a result, SB178 was pulled from the Consent Calendar, which would have ensured an easy, non-controversial passage.
Sources also indicated that the tax credit bill was “held hostage” by House leadership as part of the fight between the House and Senate over the controversial non-compete legislation, HB251.
Despite furious negotiations at the end of the 2016 session, legislators were unable to come to an accord.
The other legislative part of the Facebook deal was HB242, which provides an exemption from taxes paid on the purchase of electricity from renewable sources. That bill passed, while the data-center tax credit did not.
However, Facebook was not sunk as they were expected to pursue a private letter ruling from the Utah State Tax Commission for a tax break. It’s unclear at this time whether that ruling has been made as decisions in these matters are confidential.
None of the legislative sources willing to speak to UtahPolicy.com could pinpoint where Facebook was looking to place the proposed data center, but West Jordan, Lehi, Bluffdale, Draper, and Herriman were all mentioned as possible sites.
However, lawmakers will get another crack at luring Facebook on Wednesday. After negotiations, Gov. Gary Herbert included the issue on the call for this week’s special session. Sources tell UtahPolicy.com that this version of the legislation will remove the 50-acre real estate requirement from the proposal.
Legislative proponents of providing a tax incentive to lure Facebook to Utah point to similar deals offered to companies like Micron, EBay, Adobe, Cabellas and Duncan Aviation.
When asked about his involvement with the Facebook bill, Bramble was unapologetic.
“These kinds of decisions put Utah on the cutting edge of technology and employment,” he said. “This is a shot in the arm for Utah’s high-tech industry.”
Facebook is also considering New Mexico for the proposed data center according to a story in the Albuquerque Journal, which details filings with state regulators by the company. The Salt Lake Tribune also reported on filings by Facebook with the Utah Public Service Energy Commission requesting approval for a renewable-energy contract with Rocky Mountain Power for the potential data center.
At one point at sessions end, House Speaker Greg Hughes told UtahPolicy.com that quietly passing a bill to aid a single entity – Facebook – may be good for economic development, but not for the process of transparency.
Hughes was not against helping Facebook but was concerned about the process.
Now that Facebook’s intentions in Utah were made public via the Public Service Commission’s filings, UtahPolicy.com feels they are no longer bound the decision not to run the story, which was sussed out by Bob Bernick and Bryan Schott back in February.
